CHINA OVERSEAS PROPERTY HOLDINGS LIMITED 中海物業集團有限公司

Transcription

1 Hong Kong Exchange and Clearing Limited, The Stock Exchange of Hong Kong Limited and the Securities and Futures Commission take no responsibility for the contents of this Application Proof, 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 Application Proof. Application Proof of CHINA OVERSEAS PROPERTY HOLDINGS LIMITED 中海物業集團有限公司 (the Company ) (Incorporated in the Cayman Islands with limited liability) WARNING The publication of this Application Proof is required by The Stock Exchange of Hong Kong Limited (the Exchange ) and the Securities and Futures Commission (the Commission ) solely for the purpose of providing information to the public in Hong Kong. This Application Proof is in draft form. The information contained in it is incomplete and is subject to change which can be material. By viewing this document, you acknowledge, accept and agree with the Company, its sponsors or advisers that: (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) this document is only for the purpose of providing information about the Company to the public in Hong Kong and not for any other purposes. No investment decision should be based on the information contained in this document; the publication of this document or supplemental, revised or replacement pages on the Exchange s website does not give rise to any obligation of the Company, its sponsors or advisers to proceed with a listing in Hong Kong or any other jurisdiction. There is no assurance that the Company will proceed with any listing; the contents of this document or supplemental, revised or replacement pages may or may not be replicated in full or in part in the actual final listing document; the Application Proof is not the final listing document and may be updated or revised by the Company from time to time in accordance with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited; this document does not constitute a prospectus, offering circular, notice, circular, brochure or advertisement offering to sell any securities to the public in any jurisdiction, nor is it an invitation to the public to make offers to subscribe for or purchase any securities, nor is it calculated to invite offers by the public to subscribe for or purchase any securities; this document must not be regarded as an inducement to subscribe for or purchase any securities, and no such inducement is intended; neither the Company nor any of its affiliates, sponsors or advisers is offering, or is soliciting offers to buy, any securities in any jurisdiction through the publication of this document; no application for the securities mentioned in this document should be made by any person nor would such application be accepted; the Company has not and will not register the securities referred to in this document under the United States Securities Act of 1933, as amended, or any state securities laws of the United States; as there may be legal restrictions on the distribution of this document or dissemination of any information contained in this document, you agree to inform yourself about and observe any such restrictions applicable to you; and the application to which this document relates has not been approved for listing and the Exchange and the Commission may accept, return or reject the application for the subject listing. NEITHER THIS APPLICATION PROOF NOR ANY INFORMATION CONTAINED HEREIN CONSTITUTES AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES IN HONG KONG, THE UNITED STATES OR IN ANY OTHER JURISDICTION. THIS APPLICATION PROOF IS NOT BEING MADE AVAILABLE IN, AND MAY NOT BE DISTRIBUTED OR SENT TO THE UNITED STATES OR ANY JURISDICTION WHERE SUCH DISTRIBUTION MAY BREACH LOCAL SECURITIES LAW.

2 IMPORTANT If you are in any doubt about any of the contents of this listing document, you should obtain independent professional advice. CHINA OVERSEAS PROPERTY HOLDINGS LIMITED 中海物業集團有限公司 (Incorporated in the Cayman Islands with limited liability) LISTING BY WAY OF INTRODUCTION OF THE ENTIRE ISSUED SHARE CAPITAL OF THE COMPANY ON THE MAIN BOARD OF THE STOCK EXCHANGE OF HONG KONG LIMITED Stock Code: [REDACTED] Joint Sponsors (in alphabetical order) Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsibility for the contents of this listing document, 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 listing document. This listing document is published in connection with the Listing and contains particulars given in compliance with the Securities and Futures (Stock Market Listing) Rules (Chapter 571V of the Laws of Hong Kong) and the Listing Rules solely for the purpose of giving information with regard to our Group. This listing document does not constitute an offer of, nor is it calculated to invite offers for, shares or other securities of our Company, nor have any such shares or other securities been allotted or issued with a view to any of them being offered for sale to, or subscription by, the public. No Shares will be allotted or issued in connection with, or pursuant to, this listing document. Our Shares have not been registered under the U.S. Securities Act or the laws of any state in the United States, and may not be offered or sold within the United States, absent registration or an exemption from the registration requirements of the U.S. Securities Act and applicable state laws. There will be no public offering of securities in the United States. Neither the U.S. Securities and Exchange Commission nor any other U.S. federal or state securities commission or regulatory authority has approved or disapproved of our Shares or passed an opinion on the adequacy of this listing document. Any representation to the contrary is a criminal offence in the United States. Neither this listing document nor any copy hereof may be released, forwarded or distributed, directly or indirectly, in or into the United States, the PRC or any other jurisdiction where such release or distribution might be unlawful. The COLI Shareholders and the Beneficial COLI Shareholders located or resident in jurisdictions other than Hong Kong, including but not limited to those in the United States and the PRC, should refer to the important information set out in COLI Distribution and the Spin-off COLI Distribution Non-Qualifying COLI Shareholders. Your attention is drawn to Risk Factors. Information regarding dealings and settlement of dealings in our Shares following completion of the Spin-off is set out in COLI Distribution and the Spin-off. [REDACTED]

3 EXPECTED TIMETABLE (1) [REDACTED] i

4 CONTENTS IMPORTANT NOTICE We have not authorised anyone to provide you with information that is different from what is contained in this listing document. Any information or representation not contained in this listing document must not be relied on by you as having been authorised by us, COLI, the Joint Sponsors, any of our or their respective directors, officers, employees, agents or representatives or any other person involved in the Spin-off. Page Expected Timetable... Contents... i ii Summary... 1 Definitions and Glossary COLI Distribution and the Spin-off Responsibility Statement Forward-Looking Statements Risk Factors Directors and Parties Involved in the Spin-off Corporate Information History and Corporate Structure Industry Overview Business Financial Information Share Capital Substantial Shareholders Relationship with our Controlling Shareholders Connected Transactions Directors and Senior Management ii

5 CONTENTS Page Appendix I Accountant s Report... I-1 Appendix II Unaudited Pro Forma Financial Information... II-1 Appendix III Regulatory Overview... III-1 Appendix IV Summary of the Constitution of our Company and Cayman Companies Law... IV-1 Appendix V Taxation... V-1 Appendix VI General Information... VI-1 Appendix VII Documents Available for Inspection... VII-1 iii

6 SUMMARY This summary is intended to give you an overview of the information contained in this listing document. Since it is a summary, it does not contain all the information that may be important to you. You should read this listing document in its entirety. OVERVIEW Our Business We are one of the leading property management companies in the PRC 1, according to China Index Academy ( 中國指數研究院 ), with operations also covering Hong Kong and Macau. We have two main business segments:. property management services, which primarily include (i) services such as security, repair and maintenance, cleaning and garden landscape maintenance provided to mid- to high-end residential communities (including mixed-use properties), commercial properties and government properties and (ii) services to other enterprises, such as (for property developers) pre-delivery services, move-in assistance services, delivery inspection services and engineering service quality monitoring and (for other property management companies) consulting services; and. value-added services, which primarily include (i) engineering services such as (for property developers) automation consulting and engineering product sales and (for property management companies) inspection services, repair and maintenance services and equipment upgrade services and (ii) community leasing, sales and other services where residents and tenants of the properties under our management are offered a diversified range of offline services (such as common area rental assistance, purchase assistance and rental assistance for properties that have been delivered to owners by developers and household assistance services) and online services through our O2O platform. For our property management services segment, we charge our property management fees either under lump sum basis or under commission basis. For the majority of our property management services charged under lump sum basis, we record the full amount of property management fees received as our revenue. We pay out our expenses from the property management fees collected from properties managed under lump sum basis and recognise such costs as our direct operating expenses. For the majority of our property management services charged under commission basis, we record a pre-determined percentage of our property management fee as our revenue. The remainder of the property management fee, after deducting our pre-determined percentage, is used as property management working capital to cover property management expenses. The costs associated with the provision of our property management services are borne by the residents and tenants of the properties we manage under commission basis. 1 By scale of operation, operational performance and efficiency, quality of services, development potential and social responsibility, among other factors. 1

7 SUMMARY The properties under our management include:. in the PRC: a number of landmark properties, grade A office building complexes (with Fortune 500 companies and consulate offices among their tenants) and luxury residential properties; and. in Hong Kong and Macau: a number of government properties and residential estates, high-end residential communities, including premium luxury residential properties in the southern district of Hong Kong. We also charge fees for other services provided to property developers and other property management companies, such as fees for pre-delivery services, which consist of security, cleaning and repair and maintenance services for properties before they are fit for occupation, on a per-transaction basis and fees for consultancy services. Our engineering services business includes offerings to property developers, other property management companies and properties under our management, through our designated engineering services operating subsidiaries. Our engineering services primarily include (i) automation consulting and engineering product sales, (ii) repair and maintenance services and (iii) automation and other equipment upgrade services. We provide community leasing, sales and other services to our customers to supplement our property management services and better serve our customers needs. Leveraging our expertise in managing mid- to high-end properties, we strive to provide a comprehensive range of services to our customers, who we believe are willing to pay a premium for high-quality service. We recently introduced our online O2O service platform on which the customers may find and enjoy local products and services in a convenient manner. We currently provide our community leasing, sales and other services primarily through our offices or our telephone service lines. In addition, our community leasing, sales and other services may vary across different properties, depending on a number of factors, including the local commercial environment and the customers particular demands. Our Competitive Strengths We believe that the following competitive strengths allow us to compete effectively in the property management markets in which we operate:. We are one of the leading property management companies in the PRC with a proven track record. Our robust quality control measures help secure our strong brand recognition. We have a well-diversified portfolio of property management businesses across the PRC, Hong Kong and Macau. The expansion of our offline and O2O platforms offers new services and products to customers and drives new revenue streams 2

8 SUMMARY. We have an experienced and stable management team with strong execution capability and in-depth knowledge of our industry See Business Our Competitive Strengths for more details. Our Business Strategies Our customers needs drive our business growth. We focus on providing quality property management services to mid- to high-end properties and aim to continue developing in this market via our strong brand recognition. We intend to achieve our objectives through the following key business strategies:. Continue to leverage our leading China Overseas Property brand name and expand our business scope. Further expand our business coverage through consolidation of our advanced property management knowhow. Continue to develop our O2O platform to optimise service experience. Further enhance our service quality while maximising our cost efficiency. Attract, develop and retain talent to support our business growth See Business Our Business Strategies for more details. COLI DISTRIBUTION AND THE SPIN-OFF On [.] 2015, the COLI Board declared the COLI Distribution to the Qualifying COLI Shareholders, being registered holders of COLI Shares whose names appear on the register of members of COLI as at the Record Date. The COLI Distribution will be satisfied wholly by way of a distribution in specie to the Qualifying COLI Shareholders of an aggregate of 3,286,860,460 Shares, representing the entire issued share capital of our Company, in proportion to their shareholdings in COLI as at the Record Date. Pursuant to the COLI Distribution, the Qualifying COLI Shareholders will be entitled to one Share for every three COLI Shares held as at the Record Date. Fractional entitlements of the Qualifying COLI Shareholders to our Shares under the COLI Distribution will be disregarded and will instead be aggregated and sold by COLI on the market and the aggregate proceeds of such sale (net of expenses and taxes) will be retained for the benefit of COLI. The COLI Distribution is conditional on the Listing Committee granting approval for the listing by way of introduction of, and permission to deal in, our Shares on the Main Board of the Stock Exchange and such approval not having been revoked prior to the completion of the Spinoff. If this condition is not satisfied, the COLI Distribution will not be made and the Spin-off will not take place. As the Spin-off will be implemented by way of the COLI Distribution alone, the Spin-off will not constitute a transaction for COLI under Chapter 14 of the Listing Rules and accordingly, there will be no requirement for COLI to comply with the notification or shareholders approval requirements under Chapter 14 of the Listing Rules. 3

9 SUMMARY KEY RISKS AND UNCERTAINTIES Our business and industry is subject to a number of risks and uncertainties. The following highlights some of the key risks that affect our business:. Our ability to maintain and improve our current level of profitability depends on our ability to control operating costs, in particular, our cost of labour, and our profit margins and results of operations may be materially and adversely affected by increases in labour or other operating costs. There is no guarantee that we can procure new property management service contracts. Our future growth may not materialise as planned, and failure to manage any future growth effectively may have a material adverse effect on our business and results of operations As different investors may have different interpretations and standards for determining the materiality of a risk, you should carefully consider all of the information set out in this listing document, including the risks and uncertainties described in Risk Factors. REORGANISATION In preparation for the Listing, the following key reorganisation steps were implemented: Internal Transfers Pursuant to the Internal Transfers, our Group acquired all of COHL Group s property management business and related group company, namely CSPM Zibo (i.e. COHL Acquired Company), as well as all of CSCECL Group s property management business and related group companies, namely CSPM Beijing and CSPM Chongqing (i.e. CSCECL Acquired Companies), save for the CSCECL Retained Operations, details of which are set out in Relationship with our Controlling Shareholders Delineation of our Group s business from our Controlling Shareholders and Fellow Associates CSCECL Retained Operations. COGO Acquisition Pursuant to the COGO Acquisition, COPL PRC Holding, our wholly-owned subsidiary, acquired from COGO Property, a wholly-owned subsidiary of COGO, the entire equity interests of COGOPM Holding, which is principally engaged in real estate management. COPL PRC Holding assumed the profit and loss of COGO Acquired Companies beginning from 31 March Please see History and Corporate Structure Reorganisation for further details. 4

10 SUMMARY RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS On completion of the Spin-off, our Company will become a non-wholly owned subsidiary of COHL. We will operate independently from Remaining COLI Group, our Controlling Shareholders (namely CSCEC, CSCECL and COHL) and their close associates. Each of our Controlling Shareholders and Fellow Associates is engaged in a separate business area which does not overlap with our Group s property management business, save for the CSCEC Retained Operations and the CSCECL Retained Operations. The CSCEC Retained Operations are carried out by two subsidiary units wholly-owned by CSCEC. The CSCECL Retained Operations are carried out by CSCECL s individually operated subsidiaries, including construction bureaus and design institutes, which comprise property management services to property development projects or properties held by CSCECL s various subsidiaries, including construction bureaus and design institutes, or public-private partnership projects managed by them, from time to time. Neither the CSCEC Retained Operations nor the CSCECL Retained Operations have any specific focus on their managed properties, unlike our Group which focuses on mid- to high-end residential communities (including mixed-use properties), commercial properties and government properties. Given the nature, scope and insignificant size of the CSCEC Retained Operations and the CSCECL Retained Operations, neither CSCEC nor CSCECL intends to inject all or part of the CSCEC Retained Operations or the CSCECL Retained Operations, respectively, into our Group. Further details of the CSCEC Retained Operations and the CSCECL Retained Operations are set out in Relationship with our Controlling Shareholders Delineation of our Group s business from our Controlling Shareholders and Fellow Associates. Based on the information and reasons set out in the aforementioned section, our Directors do not regard the competition between our Group s business and the CSCEC Retained Operations or the CSCECL Retained Operations, if any, to be extreme. Our Group s business is a branded, premium property management service provider which is different, clearly distinguishable and delineated from the CSCEC Retained Operations and the CSCECL Retained Operations. To ensure a clear delineation of our Group s property management business (on the one hand) and CSCEC and CSCECL (on the other hand) following the completion of the Spin-off, CSCEC and CSCECL have entered into the Deeds of Non-competition in favour of our Group. Our Company has also adopted measures to manage the conflict of interests arising from potential competition, if any, between our Group and CSCEC or CSCECL with an overriding aim of safeguarding the interests of our Shareholders. Whilst our Group will operate independently of our Controlling Shareholders and Fellow Associates, there will be certain transactions between our Group (on the one hand) and our Controlling Shareholders and Fellow Associates (on the other hand) which will continue following the Listing. These transactions include, among others, (a) the provision of property management services to Remaining COLI Group, (b) the provision of engineering services to Remaining COLI Group; (c) leasing of properties from Remaining COLI Group; (d) provision of security services to CSCIHL Group; and (e) provision of property management services to COGO Group. For details of such transactions, please see Connected Transactions. 5

11 SUMMARY SUMMARY OF SELECTED FINANCIAL INFORMATION Pursuant to the COGO Equity Transfer Agreement, we acquired COGO Acquired Companies, the financial information of which is only reflected in our financial information for the five months ended and as at 31 May As such, our financial information for the five months ended and as at 31 May 2015 may not be comparable to our financial information for the years ended and as at 31 December 2012, 2013 and 2014 and for the five months ended 31 May Summary of Consolidated Income Statement The following table sets out selected financial information from our consolidated income statement during the Track Record Period, and should be read in conjunction with the financial information included in Appendix I: Year ended 31 December Five months ended 31 May HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 (unaudited) Revenue ,444,850 1,844,067 2,163, , ,658 (1) Direct operating expenses.... (1,215,755) (1,501,155) (1,750,598) (652,420) (753,724) 229, , , , ,934 Administrative expenses (159,122) (247,062) (304,344) (119,419) (131,620) Profit for the years/periods attributable to owners of thecompany... 61,549 85,528 97,088 32,885 41,062 (2) Notes: (1) For the period between 31 March 2015, the date beginning from which COPL PRC Holding assumed the profit and loss of COGO Acquired Companies pursuant to the COGO Equity Transfer Agreement, and 31 May 2015, COGO Acquired Companies contributed approximately HK$9,168,000 to our Group s revenue. (2) For the period between 31 March 2015, the date beginning from which COPL PRC Holding assumed the profit and loss of COGO Acquired Companies pursuant to the COGO Equity Transfer Agreement, and 31 May 2015, COGO Acquired Companies contributed approximately HK$2,486,000 to our profit attributable to owners of the Company. The gross profit margin of property management services under lump sum basis was affected by the pricing of our property management fees and our cost management initiatives. During the Track Record Period, in order to increase our profitability, we implemented various cost management initiatives, such as employing remote monitoring systems to reduce labour costs and adopting energy-saving measures to reduce utility costs. In general, we did not incur any direct operating expenses with respect to our revenue from property management services under commission basis. As a result, the gross profit margin of our property management services under commission basis was typically 100.0%. The gross profit margin of our value-added services was affected by our product mix as well as certain business restructuring initiatives implemented to prepare for further business expansion. These initiatives had an impact on the level of business activities performed and cost structure due to organisational changes. 6

12 SUMMARY The table below sets forth a breakdown of revenue by major product lines under each of our business segments for the periods indicated: Year ended 31 December Five months ended 31 May HK$ 000 %of Revenue HK$ 000 %of Revenue HK$ 000 %of Revenue HK$ 000 %of Revenue HK$ 000 %of Revenue (unaudited) Property management services under lump sum basis ,224, ,524, ,764, , , Property management services under commission basis , , , , , Other services , , , , , Total of property management services... 1,391, ,741, ,035, , , Engineering services , , , , , Community leasing, sales and other services , , , , , Total of value-added services... 53, , , , , Total revenue... 1,444, ,844, ,163, , , The table below sets forth our gross profit and gross profit margins by major product lines under each business segment for the periods indicated: Year ended 31 December Five months ended 31 May Gross Profit (HK$ 000) Property management services under Gross Gross Gross Gross Gross Gross Profit Profit Profit Profit Profit Profit Margin (HK$ 000) Margin (HK$ 000) Margin (HK$ 000) Gross Gross Gross Profit Profit Profit Margin (HK$ 000) Margin (%) (%) (%) (unaudited) (%) (%) lump sum basis , , , , , Property management services under commission basis , , , , , Other services , , , , , Total of property management services , , , , , Engineering services , , , , , Community leasing, sales and other services , , , , , Total of value-added services... 30, , , , , Total , , , , , The table below sets forth our total GFA under management as at the dates indicated: As at 31 December As at 31 May (3) ( 000 sq.m.) % ( 000 sq.m.) % ( 000 sq.m.) % ( 000 sq.m.) % GFA under management under lump sum basis... 24, , , , GFA under management under commission basis.. 9, , , , Total GFA under management (1)(2).. 34, , , ,

13 SUMMARY Notes: (1) Our GFA under management may not be comparable to other similarly titled measures of other companies. (2) Our GFA under management for properties under our management in Hong Kong and Macau is the same as our fee-charging GFA for such properties. (3) COGOAcquiredCompanies,whichweacquiredon28May2015 pursuant to the COGO Acquisition, contributed 7,807.4 thousand sq.m. to our GFA under management as at 31 May 2015, 2,268.5 thousand sq.m. of which was managed under lump sum basis and 5,538.9 thousand sq.m. of which was managed under commission basis. Summary of Consolidated Statement of Financial Position The following table sets out a summary on our consolidated statement of financial position as at the dates indicated: As at 31 December As at 31 May (1) HK$ 000 HK$ 000 HK$ 000 HK$ 000 Non-current Assets , , , ,827 CurrentAssets... 1,209,800 1,600,367 1,818,036 1,702,716 Current Liabilities ,867 1,276,111 1,408,234 1,266,631 Net Current Assets , , , ,085 Total Assets Less Current Liabilities , , , ,912 Non-current liabilities ,164 8,306 6,556 6,483 Total equity attributable to owners ofthecompany , , , ,429 Note: (1) On 28 May 2015, we acquired COGO Acquired Companies for a cash consideration of approximately RMB50.0 million (equivalent to approximately HK$63.2 million). The fair values of aggregate assets acquired and liabilities assumed due to the COGO Acquisition are as follows: HK$ 000 Property,plantandequipment Inventories Tradeandotherreceivables,andprepayments Amountduefromarelatedcompany... 66,923 Cashandcashequivalents... 29,535 Tradeandotherpayables... (26,436) Receiptsinadvanceanddeposits... (7,390) Taxliabilities... (518) 63,161 Cashconsiderationpaid... (63,161) 8

14 SUMMARY Cash Flow The table below summarises our consolidated cash flow statement for the Track Record Period: For the five months ended For the year ended 31 December 31 May HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 (unaudited) Net cash from/(used in) operating activities , , ,152 (152,640) (102,691) Net cash (used in)/from investing activities (11,995) (6,827) (133,445) (127,320) 374,672 Net cash from/(used in) financing activities ,971 35,201 20,438 5,740 (73,745) Net increase/(decrease) in cash and cash equivalents. 198, ,198 10,145 (274,220) 198,236 Cash and cash equivalents at the beginning of the year/ period , ,632 1,081,914 1,081,914 1,088,601 Effect of foreign exchange rate changes... (252) 27,084 (3,458) (9,943) (313) Cash and cash equivalents at the end of the year/period.. 751,632 1,081,914 1,088, ,751 1,286,524 Key Financial Metrics The table below sets forth a summary of our key financial metrics during the Track Record Period: For the year ended 31 December For the five months ended 31 May Financial metric Formula Rates of return: Return on equity.... Return on total assets... Profit for the year/period attributable to owners of the Company divided by total equity attributable to owners of the Company as at the date indicated x 100% Profit for the year/period attributable to owners of the Company divided by total assets as at the date indicated x 100% 20.2% 19.9% 18.4% 7.4% (annualised: 17.8%) (1) 4.7% 5.0% 5.0% 2.2% (annualised: 5.4%) (1) 9

15 SUMMARY As at As at 31 December 31 May Financial metric Formula Liquidity: Current ratio Gearing: Gearing ratio (2) Current assets divided by current liabilities Total borrowings divided by total equity attributable to owners of the Company n.a. n.a. n.a. 29.6% Notes: (1) Annualised rates are calculated by multiplying the relevant rate by 12 and dividing the product by five. (2) Our Group was in a net cash position as at 31 December 2012, 2013 and 2014 and 31 May UNAUDITED PRO FORMA FINANCIAL INFORMATION [REDACTED] DIVIDEND POLICY No dividend has been paid or proposed by our Company during the Track Record Period. Our Board has the discretion as to whether to declare any dividend for any year and, if it decides to declare a dividend, how much dividend to declare. The amount of any dividends to be declared or paid in the future will depend on, among other things, our results of operations, cash flows and financial condition, operating and capital requirements and other applicable laws and regulations and other factors. Our Board has the discretion to declare dividends subject to the Cayman Companies Law and our Articles of Association. Our Articles of Association provide that dividends may be declared and paid out of our profits, realised or unrealised, or from any reserve set aside from profits which our Directors determine is no longer needed. With the sanction of an ordinary resolution, dividends may also be declared and paid out of a share premium account or any other fund or account which can be authorised for such purpose in accordance with the Cayman Companies Law and our Articles of Association. RECENT DEVELOPMENTS Our Directors confirm that, so far as they are aware, there have been no material changes in our financial or trading position or the general economic and market conditions, or legal or regulatory regimes in the jurisdictions or industry in which we operate that have materially and adversely affected our Group s business, operations or financial position since 31 May 2015 and up to the Latest Practicable Date. LISTING EXPENSES In relation to the Listing, our Company expects to incur listing expenses in an aggregate amount of approximately HK$30.0 million, of which approximately HK$8.5 million was incurred and recognised by our Company during the Track Record Period. All of our Company s listing expenses will be borne by COLI. 10

16 DEFINITIONS AND GLOSSARY In this listing document, unless the context otherwise requires, the following terms shall have the meanings set out below. This section also contains explanations of certain terms used in this listing document in connection with our Group and our business. The terms and their meanings may not correspond to standard industry meanings or usage of those terms. Acquired Companies Articles or Articles of Association Asset Injection Beijing Equity Transfer Agreement Beneficial COLI Shareholder Board or Board of Directors Business Day BVI CAGR Cayman Companies Law or Companies Law CSCECL Acquired Companies, COHL Acquired Company and COGO Acquired Companies the amended and restated articles of association of our Company adopted by a special resolution of the sole Shareholder on [.] 2015 and effective on the Listing Date, as amended from time to time, a summary of which is set out in Appendix IV Summary of the Constitution of our Company and Cayman Companies Law the acquisition pursuant to the agreement dated 24 March 2015 between CSCECL Group and COLI Group whereby COLI Group agreed to acquire Celestial Domain, then the holding company of CSCECL Group s property development business, and the related group companies the agreement dated 15 May 2015 entered into between COLI Beijing PM Holding (as vendor) and COPL PRC Holding (as purchaser) whereby COLI Beijing PM Holding agreed to transfer the entire equity interests of CSPM Beijing to COPL PRC Holding for a consideration of RMB11,748,000 a beneficial owner of COLI Shares whose COLI Shares are registered in the name of a Registered COLI Shareholder the board of Directors any day (other than a Saturday, Sunday or public holiday in Hong Kong) on which banks in Hong Kong are generally open for normal banking business the British Virgin Islands compound annual growth rate the Companies Law, Cap. 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands, as amended, supplemented or otherwise modified from time to time 11

17 DEFINITIONS AND GLOSSARY CCASS CCASS Investor Participant the Central Clearing and Settlement System established and operated by HKSCC a person admitted to participate in CCASS as an investor participant who may be an individual or joint individuals or a corporation CCASS Participant a CCASS clearing participant, a CCASS custodian participant or a CCASS Investor Participant Celestial Domain Celestial Domain Investments Limited ( 天宇投資有限公司 ), a company incorporated in the BVI on 3 January 2012 and a wholly-owned subsidiary of COLI upon completion of the Asset Injection ChinaClear China Securities Depository and Clearing Corporation Limited Chinese government or PRC government Chongqing Equity Transfer Agreement COGO COGO Acquired Companies COGO Acquisition the central government of the PRC, including all governmental subdivisions (including provincial, municipal and other regional or local government entities) and instrumentalities thereof or, where the context requires, any of them the agreement dated 15 May 2015 entered into between COLI Chongqing PM Holding (as vendor) and CSPM Beijing (as purchaser) whereby COLI Chongqing PM Holding agreed to transfer the entire equity interests of CSPM Chongqing to CSPM Beijing for a consideration of RMB1 China Overseas Grand Oceans Group Limited ( 中國海外宏洋集團有限公司 ), a company incorporated in Hong Kong on 25 September 1970, whose shares are listed on the Main Board of the Stock Exchange (stock code: 81), of which COLI is an indirect controlling shareholder COGOPM Holding and its subsidiaries, namely COGOPM Guangzhou and COGOPM Hohhot, being the group companies which carried on all of COGO Group s property management business, which were acquired by our Group pursuant to the COGO Acquisition the acquisition of COGO Acquired Companies pursuant to the COGO Equity Transfer Agreement, which was completed on 28 May

18 DEFINITIONS AND GLOSSARY COGO Equity Transfer Agreement COGO Group the agreement dated 18 May 2015 entered into between COGO Property (as vendor) and COPL PRC Holding (as purchaser) whereby COGO Property agreed to transfer the entire equity interests of COGOPM Holding to COPL PRC Holding for a consideration of approximately RMB50.0 million COGO and its subsidiaries from time to time COGOPM Guangzhou Guangzhou Guangda Huayuan Property Management Limited ( 廣州市光大花園物業管理有限公司 ), a company established in the PRC on 15 February 2000 and a whollyowned subsidiary of COGO before the COGO Acquisition, and which became a wholly-owned subsidiary of our Company upon completion of the COGO Acquisition COGOPM Holding China Overseas Grand Oceans Property Management Limited ( 中海宏洋物業管理有限公司 ) (formerly known as Guangda Property Management Limited ( 光大物業管理有限公司 )), a company established in the PRC on 8 October 1998, a wholly-owned subsidiary of COGO before the COGO Acquisition and which became a wholly-owned subsidiary of our Company upon completion of the COGO Acquisition COGOPM Hohhot COGO Property COHL COHL Group COHL Zibo PM Holding China Overseas Hohhot Property Service Limited ( 呼和浩特市中海物業服務有限公司 ), a company established in the PRC on 13 June 2010 and a wholly-owned subsidiary of COGO before the COGO Acquisition, and which became a whollyowned subsidiary of our Company upon completion of the COGO Acquisition China Overseas Grand Oceans Property Group Company Limited ( 中海宏洋地產集團有限公司 ), a company established in the PRC on 22 November 1985 and a wholly-owned subsidiary of COGO China Overseas Holdings Limited ( 中國海外集團有限公司 ), a company incorporated in Hong Kong on 29 September 1989 and the direct controlling shareholder of COLI and, upon completion of the Spin-off, our Company COHL and its subsidiaries from time to time (excluding our Group) Zibo China Overseas Investment Limited ( 淄博中海投資有限公司 ), a company established in the PRC on 26 August 2010 and a wholly-owned subsidiary of COHL 13

19 DEFINITIONS AND GLOSSARY COLI COLI Beijing PM Holding COLI Board COLI Chongqing PM Holding COLI Distribution COLI Group China Overseas Land & Investment Ltd. ( 中國海外發展有限公司 ), a company incorporated in Hong Kong on 1 June 1979, whose shares are listed on the Main Board of the Stock Exchange (stock code: 688) China Construction International Building Limited ( 中建國際建設有限公司 ), a company established in the PRC on 19 February 1993 and a wholly-owned subsidiary of COLI upon completion of the Asset Injection the board of directors of COLI Chongqing China Overseas Xingye Industrial Limited ( 重慶中海興業實業有限公司 ), a company established in the PRC on 18 May 2010 and a wholly-owned subsidiary of COLI upon completion of the Asset Injection the conditional special interim dividend declared by COLI on [.] 2015, to be satisfied by way of a distribution in specie of an aggregate of 3,286,860,460 Shares to the Qualifying COLI Shareholders, subject to the satisfaction of the conditions described in COLI Distribution and the Spin-off COLI and its subsidiaries from time to time COLI Overseas Shareholder a COLI Shareholder whose address, as shown on the register of members of COLI as at the Record Date, is in any jurisdiction other than Hong Kong COLI PRC Stock Connect Investor(s) COLI Property COLI Property Trademark Assignment COLI Shareholder the PRC southbound trading investor(s) through Shanghai- Hong Kong Stock Connect who hold COLI Shares through ChinaClear as nominee China Overseas Property Group Co., Ltd. ( 中海地產集團有限公司 ), a company established in the PRC on 8 September 1988 and a wholly-owned subsidiary of COLI the assignment dated 9 June 2015 entered into between COLI Property (as assignor and licensor) and COPL Trademark Holding (as assignee and licensee) whereby COLI Property agreed to transfer for a consideration of HK$10 and license for nil consideration to COPL Trademark Holding the trademarks owned by it as set out in Appendix VI General Information B. Further Information About the Business of our Company 2. Intellectual Property Rights of our Group a holder of COLI Shares 14

20 DEFINITIONS AND GLOSSARY COLI Shares COLI TM COLI TM Trademark Assignment Companies Ordinance Company or our Company Controlling Shareholder(s) or our Controlling Shareholder(s) Controlling Shareholders and Fellow Associates or our Controlling Shareholders and Fellow Associates COPL Beijing COPL Building Engineering ordinary shares in the issued share capital of COLI China Overseas Group Trade Mark Limited ( 中國海外集團商標有限公司 ), a company incorporated in Hong Kong on 13 October 1997 and a wholly-owned subsidiary of COLI the assignment dated 9 June 2015 entered into between COLI TM (as assignor and licensor) and COPL Trademark Holding (as assignee and licensee) whereby COLI TM agreed to transfer for a consideration of HK$10 and license for nil consideration to COPL Trademark Holding the trademarks owned by it as set out in Appendix VI General Information B. Further Information About The Business of our Company 2. Intellectual Property Rights of our Group the Companies Ordinance (Chapter 622 of the Laws of Hong Kong), as amended, supplemented or otherwise modified from time to time China Overseas Property Holdings Limited ( 中海物業集團有限公司 ) (formerly known as China Overseas Management Services (International) Limited ( 中國海外管理服務 ( 國際 ) 有限公司 )), a company incorporated as an exempted company in the Cayman Islands on 26 June 2006 the controlling shareholders of our Company, being COHL, CSCECL and CSCEC has the meaning given to it in Relationship with our Controlling Shareholders Beijing China Overseas Property Management Limited ( 北京中海物業管理有限公司 ), a company established in the PRC on 21 January 2009 and a wholly-owned subsidiary of our Company Shenzhen China Overseas Building Technology Limited ( 深圳市中海樓宇科技有限公司 ) (formerly known as Shenzhen Building Mechanical and Electrical Equipment Repair and Maintenance Limited ( 深圳市中海樓宇機電設備維修保養有限公司 )), a company established in the PRC on 29 June 1998 and a wholly-owned subsidiary of our Company 15

21 DEFINITIONS AND GLOSSARY COPL Building Management COPL Changchun COPL Chengdu COPL Elevator Engineering COPL Guangzhou COPL HK Holding COPL Macau COPL Mechanical Engineering China Overseas Building Management Limited ( 中國海外大廈管理有限公司 ) (formerly known as Whole Kind Limited), a company incorporated in Hong Kong on 16 May 1991 and a wholly-owned subsidiary of our Company Changchun China Overseas Property Management Limited ( 長春中海物業管理有限公司 ), a company established in the PRCon14November2003andawholly-ownedsubsidiary of our Company Chengdu China Overseas Property Management Limited ( 成都中海物業管理有限公司 ), a company established in the PRC on 25 May 2001 and a wholly-owned subsidiary of our Company Shenzhen China Overseas Elevator Engineering Limited ( 深圳市中海電梯工程有限公司 ), a company established in the PRCon28December1998andawholly-ownedsubsidiary of our Company Guangzhou China Overseas Property Management Limited ( 中海物業管理廣州有限公司 ), a company established in the PRC on 28 August 1995 and a wholly-owned subsidiary of our Company China Overseas Property Services Limited ( 中國海外物業服務有限公司 ) (formerly known as Gold Court Property Limited, Gold Court Property Management Limited ( 中國海外建築 ( 地產管理 ) 有限公司 ), Gold Court Property Management Limited ( 中海物業管理有限公司 )), a company incorporated in Hong Kong on 23 December 1986 and a wholly-owned subsidiary of our Company Gold Court (Macau) Property Services Limited ( 中海 ( 澳門 ) 物業服務有限公司 ) (Companhia de Serviços de Propriedades Gold Court (Macau) Limitada), a company incorporated in Macau on 8 September 2005 and a wholly-owned subsidiary of our Company Guangzhou China Overseas Mechanical and Electrical Engineering Limited ( 廣州中海機電工程有限公司 ) (formerly known as Guangzhou Haixin Engineering Consultancy Limited ( 廣州海信工程諮詢有限公司 )), a company established in the PRC on 23 December 1999 and a wholly-owned subsidiary of our Company 16

22 DEFINITIONS AND GLOSSARY COPL Mepork Mepork Services Limited ( 美博服務有限公司 ), a company incorporated in Hong Kong on 30 May 1989 and a whollyowned subsidiary of our Company COPL Network COPL PRC Holding COPL Security COPL Shanghai COPL Trademark Holding COPL Windsor Heights CSCEC Shenzhen Haihui Wanjia Network Information Technology Limited ( 深圳市海惠萬家網絡信息技術有限公司 ) (formerly known as Shenzhen China Overseas Communities Environment Engineering Limited ( 深圳市中海社區環境工程有限公司 )), a company established in the PRC on 14 August 1998 and a wholly-owned subsidiary of our Company China Overseas Property Management Limited ( 中海物業管理有限公司 ) (formerly known as China Overseas Property Management (Shenzhen) Limited ( 中海物業管理 ( 深圳 ) 有限公司 ) and Shenzhen China Overseas Property Management Limited ( 深圳市中海物業管理有限公司 )), a company established in the PRC on 7 April 1995 and a wholly-owned subsidiary of our Company China Overseas Security Services Limited ( 中國海外保安有限公司 ), a company incorporated in Hong Kong on 28 May 2003 and a wholly-owned subsidiary of our Company Shanghai China Overseas Property Management Limited ( 上海中海物業管理有限公司 ) (formerly known as China Overseas Property Management (Shanghai) Limited ( 中海物業管理 ( 上海 ) 有限公司 )), a company established in the PRC on 26 June 1995 and a wholly-owned subsidiary of our Company China Overseas Property Management Trade Mark Limited ( 中海物業管理商標有限公司 ) (formerly known as Fortune Opal Limited ( 祥奧有限公司 )), a company incorporated in Hong Kong on 10 April 2015 and a wholly-owned subsidiary of our Company Windsor Heights Estate Management Company Limited ( 寶松苑物業管理有限公司 ), a company incorporated in Hong Kong on 6 January 1997 and owned as to 25% by our Group and as to 75% by Independent Third Parties China State Construction Engineering Corporation ( 中國建築工程總公司 ), a state-owned corporation established and organised and existing under the laws of the PRC on 24 March 1983 and the ultimate controlling shareholder of our Company through its interest in CSCECL 17

23 DEFINITIONS AND GLOSSARY CSCEC Deed of Non-competition CSCEC Group the deed of non-competition dated [.] 2015 entered into by CSCEC with our Company in respect of the undertakings given by CSCEC referred to in Relationship with our Controlling Shareholders Non-compete Undertakings CSCEC and its subsidiaries from time to time (excluding our Group) CSCEC Retained Operations has the meaning given to it in Relationship with our Controlling Shareholders Delineation of our Group s Business from our Controlling Shareholders and Fellow Associates Retained Operations CSCECL CSCECL Acquired Companies CSCECL Deed of Non-competition CSCECL Group CSCECL Retained Operations CSCIHL CSCIHL Group China State Construction Engineering Corporation Limited ( 中國建築股份有限公司 ), a company established in the PRC on 10 December 2007 whose shares are listed on the Shanghai Stock Exchange (stock code: ) and a controlling shareholder of our Company through its interest in COHL CSPM Beijing and CSPM Chongqing the deed of non-competition dated [.] 2015 entered into by CSCECL with our Company in respect of the undertakings given by CSCECL referred to in Relationship with our Controlling Shareholders Non-compete Undertakings CSCECL and its subsidiaries from time to time (excluding our Group) has the meaning given to it in Relationship with our Controlling Shareholders Delineation of our Group s Business from our Controlling Shareholders and Fellow Associates Retained Operations China State Construction International Holdings Limited, a company incorporated as an exempted company in the Cayman Islands on 25 March 2004 whose shares are listed on the Main Board of the Stock Exchange (stock code: 3311) and a connected person of our Company CSCIHL and its subsidiaries from time to time 18

24 DEFINITIONS AND GLOSSARY CSPM Beijing CSPM Chongqing CSPM Zibo or COHL Acquired Company Deed of Indemnity Deeds of Non-competition Director(s) EIT Law Beijing China Construction Property Management Limited ( 北京中建物業管理有限公司 ) (formerly known as Beijing Qingtao Property Management Limited ( 北京勍濤物業管理有限責任公司 ) and Beijing Dingboxiong Property Management Limited ( 北京鼎博雄物業管理有限責任公司 )), a company established in the PRC on 23 August 2003 and a wholly-owned subsidiary of COLI before the Internal Transfers, and which became a wholly-owned subsidiary of our Company upon completion of the Internal Transfers Chongqing Haitou Property Management Limited ( 重慶海投物業管理有限公司 ), a company established in the PRC on 21 September 2012 and a wholly-owned subsidiary of COLI before the Internal Transfers, and which became a whollyowned subsidiary of our Company upon completion of the Internal Transfers Zibo China Overseas Qinyi Property Service Limited ( 淄博中海親頤物業服務有限公司 ), a company established in the PRC on 18 January 2013 and a wholly-owned subsidiary of COHL before the Internal Transfers, and which became a whollyowned subsidiary of our Company upon completion of the Internal Transfers the deed of indemnity dated [.] 2015 entered into by COHL in favour of our Group containing the indemnities referred to in Appendix VI General Information E. Other Information 2. Tax and Other Indemnity CSCEC Deed of Non-competition and CSCECL Deed of Non-competition director(s) of our Company the PRC Enterprise Income Tax Law ( 中華人民共和國企業所得稅法 ), which came into effect on 1 January

25 DEFINITIONS AND GLOSSARY Excluded Jurisdiction(s) Executive Director(s) those jurisdictions outside Hong Kong in respect of which the COLI Board and the Board have determined that it is necessary or expedient not to distribute Shares to the COLI Shareholders or the Beneficial COLI Shareholders located or resident in those jurisdictions pursuant to the COLI Distribution, on account of either the legal restrictions under the applicable laws of such jurisdictions and/or the requirements of the relevant regulatory bodies or stock exchanges in those jurisdictions. By reference to the register of members of COLI as at the Latest Practicable Date, the Excluded Jurisdictions would include Canada and the United States executive director(s) of our Company fee-charging GFA aggregate gross floor area of individual units privately owned by property owners GFA under management aggregate of fee-charging GFA and gross floor area of common areas Group, our Group, we or us (a) (b) our Company and our subsidiaries following completion of the Reorganisation; or (where the context requires prior to the completion of the COGO Acquisition) our Company and its subsidiaries (excluding COGO Acquired Companies) HK$ and Hong Kong dollars HKAS HKFRS HKSCC Hong Kong or HK Hong Kong Branch Share Registrar Hong Kong Tax Treaty Hong Kong dollars, the lawful currency of Hong Kong Hong Kong Accounting Standards Hong Kong Financial Reporting Standards Hong Kong Securities Clearing Company Limited, a wholly owned subsidiary of Hong Kong Exchanges and Clearing Limited the Hong Kong Special Administrative Region of the PRC [REDACTED] Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income ( 內地和香港特別行政區關於對所得避免雙重徵稅和防止偷漏稅的安排 ) 20

26 DEFINITIONS AND GLOSSARY Independent Non-executive Director(s) Independent Third Party(ies) Internal Transfers Joint Sponsors independent non-executive director(s) of our Company any party who is not connected (within the meaning of the Listing Rules) with any director, chief executive or substantial shareholder of our Company or any of our subsidiaries or an associate of any of them the acquisitions of CSCECL Acquired Companies and COHL Acquired Company pursuant to the Beijing Equity Transfer Agreement, Chongqing Equity Transfer Agreement and Zibo Equity Transfer Agreement, all of which were completed on 28 May 2015 Merrill Lynch Far East Limited and HSBC Corporate Finance (Hong Kong) Limited Latest Practicable Date 3 July 2015, being the latest practicable date for ascertaining certain information in this listing document before its publication Listing Listing Date Listing Rules Macau Main Board Memorandum or Memorandum of Association the listing of our Shares on the Main Board of the Stock Exchange thedateonwhichoursharesarefirstlistedandfromwhich dealings in our Shares first commence on the Main Board of the Stock Exchange, expectedtobeon[redacted] the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, as amended, supplemented or otherwise modified from time to time the Macau Special Administrative Region of the PRC the stock market (excluding the option market) operated by the Stock Exchange which is independent from and operated in parallel with the Growth Enterprise Market of the Stock Exchange the amended and restated memorandum of association of our Company adopted by a special resolution of the sole Shareholder on [.] 2015 and effective on the Listing Date, as amended from time to time, a summary of which is set out in Appendix IV Summary of the Constitution of our Company and Cayman Companies Law 21

27 DEFINITIONS AND GLOSSARY mixed-use properties mixed-use properties containing residential units and ancillary facilities that are non-residential in nature such as commercial or office units MOHURD Non-executive Director(s) Non-Qualifying COLI Shareholders O2O platform PBOC PRC, China or the People s Republic of China property owners associations Qualifying COLI Shareholders Record Date Registered COLI Shareholder the Ministry of Housing and Urban-Rural Development of the PRC ( 中華人民共和國住房和城鄉建設部 ) or its predecessor, the Ministry of Construction of the PRC ( 中國建設部 ) non-executive director(s) of our Company those COLI Overseas Shareholders and other persons who will not receive Shares pursuant to the COLI Distribution where the COLI Board and the Board consider it necessary or expedient to exclude them from receiving Shares on account either of the legal restrictions under the laws of the relevant jurisdictions where they are located or resident and/ or the requirements of the relevant regulatory bodies or stock exchanges in those jurisdictions, but will receive the net proceeds of the sale of the relevant Shares which they would otherwise receive pursuant to the COLI Distribution if they were Qualifying COLI Shareholders in full satisfaction of such relevant Shares an online to offline platform which, in the context of our business, connects residents and tenants through online channels to our products and services. For details, please see Business Our Value-added Services Our Offline and O2O Platforms the People s BankofChina( 中國人民銀行 ), the central bank of the PRC the People s Republic of China, excluding, for the purpose of this listing document, Hong Kong, Macau and Taiwan property owners associations in the PRC and/or, where the context requires, owners corporations in Hong Kong and/or general assemblies of the condominium in Macau COLI Shareholders whose names appeared on the register ofmembersofcoliasattherecorddate [REDACTED], being the record date for determining the entitlement of the COLI Shareholders to the COLI Distribution in respect of a Beneficial COLI Shareholder, any nominee, trustee, depositary or any other authorised custodian or third-party whose name is entered in the register of members of COLI as the holder of the COLI Shares in which the Beneficial COLI Shareholder is beneficially interested 22

28 DEFINITIONS AND GLOSSARY Remaining COLI Group COLI and its subsidiaries (excluding our Group) Reorganisation the reorganisation of our Group (including the Internal Transfers and the COGO Acquisition) in preparation for the Listing, details of which are set out in History and Corporate Structure Reorganisation residential communities properties which are purely residential and mixed-use properties (as defined above) but excluding purely commercial properties RMB or Renminbi SFC SFO or Securities and Futures Ordinance Shares Shareholders Spin-off sq.m. the lawful currency of the PRC the Securities and Futures Commission of Hong Kong the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), as amended, supplemented or otherwise modified from time to time ordinary shares with a par value of HK$0.001 each in the share capital of our Company holders of Shares the proposed spin-off of our Company by way of the COLI Distribution and the separate listing of our Shares on the Main Board of the Stock Exchange by way of introduction square metre State Council the State Council of the PRC ( 中華人民共和國國務院 ) Stock Exchange Track Record Period Trademark Assignments The Stock Exchange of Hong Kong Limited the period comprising the three years ended 31 December 2014 and the five months ended 31 May 2015 the COLI TM Trademark Assignment and the COLI Property Trademark Assignment Trademarks the trademarks used by our Group pursuant to the Trademark Assignments, as set out in Appendix VI General Information B. Further Information About the Business of our Company 2. Intellectual Property Rights of our Group 23

29 DEFINITIONS AND GLOSSARY Transitional Trademark Licensing Arrangement United States or U.S. US dollars or US$ U.S. Securities Act Zibo Equity Transfer Agreement the transitional arrangement whereby COLI TM and COLI Property (each as licensor) agreed to grant to our Group (as licensee) an exclusive right for the use of the Trademarks at nil consideration pursuant to the Trademarks Assignments pending completion of the registration of COPL Trademark Holding as the registered owner of the Trademarks the United States of America, its territories and possessions, any State of the United States, and the District of Columbia United States dollars, the lawful currency of the United States U.S. Securities Act of 1933, as amended the agreement dated 15 May 2015 entered into between COHL Zibo PM Holding (as vendor) and CSPM Beijing (as purchaser) whereby COHL Zibo PM Holding agreed to transfer the entire equity interests of CSPM Zibo to CSPM Beijing for a consideration of RMB1 In this listing document, unless the context otherwise requires: (a) the terms associate, close associate, connected person, core connected person, connected transaction, controlling shareholder, subsidiary and substantial shareholder have the meanings given to such terms in the Listing Rules; and (b) references to 2012, 2013 and 2014 refer to the financial year ended 31 December of such year. If there is any inconsistency between the official Chinese name of the PRC laws or regulations or the PRC government authorities or the PRC entities referred to in this listing document and their English translations, the Chinese version shall prevail. English translations of official Chinese names are for identification purposes only. Certain amounts and percentage figures included in this listing document have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures preceding them. There may be differences between certain data in this listing document and publicly available information which may be attributable to different methods of calculation, presentation or otherwise. Unless otherwise specified, certain amounts denominated in RMB and US$ have been translated into HK$ at the following exchange rates: RMB1.00 = HK$1.27 US$1.00 = HK$

30 DEFINITIONS AND GLOSSARY The above exchange rates are for illustrative purposes only and such conversions shall not be construed as representations that amounts in RMB and US$ were or could have been or could be converted into Hong Kong dollars at such rates or any other exchange rates. Unless otherwise specified, all references to any shareholdings in our Company refer to such shareholdings immediately following completion of the Spin-off. 25

31 COLI DISTRIBUTION AND THE SPIN-OFF COLI DISTRIBUTION Information on the COLI Distribution On [.] 2015, the COLI Board declared the COLI Distribution to the Qualifying COLI Shareholders, being registered holders of COLI Shares whose names appear on the register of members of COLI as at the Record Date. The COLI Distribution will be satisfied wholly by way of a distribution in specie to the Qualifying COLI Shareholders of an aggregate of 3,286,860,460 Shares, representing the entire issued share capital of our Company, in proportion to their shareholdings in COLI as at the Record Date. Pursuant to the COLI Distribution, the Qualifying COLI Shareholders will be entitled to one Share for every three COLI Shares held as at the Record Date. Fractional entitlements of Qualifying COLI Shareholders to our Shares under the COLI Distribution will be disregarded and will instead be aggregated and sold by COLI on the market and the aggregate proceeds of such sale (net of expenses and taxes) will be retained for the benefit of COLI. On [.] 2015, COLI announced that as the Spin-off will be implemented by way of the COLI Distribution alone, the Spin-off will not constitute a transaction for COLI under Chapter 14 of the Listing Rules and accordingly, there will be no requirement for COLI to comply with the notification or shareholders approval requirements under Chapter 14 of the Listing Rules. Condition to the COLI Distribution The COLI Distribution is conditional on the Listing Committee granting approval for the listing by way of introduction of, and permission to deal in, our Shares on the Main Board of the Stock Exchange and such approval not having been revoked prior to the completion of the Spinoff. If this condition is not satisfied, the COLI Distribution will not be made and the Spin-off will not take place. Non-Qualifying COLI Shareholders The distribution of our Shares under the COLI Distribution to certain COLI Shareholders may be subject to laws of jurisdictions outside Hong Kong. The COLI Shareholders residing in jurisdictions other than Hong Kong should inform themselves about and observe all legal and regulatory requirements applicable to them. It is the responsibility of the COLI Shareholders and the Beneficial COLI Shareholders to satisfy themselves as to the full observance of the laws of the relevant jurisdictions applicable to them in connection with COLI Distribution, including obtaining of any governmental, exchange control or other consents which may be required, or compliance with any other necessary formalities and payment of any issue, transfer or other taxes due in such jurisdiction. The COLI Overseas Shareholders and the Beneficial COLI Shareholders should consult their professional advisers if they are in any doubt as to the potential applicability of, or consequences under, any provision of law or regulation or judicial or regulatory decisions or interpretations in any jurisdiction, territory or locality therein or thereof and, in particular, whether there will be any restriction or prohibition on the receipt, acquisition, retention, disposal or otherwise with respect to our Shares. It is emphasised that none of COLI, our Company, the Joint Sponsors, any of their respective directors, officers, employees, agents or representatives or any other person involved in the Spin-off accepts any responsibility in relation to the above. 26

32 COLI DISTRIBUTION AND THE SPIN-OFF The Non-Qualifying COLI Shareholders are those COLI Shareholders with registered addresses in, or the COLI Shareholders or Beneficial COLI Shareholders who are otherwise known by COLI to be residents of or located in, jurisdictions outside Hong Kong as at the Record Date and whom the COLI Board and the Board, based on enquiries made on their behalves, consider it necessary or expedient to exclude them from receiving Shares pursuant to the COLI Distribution on account of the legal restrictions under the applicable laws of the relevant jurisdictions where the COLI Shareholders or Beneficial COLI Shareholders are resident or located in and/or the requirements of the relevant regulatory bodies or stock exchanges in those jurisdictions. The relevant Non-Qualifying COLI Shareholders will not receive any Shares. Our Shares which the Non-Qualifying COLI Shareholders would otherwise receive pursuant to the COLI Distribution will be sold by COLI on their behalf on the market as soon as reasonably practicable following the commencement of dealings in our Shares on the Stock Exchange. The aggregate proceeds of such sale (net of expenses and taxes) will be paid to the relevant Non-Qualifying COLI Shareholders (in proportion to their shareholdings in COLI as at the Record Date) in Hong Kong dollars in full satisfaction of the relevant Shares which they would otherwise receive pursuant to the COLI Distribution, provided that if the amount that a Non-Qualifying COLI Shareholder would be entitled to receive is less than HK$50, such sum will be retained for the benefit of COLI. Such payment of net proceeds to the Non-Qualifying COLI Shareholders is expected to be made on or around [REDACTED]. As at the Latest Practicable Date, based on the information provided by COLI, there were 20 COLI Shareholders whose addresses as registered in the register of members of COLI were outside Hong Kong, namely in Canada, Macau, Malaysia, Japan, the Philippines, the PRC, Taiwan, Thailand, the United Kingdom and the United States. Based on the legal advice received and, where relevant, taking into account the number of COLI Overseas Shareholders in the relevant jurisdictions as at the Latest Practicable Date and/ or the number of COLI Shares they then held and assuming that the relevant legal requirements remain unchanged, the Excluded Jurisdictions are expected to be: (i) (ii) Canada; and the United States, and therefore, the COLI Overseas Shareholders in these Excluded Jurisdictions are expected to be Non-Qualifying COLI Shareholders. With respect to the Excluded Jurisdictions, COLI will send a letter to CCASS Participants (other than CCASS Investor Participants) notifying them that, in light of applicable laws and regulations of the Excluded Jurisdictions, to the extent they hold any COLI Shares on behalf of any Beneficial COLI Shareholder with an address located in any of the Excluded Jurisdictions, they should sell our Shares which they receive pursuant to the COLI Distribution on behalf of the COLI Overseas Shareholder and pay the net proceeds of such sale to such Beneficial COLI Shareholder. None of COLI, our Company, the Joint Sponsors, any of our or their respective directors, officers, employees, agents or representatives or any other person involved in the Spin-off takes any responsibility for the sale of such Shares or the payment of the net proceeds of the sale of such Shares to any such underlying Beneficial COLI Shareholder. 27

33 COLI DISTRIBUTION AND THE SPIN-OFF If there is any other jurisdiction outside Hong Kong which is not referred to above in which the address of any COLI Shareholder as shown in the register of members of COLI as at the Record Date is located or any COLI Shareholder or Beneficial COLI Shareholder as at the Record Date is otherwise known by COLI to be located or resident, and such COLI Shareholders should, in the view of the COLI Board and the Board having made the relevant enquiries and having considered the circumstances, be excluded from receiving our Shares pursuant to the COLI Distribution on the basis of the legal restrictions under the applicable laws of such jurisdiction or the requirements of the relevant regulatory bodies or stock exchanges in such jurisdiction, our Company will make an announcement. INFORMATION FOR THE COLI OVERSEAS SHAREHOLDERS COLI Overseas Shareholders residing or located in the United States No Shares will be distributed into the U.S. as part of the COLI Distribution. Our Shares have not been registered under the U.S. Securities Act or the laws of any state in the United States, and may not be offered or sold within the United States, absent registration or an exemption from the registration requirements of the U.S. Securities Act and applicable State laws. There will be no public offering of securities in the United States. Neither the SEC nor any other U.S. federal or state securities commission or regulatory authority has approved or disapproved of our Shares or passed an opinion on the adequacy of this listing document. Any representation to the contrary is a criminal offence in the United States. COLI Overseas Shareholders residing or located in the PRC In consideration of the difficulty in ascertaining whether COLI Shareholders in the PRC have complied with the relevant legal procedures in the PRC, our Directors have been advised by our PRC legal adviser that this listing document shall not be distributed in or into the PRC. COLI PRC Stock Connect Investors According to the CCASS Shareholding Search available on the Stock Exchange s website ( as at Latest Practicable Date, ChinaClear held 3,404,000 COLI Shares, representing approximately 0.03% of the total issued COLI Shares. ChinaClear is a CCASS Participant with the HKSCC Nominees Limited. Our Directors have made the relevant enquiries and have been advised by our PRC legal adviser that the COLI PRC Stock Connect Investors may receive our Shares pursuant to the COLI Distribution through ChinaClear. In addition, according to our PRC legal adviser and the Frequently Asked Questions Series 29 regarding Shanghai-Hong Kong Stock Connect, the COLI PRC Stock Connect Investors (or the relevant ChinaClear participants, as the case may be) 28

34 COLI DISTRIBUTION AND THE SPIN-OFF whose stock accounts in ChinaClear are credited with our Shares may only sell them on the Stock Exchange under Shanghai-Hong Kong Stock Connect but may not purchase our Shares as our Shares are not eligible securities under the Shanghai-Hong Kong Stock Connect. COLI PRC Stock Connect Investors should seek advice from their intermediary (including broker, custodian, nominee or ChinaClear participant) and/or other professional advisers for details of the logistical arrangements as required by ChinaClear. Information for the COLI Overseas Shareholders residing or located in Taiwan The issue and transfer of our Shares by way of the COLI Distribution have not been and will not be registered with the Financial Supervisory Commission ( FSC ) of Taiwan pursuant to relevant securities laws and regulations and our Shares may not be offered or sold in Taiwan through a public offering or in circumstance which constitutes an offer within the meaning of the Securities and Exchange Act of Taiwan, that requires a registration or approval of the FSC of Taiwan. No person or entity in Taiwan has been authorised to offer or sell our Shares in Taiwan. THE SPIN-OFF If the Spin-off proceeds, it will be implemented in compliance with the Listing Rules. The Spin-off will be effected through a listing of our Shares by way of introduction and the COLI Distribution whereby the Qualifying COLI Shareholders will receive the relevant Shares. The Spin-off does not involve an offering of our Shares or any other securities of our Company for purchase or subscription and no money will be raised in conjunction with the Spin-off. Reasons for and Benefits of the Spin-off COLI considers that the Spin-off is in the interests of COLI Group (including our Group) and the COLI Shareholders taken as a whole and the Spin-off will better position each of COLI Group and our Group for growth in its respective businesses and deliver clear benefits to both by: (a) Unlocking potential value of our Group The directors of COLI believe that a separate listing of our Group s property management business will unlock the potential value for the COLI Shareholders and identify and establish the fair value of our Group s property management business. The directors of COLI anticipate that this value will represent a substantial enhancement to its existing value within the confines of COLI to the benefit of the COLI Shareholders. (b) Focus and clarity of business The Spin-off will allow the different management teams of COLI Group and our Group to focus more effectively on their respective distinctive businesses, allowing for a more focused strategy and efficient resource allocation at both businesses. It will also facilitate dedicated management focus on further developing our Group and capturing any opportunities arising in the property management industry, particularly in the PRC. 29

35 COLI DISTRIBUTION AND THE SPIN-OFF (c) Creates a separate investor base for our Group The Spin-off will result in our Group being valued on a stand-alone basis, thereby providing investors with more information on the operating performance of our Group. It will also help create a new investor base for our Group as it will be able to attract new investors who are focused on the property management sector. (d) Enhanced fundraising flexibility As a result of the Spin-off, our Group will have separate fundraising platform in the equity and debt capital markets, which will increase its financing flexibility. A separate listing of our Group s business will also provide clarity to the credit profile of our Group and to financial institutions who wish to analyse and lend against the credit rating of our Group s business. (e) Management incentive The share price performance of our Company can serve as a separate benchmark for the public to evaluate the performance of our Group, which could in turn serve as an incentive for the management to seek improvement and raise efficiency of our Group s businesses. [REDACTED] 30

36 COLI DISTRIBUTION AND THE SPIN-OFF ARRANGEMENTS RELATING TO THE SALE OF ODD LOTS OF OUR SHARES In order to assist our Shareholders to sell their odd lots of Shares received under the COLI Distribution if they so wish, our Company has appointed [REDACTED] and [REDACTED] (the Odd Lot Traders ) to provide, on a best efforts basis, a service to match the sale and purchase of odd lots of Shares (the Matching Service ) during the period of 60 days commencing from (and including) the Listing Date (the Matching Period ). 31

37 COLI DISTRIBUTION AND THE SPIN-OFF In the event of successful matching, no brokerage fee will be charged by the Odd Lot Traders for the odd lots of Shares sold as our Company has agreed to absorb this cost as part of the appointment of the Odd Lot Traders. The opening of trading accounts with the Odd Lot Traders for the purpose of the Matching Service is subject to satisfactory completion of requisite account opening procedures. Any Shareholder wishing to make use of the Matching Service may contact the following persons during the Matching Period: [REDACTED] Our Shareholders who have brokerage accounts and who wish to sell their odd lots of Shares received under the COLI Distribution may also approach and inform their brokers that the Odd Lot Traders will, on a best efforts basis during the Matching Period, provide liquidity for odd lots of Shares. Our Shareholders selling odd lots of Shares through their brokers to the Odd Lot Traders will be responsible for all fees (if any) payable to their brokers, but no additional brokerage fee will be payable by them to the Odd Lot Traders. Holders of Shares received under the COLI Distribution should note that the successful matching of odd lots of Shares and the provision of liquidity referred to above is not guaranteed. Our Shareholders are advised to consult their own professional advisers if they are in doubt about any of these arrangements. 32

38 RESPONSIBILITY STATEMENT [REDACTED] 33

39 FORWARD-LOOKING STATEMENTS This listing document contains forward-looking statements. All statements other than statements of historical fact contained in this listing document, including, without limitation: (a) (b) (c) (d) (e) the discussions of our business strategies, objectives and expectations regarding our future operations, sales, margins, profitability, liquidity and capital resources; the future development of, and trends and conditions in, the property management industry and the general economy of the countries in which we operate or plan to operate; our ability to control costs; the nature of, and potential for, the future development of our business; and any statements preceded by, followed by or that include words and expressions such as expect, believe, plan, intend, estimate, forecast, project, anticipate, seek, may, will, ought to, would, should and could or similar words or statements, as they relate to our Group or our management, are intended to identify forward-looking statements. These statements are based on assumptions regarding our present and future business, our business strategies and the environment in which we will operate. These forward-looking statements reflect our current views as to future events and are not a guarantee of our future performance. Forward-looking statements are subject to certain known and unknown risks, uncertainties and assumptions, including the risk factors described in Risk Factors, whichmay cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Subject to the requirements of applicable laws, rules and regulations, we do not have any obligation, and undertake no obligation, to update or otherwise revise the forward-looking statements in this listing document, whether as a result of new information, future events or developments or otherwise. As a result of these and other risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this listing document might not occur in the way we expect or at all. Accordingly, you should not place undue reliance on any forwardlooking information. All forward-looking statements contained in this listing document are qualified by reference to the cautionary statements set out in this section. In this listing document, statements of or references to our intentions or those of any of our Directors are made as at the date of this listing document. Any of these intentions may change in light of future developments. 34

40 RISK FACTORS You should consider carefully all the information in this listing document and, in particular, the risks and uncertainties described below. The occurrence of any of the following events could harm us materially and adversely affect our business, financial condition, results of operations or prospects. If any of these events occur, the trading price of our Shares could decline and you may lose all or part of your investment. RISKS RELATING TO OUR BUSINESS AND INDUSTRY Our ability to maintain and improve our current level of profitability depends on our ability to control operating costs, in particular, our cost of labour, and our profit margins and results of operations may be materially and adversely affected by increases in labour or other operating costs The property management industry is a labour-intensive industry. In the years ended 31 December 2012, 2013 and 2014 and the five months ended 31 May 2014 and 2015, labour costs for our own employees and sub-contracting costs represented 69.1%, 66.6%, 68.2%, 68.8% and 70.3%, respectively, of our total direct operating expenses. To maintain and improve our profit margins, it is critical for us to effectively control and reduce our cost of labour as well as other operating costs. Various factors contribute to the rise in our cost of labour, including but not limited to:. increase in minimum wage. Minimum wages across China are set at the regional or district level, based largely on standards determined by relevant provincial, municipal and autonomous region governments. The minimum wage in the regions and districts in which we operate has increased substantially in recent years, impacting our direct labour costs as well as the fees we pay to our third-party sub-contractors. For further information on minimum wage, please see Industry Overview Overview of the Property Management Industry in the PRC, Hong Kong and Macau Labourintensive Property Management Services ; and. increase in headcount. Due to the expansion of our operations and the establishing of our municipal management centres during the Track Record Period, our headcount continued to increase. In addition to our cost of labour, this increase in headcount also increased other associated costs such as those related to training, social insurance contributions and quality control measures. We will also need to retain and continuously recruit qualified employees to meet our growing demand for talent, which will further increase our total headcount. Our ability to maintain and improve our current profitability level depends upon whether we can effectively control and reduce our labour and other operating costs as our business expands and we replicate the same cost model across different sites. We may not be successful in reducing our reliance on manual labour through our automation and standardisation strategy. In addition, although we have partnered with various energy efficiency firms to implement energysaving measures with the goal of reducing our energy costs, there can be no assurance that such measures will be successful in reducing our energy costs. There is no assurance that we 35

41 RISK FACTORS will be able to continue to control or reduce our operating costs or improve our cost efficiency. If we cannot achieve this, our business, financial condition and results of operations may be materially and adversely affected. There is no guarantee that we can procure new property management service contracts During the Track Record Period, we generally procured new property management service contracts through a tender process. At the pre-delivery stage of newly developed properties, where property units have not yet been sold or occupied or property owners associations have not yet been formed, the initial property management service provider is generally selected by a tender process conducted by the property developer. The selection of a property management company depends on a number of factors, including but not limited to the quality of services provided, the level of pricing and the operating history of the property management company. There is no assurance that we will be able to procure new property management service contracts in the future. Furthermore, prior to the Spin-off, a significant portion of our property management service contracts related to the management of properties developed by our Controlling Shareholders and Fellow Associates. As at 31 December 2012, 2013 and 2014 and 31 May 2015, properties developed by our Controlling Shareholders and Fellow Associates accounted for 87.5%, 90.7%, 89.3% and 90.5% of our total GFA under management, respectively. Due to such concentration, any adverse development in the operations of our Controlling Shareholders and Fellow Associates or their ability to develop new properties may affect our ability to procure new property management service contracts. If we are not able to supplement any shortfall in managing properties developed by our Controlling Shareholders and Fellow Associates with managing properties developed by third-party developers, our growth prospects may be materially and adversely affected. Our future growth may not materialise as planned, and failure to manage any future growth effectively may have a material adverse effect on our business and results of operations We have been expanding our business in recent years mainly through organic growth and through acquisitions. As at 31 December 2012, 2013 and 2014 and 31 May 2015, we were contracted to manage properties with an aggregate GFA under management of 34.1 million sq.m., 45.9 million sq.m., 56.4 million sq.m. and 67.6 million sq.m., respectively. We seek to continue to expand through increasing our total GFA under management and the number of properties we are contracted to manage in existing and new markets. However, our expansion is based upon our forward-looking assessment of market prospects. We cannot assure you that our assessment will always turn out to be correct or we can grow our business as planned. Our expansion plans may be affected by a number of factors beyond our control. Such factors include changes in the PRC s economic condition in general and the real estate market in particular, government regulations, changes in supply and demand for our services, availability of suitable property managers and third-party sub-contractors, as well as our ability to obtain sufficient resources for our expansion efforts. 36

42 RISK FACTORS We may have limited knowledge of the local property management service markets or have limited prior business experience in the new markets into which we will expand. In addition, we may face difficulties in adapting to the administrative, regulatory and tax environments in new markets, which could be substantially different from those in our established markets. We may not have the same level of familiarity with local business practices or relationships with local vendors, third-party sub-contractors, suppliers and other business partners as we do in our established markets. We may have limited ability to leverage our brand name in new markets in the way that we have done so in our established markets, and may face more intense competition from established residential property management companies or property developers that manage their own properties in those new markets. Furthermore, our future growth depends on our management s ability to improve our administrative, technical, operational and financial infrastructure. Our ability to grow also depends on our ability to successfully hire, retain, train, supervise and manage additional officers and employees, generate sufficient liquidity internally or obtain external financing for our capital needs, replicate our business model, allocate our human resources and manage our relationships with a growing number of customers, suppliers and other business partners without compromising our quality standards. There can be no assurance that our future growth will materialise or that we will be able to manage our future growth effectively, and failure by us to grow or to manage any future growth may have a material adverse effect on our business and results of operations. Our community leasing, sales and other services business may not achieve returns as anticipated We plan to grow our community leasing, sales and other services business by expanding the coverage of our service platform, improving the integration of online and offline services and further developing our O2O platform. As we do not have the same level of experience in valueadded services provided through our online platform as we do in our property management services business, we might not be as successful in developing this segment of our business. As a result, there is no assurance that we could grow our community leasing, sales and other services business as planned. Given the competitiveness of the market, there is no assurance that we will be able to recruit a sufficient number of qualified employees to support our growth plan. In addition, the development of community leasing, sales and other services business heavily relies on our ability to identify suitable products and servicestobemarketedonourserviceplatformaswell as our ability to develop an effective marketing strategy to increase our market penetration. See Our O2O platform is an evolving platform which may fail to attract and/or retain sufficient interest from residents or local vendors below. Furthermore, in order to develop our community leasing, sales and other services business, we need to find suitable software companies that can fulfill our business needs. There is no assurance we will be able to engage a suitable software company at a reasonable cost, if at all. Building our online platform also requires investing significant resources in our software, which may result in fluctuations in our returns. 37

43 RISK FACTORS Moreover, it is our goal to expand the functionality of our O2O platform and its mobile application to increase user accessibility, improve users experience and expand our service offerings. As our O2O platform is fairly new, certain community leasing, sales and other business we plan to offer may not be realised due to changes in demand from residents and market trends, and the related costs incurred may not be recovered. Our O2O platform is an evolving platform which may fail to attract and/or retain sufficient interest from residents or local vendors We believe that our O2O platform is important to our future growth. We plan to attract increased usage by residents of the properties we manage and local vendors around such properties. For further information on our planning to enhance the usage of our O2O platform, please see Business Our Business Strategies Continue to develop our O2O platform to optimise service experience. However, our O2O platform is a relatively new platform which is undergoing constant evolution. We regularly seek to introduce different products and services from local vendors through our O2O platform. As we may have limited experience with such new products and services, there can be no assurance that residents will respond favourably to them. In addition, we may roll out new platform features from time to time, which may present new and significant technical and operational challenges. If our O2O platform fails to attract or retain sufficient interest from residents or local vendors as planned, they may cease using the platform or turn to competing platforms. In such an event, we will not be able to successfully develop our community leasing, sales and other services business through our O2O platform or introduce more revenue-generating community leasing, sales and other services business on our O2O platform, and our business and results of operations could be materially and adversely affected. Our quality control is affected by the third-party sub-contractors that perform certain property management and engineering services We delegate certain property management services, such as cleaning services, garden landscape maintenance services and lift repair and maintenance services, to third-party subcontractors. For the years ended 31 December 2012, 2013 and 2014 and the five months ended 31 May 2014 and 2015, our sub-contracting fees to third-party sub-contractors constituted 14.1%, 14.9%, 14.6%, 13.9% and 14.3% of our total direct operating expenses, respectively. We may not be able to monitor their services as directly and efficiently as with our own employees. They may take actions contrary to our instructions or requests, or be unable or unwilling to fulfill their obligations. As a result, we may have disputes with our sub-contractors, receive complaints regarding the services provided by them or be held responsible for their actions, any of which could lead to damage to our reputation, additional expenses and business disruptions and potentially exposes us to litigation and damage claims. Upon the expiration of our agreements with our current third-party sub-contractors, there can be no assurance that we will be able to renew such agreements or find suitable replacements in a timely manner, on terms acceptable to us, or at all. In addition, if our third-party sub-contractors fail to maintain a stable team of qualified manual labour or access to a stable supply of qualified manual labour, their work process may be interrupted. Any interruption to our third-party sub-contractors work process may potentially result in a breach of the contract we entered into with our customers. Such events could materially and adversely affect our service quality, our reputation, as well as our business, financial condition and results of operations. 38

44 RISK FACTORS We may fail to recover payments on behalf of management offices During the Track Record Period, our Group made payments on behalf of management offices for properties we manage under commission basis in circumstances such as (i) before the establishment of a bank account by the management office of the property under management; (ii) for salaries, social security payments and social welfare payments that are consolidated and paid by our Group; (iii) for utility costs that are consolidated and paid by our Group; (iv) for centralised procurement costs; (v) for properties under our management prior to delivery to property owners; and (vi) when management offices experience difficulties with liquidity due to changes in regulations such as minimum wage. For more information, please see Financial Information Description of Certain Items in Statement of Financial Position Trade and Other Receivables Other Receivables. Management judgment is required to determine whether the management offices have the ability to settle such payments. We take into consideration a number of indicators to determine whether there is any objective evidence of impairment loss on payments on behalf of management offices, including, among other things, (i) subsequent settlement status of payments on behalf of management offices, (ii) historical write-off experience of payments on behalf of management offices, (iii) the financial performance of the underlying properties (such as profitability trends, cash receipts from residents by the respective management offices during each reporting period, and cash payments to settle the accounts payable of management offices), and (iv) the management fee collection rate of properties in estimating future cash flows from such properties. For the balances that our management believes may not be recovered within a reasonable time frame, we make provisions for receivables impairment. For further information on impairment of payments on behalf of management offices, please see Financial Information Critical Accounting Policies, Estimates and Judgments Impairment of payments on behalf of management offices under commission basis. Although our management s estimates for the relevant assumptions have been made in accordance with information available to us currently, such estimates or assumptions may need to be adjusted if new information becomes known. In the event that the actual recoverability is lower than expected, or that our past provision for impairment becomes insufficient in light of new information, we may need to make additional provision for impairment, which may in turn materially and adversely affect our business, financial condition and results of operations. Over the Track Record Period, our net payments on behalf of management offices increased due to increases in our GFA under management under commission basis. In addition, we experienced lower collection rates of payments during the first six months of the year due to our customers payment behaviour patterns in the PRC. There is no guarantee that we will maintain or improve the recoverability of our payments on behalf of management offices through our collections policy, or that the financial performance of the properties will be maintained or improved. There can be no assurance that payments on behalf of management offices will not increase in the future, especially in light of our growth and geographic expansion. A substantial increase in the payments on behalf of management offices and impairment loss from the same could materially and adversely affect our business, financial condition and results of operations. 39

45 RISK FACTORS We charge management fees for certain properties that we manage under lump sum basis, which could subject us to losses Properties managed under lump sum basis constituted 73.3%, 70.2%, 65.1% and 59.3% of our total GFA under management as at 31 December 2012, 2013 and 2014 and 31 May 2015, respectively. Under lump sum basis, we are generally paid management fees for our services regardless of the actual amount of property management expenses we incur. In the event that the amount of property management fees that we charge is insufficient to cover all the management expenses incurred, we are not entitled to collect the shortfall from the relevant property owners association or property owners. As such, we may suffer losses, which could result in an adverse effect on our profitability, financial condition and results of operations. Furthermore, our ability to mitigate the risk of such losses through cost-saving initiatives such as automation measures to reduce labour costs and energy-saving measures to reduce energy costs may not be successful. We are in a highly competitive business with numerous competitors and if we do not compete successfully against existing and new competitors, our business, financial condition, results of operations and prospects may be materially and adversely affected The PRC, Hong Kong and Macau property management industry is highly competitive and fragmented. See Industry Overview Competition. Our major competitors include large national, regional and local property management companies. Competition may intensify as our competitors expand their product or service offerings or as new competitors enter into our existing or new markets. We believe that we compete with our competitors on a number of factors, including primarily scale, brand recognition, financial resources and service quality. Moreover, our engineering services face competition from other property management companies as well as engineering companies providing similar services. Our competitors may have better track records, longer operating histories and greater financial, technical, sales, marketing, distribution and other resources, as well as greater name recognition and larger customer bases. As a result, these competitors may be able to devote more resources to the development, promotion, sale, and support of their services. In addition to competition from established companies, emerging companies may enter our existing or new markets. There can be no assurance that we will be able to continue to compete effectively or maintain or improve our market position, and such failure could have a material adverse effect on our business, financial condition and results of operations. We believe our current success can be partially attributed to our automation measures in our operations. We plan to further refine our service automation and standardisation measures to enhance the quality and consistency of our services, improve our on-site service teams efficiency and reduce our costs. If we fail to continue to improve our business process through measures such as automation and standardisation, our competitors may emulate our business model, and we may lose a competitive advantage that has distinguished us from our competitors. If we do not compete successfully against existing and new competitors, our business, financial condition, results of operations and prospects may be materially and adversely affected. 40

46 RISK FACTORS Termination or non-renewal of our property management services for a significant number of properties could have a material adverse effect on our business, financial condition and results of operations We generate a significant portion of our revenue from property management services. In the years ended 31 December 2012, 2013 and 2014 and the five months ended 31 May 2014 and 2015, revenue generated from our property management services constituted 96.3%, 94.4%, 94.1%, 96.1% and 95.3%, respectively, of our total revenue. Our property management service contracts with the property developers, property owners associations or individual property owners may be terminated for cause. In addition, our property management service contracts that will expire in 2015, 2016 and 2017 accounted for 39.8% of our total GFA under management as at 31 May See Business Our Property Management Services Expiration Schedule for Property Management Service Contracts. There can be no assurance that any such contracts will not be terminated prior to their expiration or will be renewed when their terms expire. Termination or non-renewal of a significant number of property management service contracts could have a material and adverse impact on our revenue from property management services. Moreover, during the Track Record Period, we generally continued to provide services to certain properties notwithstanding that the relevant property management service contracts had expired. As at 31 May 2015, we provided services to 44 properties, which accounted for 8.9 million sq.m., or 13.2%, of our GFA under management, under such arrangements. As this type of work relationship may be unilaterally terminated by either party, there is no guarantee that we can continue to provide services and generate revenue from these properties, either by maintaining the current work relationship or through a formal contract. If we cease to provide property management services to a significant number of these properties, this could have a material and adverse impact on our revenue from property management services. In addition, the performance and development of our value-added services to properties we manage are significantly influenced by our GFA under management and the number of properties we manage. Therefore, any failure to renew our property management service contracts or termination of such contracts could also adversely affect the performance of our value-added services segment. As such, termination or non-renewal of our property management services contracts for a significant number of properties we manage could have a material adverse effect on our business, financial condition and results of operations. Damage to the common areas of the properties we manage as a result of any natural disasters, intended or unintended actions of residents or other events could adversely affect our business, results of operations and financial condition The common areas of the properties we manage may be damaged in a variety of ways that are out of our control, including but not limited to natural disasters, residents intended or unintended actions, and epidemics, such as Middle East Respiratory Syndrome (MERS) or Severe Acute Respiratory Syndrome (SARS). For example, in the event of natural disasters, such as earthquakes, typhoons and floods, the common areas may be materially damaged. Although the special fund for residence maintenance may cover all or part of the cost, there can be no assurance that such fund will be sufficient. If any person deliberately or recklessly sets 41

47 RISK FACTORS fire or causes flooding in an apartment or common area, the exterior of the building, corridors and stairways may be damaged, or if a person commits or is suspected of having committed criminal activities within the properties we manage, we would need to allocate additional resources to assist the police and other governmental authorities in their investigations. In the event of any damage to the common areas of the properties under our management, we may need to incur additional costs to repair such damage. The additional costs we incur due to damage to the common areas may increase along with our business growth and geographic expansion. For example, certain areas where we operate may be located on an earthquake belt or may be subject to frequent typhoons. Accidents in our business may expose us to liability and reputational risk Accidents may occur in the ordinary course of our business. We provide repair and maintenance services to property developers and properties under our management through our own employees and third-party sub-contractors. Repair and maintenance services such as elevator maintenance involve the operation of heavy machinery and are generally subject to certain risks of accidents. These occurrences could result in damage to, or destruction of, properties, personal injury or death and legal liability. Working in a dangerous environment presents risks to our employees and third-party sub-contractors. In addition, we are exposed to claims that may arise due to employees or third-party sub-contractors negligence or recklessness when performing repair and maintenance services. We may be held liable for the employees, sub-contractors or residents injuries or deaths. We may also experience interruptions to our business and may be required to change the manner in which we operate as a result of governmental investigations or the implementation of safety measures upon occurrence of accidents. Any of the foregoing could materially and adversely affect our reputation, business, financial condition and results of operations. Interruption to automated and standardised operations may adversely affect our business and results of operations We employ various automation devices, such as remote video surveillance cameras, building access systems and carpark security systems. Many factors such as power outages and damage to our equipment may cause interruptions to our centralised remote system and other automation devices. If we experience any power outage, our computer system, which is a key component of our remote video surveillance system, may not function properly. Our equipment may also be subject to damages caused by unforeseeable events and unexpected natural disasters, such as earthquake, fire or flood, or other similar events. If there is any interruption to our automated business operations, our business, financial condition and results of operations may be materially and adversely affected. We are subject to the regulatory environment and measures affecting the property management industry Our operations are affected by the regulatory environment and measures affecting the property management industry. In particular, the fees that property management companies may charge in connection with property management services are subject to regulation and supervision by relevant regulatory authorities. For example, for our operations in the PRC, the relevant price administration department and construction administration department of the State 42

48 RISK FACTORS Council are jointly responsible for the supervision over and administration of the fees charged in relation to property management services, and such fees may need to follow PRC government guidance prices. Although government-imposed price controls on property management fees may relax over time pursuant to the National Development and Reform Commission on the Price Control of Some Services Liberalisation Opinion Notice ( 國家發展改革委關於放開部分服務價格意見的通知 ( 發改價格 [2014]2755 號 )), which was promulgated on 17 December 2014, our property management fees continue to be subject to price controls until local regulations implementing this notice are passed. For more information, please see Appendix III Regulatory Overview PRC Regulatory Overview Legal Regulations on Enterprises Engaging in Property Management Services. We believe the implementing regulations of this notice will allow us greater flexibility in our pricing in the future. Government-imposed limits on fees, coupled with rising labour and other operating costs, could have a negative impact on property management companies earnings. If a property is managed under lump sum basis, the property management company may experience a decrease in profit margin. If a property is managed under commission basis, in the event that the collected fees after deducting the commission are insufficient to cover property management expenses, the property owners are legally responsible for making up for such shortage. However, there is no assurance that we will be able to recover any payments made on behalf of management offices of properties managed under commission basis. We cannot assure you that the government regulations on fees and other matters concerning the property management industry will not continue to have an adverse effect on our business, financial condition and results of operations, which may be material. We are affected by the government regulations on the real estate industry, which may limit our business growth We generated a significant portion of our revenue from our property management services segment during the Track Record Period. The performance of our property management services segment is primarily dependent on our total GFA under management and the number of properties we manage. As such, our growth in the property management services segment is, and will likely continue to be, affected by government regulations with respect to the real estate industry. For further information on laws and regulations that are applicable to our business, please see Appendix III Regulatory Overview PRC Regulatory Overview. For example, the PRC government has implemented various restrictive measures with a view to monitoring the growth of the economy and discouraging speculation in the real estate market in the past. The PRC government directly and indirectly influences the development of the PRC real estate industry through various industry policies and other economic measures, such as control over the supply of land for property development, control of foreign exchange, property financing, taxation and foreign investment. Through these policies and measures, the PRC government may restrict or reduce property development activities, place limitations on the ability of commercial banks to make loans to property purchasers, impose additional taxes and levies on property sales and affect the delivery schedule and occupancy rates of the properties we service. If the PRC government implements any restrictive regulations and measures, this may affect the PRC real estate industry, thereby limiting our business growth and resulting in a material adverse effect on our business, financial condition and results of operations. 43

49 RISK FACTORS System interruptions and security risks, including security breaches and identity theft, may result in reduced use by our customers of our O2O platform, and expose us to the risk of litigation which could negatively affect our financial and operating results and damage our reputation We may experience occasional system interruptions and delays that make our O2O platform and its services unavailable or difficult to access, and prevent us from promptly responding or providing services to our customers, which may reduce the attractiveness of our O2O platform. If we are unable to continue to effectively upgrade our systems and network infrastructure and take other steps to improve the efficiency of our systems, there may be system interruptions or delays and adversely affect our operating results. In addition, our e- commerce businesses are subject to security risks, including security breaches and identity theft. In order to succeed, our e-commerce businesses must be able to provide secure transmission of confidential information over public networks. Any penetration of network security or other misappropriation or misuse of personal information could cause interruptions in the operations of our business and subject us to increased costs, litigation and other liabilities, which could materially and adversely affect our financial and operating results and damage our reputation. Our business is significantly influenced by various factors affecting the property management industry and general economic conditions Our business, financial condition and results of operations are and will continue to be dependent on various factors affecting the property management industry and general economic conditions, most of which are beyond our control. For example, limited flexibility in the pricing of our property management fees can adversely affect profit margins in the event of increased labour costs. Furthermore, any economic slowdown, recession or other developments in the social, political, economic or legal environment of the PRC, Hong Kong or Macau could result in fewer new property development projects, or a decline in the purchasing power of residents or tenants living in the properties we manage, resulting in lower demand for our services and lower revenue for us. As such, our business, financial condition and results of operations could be materially and adversely affected. Our success depends upon the retention of our senior management, as well as our ability to attract and retain qualified and experienced employees Our continued success is highly dependent upon the efforts of our Executive Directors and other key employees. If any of our key employees leaves and we are unable to promptly hire and integrate a qualified replacement, our business, financial condition and results of operations may be materially and adversely affected. For further information on our senior management, please see Directors and Senior Management. In addition, the future growth of our business will depend in part on our ability to attract and retain qualified personnel in all aspects of our business, including corporate management and property management personnel. If we are unable to attract and retain these qualified personnel, our growth may be limited and our business, financial condition and operating results could be materially and adversely affected. 44

50 RISK FACTORS Our insurance may not sufficiently cover, or may not cover at all, losses and liabilities we may encounter Thereisnoassurancethatourinsurancecoveragewillbesufficientoravailabletocover damages, liabilities or losses we may incur in the course of our business. Moreover, there are certain losses for which insurance is not available in the PRC on commercially practicable terms, such as losses suffered due to business interruption, earthquakes, typhoons, flooding, war or civil disorder. If we are held responsible for any such damages, liabilities or losses due to insufficiency or unavailability of insurance, there could be a material adverse effect on our business, financial condition and results of operations. See Business Insurance. The expansion of our business may expose us to increased risks of non-compliance with rules and regulations issued by a number of governments at provincial and local levels As we expand our business operations into new geographic regions and broaden the range of services we perform, we are subject to an increasing number of provincial and local rules and regulations. In addition, because the size and scope of our operations have increased during the Track Record Period, the difficulty of ensuring compliance with the various local property management regulations and the potential for loss resulting from non-compliance have increased. If we fail to comply with the related local regulations, we may be subject to penalties by the competent authorities. The laws and regulations applicable to our business, whether national, provincial or local, may also change in ways that materially increase the costs of compliance, and any failure to comply could result in significant financial penalties which could have a material adverse effect on our business, financial condition and results of operations. We may be involved in legal, labour and other disputes and claims from time to time arising out of our operations We may, from time to time, be involved in disputes with and subject to claims by property developers or property owners to whom we provide property management services. Disputes may also arise if they are dissatisfied with our services. Please see Business Quality Control Quality Control over Property Management Services. In addition, property owners may take legal action against us if they perceive that our services are inconsistent with our service standards contained in the representations and warranties made to such property owners. Furthermore, we may from time to time be involved in disputes with and subject to claims by other parties involved in our business, including third-party sub-contractors, suppliers and employees, or other third parties who sustain injuries or damages while visiting properties under our management. All of these disputes and claims may lead to legal or other proceedings or cause negative publicity against us, thereby resulting in damage to our reputation, substantial costs and diversion of resources and management s attention from our business activities. For more information, see Business Legal and Regulatory Proceedings. Any such dispute, claim or proceeding may have a material adverse effect on our business, financial condition and results of operations. 45

51 RISK FACTORS We do not carry product liability insurance and may be exposed to liabilities from disputes involving products and services advertised and sold on our O2O platform We collaborate with local vendors near the properties we manage to offer their products and services on our O2O platform. We may therefore become, or may be joined as, a defendant in litigation or administrative proceedings brought against such local vendors by purchasers of such products and services, governmental authorities or other third parties. These actions could involve claims alleging, among other things, that: (1) the quality of the products sold by local vendors fails to conform to required product quality; (2) advertisements made on our O2O platform with respect to such local vendors products or services are false, deceptive, misleading, libelous, injurious to the public welfare or otherwise offensive; (3) such local vendors products or services advertised on our platform are defective or injurious and may be harmful to others; and (4) such local vendors marketing, communications or advertising infringe on the proprietary rights of third parties. In addition, if the products sold through us are deemed by the PRC, Hong Kong or Macau government authorities to fail to conform to product quality and personal safety requirements in the PRC, Hong Kong or Macau, respectively, we could be subject to regulatory action. Violation of product quality and safety requirements by third-party products sold by us may subject us to confiscation of related earnings, penalties or an order to cease sales of the violating products or to cease operations pending rectification. If the offence is determined to be serious, our business licence to sell these products could be suspended and we could be subject to investigation and prosecution under criminal law. We currently do not carry any product liability insurance coverage. Any product liability claim or governmental regulatory action could be costly and time-consuming. We could be required to pay substantial damages as a result of such claim or action. A material design, manufacturing or quality failure in other parties products sold by us, safety issues or heightened regulatory scrutiny could each result in a product recall by us and increased product liability claims. Furthermore, customers may not use the products sold by us in accordance with product usage instructions, possibly resulting in customer injury. All of these events could materially harm our brand and reputation and marketability of such products, divert our management s attention and have a material adverse effect on our business, financial condition and results of operations. 46

52 RISK FACTORS Wemaybeconsidereda resident enterprise under the EIT Law and income tax on the dividends that we receive from our PRC operating subsidiaries may increase Our Company was incorporated in the Cayman Islands. A significant portion of our business is conducted through operating subsidiaries in the PRC. Under the EIT Law, enterprises established under the laws of foreign countries or regions and whose de facto management bodies are located within the PRC are considered resident enterprises and thus will generally be subject to enterprise income tax at the rate of 25% on their global income. On 6 December 2007, the State Council adopted the Regulation on the Implementation of EIT Law, effective as at 1 January 2008, which defines the term de facto management bodies as bodies that substantially carry out comprehensive management and control on the business operation, employees, accounts and assets of enterprises. In April 2009, the PRC State Administration of Taxation promulgated a circular to clarify the definition of de facto management bodies for enterprises incorporated overseas with controlling shareholders being onshore enterprises or enterprise groups in China. However, it remains unclear how the tax authorities will treat an overseas enterprise invested in or controlled by another overseas enterprise and ultimately controlled by PRC individual residents. If we were considered a PRC resident enterprise, we would be subject to enterprise income tax at the rate of 25% on our global income, and any dividend or gain on the sale of our Shares received by our non-resident enterprise shareholders may be subject to a withholding tax at a rate of up to 10%. In addition, although the EIT Law provides that dividend payments between qualified PRC resident enterprises are exempted from enterprise income tax, it remains unclear as to the detailed qualification requirements for this exemption and whether dividend payments by our PRC operating subsidiaries to us would meet such qualification requirements if we were considered a PRC resident enterprise for this purpose. If our global income were to be taxed under the EIT Law, our financial position and results of operations would be materially and adversely affected. Under the EIT Law and its implementing rules, dividend payments from PRC subsidiaries to a foreign shareholder, if the foreign shareholder is not deemed to be a PRC tax resident enterprise under the EIT Law, are subject to a withholding tax at the rate of 10%, unless the jurisdiction of such foreign shareholder has a tax treaty or similar arrangement with China and the foreign shareholder obtains approval from competent local tax authorities for application of such tax treaty or similar arrangement. Pursuant to the Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income ( 內地和香港特別行政區關於對所得避免雙重徵稅和防止偷漏稅的安排 )(the Hong Kong Tax Treaty ), Hong Kong tax residents will be subject to a withholding tax at a rate of 5% on dividends received from our PRC operating subsidiaries. Pursuant to the Hong Kong Tax Treaty, subject to certain conditions, this reduced withholding tax rate will be available for dividends received from PRC entities provided that the recipient can demonstrate it is a Hong Kong tax resident and it is the beneficial owner of the dividends. Our Company intends to apply for a Hong Kong tax resident certificate from the Inland Revenue Department of Hong Kong but there is no assurance that the certificate will be granted or that the reduced withholding tax rate will be available. In that case, our financial position and results of operations would be materially and adversely affected. 47

53 RISK FACTORS Our failure to protect our intellectual property rights could have a negative impact on our business and competitive position We consider our intellectual property, and in particular, the trademarks of the China Overseas Property logo, are crucial business assets, key to customer loyalty and essential to our future growth. The success of our business depends substantially upon our continued ability to use our brand, trade names and trademarks to increase brand recognition and to further develop our brand. The unauthorised reproduction of our trade names or trademarks could diminish the value of our brand and our market reputation and competitive advantages. Please see Business Intellectual Property Rights. We rely on a combination of trademarks, trade secrets, confidentiality procedures and contractual provisions to protect our intellectual property rights. Nevertheless, these afford limited protection and policing unauthorised use of proprietary information can be difficult and expensive. In addition, enforceability, scope and validity of laws governing intellectual property rights in the PRC are uncertain and still evolving, and could involve substantial risks to us. To our knowledge, the relevant authorities in the PRC historically have not protected intellectual property rights to the same extent as most developed countries. If we were unable to detect unauthorised use of, or take appropriate steps to enforce, our intellectual property rights, it could have a material adverse effect on our business, operating results and financial condition. We may be subject to fines for our failure to register for or contribute to social insurance and housing provident funds on behalf of some of our employees Under PRC national labour laws and regulations, we are required to contribute to certain social insurance and housing provident funds. During the Track Record Period, some of our PRC branches and subsidiaries did not register for and/or fully contribute to the social insurance and housing provident funds for certain employees. The overdue contributions to the social insurance and housing provident funds and maximum penalty that such branches and subsidiaries may be subject to are estimated to be approximately RMB9.6 million in aggregate. COHL has agreed to provide an indemnity to our Group for any liabilities, penalties, losses or damages incurred or suffered by our Group in connection with the incidents of non-compliance referred to in Business Non-Compliance, including for such overdue contributions. Please see Business Non-Compliance. Our PRC legal adviser has advised us that the relevant PRC authorities may notify and require us to complete registration and/or pay the outstanding contributions within stipulated deadlines. According to the Social Insurance Law of the PRC ( 中華人民共和國社會保險法 ), for outstanding social insurance contributions that we fail to pay within the prescribed deadlines, we may be subject to a penalty rate of 0.05% compounded daily from the date the relevant contributions became payable. If payment is not made within the prescribed period, we may be liable to a fine of one to three times the outstanding contribution amount. Under the Regulations on Administration of Housing Fund ( 住房公積金管理條例 ), (i) for housing provident fund registrations that we fail to complete before the prescribed deadlines, we may be subject to a fine ranging from RMB10,000 to RMB50,000 each and (ii) for housing fund contributions that we fail to pay within the prescribed deadlines, we may be subject to any order by the relevant people s court to make such payments. Any inability to comply with our environmental responsibilities may subject us to liability We are subject to extensive and increasingly stringent environmental protection laws, regulations and decrees that impose fines for violation of such laws, regulations or decrees. In addition, there is a growing awareness of environmental issues, and we may sometimes be 48

54 RISK FACTORS expected to meet a standard which is higher than the requirement under the prevailing environmental laws and regulations. In addition, there is no assurance that more stringent environmental protection requirements will not be imposed in the future. If we are unable to comply with existing or future environmental laws and regulations or are unable to meet public expectations in relation to environmental matters, our reputation may be damaged or we may be required to pay penalties or fines or take remedial actions and our operations may be suspended, any of which may materially and adversely impact our business, financial condition, results of operations and growth prospects. RISKS RELATING TO CONDUCTING BUSINESS IN THE PRC, HONG KONG AND MACAU PRC economic, political and social conditions as well as government policies could affect our business The PRC has been, and will continue to be, our primary operating base and market. While the PRC government has been pursuing economic reforms to transform its economy from a planned economy to a market economy since 1978, a substantial part of the PRC economy is still being operated under various controls by the government. By imposing industrial policies and other economic measures, such as control of foreign exchange, taxation and foreign investment, the PRC government exerts considerable direct and indirect influence on the development of the PRC economy. Many of the economic reforms carried out by the PRC government are unprecedented or experimental and are expected to be refined and improved over time. Other political, economic and social factors may also lead to further adjustments of the reform measures. This refining and adjustment process may materially and adversely impact our business, financial condition, results of operations and growth prospects. PRC governmental control of currency conversion may limit our ability to use capital effectively The PRC government imposes controls on the convertibility of Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China. Please see Appendix III Regulatory Overview PRC Regulatory Overview Legal Regulations over Foreign Exchange in the PRC. We receive most of our revenue in Renminbi. Under our current structure, our income is primarily derived from dividend payments from our PRC subsidiaries. Shortages in the availability of foreign currency may restrict the ability of our PRC subsidiaries to remit sufficient foreign currency to pay dividends or other payments to us, or otherwise satisfy their foreign currency denominated obligations, if any. If the foreign exchange control system prevents us from obtaining sufficient currency to satisfy our currency demands, we may not be able to pay dividends in foreign currencies to our shareholders. The PRC government may also at its discretion restrict access in the future to foreign currencies for current account transactions. Under existing PRC foreign exchange regulations, payments of certain current account items can be made in foreign currencies without prior approval from the local branch of the SAFE by complying with certain procedural requirements. However, approval from appropriate government authorities is required where Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of indebtedness denominated in foreign currencies. The restrictions on foreign 49

55 RISK FACTORS exchange transactions under capital accounts could also affect our subsidiaries ability to obtain foreign exchange through debt or equity financing, including by means of loans or capital contribution from us. Our ability to access credit and capital markets may be adversely affected by factors beyond our control Interest rate increases by the PBOC, or market disruptions such as those recently experienced in the United States, European Union and other countries or regions, may increase our cost of borrowing or adversely affect our ability to access sources of liquidity upon which we have relied to finance our operations and satisfy our obligations as they become due. We intend to continue to make investments to support our business growth and may require additional funds to respond to business challenges. There can be no assurance that the anticipated cash flow from our operations will be sufficient to meet all of our cash requirements, or that we will be able to secure external financing at competitive rates, or at all. Any such failure may adversely affect our ability to finance our operations, meet our obligations or implement our growth strategy. Fluctuation in the value of the Renminbi may have a material adverse effect on our business We conduct most of our business in Renminbi. The value of the Renminbi against the US dollar, Hong Kong dollar and other currencies may be affected by changes in the PRC s policies and international economic and political developments. On 21 July 2005, the PRC government changed its policy of pegging the value of the Renminbi to the US dollar. Under the new policy, the Renminbi is permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. Effective 21 May 2007, the PBOC enlarged the floating band for the trading prices in the inter-bank foreign exchange market of the Renminbi against the US dollar from 0.3% to 0.5% around the central parity rate. This allows the Renminbi to fluctuate against the US dollar by up to 0.5% above or below the central parity rate published by the PBOC. On 19 June 2010, the PBOC announced that the PRC government will reform the Renminbi exchange rate regime and increase the flexibility of the exchange rate. The floating band was further enlarged to 1% on 16 April 2012 and 2% on 17 March Under the current policy, the RMB is pegged against a basket of currencies, as determined by the PBOC, against which it can rise or fall within stipulated ranges each day. These changes in currency policy resulted in the Renminbi appreciating against the US dollar by approximately 34.3% from 21 July 2005 to 6 June As a result of these and any future changes in currency policy, the exchange rate may become volatile, the Renminbi may be revalued further against the US dollar or other currencies or the Renminbi may be permitted to enter into a full or limited free float, which may result in an appreciation or depreciation in the value of the Renminbi against the US dollar or other currencies. Fluctuations in exchange rates may adversely affect the value, translated or converted into US dollars or Hong Kong dollars (which are pegged to the US dollar), of our cash flows, revenue, earnings and financial position, and the value of, and any dividends payable to us by our PRC subsidiaries. For example, an appreciation of the Renminbi against the US dollar or the Hong Kong dollar would make any new Renminbi-denominated investments or expenditures more costly to us, to the extent that we need to convert US dollars or Hong Kong dollars into Renminbi for such purposes. 50

56 RISK FACTORS Uncertainty with respect to the PRC legal system could adversely affect us and may limit the legal protection available to you As most of our business is conducted, and our assets are located, in the PRC, our operations are governed principally by PRC laws and regulations. The PRC legal system is based on written statutes, and prior court decisions can only be cited as reference. Since 1979, the PRC government has promulgated laws and regulations in relation to economic matters such as foreign investment, corporate organisation and governance, commerce, taxation, finance, foreign exchange and trade, with a view to developing a comprehensive system of commercial law. However, the PRC has not developed a fully integrated legal system and recently enacted laws and regulations may not sufficiently cover all aspects of economic activities in the PRC, or may be unclear or inconsistent. In particular, since the property management industry is in its early developmental stage in the PRC, the laws and regulations relating to this industry are unspecific and may be incomprehensive. Because of the limited volume of published decisions and their non-binding nature, the interpretation and enforcement of PRC laws and regulations involve uncertainties and can be inconsistent. Even where adequate laws exist in the PRC, the enforcement of existing laws or contracts based on existing laws may be uncertain or sporadic, and it may be difficult to obtain swift and equitable enforcement of a judgment by a PRC court. In addition, the PRC legal system is based in part on government policies and internal rules (some of which are not published on a timely basis or at all) that may have a retroactive effect. As a result, we may not be aware of our violation of these policies and rules until some time after such violation. Finally, any litigation in the PRC may be protracted and result in substantial costs and the diversion of resources and management s attention. The materialisation of all or any of these uncertainties could have a material adverse effect on our financial position and results of operations. It may be difficult to effect service of process on our Directors or executive officers who reside in the PRC or to enforce against us or them in the PRC any judgments obtained from non-prc courts A majority of our senior management members reside in the PRC, and substantially all of the assets of those people and of our Group are located in the PRC. Therefore, it may be difficult for investors to effect service of process upon those persons inside the PRC or to enforce against us or them in the PRC any judgments obtained from non-prc courts. China does not have treaties providing for the reciprocal recognition and enforcement of judgments of courts with the Cayman Islands, the United States, the United Kingdom, Japan and many other developed countries. Therefore, recognition and enforcement in China of judgments of a court in any of these jurisdictions may be difficult or even impossible. Our prospects may be adversely affected by a recurrence of Severe Acute Respiratory Syndrome (SARS), outbreaks of other epidemics, such as Middle East Respiratory Syndrome (MERS), influenza A (H1N1) or avian flu (H5N1), natural disasters or acts of war or terror Any recurrence of Severe Acute Respiratory Syndrome (SARS) or an outbreak of any other epidemic in the places we operate, such as Middle East Respiratory Syndrome (MERS), influenza A (H1N1) or avian flu (H5N1), may result in material disruptions to our and our tenants businesses. 51

57 RISK FACTORS Natural disasters, acts of war or terror or other catastrophic events, such as earthquakes, floods, severe weather conditions, armed hostilities or acts of terrorism affecting the regions where we operate could, depending upon their magnitude, significantly disrupt our business operations or cause a material economic downturn in the affected area, which in turn could materially and adversely affect our business, results of operations and financial condition. For example, the PRC and a number of other countries have experienced severe earthquakes in recent years that caused significant property damage and loss of life. There can be no assurance that future earthquakes, other natural disasters or acts of war or terrorism will not occur in the areas where we operate and cause major damage to our operations. The occurrence of any of the above may materially and adversely impact our business, financial condition, results of operations and growth prospects. Changes in the PRC government policy on foreign investment in the PRC may adversely affect our business and results of operations According to the latest version of the Foreign Investment Catalogue, which was released on 13 March 2015, our business does not fall within a prohibited or restricted category. As the Foreign Investment Catalogue is updated every few years, we cannot assure you that the PRC government will not change its policies in a manner that would render part or all of our business to fall within the restricted or prohibited categories. If we cannot obtain approval from relevant authorities to engage in a business which becomes prohibited or restricted for foreign investors, we may be forced to sell or restructure our operations which have become restricted or prohibited from foreign investment. If we are forced to adjust our corporate structure or business line as a result of changes in government policy on foreign investment, our business, financial condition and results of operations may be materially and adversely affected. Our business is subject to economic and political risks in Hong Kong and Macau A portion of our business is conducted, and our assets are located, in Hong Kong and Macau. Conducting business in Hong Kong and Macau involves certain risks not typically associated with operations in the PRC, including risks relating to changes in Hong Kong s and Macau s political, economic and social conditions, changes in Hong Kong and Macau governmental policies, changes in Hong Kong and Macau laws or regulations or their interpretation, changes in exchange control regulations, changes in interest rate and changes in rates or method of taxation. Our operations in Hong Kong and Macau are exposed to the risk of changes in laws and policies that govern companies that operate in Hong Kong and Macau, respectively. In addition, the legal and judicial system adopted in Macau is substantially different from that in the PRC and in Hong Kong, and rights and protections under PRC or Hong Kong laws that companies in the PRC and in Hong Kong expect may not exist in Macau. 52

58 RISK FACTORS RISKS RELATING TO THE LISTING AND THE SPIN-OFF Our Shareholders interests in our Company s share capital may be diluted in the future In order to expand our business, we may consider offering and issuing additional Shares or equity-linked securities in the future, which may result in dilution in our net tangible book value or earnings per Share. The Board has been granted a general mandate to issue Shares with an aggregate nominal value of not more than 20.0% of the aggregate nominal value of the ordinary share capital immediately following completion of the Spin-off, as described in Appendix VI General Information A. Further Information about our Company. There is no existing public market for our Shares and their liquidity and market price may fluctuate Prior to the Listing, there was no public market for, and no established price for, our Shares. Our Company has made an application for the listing of, and permission to deal in, our Shares on the Stock Exchange. The Listing, however, does not guarantee that an active trading market for our Shares will develop or, if it does develop, that it will be sustained following the Listing or that the market price of our Shares will not fluctuate following completion of the Listing. In addition, we cannot assure you that the Listing will result in the development of an active and liquid public trading market for our Shares. Furthermore, the price and trading volume of our Shares may be volatile. Factors such as the following may affect the volume and price at which our Shares will trade:. actual or anticipated fluctuations in our results of operations;. news regarding recruitment or loss of key personnel by us or our competitors;. announcements of competitive developments, acquisitions or strategic alliances in our industry;. changes in earnings estimates or recommendations by financial analysts;. potential litigation or regulatory investigations;. general economic, market or regulatory conditions or other developments affecting us or our industry;. the operating and stock price performance of other companies, other industries and other events or factors beyond our control; and. release of lock-up or other transfer restrictions on the outstanding Shares or sales of perceived sales of additional Shares by our Company or other Shareholders. You should note that the stock prices of companies in the property industry have experienced wide fluctuations. Such wide market fluctuations may adversely affect the market price of our Shares. In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are not related to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our Shares. 53

59 RISK FACTORS Future issues, offers or sales of our Shares may adversely affect the prevailing market price of our Shares Future issues of our Shares by our Company or the disposal of our Shares by any of our Shareholders or the perception that such issues or sale may occur, may negatively affect the prevailing market price of our Shares. Moreover, future sales or perceived sales of a substantial amount of our Shares or other securities relating to our Shares in the public market may cause a decrease in the market price of our Shares, or adversely affect our ability to raise capital in the future at a time and at a price which we deem appropriate. Our Shareholders may experience dilution in their holdings in the event we issue additional securities in future offerings. The Shares held by our Controlling Shareholders are subject to certain lock-up undertakings for a period of up to six months after the Listing Date. Details of such lock-up undertakings are set out in Appendix VI General Information D. Undertakings to the Stock Exchange Pursuant to the Listing Rules. We cannot give any assurance that our Controlling Shareholders will not dispose of the Shares they may own now or in the future. Our Controlling Shareholders have substantial control over our Company and their interests may not be aligned with the interests of other Shareholders Following the Listing, our Controlling Shareholders will continue to have substantial control over our Company. Subject to the Articles of Association, the Memorandum of Association and the Listing Rules, our Controlling Shareholders by virtue of their controlling beneficial ownership of the share capital of our Company, will be able to exercise significant control and exert significant influence over our business or otherwise on matters of significance to us and other Shareholders by voting at the general meeting of our Shareholders and at Board meetings. Our Controlling Shareholders interests may differ from the interests of other Shareholders, and they are free to exercise their votes according to their interests. To the extent that the interests of our Controlling Shareholders conflict with the interests of other Shareholders, the interests of other Shareholders can be disadvantaged and harmed. You may not have the same protection of your shareholder rights under Cayman Islands law compared to what you would have under Hong Kong law Our corporate affairs are governed by our Memorandum of Association and Articles of Association, the Companies Law, and the common law of the Cayman Islands. The rights of our Shareholders to take action against our Directors, the rights of minority shareholders to instigate actions and the fiduciary responsibilities of our Directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from English common law, which has persuasive, but not binding, authority on a court in the Cayman Islands. The rights of our Shareholders and the fiduciary responsibilities of our Directors under Cayman Islands law may not be the same as they would be under statutes or judicial precedent in Hong Kong. In particular, the Cayman Islands have different securities laws as compared to Hong Kong and may not provide the same protection to investors. Furthermore, shareholders of Cayman Islands companies may not have standing to initiate a shareholder derivative action in a Hong Kong court. 54

60 RISK FACTORS We may not declare dividends on our Shares in the future We did not declare any dividends during the Track Record Period. The amount of dividends actually distributed to our Shareholders will depend upon our earnings and financial position, operating requirements, capital requirements and any other conditions that our Directors may deem relevant and will be subject to the approval of our Shareholders. There is no assurance that dividends of any amount will be declared or distributed in any year. Certain facts and other statistics contained in this listing document are derived from various official government sources and third-party sources and may not be reliable Certain facts and other statistics in this listing document, including those relating to the PRC, the PRC economy, the PRC property management industry and the PRC e-commerce industry have been derived from various official government publications, and data from China Index Academy ( 中國指數研究院 ), iresearch Consulting Group ( 艾瑞諮詢 ) and publicly available sources. However, we cannot guarantee the quality or reliability of these sources. They have not been prepared or independently verified by us or any of our affiliates or advisers and, therefore, we make no representation as to the accuracy of such facts and statistics. Due to possibly flawed or ineffective collection methods or discrepancies between published information and market practice and other problems, the facts and statistics herein may be inaccurate or may not be comparable to facts and statistics produced with respect to other economies. Further, we cannot assure you that they are stated or compiled on the same basis or with the same degree of accuracy (as the case may be) in other jurisdictions. Therefore, you should not rely unduly upon such facts and statistics contained in this listing document. You should read the entire listing document carefully and should not consider any particular statements or any information contained in press articles, media and/or research reports regarding us, our business and/or our industry without carefully considering the risks and other information contained in this listing document There may be coverage in the press, media and/or research analyst coverage regarding our Group, our business, our industry and the Spin-off. There had been, prior to the publication of this listing document, and there may be, subsequent to the date of this listing document but prior to the completion of the Spin-off, press, media and/or research analyst coverage regarding our Group, our business, our industry and the Spin-off containing, among other matters, certain financial information, projections, valuations and other forward-looking information about us and the Spin-off. We do not accept any responsibility for any such press or media coverage or the accuracy or completeness of any such information. We make no representation as to the appropriateness, accuracy, completeness or reliability of any such information or publication. To the extent that any of the information in the media or publications other than this listing document is inconsistent or conflicts with the information contained in this listing document, we disclaim it. Accordingly, you should read the entire listing document carefully and should not rely on any of the information in press articles or other media coverage. You should only rely on the information contained in this listing document to make investment decisions about us. 55

61 DIRECTORS AND PARTIES INVOLVED IN THE SPIN-OFF DIRECTORS INVOLVED IN THE SPIN-OFF The members of the Board are: Name Address Nationality Chairman and Non-executive Director Mr. Hao Jian Min ( 郝建民 ) FlatC,12thFloor Hoover Tower, Tower 5 8St.FrancisYard Wanchai, Hong Kong Chinese Vice Chairman, Executive Director and Chief Executive Officer Ms. Wang Qi ( 王琦 ) 11D, Block 2, Zhonghai Huating Huajingtai, 89 Mintian Road Futian District, Shenzhen Guangdong Province, PRC Chinese Executive Directors and Vice Presidents Mr. Luo Xiao ( 羅肖 ) 22C, Block 26 Stage 2 Zhonglv International Mansion Runtian Road, Futian District Shenzhen, Guangdong Province, PRC Chinese Mr. Shi Yong ( 史勇 ) D1, 19th Floor, Lvyixuan Stage 2 Guodu Golf Garden Xinsha Road, Futian District Shenzhen, Guangdong Province, PRC Chinese Mr. Yang Ou ( 楊鷗 ) FlatD,16thFloor,Tower3A Lions Rise, 8 Muk Lun Street Wong Tai Sin, Kowloon, Hong Kong Chinese Executive Director and Deputy Chief Financial Officer Mr. Kam Yuk Fai ( 甘沃輝 ) FlatB,32thFloor,Tower5 Grandview Garden 185 Hammer Hill Road Kowloon, Hong Kong Chinese 56

62 DIRECTORS AND PARTIES INVOLVED IN THE SPIN-OFF Name Address Nationality Independent Non-executive Directors Mr. Lim Wan Fung, Bernard Vincent ( 林雲峯 ) Apt Convention Plaza Apartments 1 Harbour Road Wanchai, Hong Kong Chinese Mr. Suen Kwok Lam ( 孫國林 ) FlatB,30/F,Tower5 28 Bel-Air Avenue Residence Bel-Air Island South Hong Kong Chinese Mr. Yung Wing Ki, Samuel ( 容永祺 ) 4PalmDrive The Redhill Peninsula Tai Tam Hong Kong Chinese For further details of each member of the Board, please see Directors and Senior Management. PARTIES INVOLVED IN THE SPIN-OFF Joint Sponsors Merrill Lynch Far East Limited 55th Floor, Cheung Kong Center 2 Queen s Road Central Central Hong Kong HSBC Corporate Finance (Hong Kong) Limited 1 Queen s Road Central Hong Kong Legal Advisers to our Company As to Hong Kong and U.S. laws: Mayer Brown JSM 16th 19th Floors Prince s Building 10 Chater Road Central Hong Kong 57

63 DIRECTORS AND PARTIES INVOLVED IN THE SPIN-OFF As to PRC laws: Jingtian & Gongcheng 34th Floor Tower 3 China Central Place 77 Jianguo Road Beijing PRC As to Cayman laws: Conyers Dill & Pearman Cricket Square PO Box 2681 Grand Cayman KY Cayman Islands As to Macau laws: Rato, Ling, Lei & Cortés Advogados Avenida da Amizade no 555 Macau Landmark Office Tower 23, Macau SAR Legal Advisers to the Joint Sponsors As to Hong Kong and U.S. laws: Freshfields Bruckhaus Deringer 11th Floor, Two Exchange Square Central Hong Kong As to PRC laws: King & Wood Mallesons 28th Floor, Landmark 4028 Jintian Road Futian District Shenzhen PRC Reporting Accountant PricewaterhouseCoopers Certified Public Accountants 22nd Floor, Prince s Building Central Hong Kong 58

64 CORPORATE INFORMATION Registered Office Headquarters and Principal Place of Business in Hong Kong Compliance Adviser Company Secretary Authorised Representatives Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY Cayman Islands 19th Floor, China Overseas Building No. 139 Hennessy Road and No. 138 Lockhart Road Wanchai Hong Kong Somerley Capital Limited 20/F, China Building 29 Queen s Road Central Central Hong Kong Mr. Ko Hiu Fung LLB, LLM, Barrister Flat A, 9th Floor Block 18, Hong Kong Garden 100 Castle Peak Road, Tsing Lung Tau New Territories, Hong Kong Mr. Hao Jian Min (Mr. Luo Xiao as his alternate) Flat C, 12th Floor Hoover Tower, Tower 5 8St.FrancisYard Wanchai, Hong Kong Ms. Wang Qi (Mr. Kam Yuk Fai as her alternate) 11D, Block 2, Zhonghai Huating Huajingtai, 89 Mintian Road Futian District, Shenzhen Guangdong Province, PRC Audit Committee Remuneration Committee Mr. Yung Wing Ki, Samuel (Chairman) Mr. Lim Wan Fung, Bernard Vincent Mr. Suen Kwok Lam Mr. Suen Kwok Lam (Chairman) Mr. Hao Jian Min Mr. Lim Wan Fung, Bernard Vincent Mr. Yung Wing Ki, Samuel 59

65 CORPORATE INFORMATION Nomination Committee Principal Share Registrar and Transfer Office in the Cayman Islands Hong Kong Branch Share Registrar and Transfer Office Principal Bankers Mr. Hao Jian Min (Chairman) Mr. Lim Wan Fung, Bernard Vincent Mr. Suen Kwok Lam Mr. Yung Wing Ki, Samuel [REDACTED] [REDACTED] The Hongkong and Shanghai Banking Corporation Limited 1 Queen s Road Central Hong Kong China Construction Bank Corporation Shenzhen Branch 1st Floor, Block B, Rongchao Commercial Centre 6003 Yitian Road Futian District Shenzhen Guangdong Province, PRC Company s Website (A copy of this listing document is available on our Company s website. Except for the information contained in this listing document, none of the other information contained on our Company s website forms part of this listing document) 60

66 HISTORY AND CORPORATE STRUCTURE HISTORY AND DEVELOPMENT History and Development Initial development and early growth (1986 to 1995) Our property management business can be traced back to 1986 when COPL HK Holding was incorporated to provide property management services in Hong Kong to complement and to strategically align with COLI s property development business in Hong Kong. In 1995, COPL PRC Holding, COPL Guangzhou and COPL Shanghai were established in the PRC and marked the commencement of our property management business in the PRC by leveraging on COPL HK Holding s experience in the Hong Kong market. Expansion in service scope and operation scale (1996 to 2006) Our business underwent a phase of rapid expansion during this period with strong growth in the total GFA under management and expansion of our property management services to customers in various PRC provinces and special administrative regions as well as the major first and second tier cities in the PRC. In 1998, we established COPL Building Engineering, COPL Elevator Engineering and COPL Network to expand the scope of our services to include building automation services, lift repair and maintenance services and other professional services. Integration of regional operations (2007 to 2010) During this period, and as part of a quality benchmark standardisation and resources consolidation strategic initiative, COLI established a centralised quality control department for the property management business, which was principally responsible for resources planning and quality control for property management business in the PRC. Our regional headquarters cover six main regions, namely Hua Nan Region, Hua Dong Region, Hua Bei Region, Northern Region, Western Region, and Hong Kong and Macau, each of which is responsible for overseeing the implementation of centralised management and standardisation of business process and property management service quality in its region. Foundation for future growth (2011 onwards) Since 2011, we have further refined our management model in order to better manage our expanded service scope and scale. This was achieved by consolidating COLI s centralised quality control department for the property management business under COPL PRC Holding and establishing 12 municipal management centres under the six regional headquarters. This has enabled us to better manage our operations across various locations and services. As at 31 May 2015, we provide property management services to customers in 48 cities in the PRC as well as in Hong Kong and Macau, with an aggregate GFA under management of approximately 67.6 million sq.m.. 61

67 HISTORY AND CORPORATE STRUCTURE Key Milestones Some of the key milestones in the development of our Group since its establishment are set out below: Year Events Our first subsidiary, COPL HK Holding, was incorporated in Hong Kong Commencement of our property management business in the PRC COPL PRC Holding first obtained ISO 9001 certification for the quality of its property management services COPL PRC Holding first obtained ISO certification for the quality of its property management services Our Company was incorporated on 26 June COPL HK Holding, COPL Mepork and COPL Security obtained various ISO certifications for its quality management system for, among other things, design and provision of property and facilities management services COPL Macau obtained ISO 9001:2008 certification for its quality management system for design and provision of property and facility management services COPL PRC Holding trial-launched a mobile application designed to enhance residents convenience We acquired CSPM Beijing, CSPM Chongqing, CSPM Zibo, COGOPM Holding, COGOPM Hohhot and COGOPM Guangzhou pursuant to the Internal Transfers and the COGO Acquisition. REORGANISATION In preparation for the Listing, the following reorganisation steps were implemented: Internal Transfers Pursuant to the following Internal Transfers, our Group acquired all of COHL s property management business and related group company, namely CSPM Zibo (i.e. COHL Acquired Company), as well as all of CSCECL Group s property management business and related group companies, namely CSPM Beijing and CSPM Chongqing (i.e. CSCECL Acquired Companies), save for the CSCECL Retained Operations, details of which are set out in Relationship with our Controlling Shareholders Delineation of our Group s Business from our Controlling Shareholders and Fellow Associates CSCECL Retained Operations. 62

68 HISTORY AND CORPORATE STRUCTURE On 15 May 2015, COHL Zibo PM Holding, as vendor and a wholly-owned subsidiary of COHL, and CSPM Beijing, as purchaser and a then wholly-owned subsidiary of COLI, entered into the Zibo Equity Transfer Agreement whereby COHL Zibo PM Holding agreed to transfer the entire equity interests of CSPM Zibo, which is principally engaged in real estate management, to CSPM Beijing for a cash consideration of RMB1, having regard to the negative net asset value of RMB282,700 of CSPM Zibo as at 31 March 2015, as assessed by a PRC valuer. The consideration was settled in cash on 27 May 2015 and the aforesaid transfer was properly and legally completed on 28 May On 15 May 2015, COLI Chongqing PM Holding, as vendor and a wholly-owned subsidiary of COLI after the Asset Injection, and CSPM Beijing, as purchaser, entered into the Chongqing Equity Transfer Agreement whereby COLI Chongqing PM Holding agreed to transfer the entire equity interests of CSPM Chongqing, which is principally engaged in real estate management, to CSPM Beijing for a cash consideration of RMB1, having regard to the negative net asset value of RMB5,430,900 of CSPM Chongqing as at 31 January 2015, as assessed by a PRC valuer. The consideration was settled in cash on 27 May 2015 and the aforesaid transfer was properly and legally completed on 28 May On 15 May 2015, COLI Beijing PM Holding, as vendor and a wholly-owned subsidiary of COLI after the Asset Injection, and COPL PRC Holding, as purchaser, entered into the Beijing Equity Transfer Agreement whereby COLI Beijing PM Holding agreed to transfer the entire equity interests of CSPM Beijing to COPL PRC Holding for a cash consideration of RMB11,748,000, having regard to the net asset value of RMB11,748,000 of CSPM Beijing as at 31 January 2015, as assessed by a PRC valuer. The consideration was settled in cash on 27 May 2015 and the aforesaid transfer was properly and legally completed on 28 May As confirmed by our PRC legal adviser, all necessary PRC regulatory approvals for the Internal Transfers have been obtained. COGO Acquisition On 18 May 2015, COGO Property, as vendor and a wholly-owned subsidiary of COGO, and COPL PRC Holding, as purchaser, entered into the COGO Equity Transfer Agreement whereby COGO Property agreed to transfer the entire equity interests of COGOPM Holding, which is principally engaged in real estate management, to COPL PRC Holding for a cash consideration of approximately RMB50.0 million, which was determined after arm s length negotiations between the parties by reference to the assessed net asset value of COGOPM Holding of approximately RMB50.0 million, according to the valuation report from a valuer jointly appointed by COGO Property and COPL PRC Holding. The consideration was settled in cash on 27 May 2015 and the aforesaid transfer was properly and legally completed on 28 May Pursuant to the COGO Equity Transfer Agreement, COPL PRC Holding assumed the profit and loss of COGO Acquired Companies beginning from 31 March Pursuant to the above acquisition, our Group has acquired all of COGO Group s property management business and related group companies, i.e. COGO Acquired Companies. As confirmed by our PRC legal adviser, all necessary PRC regulatory approvals for the COGO Acquisition have been obtained. 63

69 HISTORY AND CORPORATE STRUCTURE Reorganisation of the share capital of the Company On [.] 2015: (a) (b) (c) every issued and unissued share of a par value of HK$0.10 each in the share capital of our Company was subdivided into 100 Shares of a par value of HK$0.001 each (the Share Subdivision ) such that immediately after the Share Subdivision, our Company had an authorised share capital of HK$300,000,000 divided into 300,000,000,000 Shares of a par value of HK$0.001 each, of which 100 Shares were issued to COLI; following the Share Subdivision, the authorised but unissued share capital of our Company was diminished by the cancellation of 270,000,000,000 unissued Shares in the authorised share capital of our Company (the Diminution of Authorised Share Capital ). Following the Diminution of Authorised Share Capital, our Company has an authorised share capital of HK$30,000,000 divided into 30,000,000,000 Shares; and after the Diminution of Authorised Share Capital, our Company allotted and issued 3,286,860,360 Shares to COLI at par value for an aggregate subscription price of HK$3,286,860.36, the payment of which was settled in cash paid by COLI to our Company (the Cash Capitalisation ). Immediately after the Cash Capitalisation, COLI held 3,286,860,460 Shares, representing the entire issued share capital of our Company. Our Company intends to apply the net proceeds from the Cash Capitalisation of HK$3,286, as general working capital of our Group. 64

70 HISTORY AND CORPORATE STRUCTURE CORPORATE STRUCTURE The simplified chart below sets out our Group s corporate and shareholding structure immediately before the Reorganisation: Public Shareholders COHL (Incorporated in Hong Kong) 38.82% 61.18% COLI (Incorporated in Hong Kong) (Stock Code: 688) 100% 100% 37.98% Company (Incorporated in the Cayman Islands) COGO (Incorporated in Hong Kong) (Stock Code: 81) Celestial Domain (Incorporated in British Virgin Islands) 100% 100% 100% 100% 100% 100% 4% 96% 100% COGO Property (Established in the PRC) 100% COLI Chongqing PM Holding (Established in the PRC) COLI Beijing PM Holding (Established in the PRC) 100% 100% COHL Zibo PM Holding (Established in the PRC) COPL PRC Holding (Established in the PRC) COPL HK Holding (Incorporated in Hong Kong) COPL Macau (Incorporated in Macau) COPL Trademark Holding (Incorporated in Hong Kong) COGOPM Holding^ (Established in the PRC) CSPM Chongqing* (Established in the PRC) CSPM Beijing* (Established in the PRC) CSPM Zibo # (Established in the PRC) 100% 100% 100% 25% 100% 100% COPL Security (Incorporated in Hong Kong) COPL Building Management (Incorporated in Hong Kong) COPL Mepork (Incorporated in Hong Kong) COPL Windsor Heights (Incorporated in Hong Kong) COGOPM Guangzhou^ (Established in the PRC) COGOPM Hohhot^ (Established in the PRC) 100% 100% 100% 100% 100% 100% 100% 100% COPL Building Engineering (Established in the PRC) COPL Elevator Engineering (Established in the PRC) COPL Network (Established in the PRC) COPL Shanghai (Established in the PRC) COPL Chengdu (Established in the PRC) COPL Changchun (Established in the PRC) COPL Beijing (Established in the PRC) COPL Guangzhou (Established in the PRC) 100% * CSCECL Acquired Companies # COHL Acquired Company ^ COGO Acquired Companies COPL Windsor Heights is 25% owned by our Group, with the remaining 75% owned by Independent Third Parties. COPL Mechanical Engineering (Established in the PRC) 65

71 HISTORY AND CORPORATE STRUCTURE The simplified chart below sets out our Group s corporate and shareholding structure immediately following completion of the Reorganisation but before the completion of Spin-off: Public Shareholders COHL (Incorporated in Hong Kong) 38.82% 61.18% COLI (Incorporated in Hong Kong) (Stock Code: 688) 100% Company (Incorporated in the Cayman Islands) 100% 100% 4% 96% 100% COPL PRC Holding (Established in the PRC) COPL HK Holding (Incorporated in Hong Kong) COPL Macau (Incorporated in Macau) COPL Trademark Holding (Incorporated in Hong Kong) 100% 100% 100% 100% 100% 25% CSPM Beijing* (Established in the PRC) COGOPM Holding^ (Established in the PRC) COPL Security (Incorporated in Hong Kong) COPL Building Management (Incorporated in Hong Kong) COPL Mepork (Incorporated in Hong Kong) COPL Windsor Heights (Incorporated in Hong Kong) 100% 100% 100% 100% CSPM Chongqing* (Established in the PRC) CSPM Zibo # (Established in the PRC) COGOPM Guangzhou^ (Established in the PRC) COGOPM Hohhot^ (Established in the PRC) 100% 100% 100% 100% 100% 100% 100% 100% COPL Building Engineering (Established in the PRC) COPL Elevator Engineering (Established in the PRC) COPL Network (Established in the PRC) COPL Shanghai (Established in the PRC) COPL Chengdu (Established in the PRC) COPL Changchun (Established in the PRC) COPL Beijing (Established in the PRC) COPL Guangzhou (Established in the PRC) 100% * CSCECL Acquired Companies # COHL Acquired Company ^ COGO Acquired Companies COPL Windsor Heights is 25% owned by our Group, with the remaining 75% owned by Independent Third Parties. COPL Mechanical Engineering (Established in the PRC) 66

72 HISTORY AND CORPORATE STRUCTURE The simplified chart below sets out our Group s corporate and shareholding structure immediately following completion of the Spin-off: Public Shareholders COHL (Incorporated in Hong Kong) 38.82% 61.18% COLI (Incorporated in Hong Kong) (Stock Code: 688) Company (Incorporated in the Cayman Islands) 100% 100% 4% 96% 100% COPL PRC Holding (Established in the PRC) COPL HK Holding (Incorporated in Hong Kong) COPL Macau (Incorporated in Macau) COPL Trademark Holding (Incorporated in Hong Kong) 100% 100% 100% 100% 100% 25% CSPM Beijing* (Established in the PRC) COGOPM Holding^ (Established in the PRC) COPL Security (Incorporated in Hong Kong) COPL Building Management (Incorporated in Hong Kong) COPL Mepork (Incorporated in Hong Kong) COPL Windsor Heights (Incorporated in Hong Kong) CSPM Chongqing* (Established in the PRC) 100% 100% CSPM Zibo # (Established in the PRC) 100% COGOPM^ Guangzhou (Established in the PRC) 100% COGOPM Hohhot^ (Established in the PRC) 100% 100% 100% 100% 100% 100% 100% 100% COPL Building Engineering (Established in the PRC) COPL Elevator Engineering (Established in the PRC) COPL Network (Established in the PRC) COPL Shanghai (Established in the PRC) COPL Chengdu (Established in the PRC) COPL Changchun (Established in the PRC) COPL Beijing (Established in the PRC) COPL Guangzhou (Established in the PRC) 100% * CSCECL Acquired Companies # COHL Acquired Company ^ COGO Acquired Companies COPL Windsor Heights is 25% owned by our Group, with the remaining 75% owned by Independent Third Parties. COPL Mechanical Engineering (Established in the PRC) 67

73 INDUSTRY OVERVIEW This industry overview section contains information and statistics that are derived from government publications, data we purchased from China Index Academy and iresearch Consulting Group and publicly available data. We believe that the official government publications and the sources of information used by China Index Academy and iresearch Consulting Group are appropriate, and have taken reasonable care in extracting and reproducing such information. The information and data derived from China Index Academy and iresearch Consulting Group are not commissioned by us or the Joint Sponsors and China Index Academy s information and data can be accessed by all its subscribers. We have no reason to believe that such information is false or misleading or that any fact has been omitted that would render such information false or misleading. The information extracted from the official government publications, the data purchased from China Index Academy and iresearch Consulting Group and the data extracted from publicly available sources have not been independently verified by us, COLI, the Joint Sponsors, any of our or their respective directors, officers, employees, agents or representatives or any other person involved in the Spin-off. The information may not be consistent with other information available from other sources within or outside the PRC, Hong Kong or Macau. None of us, COLI, the Joint Sponsors, any of our or their respective directors, officers, employees, agents or representatives or any other person involved in the Spin-off, make any representation as to the accuracy, completeness or fairness of such information and, accordingly, you should not unduly rely on such information. The Directors confirm that, after due enquiry, there is no material adverse change in the market information since the issue date of the abovementioned sources which may qualify, contradict or adversely impact on the information contained in this section. RESEARCH BACKGROUND, METHOD AND ASSUMPTIONS China Index Academy We purchased the right to use and quote various data from publications by China Index Academy at a total cost of approximately RMB0.4 million and supplemented this with data obtained from public sources. China Index Academy is an independent research institute cofounded by experts, based both domestically and abroad, who integrate research resources such as China Real Estate Index System, SouFun Research Institute, China Villa Index System and China Real Estate TOP10 Research Group. China Index Academy covers the five regions of Northern China, Eastern China, Central China, Southern China and Southwestern China, with subsidiaries distributed across 75 large and medium-sized cities in China. It has a team of more than 500 professional analysts, predominantly out of real estate research institutes in the PRC. The China Property Management Service TOP100 Enterprise Research organised by the China Index Academy has been conducted since China Index Academy derives its rankings of overall strength of property management companies by evaluating each property management company s scale of operation, operational performance and efficiency, quality of services, development potential and social responsibility, among other factors. The parameters and assumptions used by China Index Academy in compiling the publications are based on their own in-house standards. 68

74 INDUSTRY OVERVIEW iresearch We also purchased the right to use and quote various data from publications by iresearch Consulting Group at a total cost of approximately RMB0.2 million, and supplemented such information with other data from publicly available sources. iresearch Consulting Group was founded in 2002 and has more than 400 employees. It is one of the market leaders in the fields of online marketing, e-commerce, mobile internet, big data and internet finance. iresearch Consulting Group collects data through its online questionnaires, interviews with industry experts and participants, publicly available information and its own research. The parameters and assumptions used by iresearch Consulting Group in compiling the publications are based on their own in-house standards. OVERVIEW OF THE PROPERTY MANAGEMENT INDUSTRY IN THE PRC, HONG KONG AND MACAU History of the Property Management Industry in the PRC, Hong Kong and Macau The PRC: The Shenzhen Special Economic Zone was established in 1980 and the history of the property management industry in the PRC began in 1981, when the first domestic property management company was founded in Shenzhen. Shenzhen s property management industry subsequently became a model for other regions of the PRC, leading to the rapid growth of the industry. Hong Kong: Hong Kong s property management industry dates back to the 1950s. In 1953, more than 50,000 people lost their homes due to a fire in Shek Kip Mei, Kowloon. In order to address the victims basic housing requirements, the Hong Kong government vigorously implemented a public housing programme, and adopted the concept of property management from the United Kingdom, which required developers of public housing to provide management services after completion, leading to the emergence of property management companies in Hong Kong. Macau: In the 1980s, most of the buildings in Macau were low-rise buildings of seven stories or less. Such buildings had small communal areas, lacked common equipment such as elevators, charging pumps, fire-fighting systems and emergency lighting, and did not have management offices. As such, Macau s property management industry remained fairly undeveloped. In the late 1980s, with the rapid development of Macau s economy and rising average income levels, demand for residential buildings grew substantially, leading to numerous construction projects. Additionally, to meet the needs of low-income residents at that time, the Macau government prioritised the construction of affordable public housing. As a result, the development of high-rise buildings spiked and led to the emergence of Macau s property management industry. Overview of Industry Participants According to China Index Academy, the PRC property management industry is highly fragmented. Between 2008 and 2014, the average gross floor area managed by the top 100 property management companies increased from 6.2 million sq.m. to 17.5 million sq.m., representing a CAGR of approximately 18.9%. In 2012, the PRC government implemented various restrictive 69

75 INDUSTRY OVERVIEW measures to curb the rapid growth of the real estate industry. Despite this, the top 100 property management service companies maintained healthy returns by leveraging their brand recognition and high-quality services. By the end of 2014, the top 100 property management companies managed 95 properties on average, representing a CAGR of approximately 11.3% from In the first half of 2015, the PRC government carried out new stimulus measures over the real estate market, leading to expectations of a recovery in the PRC real estate industry. The chart below shows the average gross floor area and average number of properties under management of the top 100 property management companies from 2008 to 2014: Average Gross Floor Area and Average Number of Properties under Management by Top 100 Property Management Companies ( ) Gross Floor Area (million sq.m.) Number of Properties Average gross floor area under management Average number of properties under management Source: China Index Academy In terms of geographical coverage, the top 100 property management companies have established presence in an increasing number of locations, reaching an average of 24 cities in By increasing the number of managed properties in cities with established regional bases, the top 100 property management companies have expanded their scale of local operations. In addition, a number of the top 100 property management companies are growing from regional to national companies through acquisitions, among other methods. 70

76 INDUSTRY OVERVIEW Labour-intensive Property Management Services The property management industry in the PRC involves labour-intensive processes for the provision of traditional property management services such as security, cleaning, gardening, landscaping and repair and maintenance services. In addition to manual labour, the industry also has a strong demand for technical and managerial professionals, who play an important role in improving business performance, service quality and future growth. Rising labour costs, utility costs and material costs due to inflation in recent years have increased the cost of providing property management services. The chart below shows the average minimum wage per month in major cities (Beijing, Shanghai, Shenzhen and Guangzhou): Average Monthly Minimum Wages in Major Cities (Beijing, Shanghai, Shenzhen and Guangzhou) ( ) (RMB per month) 1,800 1,600 1,400 1,200 1, CAGR = 12.8% 1,154 1,314 1,543 1, Source: China Index Academy Low Standardisation Rate According to China Index Academy, the PRC s property management industry lacks unified standards for service quality. As a result, the quality of services provided by different property management companies may vary significantly. In an effort to address rising labour costs, certain property management companies took various measures, which have lowered the quality oftheirservices,leadingtoadeclineincustomersatisfaction. Despite the low standardisation in the industry, increasing levels of urbanisation have led residents to develop higher expectations of property management services and expect more value-added services. As such, it is expected that in the near future, property management companies will devote more resources to standardising the quality of traditional property management services and diversifying valueadded service offerings to address residents needs. 71

77 INDUSTRY OVERVIEW Profitability of Property Management Companies In 2014, the average net profit of the top 100 property management companies increased to RMB31.9 million, representing a year-on-year growth rate of approximately 31.6%. This increase was primarily due to the steady growth of traditional property management services and the accelerated development of community leasing, sales and other services. Average net profit from traditional property management services increased by a year-on-year growth rate of approximately 18.4% from 2013 to RMB11.0 million in 2014 as a result of efforts by property management companies to boost operating efficiency by employing automation, standardisation and centralisation initiatives. Average profit from community leasing, sales and other services increased to RMB21.0 million in 2014, representing a year-on-year growth rate of approximately 39.8%. The top 100 property management companies explored new revenue streams by increasing their use of technological innovations, cloud services, online communication platforms and APP platforms to develop value-added services to improve their operating results. The top 100 property management companies, by expanding their scope of business, have gradually transitioned to a sustainable business model comprising property management services as its core business, as supplemented by community leasing, sales and other services. This business model has helped the top 100 property management companies achieve a steady rate of growth by optimising and integrating internal resources to control operating costs and boost profitability. According to China Index Academy, the average net profit margins of the top 100 property management companies have risen from 5.5% in 2008 to 8.9% in MARKET CONDITIONS AFFECTING THE PROPERTY MANAGEMENT INDUSTRY Increasing Urbanisation and Growing Disposable Income Per Capita The levels of urbanisation and disposable income per capita in the PRC have increased significantly in recent years, which we believe has driven the growth of the PRC s real estate industry. The table below shows a summary of the PRC s urbanisation level and disposable income per capita from 2008 to 2014: Total Population (in millions).. 1, , , , , , ,367.8 Urban Population (in millions) UrbanisationRate(%) % 48.3% 50.0% 51.3% 52.6% 53.7% 54.8% Annual Urban Disposable Income Per Capita (RMB)... 15,781 17,175 19,109 21,810 24,565 26,955 28,844 Source: National Bureau of Statistics of China Increased Land Supply With a high rate of urbanisation and increasing disposable income per capita, the PRC government has increased its land supply over the past few years. New land supply for property purpose (site area) increased from approximately million sq.m. in 2008 to approximately 2,000.0 million sq.m. in 2013, representing a CAGR of approximately 21.6%. The total gross floor area of residential properties under construction in the PRC increased from approximately 2.2 billion sq.m. in 2008 to approximately 5.2 billion sq.m. in 2014, representing a CAGR of 72

78 INDUSTRY OVERVIEW approximately 15.0%. During the same period, the gross floor area of completed residential properties also increased from approximately million sq.m. in 2008 to approximately million sq.m. in 2014, representing a CAGR of approximately 6.9%. The table below indicates the PRC s new land supply for property development (site area), the gross floor area of residential properties under construction and the gross floor area of completed residential properties from 2008 to 2014: CAGR between 2008 to 2014 New Land Supply for Property Development (million sq.m.) , , , , ,000.0 n.a. n.a. Gross Floor Area of Residential Properties under Construction (million sq.m.) , , , , , , , % Gross Floor Area of Completed Residential Properties (million sq.m.) % Source: National Bureau of Statistics of China and Ministry of Land and Resources TRENDS IN THE PROPERTY MANAGEMENT INDUSTRY Increasing Cost Pressure on Labour-Intensive Property Management Services Since the inception of the PRC s property management services in the 1980s, the industry has involved labour-intensive processes in its traditional services, including security, cleaning, gardening, repair and maintenance services. According to China Index Academy, property management companies relying primarily on such traditional services face a number of operational difficulties. While operating costs have risen with the increased cost of labour, property management fees have not matched this increase, leading to weaker margins. Further, property management companies can no longer depend on the expansion of traditional property management services alone to generate corresponding increases in profitability. Under such circumstances, many property management companies are forced to compromise service quality to maintain their profitability, and to forego new business opportunities to maintain their existing operations. Increasing Standardisation and Automation Standardisation is not only an important tool for property management companies to improve service quality, but also a crucial foundation for the scaleability of operations across new regions. The top 100 property management companies have continuously refined and upgraded their service standards to improve the quality of property management services and plan for regional expansion through this strategy. 73

79 INDUSTRY OVERVIEW The internet and information technology has played a growing role in property management services in recent years. Property management companies have placed greater emphasis on adopting new technologies to maintain their leading market positions through innovations. The top 100 property management companies have steadily raised their levels of investment in technology, significantly improving the quality of services while successfully controlling labour costs. Diversification and Innovative Services Create New Opportunities According to China Index Academy, residents have increasingly demanded higher-quality traditional property management services as well as new diversified offerings from property management companies. Such demands, together with the increasing pressure from rising costs, have led property management companies to adjust their traditional business model, consolidate their resources and transform their operations to achieve sustainable profitability growth. In particular, property management companies have recognised that their biggest assets are the residents living in the properties they manage and the residents demands represent the most valuable business opportunities. Community leasing, sales and other services not only serve as an additional profit generator, but also support the traditional property management services business. The top 100 property management companies provide comprehensive services through real estate agency and asset management services, e-commerce, consulting services and professional technology services, with significant emphasis on service quality. In the future, the property management industry will undergo significant integration. Aside from certain large platform companies, most property management companies will downsize and specialise in niche areas of service, and property management services will become more heavily specialised. Accelerated Industrial Consolidation After over thirty years of development, the PRC s property management industry now comprisesmorethan100,000companies, most of which however, are excessively fragmented. In recent years, some of the top 100 property management companies have begun to merge with or acquire small- and medium-sized property management companies to improve their strategic position. First, they quickly expand the scale of projects under management through mergers and acquisitions, optimise shareable resources and realise economies of scale to improve their market position. Second, they lower barriers to entry to markets in new regions through regional mergers and acquisitions, which can effectively alleviate cross-regional operation risks, and successfully complete the localisation process in an efficient manner. Third, they expand globally through mergers and acquisitions. According to China Index Academy, mergers and acquisitions is one of the principal ways for property management companies to achieve growth. 74

80 INDUSTRY OVERVIEW SERVICE QUALITY OF TOP PROPERTY MANAGEMENT COMPANIES Continuously enhancing service quality, with property management service satisfaction remaining high From March 2014 to May 2014, the overall customer satisfaction rate of the top 100 property management companies was approximately 84.9%, and satisfaction rate for each area of service exceeded 80%. Areas of higher satisfaction included basic property management services such as garden landscape maintenance, cleaning, energy saving, fire-fighting safety management, community security and elevator maintenance, all of which exceeded 85%. These high scores indicate the high level of quality of basic property management services. In addition, residents placed more emphasis on paid services and community cultural activities than they did in In particular, the importance residents placed on community cultural activities increased by more than 20%. To help build more cohesive residential communities, the top 100 property management companies often organise various community cultural activities to effectively enhance communication between property residents and the property management company. A higher overall satisfaction rate contributes to timely payment of property management fees, and higher collection rates and renewal rates In 2013, the top 100 property management companies, having established brand recognition and customer loyalty among residents, experience high collection rates of property management service fees and renewal rates of service contracts. In 2013, the top 100 property management companies actively developed community leasing, sales and other services, including community network, community commerce and community finance, to supplement traditional property management services and better serve residents growing demand for community convenience services. In order to enhance brand recognition, certain top 100 companies voluntarily declined to renew contracts with low-quality projects, leading to a decline in contract renewal rates. However, this decline nevertheless improved overall profitability and brand value. High-quality services of the top 100 property management companies contributing to project value preservation and appreciation The top 100 property management companies, through repair and maintenance of hardware facilities and professional support of software operation services, helped property owners maximise the value of their properties. In 2013, China Index Academy s sampling survey on top key cities in the PRC revealed that the average price of second-hand housing under the management of the top 100 companies on average grew at a higher rate than the overall in property prices by %. This suggests that high-quality property management services supports the rise of second-hand housing prices. Similarly, in the leasing market, tenants paid a premium for high-quality services, with the annual average rent higher than industry average by %. COMPETITION Competitive Landscape We compete with our major competitors primarily on scale, branding, profitability and service quality. As at 31 December 2014, there were fewer than 20 property management companies with GFA under management exceeding 50 million sq.m.. 75

81 INDUSTRY OVERVIEW According to a study conducted by China Index Academy in 2015, as at 31 December 2014, our Company was ranked first as a state-owned property management enterprise, with operations covering the PRC, Hong Kong and Macau. Our Company was also ranked 9th in terms of GFA under management among the top 100 property management companies in Our steady growth helped us earn titles such as the 2015 Top Property Service Enterprises to Watch Out For Capital Markets No. 1 and 2015 China Property Service Top 100 Enterprises Corporate Social Responsibility Top 10 No. 4. Barriers to Entry New entrants must meet certain eligibility criteria under relevant PRC laws and regulations. Please see section entitled Appendix III Regulatory Overview PRC Regulatory Overview Legal Regulations on Enterprises Engaging in Property Management Services. Wedonot believe that there are high barriers to entry in this industry, which contributes to the intense competition. Competitive Strength of our Company Our Company is one of the earliest players in the industry and consequently enjoys a firstmover advantage with high brand recognition and customer loyalty. Our history with COLI Group, a leading property developer in the PRC, has allowed us to leverage the China Overseas brand name to secure our position as an experienced property management service provider for mid- to high-end properties. We also focus on implementing our automation and standardisation strategy to improve service quality while reducing our reliance on manual labour. In addition, we plan to invest more resources in our value-added services segment to better satisfy our customers and also create revenue growth potential. For more information, refer to the section entitled Business Our Competitive Strengths and Business Our Business Strategies. E-COMMERCE OPPORTUNITIES FOR PROPERTY MANAGEMENT Internet Penetration and E-commerce Market Size According to the China Internet Network Information Center ( 中國互聯網絡信息中心 ), the administrative agency responsible for Internet affairs under the Ministry of Industry and Information Technology of the PRC, the PRC s internet user quantity and penetration has steadily increased in recent years. The chart below sets forth the internet penetration rate and the number of Internet users in China from 2008 to 2014: Number of PRC s Internet Users (inmillions) Internet Penetration Rate % 28.9% 34.3% 38.3% 42.1% 45.8% 47.9% Source: China Internet Network Information Center 76

82 INDUSTRY OVERVIEW E-commerce and Market Growth and Future Development According to iresearch Consulting Group, the PRC s e-commerce transaction value in 2014 reached RMB13.3 trillion, which will continue to grow, although the growth rate will decline slightly. The specific data is shown in the table below: e 2016e 2017e 2018e Size of E-commerce Transactions (RMBintrillions) GrowthRate % 27.2% 24.5% 21.6% 18.7% 16.2% Source: iresearch Consulting Group According to iresearch Consulting Group, the PRC s online shopping transaction value reached RMB2.8 trillion in 2014, representing approximately 10.6% of the total retail sales of consumer goods. This proportion will increase by approximately 2.0% every year for the next four years, based on the increase of the PRC s internet users, changes to their consumption behaviour, as well as a higher degree of transparency and a more secure online shopping environment. The specific data is shown in the table below: e 2016e 2017e 2018e Size of Online Shopping Transactions (RMB in billions).. 1, , , , , ,785.0 GrowthRate % 47.4% 43.1% 33.3% 25.1% 17.0% Online Shopping as a percentage of total value of retailed consumer products % 10.6% 13.5% 16.2% 18.5% 20.0% Source: iresearch Consulting Group 77

83 INDUSTRY OVERVIEW O2O Market Analysis and Its Effect on the Property Management Industry O2O plays an important role for the future development of traditional property management services, by connecting property management companies and residents through a convenient platform and increasing resident satisfaction by offering services that increase their convenience. In particular, online catering and online leisure and entertainment account for a significant portion of O2O industry. The table below sets forth the breakdown of the O2O industry: e 2016e 2017e 2018e OnlineCatering % 40.2% 42.4% 42.3% 41.7% 41.3% Online Leisure and Entertainment % 27.2% 25.8% 25.4% 25.3% 24.9% OnlineHotel % 26.1% 25.4% 25.5% 25.9% 25.9% OnlineWedding % 1.9% 2.5% 2.9% 3.3% 4.2% OnlineParent-Child % 2.3% 2.1% 2.2% 2.2% 2.3% OnlineBeauty % 2.3% 1.8% 1.7% 1.6% 1.4% Source: iresearch Consulting Group 78

84 BUSINESS OVERVIEW We are one of the leading property management companies in the PRC 1, according to China Index Academy, with operations also covering Hong Kong and Macau. As at 31 May 2015, our properties under management consisted of residential communities, commercial properties and government properties with an aggregate GFA under management of 67.6 million sq.m.. We manage mid- to high-end properties and strive to retain and add value to the properties under our management by providing high-quality and sophisticated services to our customers and maximising customer satisfaction. We have two main business segments:. property management services, which primarily include (i) services such as security, repair and maintenance, cleaning and garden landscape maintenance provided to mid- to high-end residential communities (including mixed-use properties), commercial properties and government properties and (ii) services to other enterprises, such as (for property developers) pre-delivery services, move-in assistance services, delivery inspection services and engineering service quality monitoring and (for other property management companies) consulting services; and. value-added services, which primarily include (i) engineering services such as (for property developers) automation consulting and engineering product sales and (for property management companies) inspection services, repair and maintenance services and equipment upgrade services and (ii) community leasing, sales and other services where residents and tenants of the properties under our management are offered a diversified range of offline services (such as common area rental assistance, purchase assistance and rental assistance for properties that have been delivered to owners by developers and household assistance services) and online services through our O2O platform. We strive to provide high-quality and sophisticated services to our customers through our automated, standardised and specialised processes which allow us to strengthen our operating efficiency and effectively control our costs. Through our integrated platform of services, we aim to provide service offerings which meet our customers needs in order to diversify our revenue base and improve our market position. For our property management services segment, we charge our property management fees either under lump sum basis or under commission basis. For the majority of our property management services charged under lump sum basis, we record the full amount of property management fees received as our revenue. We pay out our expenses from the property management fees collected from properties managed under lump sum basis and recognise such costs as our direct operating expenses. For the majority of our property management services charged under commission basis, we record a pre-determined percentage of our property management fee as our revenue. The remainder of the property management fee, after deducting our pre-determined percentage, is used as property management working capital to 1 By scale of operation, operational performance and efficiency, quality of services, development potential and social responsibility, among other factors. 79

85 BUSINESS cover property management expenses. The costs associated with the provision of our property management services are borne by the residents and tenants of the properties we manage under commission basis. Our revenue increased from HK$1,444.9 million for the year ended 31 December 2012, to HK$1,844.1 million for the year ended 31 December 2013 and further to HK$2,163.7 million for the year ended 31 December 2014, representing a CAGR of 22.4% from 31 December 2012 to 31 December Our revenue increased from HK$807.5 million for the five months ended 31 May 2014 to HK$932.7 million for the five months ended 31 May 2015, representing an increase of 15.5%. Our profit attributable to owners of the Company increased from HK$61.5 million for the year ended 31 December 2012, to HK$85.5 million for the year ended 31 December 2013 and further to HK$97.1 million for the year ended 31 December 2014, representing a CAGR of 25.7% from 2012 to Our profit attributable to owners of the Company increased from HK$32.9 million for the five months ended 31 May 2014 to HK$41.1 million for the five months ended 31 May 2015, representing an increase of 24.9%. OUR COMPETITIVE STRENGTHS We believe that the following competitive strengths allow us to compete effectively in the property management markets in which we operate. We are one of the leading property management companies in the PRC with a proven track record According to China Index Academy, we are one of the leading property management companies in the PRC, with operations also covering Hong Kong and Macau. We pride ourselves as one of the pioneers in the PRC property management industry and believe that our long history of 29 years gives us a first-mover advantage. Customers associate our brand with high-quality property management services due to our extensive industry experience, which has helped us to achieve high levels of customer satisfaction and low rates of contract termination. We have a proven track record in expanding our operations and successfully increasing our total GFA under management and the number of properties under our management over the Track Record Period. Our total GFA under management increased from 34.1 million sq.m. as at 31 December 2012, to 45.9 million sq.m. as at 31 December 2013, to 56.4 million sq.m. as at 31 December 2014, and further to 67.6 million sq.m. as at 31 May The number of properties under our management, including residential communities, commercial properties and government properties, increased from 249 properties as at 31 December 2012 to 384 properties as at 31 May Our history with COLI Group, a leading property developer in the PRC, has helped secure our position as an experienced property management service provider. We differentiate ourselves from our competitors through our track record in meeting customers demands with high-quality services, which has established our expertise in managing mid- to high-end properties. We believe our expertise in managing mid- to high-end properties gives us a stronger ability to adjust our property management fees compared to competitors managing neighbouring properties. Furthermore, over the Track Record Period, we successfully increased 80

86 BUSINESS our property management fees upon contract renewal for 130 properties under our management. Our ability to increase our property management fees during the Track Record Period for properties under our management demonstrates the value we provide to our customers. Our robust quality control measures help secure our strong brand recognition We have established a strong brand in the PRC property management industry by leveraging the expertise we acquired from our Hong Kong property management business and our in-depth knowledge of the local PRC markets and by providing high-quality property management services tailored to our customers. We were among the first PRC property management service providers (i) to employ international benchmarks, such as certification under the International Organization for Standardization and (ii) to roll out management systems and standards based on our know-how gained in Hong Kong, in the PRC property management industry. We believe this has contributed to the recognition of our brand name and quality of our services in the management of mid- to high-end properties. We aim to continue to leverage our strong brand name to further penetrate the PRC, Hong Kong and Macau markets, expand our business and increase our profitability. In recognition of the high quality of our services and products, we have received various honours and awards, such as 2015 Property Management Company Worth Focusing by Capital Market (2015 年值得資本市場關注物業服務企業 ) from China Index Academy and China Real Estate TOP10 Research Group ( 中國房地產 TOP10 研究組 ) and 2014 China Property Management Enterprise Brand Value TOP10 (2014 中國物業管理企業品牌價值 TOP10) from China Real Estate Research Association ( 中國房地產研究會 ) and China Real Estate Association and China Real Estate Assessment Center ( 中國房地產業協會與中國房地產測評中心 ). For more information on the honours and awards granted to our business, please see Honours and Awards. We believe our well-established market leadership and our extensive experience in the PRC property management industry position us to capture greater market share in the growing PRC property management industry. We strive to maintain our strong brand reputation through our stringent quality control system to ensure the high quality, safety and efficiency of our services and products. We are certified under the ISO 9001:2008, ISO 10002:2004 and ISO 14001:2004 quality standards issued by the International Organization for Standardization and under the OHSAS 18001:2007 standard for occupational health and safety management systems. These certifications help us ensure that the quality of our services and processes meet international standards. In addition, we maintain a team dedicated to nurturing close relationships with the residents and tenants of the properties under our management and actively solicit feedback. We believe this allows us to serve our customers more effectively and identify new business opportunities through understanding their needs. To ensure our rigorous standards are maintained by our sub-contractors, we carefully evaluate pre-screened sub-contractors regarding their performance on their first contract with us before including them in our official list of qualified sub-contractors. We believe our consistent delivery of high-quality services helps solidify our strong brand name and establish a strong foundation for our growth in the property management industry. 81

87 BUSINESS During the Track Record Period, we did not experience any involuntary terminations for our property management service contracts, demonstrating the high satisfaction level of our customers. We believe our comprehensive quality control processes help us to maintain our customers high satisfaction level. We have a well-diversified portfolio of property management businesses across the PRC, Hong Kong and Macau Our operations commenced in Hong Kong in 1986 and we have strategically expanded our operations to the PRC and Macau. As at 31 May 2015, we provided property management services to customers in 48 cities in the PRC, as well as in Hong Kong and Macau. With operations in most of the provincial capitals in the PRC, we focus on cities with strong economic development, dense populations, a high affinity for quality property management services and favourable regulatory landscapes. We believe that we are one of the few large-scale property management companies with coverage on various types of properties across the PRC, Hong Kong and Macau. As at 31 May 2015, we managed 341 residential communities, 31 commercial properties and 12 government properties with an aggregate GFA under management of approximately 67.6 million sq.m.. Our sources of income are well-diversified, with growing income streams from our property management business, we maintain operations in most first and second tier cities, which has helped us develop our brand recognition in the management of mid- to high-end properties. Through the COGO Acquisition, we have further expanded our operations in managing mid- to high-end properties in emerging third tier cities which we believe hold significant growth potential. The expansion of our offline and O2O platforms offers new services and products to customers and drives new revenue streams Leveraging our understanding of our customers needs, we have successfully expanded our offline and O2O platforms to offer comprehensive services and products to our customers in selected regions, such as laundry services and household services. We carefully select vendors based on their product or service quality and post-sales delivery capabilities and continuously evaluate their performance to ensure we provide quality services and a good experience for our customers. Our expertise in managing mid- to high-end properties has helped us develop a customer base of residents and tenants with high purchasing power. We seek to tap the high purchasing power of our network by developing various rental and sales assistance, household, health management and other services targeted at specific sub-categories of our customers, such as commercial property tenants or new residents. We recently launched our online platform to provide our customers in selected regions with more convenient access to our offerings and drive new revenue streams. Through our online and offline platforms, we believe we can boost customer satisfaction, diversify our revenue base and expand our core competency in mid- to high-end property management. 82

88 BUSINESS We have an experienced and stable management team with strong execution capability and in-depth knowledge of our industry Our Group s long history of 29 years in the property management industry has allowed us to develop an experienced senior management team of professionals with an average of over 10 years experience in the industry. Our team s in-depth knowledge of the property management industry and execution capabilities drive our growth as a leading property management company. Our emphasis on training and career development helps us nurture a cohesive corporate culture and ensure high-quality standards in our services. Our management team members history with the Group helps us foster a strong customer service-oriented culture, which we believe differentiates us from our competitors. For further information, please see Directors and Senior Management. We believe our strong management team plays a key role in strengthening our market position and developing our business. OUR BUSINESS STRATEGIES Our customers needs drive our business growth. We focus on providing quality property management services to mid- to high-end properties and aim to continue developing in this market via our strong brand recognition. We intend to achieve our objectives through the following key business strategies: Continue to leverage our leading China Overseas Property brand name and expand our business scope We aim to solidify our strong brand recognition as a property management service provider for mid- to high-end properties by focusing on our core competency of managing such properties in major cities in the PRC, as well as in Hong Kong and Macau. As our current operations cover 50 cities, we intend to achieve this objective by further penetrating these markets by expanding our range of service offerings to better cater to mid- to high-end customers, and by leveraging our property management knowhow from Hong Kong high-end properties to develop the highend and mixed-use property management market in the PRC and abroad. In order to continue to leverage on our strength in managing mid- to high-end properties, we plan to expand our coverage to property developers whose profiles are consistent with our brand image and market positioning. In particular, we intend to expand our portfolio of commercial properties under our management through such developers. Furthermore, to continue expanding our scope of operations, we plan to explore potential cooperation opportunities with, or acquisitions of, other property management companies in the PRC when suitable opportunities arise. Further expand our business coverage through consolidation of our advanced property management knowhow We will leverage on our extensive experience in managing mid- to high-end properties in order to continue to expand our coverage for consulting services. We will provide bespoke services to meet our customers demands. Such services include planning design assessments, engineering consultancy and equipment advisory services to achieve the goal of lowering development costs and improving property offerings. Our management knowhow offerings 83

89 BUSINESS include property management methodology design and modernising quality control techniques to aid with raising management efficiency and lowering costs arising from property management services. Continue to develop our O2O platform to optimise service experience We believe our O2O platform will play a key role in our growth opportunities in the future. We have dedicated and will continue to devote additional resources to grow our O2O platform and offer services outside the scope of traditional property management services, thereby creating value for our customers. We intend to further promote our online service platform by better integrating our online and offline service offerings to help customers transition from our offline offerings to our online platform. We will also invest more resources in marketing our O2O platform to increase customer awareness of our offerings and boost our technological capabilities to support the platform s operation. We intend to explore opportunities to collaborate with potential partners in the following areas to develop new offerings on our O2O platform and attract more users:. E-commerce: (i) encouraging cooperation between online and offline commerce offerings to provide customers with services such as group purchases, online marketplace sale and leasing platform, high-end travel and home appliance maintenance and providing businesses with targeted advertisements and big data analytics services; and (ii) providing integrated services such as home repair, laundry services and carpark short-term sub-leasing on behalf of residents by integrating our internal resources with those of the surrounding community;. Finance: cooperating with various financial entities including banks, insurance and online payment companies to provide wealth management, investment, small-scale loans, bill payments and other payment services; and. Community building: providing internet- and mobile-based community building services via a broad offering of interest-based group activities to foster a cohesive and connected community. Further enhance our service quality while maximising our cost efficiency We pay close attention to our customers needs and aim to improve our core competency in providing quality property management services by leveraging innovations in technology, ensuring service quality through effective supervision and raising management efficiency. Automation and standardisation are key factors in our strategy to increase cost efficiency and improve service quality. We intend to continue implementing automation measures in our processes and emphasising standardisation in our operations. Automation and standardisation allow us to better take advantage of our internal control systems for more efficient control over our operations across the PRC, Hong Kong and Macau. For example, we intend to employ more automation measures such as implementing a real-time quality control system, remote video surveillance system, smart guest access system and carpark management system. 84

90 BUSINESS We also aim to maintain our close relationships with quality vendors and sub-contractors to ensure consistency and reliability in service quality while controlling costs through bulk purchases or economies of scale. Our focus is to differentiate our Company from our competitors through quality services and reliability. We will implement a standardised management system for the properties under our management to maintain and increase the valueofsuchproperties. Attract, develop and retain talent to support our business growth To facilitate our business rapid growth, we have adopted a series of human resources strategies to attract, nurture and retain talent to execute our business expansion. We mainly select our management staff organically through internal promotion but will also externally recruit talent in the property management industry who complement our development strategy and corporate culture. We tailor our training programmes to various levels of management from entry-level staff to senior management to address their need for different skill sets. To supplement our recruiting and training efforts, we will continue developing our long-term relationships with professional institutions and industrial organisations for strategy planning as well as establishing various training camps. Our online training courses also provide timely and attractive learning opportunities for our employees. In addition, we have implemented various employee recognition initiatives and rewards, such as a star-rating evaluation system, to further improve their performance in service quality and job experience. We design competitive compensation packages and performance review systems. Through regular performance reviews, stipends, bonuses and special contractual arrangements, we incentivise our employees and boost productivity by ensuring compensation is tied to performance. Furthermore, our internal mobility programmes allow us to offer wider and longterm career development opportunities to our staff and retain talent. 85

91 BUSINESS OUR PROPERTY MANAGEMENT SERVICES Our Geographical Presence As at 31 May 2015, the properties we managed were located in the cities indicated in the map below: 86

92 BUSINESS Immediately prior to the COGO Acquisition, our operations were located across 34 cities in the PRC, as well as in Hong Kong and Macau. Through the COGO Acquisition, we expanded our geographical scope by 14 cities to a total of 50 cities across the following regions: Hua Nan Region: Hua Dong Region: Hua Bei Region:. Changsha. Foshan. Fuzhou. Ganzhou*. Guangzhou. Guilin*. Nanning*. Shantou*. Shenzhen. Wuhan. Xiamen. Zhongshan. Zhuhai. Changzhou*. Hangzhou. Hefei*. Shanghai. Nanchang. Nanjing. Nantong*. Ningbo. Shaoxing*. Suzhou. Wuxi. Yancheng*. Yangzhou*. Beijing. Hohhot*. Jinan. Taiyuan. Tianjin. Weifang. Zhengzhou Northern Region: Western Region: Hong Kong and Macau:. Changchun. Dalian. Harbin. Jilin*. Qingdao. Shenyang. Yantai. Zibo. Chengdu. Chongqing. Kunming. Lanzhou*. Urumqi. Xi an. Yinchuan*. Hong Kong. Macau * Location added through the COGO Acquisition The table below sets forth our total GFA under management by different regions in the PRC and in Hong Kong and Macau as at the dates indicated: As at 31 December As at 31 May ( 000 sq.m.) % ( 000 sq.m.) % ( 000 sq.m.) % ( 000 sq.m.) % Hua Nan Region.. 9, , , , Hua Dong Region.. 5, , , , Hua Bei Region... 4, , , , Northern Region... 4, , , , Western Region... 6, , , , Hong Kong and Macau , , , , Total , , , ,

93 BUSINESS The table below sets forth our total GFA under management by property type as at the dates indicated: As at 31 December As at 31 May ( 000 sq.m.) % ( 000 sq.m.) % ( 000 sq.m.) % ( 000 sq.m.) % Residential properties , , , , Commercial properties , , , , Government properties Total , , , , As at 31 May 2015, we were contracted to manage 341 residential communities, 31 commercial properties and 12 government properties located across 48 cities in the PRC, as well as in Hong Kong and Macau, with an aggregate GFA under management of approximately 67.6 million sq.m.. Over the Track Record Period, we expanded our business mainly through obtaining new service engagements. The table below indicates the movement of our total GFA under management during the Track Record Period: As at 31 December As at 31 May ( 000 sq.m.) ( 000 sq.m.) ( 000 sq.m.) ( 000 sq.m.) As at beginning of period ,789 34,090 45,900 56,384 New engagements ,301 12,517 10,485 11,427 Voluntarywithdrawals... (707) (1) (189) As at end of period ,090 45,900 56,384 67,622 During the Track Record Period, we established certain municipal management centres to facilitate the expansion of the geographical scope of our operations, while minimising and controlling discrepancies in service quality across different properties under our management. We believe that the establishment of such municipal management centres will help us prepare for future expansions of our operations and enable us to better leverage economies of scale with future expansions. Scope of Our Property Management Services We focus on providing: (i) services such as security, repair and maintenance, cleaning and garden landscape maintenance provided to mid- to high-end residential communities (including mixed-use properties), commercial properties and government properties and (ii) services to other enterprises, such as (for property developers) pre-delivery services, move-in assistance services, delivery inspection services and engineering service quality monitoring and (for other property management companies) consulting services. 88

94 BUSINESS We focus on providing property management services to mid- to high-end residential communities (including mixed-use properties), commercial properties and government properties. The properties under our management include:. in the PRC: a number of landmark properties, grade A office building complexes (with Fortune 500 companies and consulate offices among their tenants, and luxury residential properties); and. in Hong Kong and Macau: a number of government properties and residential estates, high-end residential communities, including premium luxury residential properties in the southern district of Hong Kong. The property management services we provide can be grouped into the following categories:. Security services We strive to ensure the safety of the residents and tenants of the properties we manage through providing quality security services. We seek to enhance the quality of our security services through equipment upgrades and automation measures, such as the use of remote monitoring systems, building access systems, electronic patrolling systems, electronic gates and carpark security systems, and staff training such as fire drills and practice evacuations for natural disasters. The daily security services we provide include 24-hour patrolling, access control, visitor handling and registration and emergency handling.. Repair and maintenance services Our on-site teams at our management offices provide repair and maintenance services in connection with normal wear and tear of equipment and property at certain properties under our management. We also perform delivery inspections on units prior to delivery to property owners for an inspection fee. In particular, we are generally responsible for the maintenance of (i) common area facilities such as lifts, escalators and central air conditioning facilities; (ii) fire and safety facilities such as fire extinguishers and fire alarm systems; (iii) security facilities such as entrance gates control and surveillance cameras; and (iv) utility facilities such as electricity generators, water pumps and water tanks. We set up regular equipment maintenance schedules and employ an information platform through which management can monitor each property s equipment maintenance status. In addition to the repair and maintenance services we provide, we also sub-contract certain repair and maintenance services, such as lift repair and maintenance and fire safety facilities maintenance. For details of sub-contracting, please see Sub-contracting.. Cleaning and garden landscape maintenance services We provide general cleaning, pest control and garden landscape maintenance services to the properties we manage. We delegate the provision of cleaning services to third-party sub-contractors. For details of sub-contracting, please see Sub-contracting. 89

95 BUSINESS Revenue Model of Property Management Services Our property management services generate revenue from the following three types of services: Year ended 31 December Five months ended 31 May HK$ 000 % HK$ 000 % HK$ 000 % HK$ 000 % HK$ 000 % Property management services under lump sum basis.. 1,224, ,524, ,764, , , Property management services under commission basis. 46, , , , , Other services , , , , , Total property management service fees... 1,391, ,741, ,035, , , During the Track Record Period, we charged (i) property management fees either under commission basis or under lump sum basis, depending on the nature and requirements of individual properties, and (ii) we also charge fees for other services provided to property developers and other property management companies, such as fees for pre-delivery services, which consist of security, cleaning and repair and maintenance services for properties before they are fit for occupation, on a per-transaction basis and fees for consultancy services. Based on the proposals received from our prospective customers, we conduct financial assessments by evaluating key factors such as projected profitability. The assessment results help us determine whether to accept the proposals and take up the engagements as their property management service providers. The differences between these two bases are explained in more detail below.. Property management fees charged lump sum basis For the majority of properties managed under lump sum basis, we are entitled to retain the full amount of received property management fees. We pay out the expenses we incur in connection with the provision of our property management services from the property management fees collected. These expenses include costs associated with, among others, staff, cleaning, garbage disposal, garden landscape maintenance, security and general overhead covering the common areas. During the term of the property management contract, if the amount of property management fees we collect is not sufficient to cover all the expenses incurred, we are not entitled to request the property owners to pay us the shortfall. In light of this, during the Track Record Period, we implemented certain cost management initiatives such as implementing automation measures such as remote video surveillance to reduce labour costs, converting to LED lighting and implementing water conservation measures to reduce utility costs, as well as making appropriate adjustments to the services we offer. These initiatives have helped us generate an overall net profit from our contracts charged under lump sum basis during the Track Record Period. 90

96 BUSINESS Our property management service contracts currently do not provide for price adjustment mechanisms in the event that our costs incurred are higher than expected. However, during the Track Record Period, we have been successful in increasing our property management fees when renewing certain contracts with property owners associations or through obtaining approval from the requisite number of property owners under local regulations. However, there is no assurance that we will succeed in increasing our property management fees in the future. Please see Risk Factors Risks Relating to Our Business and Industry We charge management fees for certain properties that we manage under lump sum basis, which could subject us to losses. For the majority of properties managed under lump sum basis, we recognise as revenue the full amount of property management fees we charged to the property owners, and recognise the expenses we incurred in connection with performing our services. Therefore, the relevant costs are recognised as our direct operating expenses.. Property management fees charged under commission basis For the majority of properties managed under commission basis, we first recognise as our revenue and gross profit a pre-determined percentage (typically 10% in the PRC) of the property management fees we charge property owners. The remainder of the management fee is used as property management working capital to cover the property management expenses associated with the provision of our property management services. When managing properties under commission basis, we essentially act as an agent of the property owners. Although we normally enter into employment contracts with the on-site staff and we are the contracting party to the sub-contracting arrangements, the residents and tenants of the properties we manage under commission basis typically bear the relevant costs associated with the on-site staff and sub-contracting arrangements. Therefore, we do not incur any direct cost under property management service contracts charged under commission basis in general. In the event of a surplus of working capital after deducting the relevant property management expenses, the surplus is generally rolled over to the next annual period. In the event of a shortfall of working capital to pay for the relevant property management expenses, we may need to make up for the shortfall and pay on behalf of the management offices of properties first, with a view to recovering from the residents, tenants or property owners subsequently. Such payments on behalf of the management offices properties we manage under commission basis are recorded as other receivables in our consolidated statement of financial position. As at 31 December 2012, 2013 and 2014 and 31 May 2015, payments on behalf of management offices of properties managed under commission basis, net of provision for impairment, amounted to HK$3.3 million, HK$9.3 million, HK$29.0 million and HK$62.6 million, respectively. 91

97 BUSINESS In order to ensure a high recovery rate of payments on behalf of management offices under commission basis, our Company employs the following measures:. ensure the early establishment of bank accounts for management offices;. settle receivables with management offices on a monthly basis;. enhance the liquidity of management offices by collecting property management fees promptly;. enhance the liquidity of management offices by improving profitability through cost management initiatives, such as employing energy-saving measures, and adjusting property management fees as appropriate; and. set credit limits on payment on behalf of management offices based on the property s expected cash flows and consider termination of property management service contract if such limits are exceeded. For further information, please see Financial Information Description of Certain Items in Statement of Financial Position Trade and Other Receivables.. Other services We may be appointed as the property management service provider by property developers during early stages of property development. We provide pre-delivery services to property developers, such as security, cleaning and repair and maintenance services for display units for developing properties, and we recognise our revenue based on the fees we charge, which is calculated in accordance with our estimated expenses. We also provide services to assist with moving in, inspection services for units prior to their delivery to property owners by developers and engineering quality monitoring services. We recognise relevant labour costs we incur as direct operating expenses in connection with performing our services. We also provide consultancy services to other property management companies on various aspects of their operations (such as property management, engineering, personnel training, marketing strategy and human resources management) so that they can leverage our experience and platform to improve the standard of their own operations and improve their operational cost efficiency. As at 31 December 2012, 2013 and 2014 and 31 May 2015, properties with fees charged under lump sum basis constituted 73.3%, 70.2%, 65.1% and 59.3% of our total GFA under management, respectively, while properties with fees charged under commission basis constituted 26.7%, 29.8%, 34.9% and 40.7% of our total GFA under management, respectively. For the years ended 31 December 2012, 2013 and 2014 and the five months ended 31 May 2014 and 2015, gross profit margin for property management services charged under commission basis was 100.0%. For the same periods, the gross profit margin for property management services charged under lump sum basis was 9.4%, 12.2%, 12.7%, 13.9% and 13.6%, respectively. The gross profit margin for other services was 31.1%, 33.9%, 30.8%, 27.6% and 31.0%, respectively. Any 92

98 BUSINESS change in the mix between commission basis and lump sum basis will have impact on our gross profit margins, please see Financial Information Key Factors Affecting Our Results of Operations Business Mix. Our pricing policy In the PRC, we are typically appointed as the property management company to provide property management services to properties through a tender process. For more information, see Appendix III Regulatory Overview PRC Regulatory Overview Legal Regulations on Enterprises Engaging in Property Management Services. When we submit a tender for a new engagement, we generally price our services based on a number of factors, including (i) our estimated expenses, based on factors including the scope and quality of the services proposed, (ii) the classifications, types and locations of the properties, (iii) the pricing for comparable properties, (iv) the local government s guidance price on property management fees, if any, and (v) our estimation of our competitors pricing. Our pricing also varies with the level of service coverage we provide to properties under our management, which is determined based on certain pre-set packages of property management services selected by our customers. In addition, we consider the potential cost savings we can realise via automation and other equipment upgrade services, which allows us to submit more competitive tenders. When the properties have reached the delivery stage, we receive property management fees on all units based on the size of the unit and the nature of the area of the property (such as residential areas, retail areas or carparks). We generally charge property management fees at the same rate on sold and unsold units, except when required by governmental authorities in certain areas to grant a discount on property management fees paid by developers for unsold units. The fees that property management companies may charge in connection with property management services are subject to regulation and supervision by relevant regulatory authorities. For example, for our operations in the PRC, the relevant price administration department and construction administration department of the State Council are jointly responsible for the supervision over and administration of the fees charged in relation to property management services, and such fees may need to follow PRC government guidance prices. Please see the section entitled Appendix III Regulatory Overview PRC Regulatory Overview Legal Regulations on Enterprises Engaging in Property Management Services. Seethesectionentitled Risk Factors Risks relating to Our Business and Industry We are subject to the regulatory environment and measures affecting the property management industry. However, we expect government-imposed price controls on property management fees to relax over time pursuant to the National Development and Reform Commission on the Price Control of Some Services Liberalisation Opinion Notice ( 國家發展改革委關於放開部分服務價格意見的通知 ( 發改價格 [2014]2755 號 )), which was promulgated on 17 December We believe the implementing regulations of this notice will allow us greater flexibility in our pricing in the future. For more information, please see Appendix III Regulatory Overview PRC Regulatory Overview Legal Regulations on Enterprises Engaging in Property Management Services. 93

99 BUSINESS In Hong Kong, we generally follow the terms set forth in the Deeds of Mutual Covenant of different developments to establish the scope of the proposed management services. We generally set our pricing based on the scope of services. In terms of management services for public housing, we generally go through a tender process to secure the relevant contracts. We generally set our pricing for these tenders by taking into account the scope of the services and market conditions. Payment terms We generally charge property management fees on a monthly basis for our property management services and on a per-transaction basis for our pre-delivery services for properties before they are fit for occupation. At the beginning of each month, we generally send out invoices in advance for the next month s fees for residential and commercial properties that we manage. For government properties under our management, we generally send our invoices at the beginning of each month for the previous month s property management fees. For property management fees charged under commission basis, any surplus in working capital at the end of the year are carried over to the next annual period, and any shortfalls in working capital are to be recovered from property owners, with each property owner s share of the shortfall generally proportional to the property owner s share of the total fee-charging GFA, within the first month of the following annual period. We calculate our fees for pre-delivery services based on the estimated cost of providing the particular services requested for each transaction. Revenue from property management services under lump sum basis in the PRC are received in accordance with the terms of the relevant property management service contracts. Revenue from property management services are due for payment by property owners upon the issuance of a demand note. We typically receive payment for our property management services within 30 days to one year after the issuance of the demand note to property owners. In certain areas in which we operate, customers have a habit of making payments in the second half of the year. As a result, we experience a relatively higher cash collection rate in the second half of the year and a lower cash collection rate during or around the Lunar New Year period. Property management services income from properties managed under lump sum basis in Hong Kong has an average credit period of 60 days or less. In order to enhance the timeliness of property management fee and other payments, we have undertaken certain measures aimed at improving our collection of trade and other receivables. We actively collect our receivables through collection measures such as home visits, mailing reminders to property owners, posting payment status notices, ing payment reminders and sending payment reminders through our O2O mobile APP. Automation and Standardisation Property management is a highly labour-intensive industry. To strengthen our competitive position and reduce our reliance on manual labour, we focus on automating and standardising our services. We evaluate our property management services and formulate processes to render such services in a manner that alleviates the pressure of increasing labour costs. 94

100 BUSINESS We have implemented various automated and standardised measures including employing equipment such as carpark security systems, visitor handling systems, garden landscape maintenance management systems, building access and security systems, video surveillance cameras, machine room remote monitoring systems, as well as mechanised cleaning equipment to reduce dependency on manual labour such as security guards and cleaning staff. For more details of our automation, please see Our Value-added Services Engineering Services. Such automation measures help us standardise the provision of our services, which strengthens our brand and reputation by ensuring consistency in our service quality and minimising human error. We believe automation and standardisation facilitate our expansion of our business by enabling us to efficiently scale up and replicate our operations without compromising our service quality. Furthermore, we believe that automation and standardisation play a key role in improving our cost efficiency by reducing our reliance on intensive labour and controlling headcount, while maintaining a high level of security for the properties we manage by minimising human error. Our automation and standardisation measures allow us to better monitor and evaluate our operations from our headquarters. For instance, we are able to employ relatively fewer on-site security guards overseeing main access gates to residential communities and carparks by using surveillance cameras and intrusion detection systems, which can be remotely controlled. Types of Property Management Service Contracts We generally enter into two types of property management service contracts in the PRC: (i) preliminary property management service contracts with property developers prior to the delivery of the individual units to property owners and (ii) contracts with property owners associations after the delivery of the individual units to property owners and the establishment of a property owners association. Contracts with property developers regarding property management services With respect to service engagements for new properties, we generally enter into preliminary property management service contracts with property developers prior to delivery of the relevant properties to property owners. Under these contracts, we are responsible for the concierge service, security and general cleaning of designated areas. We and the property developer jointly conduct the acceptance inspection of the common areas and facilities of the properties according to relevant regulations, as applicable. The property developer is generally responsible for the property construction quality, supplying an area for our use as management office and completion inspection materials. Parties are typically required to resolve any contractual disputes through negotiations first, failing which the dispute is to be resolved through mediation or court proceedings. As advised by our PRC legal adviser, according to Interpretations on Several Issues relating to the Specific Application of Laws on the Hearing of Property Management Service Disputes ( 關於審理物業服務糾紛案件具體應用法律若干問題的解釋 ) (Fa Shi 2009 No. 8), which was promulgated by the Supreme People s Court on 25 May 2009 and came into effect on 1 October 2009, contracts between property developers and property management companies, 95

101 BUSINESS signed before the establishment of property owners associations, and the various legal rights and obligations of property owners listed in such contracts are valid and legally binding on subsequent property owners. These preliminary contracts generally have a duration of three years or less and will be automatically terminated when the property owners associations enter into new property management service contracts. If upon the expiration of the initial term of the contract, the property owners association has not yet been formed or a new property management contract have not been entered into, (i) the preliminary contract will be automatically renewed until a new property management contract is entered into by the property owners associations, if the relevant contract stipulates such automatic renewal, or (ii) we may choose to extend our services without a formal contractual renewal, in such event either party may unilaterally terminate the work relationship without liabilities. During the contractual term, if we decide to terminate a contract through non-renewal, we will notify our counter-party, and continue to provide services until contract expiration. As advised by our PRC legal adviser, we typically have the option to unilaterally terminate a property management contract and cease service provisions before its expiration if we pay a compensation to our counter-party. We may also unilaterally terminate a contract and cease service provisions before its expiration without paying a compensation to our counter-party if there are legal or contractual grounds for such unilateral termination, such as our counter-party s non-performance of its material obligations. Furthermore, both parties may agree on early termination of a contract based on mutual consent. If in the future we choose to do so, we intend to negotiate with our counter-party such that the contract can be terminated based on mutual consent to minimise legal risks. Contracts with property owners associations regarding property management services We enter into property management service contracts with the respective property owners associations, either to replace the preliminary property management service contracts with the property developers, or to replace previous property management companies. As advised by our PRC legal adviser, such contracts between property owners associations and property management companies, including the various legal rights and obligations of property owners under such contracts, are also valid and legally binding on property owners, whom their respective property owners associations represent, even if property owners are not parties to such contracts. In the event of a sale, the current and future owners are free to contract between themselves regarding the assumption of various legal rights and obligations under the relevant property management contract. Under the Law on Property ( 物權法 ) (Order No. 62 of the President of the PRC), the property owners association is elected by the property owners, and represents their interest in matters concerning property management, and the association s decisions are binding on the property owners. We therefore have legally enforceable claims against property owners for owed property management fees. These contracts generally have a duration of one to five years and have terms that are substantially similar to those of the preliminary contracts. These contracts may be extended, either (i) through a formal contract renewal or (ii) in practice, in which event either party may unilaterally terminate the work relationship without liability. During the contractual term, if we decide to terminate a contract through non-renewal, we will notify our counter-party in advance, and continue to provide services until contract expiration. As advised by our PRC legal adviser, we typically have the option to unilaterally terminate a property management contract and cease 96

102 BUSINESS service provisions before its expiration if we pay a compensation to our counter-party. We may also unilaterally terminate a contract and cease service provisions before its expiration without paying a compensation to our counter-party if there are legal or contractual grounds for such unilateral termination, such as our counter-party s non-performance of its material obligations. Furthermore, both parties may agree on early termination of a contract based on mutual consent. Under PRC laws and regulations, the property owners association of a residential property of a certain scale has the right to change property management companies pursuant to certain procedures. For more information, see Appendix III Regulatory Overview PRC Regulatory Overview Legal Regulations on Enterprises Engaging in Property Management Services. In the event of termination or non-renewal of property management service contracts, we may be adversely affected. Please see Risk Factors Risks relating to Our Business and Industry Termination or non-renewal of our property management services for a significant number of properties could have a material adverse effect on our business, financial condition and results of operations. Our property management service contracts with property developers and property owners associations delineate the scope of services to be provided by us, which generally include security, cleaning, garden landscape maintenance, repair and maintenance for the common area facilities within the properties under our management. Although we may not assign the contracts to third parties in their entirety, we are typically allowed to sub-contract some of the services to third parties, such as cleaning or lift repair and maintenance services. In addition, such contracts authorise us or third parties we collaborate with to provide community leasing, sales and other services to the residents and property owners. These contracts typically require us to meet certain quality standards such as those promulgated by the relevant regulatory bodies. For arrangements with our third-party sub-contractors, see the section entitled Sub-contracting. In relation to a community managed under commission basis, our PRC legal adviser has confirmed that we have the legal right to request the property owners at properties we manage under commission basis to make up for a shortfall of working capital and also to recover such shortfall, within the scope set by local competent authorities, according to the Measures on the Charges of Property Management Enterprise ( 物業服務收費管理辦法 ) (Fa Gai Jia Ge 2003 No. 1864). Our property management service contracts currently do not provide for price adjustment mechanisms in the event that our costs incurred are higher than expected. We have been advised by our PRC legal adviser that, in order for us to raise our property management fees, we have to go through certain administrative procedures, including holding a property owners meeting. The fees can only be increased if owners representing (i) more than 50% of total number of units and (ii) more than 50% of the total proprietary gross floor area of that property approve the motion, subject to applicable government guidance prices. Parties are typically required to resolve any contractual disputes through negotiations first, failing which the dispute is to be resolved through mediation or court proceedings. 97

103 BUSINESS Property management service contracts in Hong Kong and Macau In Hong Kong, we enter into property management service contracts with government authorities and owners corporations. We provide general property management services such as cleaning, security and repair and maintenance services to private or public housing and governmental facilities pursuant to such contracts. The term of contracts with government authorities is typically three years and renewable for a period of one to two years, while those with owners corporations vary from one to three years. We receive a lump sum fee or a fixed monthly fee depending on the nature of the services provided. In Macau, we generally enter into property management service contracts with government authorities, property developers and individual property owners. Expiration Schedule for Property Management Service Contracts As at 31 May 2015, we managed 341 residential communities, 31 commercial properties and 12 government properties. The table below sets forth the expiration schedule of the related property management service contracts based on their contractual terms in terms of GFA under management by properties managed under lump sum basis and properties managed under commission basis, as at 31 May 2015: Properties managed under lump sum basis Properties managed under commission basis Total ( 000 sq.m.) ( 000 sq.m.) ( 000 sq.m.) Properties we provided services to beyond contract expiration ,721 2,203 8,924 Contracts expiring in year ending 31December ,018 2,092 6,110 Contracts expiring in year ending 31December ,396 7,756 12,151 Contracts expiring in year ending 31December ,413 3,232 8,645 Contracts expiring in year ending 31 December 2018 and after ,372 1,469 3,842 No expiration date specified (1)... 16,961 10,989 27,950 Total ,881 27,741 67,622 Note: (1) The majority of these property management service contracts are with property developers and will expire when the respective property owners associations are formed and enter into new property management service contracts, while the remaining contracts do not specify their expiration dates. 98

104 BUSINESS Decision to Expand through Growing Property Management Services We are typically appointed as the property management company to service properties through a tender process. Such tender processes are generally held by the developers for properties under development or by property owners associations for completed residential communities or tenants of commercial properties that wish to replace their then-existing property management service provider. It is our general policy to expand our presence by growing our property management services through organic growth of new engagements with property developers or property owners associations. We aim to continue focusing on managing mid- to high-end residential and commercial properties in first and second tier cities. We have existing operations in most provincial capitals of the PRC and in Hong Kong and Macau. Through the COGO Acquisition, we also expanded our operations to emerging third tier cities in the PRC so as to further diversify our business and customer base. We intend to continue pursuing managing mid- to high-end properties in these emerging third tier cities. For our Hong Kong operations, we intend to focus on growing our business through obtaining property management service contracts with the government. We aim to further increase our market penetration in each of our current locations with a view to maximising our economics of scale. In addition, we may explore potential cooperation opportunities with, acquisitions of, other property management companies in the PRC when suitable opportunities arise. In the event that we expand our geographical presence, we will selectively evaluate opportunities in cities based on the following criteria: (i) population size, (ii) level of economic development, (iii) cultural atmosphere, (iv) affinity for property management services and (v) favourability of local regulations concerning the provision of property management services. 99

105 BUSINESS OUR VALUE-ADDED SERVICES Our value-added services segment includes: (i) engineering services such as (for property developers) automation consulting and engineering product sales and (for property management companies) inspection services, repair and maintenance services and equipment upgrade services and (ii) community leasing, sales and other services where residents and tenants of the properties under our management are offered a diversified range of online and offline services (such as common area rental assistance, purchase assistance and rental assistance for properties that have been delivered to owners by developers and household assistance services) through our O2O platform. The following table sets forth a breakdown of revenue from our value-added services segment by service type: Year ended 31 December Five months ended 31 May HK$ %of valueadded services revenue HK$ 000 %of valueadded services revenue HK$ 000 %of valueadded services revenue HK$ 000 %of valueadded services revenue HK$ 000 %of valueadded services revenue Engineering services... 30, , , , , Community leasing, sales and other services... 23, , , , , Total , , , , , Engineering Services Our engineering services sub-segment includes offerings to property developers, other property management companies and properties under our management, through our designated engineering services operating subsidiary. Our engineering services primarily include (i) automation consulting and engineering product sales, (ii) repair and maintenance services and (iii) automation and other equipment upgrade services. We provide consulting services for automation measures and products such as visitor handling systems and remote video surveillance systems to property developers for properties in the pre-delivery stage. Such services generally involve the procurement and design of devices such as security monitoring systems, intercommunication devices, alarms, security systems, carpark management systems and power supplies systems. We also offer equipment upgrade services, repair and maintenance services, automation services and other engineering equipment to property management companies and properties under our management. Our equipment upgrade services include implementing energy-saving and water conservation measures, including replacing existing hardware with equipment such as LED lights, energyefficient air conditioners and water-recycling systems. We have partnered with various companies to secure a reliable supply of materials and minimise unit costs through bulk purchases. We have dedicated personnel for researching and developing engineering products such as remote video surveillance equipment. Our automation equipment include carpark security systems, automatic door entry systems at unmanned access points, machine room remote monitoring systems and high-definition surveillance cameras. These automation measures help reduce the need for manual labour in the provision of property management services. For 100

106 BUSINESS example, our carpark management system and remote optical surveillance systems allow us to remotely monitor the properties we manage. We provide these services with a view towards lowering the cost of property management services. Community Leasing, Sales and Other Services Under our community leasing, sales and other services sub-segment, we primarily provide common area rental assistance, purchase assistance, rental assistance and household assistance (such as housekeeping) services. We provide community leasing, sales and other services to our customers to supplement our property management services and better serve our customers needs. Leveraging our expertise in managing mid- to high-end properties, we strive to provide a comprehensive range of services to our customers, who we believe are willing to pay a premium for high-quality service. We recently introduced our online O2O service platform on which the customers may find and enjoy local products and services in a convenient manner. We currently provide our community leasing, sales and other services primarily through our offices or our telephone service lines. In addition, our community leasing, sales and other services may vary across different properties, depending on a number of factors, including the local commercial environment and the customers particular demands. Our key community leasing, sales and other services can be grouped into the following major categories: (1) Common area rental assistance Common areas are the property of the property developer or property owners. We assist them with leasing out such spaces and receive a commission in return. We generally lease out such common areas to businesses that we believe will provide services of value to our residents and tenants, such as supermarkets and auto care shops. (2) Purchase assistance Depending on the product or service type, residents and tenants of properties to which we provide purchase assistance services may place orders at our on-site management offices, by telephone or through our mobile APP platform, which recently launched in November Payments may be settled on a cash-on-delivery basis or through advance payments. We plan to implement an online payment service in the future. (3) Rental assistance We provide rental assistance services to property owners who would like to rent or sell their units in the properties we manage. We receive commission fees when the properties are leased or sold. (4) Household assistance We help connect our residents and tenants with providers of household assistance services such as housekeeping services and renovation designing. We receive a fee upon the completion of the transaction. 101

107 BUSINESS Our Offline and O2O Platforms We currently provide our community leasing, sales and other services through our offline platform where residents and tenants may place orders at our on-site management offices or by telephone. Our offline services include special discounts after-sale services from local retailers, travel agency services, housekeeping services, laundry services and property agency services. In addition, we also serve as an offline product platform for vendors of household products, daily use products and home improvement products. We recently launched our O2O platform in November 2014, which is accessible through our mobile APP platform. Each resident and tenant living at a property we manage, where available, is eligible to register an account to gain access to our mobile APP platform. The services offered on our mobile APP platform cover three categories: (i) basic services, including information and local news platforms, electronic receipts, polling services and user feedback systems, (ii) smart services such as visitor booking and carpark space availability query systems and (iii) other services such as water purchases, group purchases, property listing and leasing services, household assistance services and customer feedback searches. Our O2O platform is location-targeted, as the types of products and services offered our O2O platform vary between different properties. We tally and relay online orders to the relevant local vendors. Residents and tenants may select different fulfilment methods, depending on the types of products ordered. Local vendors may provide home delivery, or provide services or products at designated locations, depending on the types of services or products offered. Residents and tenants settle their product and service purchases on a cash-on-delivery basis or through advance payments. As at 31 May 2015, our O2O platform was available for 44 properties under our management. We believe our O2O platform has significant growth potential, as it allows us to tap the high purchasing power of our network of mid- to high-end customers. Partnership with Local Vendors We focus on featuring local vendors in the immediate vicinity surrounding a property on our O2O platform, which we believe would help local vendors target the relevant market segment with the highest potential, and facilitate searches for the most relevant offerings. Our on-site teams actively reach out to vendors in the business circles surrounding the properties we manage and invite them to promote their products and services on our service platform. We carefully evaluate which local vendors to collaborate to offer quality products and services on our service platform. Please see the section entitled Quality Control Quality Control over Vendors. SUB-CONTRACTING We delegate certain operations, such as cleaning, garden landscape maintenance and elevator repair and maintenance to qualified sub-contractors, which to our best knowledge and belief, are Independent Third Parties. 102

108 BUSINESS To ensure the overall quality of our works, we have maintained a list of third-party subcontractors, the selection of which are based on factors, including their (i) business performance, (ii) experience in the relevant field, (iii) reputation in the industry (iv) satisfaction of regulatory licence requirements and (v) price competitiveness of their quotations. We carefully monitor pre-screened sub-contractors on their performance on their first contract with our Company before admitting them onto our official list of qualified sub-contractors. We select our cleaning and garden landscape maintenance sub-contractors through a tender process. We regularly monitor and evaluate such sub-contractors on their ability to meet our requirements and standards. For our sub-contracted elevator repair and maintenance services, we have partnered with a leading elevator manufacturing and repair company. This partnership allows us to secure repair and maintenance services and materials at a reasonable cost, establish procurement procedures for such services and materials and set pre-scheduled maintenance periods. We believe this partnership allows us to achieve consistency in the quality of such services, reduce shortage risks and reduce our costs through bulk ordering. A typical sub-contracting agreement entered into between a sub-contractor and us generally includes the following material terms:. scope of work and sub-contracting rates, inclusive of the labour costs and miscellaneous expenses to be incurred by the sub-contractor;. rights and obligations of the parties, such as the arrangement as to which party is responsible for maintaining the applicable insurance and the sub-contractors obligations to follow our instructions. The sub-contractor is usually responsible for maintaining the applicable insurance;. prohibition of assignment or further sub-contracting by the sub-contractor of its work without approval;. damages to be payable by our sub-contractor if the sub-contractor fails to complete the work before the specified completion date;. our right to retain a warranty fee, which would be released to the sub-contractor upon expiration of the warranty period if the work quality meets the requisite standards;. compliance with the relevant safety rules and regulations in connection with the work; and. undertaking by sub-contractor to indemnify us under certain circumstances, such as any breach, non-observant or non-performance by the sub-contractor or any act or omission of the sub-contractor resulting in liability claims by our customers. We generally enter into contracts with sub-contractors for the relevant services on an annual basis. During the Track Record Period, we did not experience any significant disruptions in our sub-contracting arrangements that materially affected our operations. The contract defines the scope of work, such as cleaning and garbage removal, and the service frequency. The thirdparty sub-contractors are required to manage their own staff, and assume liabilities for their 103

109 BUSINESS operations. During the Track Record Period, we generally settled our payments mainly by bank transfers and cheques, within the credit period of 30 to 60 days from third-party sub-contractors of our property management and engineering services. As at the Latest Practicable Date, none of our Directors, their close associates or any Shareholders who, to the knowledge of our Directors, owned more than 5% of our share capital, had any interest in any of our five largest sub-contractors. We have established business relationships with most of our major suppliers for over three years. OUR SUPPLIERS Our suppliers primarily include suppliers of our raw materials and sub-contractors. Our major suppliers are sub-contractors providing cleaning, garden landscape maintenance services to the properties we manage. We have established business relationships with most of our major suppliers for over five years. In the years ended 31 December 2012, 2013 and 2014 and the five months ended 31 May 2015, our five largest suppliers accounted for approximately 11.3%, 10.1%, 14.4% and 12.1% of the sum of our sub-contracting costs, equipment repair and maintenance costs and cost of inventories recognised as expenses, respectively, and our largest supplier accounted for approximately 3.0%, 2.9%, 5.2% and 3.4% of the sum of our total sub-contracting costs, equipment repair and maintenance costs and cost of inventories recognised as expenses, respectively. During the Track Record Period, we did not experience any material delay in receiving products or services from our suppliers. Please also see section entitled Risk Factors Risks relating to Our Business and Industry Our quality control is affected by the third-party sub-contractors that perform certain property management and engineering services. We did not enter into any material contracts with our community leasing, sales and other services suppliers during the Track Record Period. As at the Latest Practicable Date, none of our Directors, their close associates or any Shareholders who, to the knowledge of our Directors, owned more than 5% of the issued share capital of our Company, had any interest in any of our five largest suppliers. OUR CUSTOMERS We have established business relationships with most of our major customers, which we provide property management services to, for over ten years. For the years ended 31 December 2012, 2013 and 2014 and the five months ended 31 May 2015, our five largest customers accounted for approximately 28.3%, 27.6%, 23.0% and 16.7% of our revenue, respectively, and our largest customer accounted for approximately 16.8%, 17.7%, 13.8% and 7.0% of our total revenue, respectively. Property management service fees are received in accordance with the terms of the relevant property management service contracts and are generally due for payment by cash and bank transfers upon the issuance of a demand note. For our property management services in the PRC, we typically receive payment for our property management services within 30 days to one year after the issuance of the demand note. For our property management services in Hong Kong, we typically grant an average credit period of 60 days or less. 104

110 BUSINESS We receive our engineering service fees which were settled mainly by bank transfers in accordance with the terms of the relevant contracts, normally within 60 days from the issuance of payment requests. Community leasing, sales and other services income is due for payment upon the issuance of a demand note. Before accepting a new customer for our value-added services segment, we assess a potential customer s credit quality and define credit rating limits for each customer. We review such credit rating limits assigned to each customer on an annual basis. COLI Group and CSCIHL Group were among our top five customers during the Track Record Period. For the years ended 31 December 2012, 2013 and 2014 and the five months ended 31 May 2015, revenue derived from our transactions with (i) COLI Group accounted for approximately 16.8%, 17.7%, 13.8% and 6.6% of our total revenue, respectively (ii) CSCIHL Group accounted for 1.6%, 1.1%, 0.8% and 0.7%, respectively. Save for COLI Group and CSCIHL Group, as at the Latest Practicable Date, none of our Directors, their close associates or any Shareholders who, to the knowledge of our Directors, owned more than 5% of the issued share capital of our Company, had any interest in any of our five largest customers. QUALITY CONTROL As at 31 May 2015, our quality control department consisted of 106 staff members mainly focused on, among other things, the establishment and maintenance of our internal quality standards, the central management of customer complaints and customer satisfaction surveys and analyses, and reviewing and approving standard form contractual terms relating to quality management and specifications. Our quality control team has an average of four years of relevant industry experience and qualifications in conducting quality certification assessments such as ISO and OHSAS standards, with the headquarters level consisting of five staff members with an average of 12 years of relevant industry experience. Quality Control over Property Management Services We are certified under the ISO 9001:2008, ISO 10002:2004 and ISO 14001:2004 quality standards for quality management, customer satisfaction and environmental management issued by the International Organization for Standardization and under the OHSAS 18001:2007 standard for occupational health and safety management systems. Our Company adopts strict quality monitoring measures to ensure quality standards are achieved. We have set up a multilevel inspection system conducted on three levels: headquarters, branch offices and property management offices. During the Track Record Period, we established certain municipal management centres to facilitate the expansion of our operations, while minimising and controlling discrepancies in service quality across different properties under our management. Inspections can take the form of both scheduled and unannounced visits. Headquarters level internal audits are done annually with reviews of model projects, and random sampling of regional centres and certified projects. Branch level audits are conducted seasonally, with more frequent audits targeted to new or special projects. Management office level audits are selfconducted on a daily, weekly and monthly basis. 105

111 BUSINESS We believe that quality control is crucial to our business, and we require our employees and the third-party sub-contractors we engage to strictly observe our quality standards. We identify and address residents and tenants needs and feedback in accordance with ISO 10002:2004 requirements. Our residents and tenants can provide feedback at our on-site management offices, by telephone and on our website. We conduct surveys of residents and tenants satisfaction levels, and also periodically review our complaints-handling process to further improve our service quality. The following summarises our certifications under the International Organization for Standardization s standards: Since 1 September 2008: (i) COPL HK Holding has achieved ISO 9001:2008 certification for its quality management system for design and provision of property and facilities management services ( 設計與提供物業管理和設施管理 服務 ); (ii) COPL Mepork has achieved ISO 9001:2008 certification for its quality management system for building activities to keep, restore and improve the facilities of buildings and surroundings ( 樓宇保養 維修和改善工程 ); and (iii) COPL Security has achieved ISO 9001: 2008 certification for its quality management system for provision of security services ( 提供專業保安服務 ). The above certificates were awarded by SGS, the world s leading inspection, verification, testing and certification body. The award of ISO 9001 certification shows that our relevant subsidiaries have raised their service level to the applicable international standard and demonstrates their ability to consistently provide service that meets customer and applicable statutory and regulatory requirements. 106

112 BUSINESS Since 1 September 2008, COPL HK Holding has achieved ISO 10002:2004 certification by SGS for its quality management customer satisfaction in design and provision of property and facilities management services ( 設計與提供物業管理和設施管理服務 ). ISO 10002:2004 is the international standard for complaints handling related to products and services within an organisation, including planning, design, operation, maintenance and improvement. The complaints handling process is suitable for use as one of the processes of an overall quality management system, which addresses the following aspects of complaints handling:. enhancing customer satisfaction by creating a customer-focused environment that is open to feedback (including complaints), resolving any complaints received, and enhancing the organisation s ability to improve its product and customer service;. top management involvement and commitment through adequate acquisition and deployment of resources, including personnel training;. recognising and addressing the needs and expectations of complainants;. providing complainants with an open, effective, and easy-to-use complaints process;. analysing and evaluating complaints in order to improve the product and customer service quality;. auditing of the complaints-handling process; and. reviewing the effectiveness and efficiency of the complaints-handling process. 107

113 BUSINESS Since 1 September 2008: (i) COPL HK Holding has achieved ISO 14001:2004 certification by SGS for its environmental management system for design and provision of property and facilities management services ( 設計與提供物業管理和設施管理服務 ); and (ii) COPL Mepork has achieved ISO 14001:2004 certification for its environmental management system forbuildingactivitiestokeep,restoreandimprovethe facilities of buildings and surroundings ( 樓宇保養 維修和改善工程 ). This certification demonstrates that our relevant subsidiaries have established, implemented, maintained and improved their environmental management systems to the applicable international standard. Since 1 September 2008: (i) COPL HK Holding has achieved OHSAS 18001:2007 certification by SGS for its occupational health and safety management system for design and provision of property and facilities management services ( 設計與提供物業管理和設施管理服務 ); and (ii) COPL Mepork has achieved OHSAS 18001:2007 certification by SGS for its occupational health and safety management system for building activities to keep, restore and improve the facilities of buildings and surroundings ( 樓宇保養 維修和改善工程 ). This OHSAS certification demonstrates that our relevant subsidiaries occupational health and safety management systems have met with the applicable international standard. 108

114 BUSINESS Since 12 October 2011, COPL Macau has achieved ISO 9001:2008 certification for its quality management system for design and provision of property and facility management services ( 設計和提供物業管理和設施管理服務 ). This certification was awarded by the Hong Kong Quality Assurance Agency, a non-profit-distributing organisation by the Hong Kong Government. The award of ISO 9001 certification shows that our relevant subsidiary has raised its service level to the applicable international standard and demonstrates its ability to consistently provide service that meets customer and applicable statutory and regulatory requirements. During our ordinary course of business, from time to time, we may receive complaints from our residents and tenants. When we receive such complaints, we analyse and evaluate them by creating logs on our internal platform to record such complaints, and each level of our management tracks our progress in addressing the underlying concerns. We categorise complaints received by level of severity, level of actionability and subject matter of the complaint to provide our staff with systematic guidance on handling such complaints. During the Track Record Period and as at the Latest Practicable Date, we did not receive any complaints from our residents or tenants that may have a material adverse impact on our operations. Please see Risk Factors Risks relating to Our Business and Industry We may be involved in legal, labour and other disputes and claims from time to time arising out of our operations. Quality Control over Third-party Sub-contractors and Procurement We perform quality control procedures over third-party sub-contractors pursuant to certain quality standards such as the ISO 9001:2008, ISO 10002:2004 and ISO 14001:2004 quality standards for quality management, customer satisfaction and environmental management issued by the International Organization for Standardization and the OHSAS 18001:2007 standard for occupational health and safety management systems. We consider the following factors when selecting a sub-contractor: (i) business performance, (ii) experience in the relevant field, (iii) reputation in the industry and (iv) price-competitiveness of their quotations. Depending on the value of the contract, sub-contractors may be selected through a competitive tender process. Once we have identified sub-contractors who meet our selection criteria, our operations team pre-screens candidates through face-to-face interviews, on-the-ground examinations and other evaluation methods and submits successful candidates to our procurement review committee for approval as a potential qualified sub-contractor. We then monitor and evaluate such candidates on their performance on their first contracts. Only candidates who perform on their first contract to our satisfaction are deemed fully approved. After we approve a subcontractor, we add it to our qualified sub-contractors list. We only enter into contracts with qualified sub-contractors on a regular basis. 109

115 BUSINESS Quality Control over Vendors We collaborate with local vendors in the vicinity of residential communities we manage with a view to providing certain community leasing, sales and other services, and we have formulated a quality control system to pre-screen and continuously evaluate the service quality of such local vendors. Our quality control department at our headquarters is responsible for implementing our quality control system, maintaining and regularly updating a list of local vendors qualified under our system. We only enter into contracts with qualified local vendors. We pre-screen local vendors around the residential communities we manage in accordance with a set of criteria, such as their (i) business performance, (ii) after-sales service capabilities, (iii) technical capabilities, (iv) product quality and (v) satisfaction of regulatory licence requirements. After we approve a local vendor, we add it to our qualified local vendors list. We review our qualified local vendors list on an annual basis, and each qualified local vendor is evaluated and graded based on multiple factors, such as (i) pricing, (ii) product quality, (iii) delivery capabilities, (iv) compatibility with our platform, (v) sales performance on our platform and (vi) after-sales service capabilities. We may remove local vendors from the list if we discover any fraudulent activity or discrepancies from our requirements during our business dealings. BRAND MANAGEMENT Our quality control and marketing strategy teams are responsible for spearheading our brand management efforts, strategising our market expansion and organising promotion activities directed at residents and tenants of the properties under our management. We intend to focus on our core competency of providing quality property management services and have implemented robust quality control measures on our internal processes, sub-contractors and vendors of products and services offered on our platform to maintain our high standards. Please see Quality Control for more information. COMPETITION The PRC, Hong Kong and Macau property management industries are highly fragmented. Our major competitors include large national, regional and local property management companies. We compete with our major competitors primarily on scale, branding, profitability and service quality. Our engineering services compete with other property management companies as well as engineering companies providing similar services. We believe that automating and standardising our property management services strengthens our business by minimising labour costs, improving staff efficiency and boosting our service quality and consistency. We strive to continuously develop our community leasing, sales and other services platform to cater to the residents and property owners needs for local products and services, which increases our competitiveness in the property management industry. For more information, please see Risk Factors Risks relating to our Business and Industry We are in a highly competitive business with numerous competitors and if we do not compete successfully against existing and new competitors, our business, financial condition, results of operations and prospects may be materially and adversely affected and Industry Overview Competition. 110

116 BUSINESS INTELLECTUAL PROPERTY RIGHTS We have entered into the Trademark Assignments dated 9 June 2015 with COLI Property and COLI TM for the transfer of the Trademarks as set out in Appendix VI General Information B. Further Information about the Business of our Company 2. Intellectual Property Rights of our Group. We have also entered into the Transitional Trademark Licensing Arrangement with COLI Property and COLI TM for the use of certain trademarks as a transitional arrangement pending completion of the registration of COPL Trademark Holding as the registered owner or assignee of the trademarks to our Group. Please see Connected Transactions for further details. As at the Latest Practicable Date, we had 6 registered trademarks and 16 domain names, and had been licensed to use 23 trademarks (one of which is in the process of application for registration), which are material to our business. Further details of such intellectual property rights are set out in Appendix VI General Information B. Further Information about the Business of our Company 2. Intellectual Property Rights of our Group. As at the Latest Practicable Date, we were not aware of any material infringement (i) by us of any intellectual property rights owned by third parties, or (ii) by any third parties of any intellectual property rights owned by us. EMPLOYEES We employed approximately 21,115 full-time employees as at 31 May We also subcontract part of the labour-intensive work, such as cleaning and garden landscape maintenance to third-party sub-contractors. A breakdown of our employees by function as at 31 May 2015 is set forth below: Function Number of employees Labour costs borne by us Headquarters and regional offices On-site staff in properties managed under lump sum basis Labour costs borne by properties managed under commission basis (1) Security, Cleaning and Garden LandscapeMaintenance... 6,456 5,290 Engineering Technical ,059 1,489 Operation ,334 1,708 MarketingStrategy QualityControl LegalandAccounting Others (2) Total.... 1,444 11,056 8,

117 BUSINESS Notes: (1) The labour costs of on-site staff in properties managed under commission basis are paid with monies managed on behalf of such properties. As a result, our financial statements do not recognise their labour costs. (2) Includes drivers, catering staff, inventory management and reception staff. A breakdown of our employees by geographic location as at 31 May 2015 is set forth below: Geographical regions Number of employees Labour costs borne by us Headquarters and regional offices On-site staff in properties managed under lump sum basis Labour costs borne by properties managed under commission basis (1) HuaNanRegion ,910 2,746 HuaDongRegion , HuaBeiRegion ,618 1,695 NorthernRegion ,034 1,398 WesternRegion ,525 1,228 HongKongandMacau , Total.... 1,444 11,056 8,615 Note: (1) The labour costs of on-site staff in properties managed under commission basis are paid with monies managed on behalf of such properties. As a result, our financial statements do not recognise their labour costs. We generally enter into individual employment contracts with our employees covering matters such as work location, scope of work, work hours, wages, employee benefits, safety and sanitary conditions at the workplace, confidentiality obligations and grounds for termination. The majority of our employment contracts have fixed terms of generally up to three years, after which we evaluate renewals based on performance appraisals. A portion of our employment contracts have no fixed term. We conduct regular performance appraisals to ensure that our employees receive feedback on their performances and award discretionary bonuses based on employee performance. As part of our comprehensive training programme, we provide classroom and online training to our staff to enhance technical and service knowledge as well as knowledge of industry quality standards and work place safety standards. We have maintained good working relationships with our employees. Our employees do not negotiate their terms of employment through any labour union or by way of collective bargaining agreements. During the Track Record Period, no significant labour disputes occurred which adversely affected or were likely to have an adverse effect on our business. 112

118 BUSINESS HONOURS AND AWARDS We have received honours and awards from various entities in the PRC and Hong Kong in recognition of, among other things, our development status, customer satisfaction, attention to social responsibilities and overall reputation in the PRC and Hong Kong property management industry. The table below sets forth our major awards during the Track Record Period: Year Honour/Award Awarding Entity Property Management Company Worth Focusing by Capital Markets (2015 年值得資本市場關注物業服務企業第 1 名 ) China TOP100 Property Management Companies Social Responsibility TOP10 No. 4 (2015 物業服務百強社會責任感企業 TOP10 第 4 名 ) China TOP100 Property Management Companies Business Size TOP10 No. 9 (2015 中國物業百強服務規模 TOP10 第 9 名 ) China Property Management Enterprise Brand Value TOP10 (2014 中國物業管理企業品牌價值 10 強 ) Shenzhen Property Service Top 50 Enterprises Overall No. 2 (2013 年度深圳市物業服務企業綜合實力 50 強 ( 第二名 )) 2014 Shenzhen Top Brand ( 深圳市知名品牌 ) 2014 Estate Management Services Contractor Awards Best Property Management Service Provider Small Public Housing Estates Sheung Lok Estate (Bronze Award) Security Services Best Training Award China Index Research Institute ( 中國指數研究院 ); China Real Estate TOP10 Research Group ( 中國房地產 TOP10 研究組 ) China Index Research Institute ( 中國指數研究院 ); China Real Estate TOP10 Research Group ( 中國房地產 TOP10 研究組 ) China Index Research Institute ( 中國指數研究院 ); China Real Estate TOP10 Research Group ( 中國房地產 TOP10 研究組 ) China Real Estate Research Association ( 中國房地產研究會 ); China Real Estate Association and China Real Estate Assessment Center ( 中國房地產業協會與中國房地產測評中心 ) Shenzhen Property Management Association ( 深圳市物業管理協會 ) Shenzhen Renowned Brand Evaluation Committee ( 深圳市知名品牌評價委員會 ) Hong Kong Housing Authority Vocational Training Council and Hong Kong Police Force Crime Prevention Bureau 113

119 BUSINESS Year Honour/Award Awarding Entity 2014 Estate Management Services Contractors Awards Best Property Management Service Provider Small Public Housing Estates Cheung Sha Wan Estate (Gold Award) 2014 Estate Management Services Contractors Awards Best Property Management Service Company Safety Management 2013 National Property Service Top 200 Enterprises No. 6 ( 全國物業服務企業 TOP200( 第六名 )) Shenzhen Property Service Top 50 Enterprises Overall No. 2 (2012 年度深圳市物業服務企業綜合實力 50 強第二名 ) 2013 Estate Management Services Contractors Awards Best Property Management Service Company Safety Management China Property Service Top 100 Enterprises Business size TOP10 (2012 中國物業服務百強企業服務規模 TOP10) Hong Kong Housing Authority Hong Kong Housing Authority China Property Management Association ( 中國物業管理協會 ) Shenzhen Property Management Association ( 深圳市物業管理協會 ) Hong Kong Housing Authority China Real Estate TOP10 Research Group ( 中國房地產 TOP10 研究組 ) INSURANCE We have purchased public liability insurance for a number of the properties we manage. We generally require our third-party sub-contractors to purchase accident insurance for their employees or to be responsible for any injuries suffered by their employees when they discharge their duties at our sites. We believe our insurance coverage is in line with industry practices in the PRC, Hong Kong and Macau, and we have not faced any material insurance claims during the Track Record Period. However, our insurance coverage may not adequately protect us against certain operating risks and other hazards, which may result in adverse effects on our business. Please see Risk Factors Risks relating to Our Business and Industry Our insurance may not sufficiently cover, or may not cover at all, losses and liabilities we may encounter. SOCIAL, HEALTH AND SAFETY MATTERS We are subject to various PRC, Hong Kong and Macau laws and regulations with respect to labour, health, safety, insurance and accidents, including the Labour Law, the Labour Contract Law, the Implementation Regulations on Labour Contract Law, the Interim Regulations on the Collection and Payment of Social Insurance Premiums, the Regulations on Work Injury Insurance, the Regulations on Unemployment Insurance, the Trial Measures on Employee 114

120 BUSINESS Maternity Insurance of Enterprises, the Law on Social Insurance, the Regulations on the Administration of Housing Provident Fund and other related laws, regulations, rules and provisions issued by the relevant governmental authorities from time to time. In compliance with the relevant laws and regulations, we participate in various social welfare schemes for the benefit of our employees. Our human resources department personnel are responsible for our social, health and safety issues. They administer employment and related matters and have knowledge of the latest legal developments in this area and our compliance with the relevant requirements. In addition, we have established internal policies aiming at promoting work safety through measures such as conducting safety trainings and setting up safety goals in order to promote a safe work environment and minimise workplace injuries. During the Track Record Period, some of our branches have not strictly complied with local policies governing contributions to social insurance or paid the required amounts with respect to certain housing provident funds for our employees in the PRC pursuant to the Regulations on the Administration of Housing Provident Fund. During the Track Record Period, there were no such instances of non-compliance with social, health and safety matters under Hong Kong and Macau law. Please also see Non-compliance. During the Track Record Period and up to the Latest Practicable Date, there had been no accidents in the course of our business operations which resulted in any material claims or compensation. CORPORATE SOCIAL RESPONSIBILITY We are committed to a high standard of corporate social responsibility and aim to cultivate responsible corporate citizenship. Our Company s involvement in this area mainly consists of social welfare work targeting its serviced areas, as well as disaster and poverty-stricken communities. We organise and participate in a wide range of community activities, including:. property and financial donation efforts for the underprivileged and victims of natural disasters, including mentoring programmes with underprivileged schools and donation drives for victims of the 2008 Sichuan earthquake, 2013 Lushan earthquake and 2013 Ningbo flood;. regular blood drives;. autistic children care activities and volunteer teaching opportunities; and. visitations and care at elderly homes. ENVIRONMENTAL MATTERS We are committed to sustainable development and adopt high standards for energy conservation and carbon emission reduction for our managed projects, a number of which have been accredited with Leadership in Energy & Environmental Design by the U.S. Green Building Council. In certain managed properties, we leverage our technological know-how and capabilities to organise and participate in various programmes including: 115

121 BUSINESS. centralised water-recycling and reuse systems to reduce water waste and utility costs;. energy-efficient centralised air conditioning systems and water-recycling systems;. LED conversion projects across certain managed properties diverting reliance on coal energy and lowering carbon emissions; and. general environmental activities, such as tree planting, earth hour and car-free days. The annual cost of our compliance with applicable environmental laws and regulations is generally factored into the property management fees charged by our Group and such cost is not expected to be significant. PROPERTIES As at the Latest Practicable Date, we owned approximately 39 properties most of which are located in Guangdong with an approximate aggregate gross floor area of 10,000 sq.m., which we used for non-property activities as defined under Rule 5.01(2) of the Listing Rules and mainly as staff residences and carpark spaces. As at the Latest Practicable Date, we leased approximately 153 properties most of which are located in Guangdong with an approximate aggregate gross floor area of 18,000 sq.m., which we used for non-property activities as defined under Rule 5.01(2) of the Listing Rules and mainly as staff residences and office space. Except for one property with an approximate aggregate gross floor area of 120 sq.m. which we use as office space, we have obtained building title certificates for all the properties we own. We are currently in the process of applying for the relevant building title certificate and our PRC legal adviser has advised us that there are no material legal obstacles preventing us from obtaining the relevant building title certificate of this property. As at the Latest Practicable Date, the lessors of approximately 77 leased properties with an approximate aggregate GFA of 6,000 sq.m. had not obtained or provided us with the relevant building title certificates. As advised by our PRC legal adviser, we are unable to ascertain whether the lessors have the legal right or requisite authority to lease such properties, whether such properties are subject to mortgages or third-party rights, or whether such leases are subject to challenge by third parties. Our Directors are of the view that, as most of the leased properties without building title certificates are used as staff residences, which will not affect our daily business operations, and replacement premises are readily available, such defects will not have a material adverse effect on our business or financial condition taken as a whole. Our Directors further confirm that during the term of such leases, they have not been challenged by any third party. As at the Latest Practicable Date, the lease agreements for approximately 150 properties had not been registered with the relevant PRC authorities. As advised by our PRC legal adviser, we may be subject to a maximum administrative penalty of RMB10,000 for each property accordingtotheadministrative Measures for Commodity House Leasing ( 住房與商品房屋租賃管理辦法 ) promulgated by MOHURD which came into effect on 1 February Our PRC 116

122 BUSINESS legal adviser is of the view that the non-registration of the lease agreements will not affect the validity of the lease agreements or the possession and use of the properties by us according to the lease agreement and PRC laws and regulations. As at the Latest Practicable Date, we leased approximately two properties located in Hong Kong with an approximate aggregate gross floor area of 874 sq.m., which we used for nonproperty activities as defined under Rule 5.01(2) of the Listing Rules and mainly as office space. As at the Latest Practicable Date, we leased approximately five properties located in Macau with an approximate aggregate gross floor area of 420 sq.m., which we used for nonproperty activities as defined under Rule 5.01(2) of the Listing Rules and mainly as staff residences and office spaces. As at 31 May 2015, no single property interest which forms part of our non-property activities had a carrying amount (within the meaning of Chapter 5 of the Listing Rules) of 15% or more of our total assets. As a result, valuations of our properties are not required to be including in this listing document. LICENCES AND PERMITS During the Track Record Period and up to the Latest Practicable Date, we have obtained all material licences and permits necessary for the operation of our business in the jurisdictions in which we operate (including the Property Management Qualification Certificate (Level One) issued by MOHURD). Such licences and permits were granted during the Track Record Period and are still valid and are in force, save for the Property Management Qualification Certificate (Level Two) of COGOPM Guangzhou the renewal for which we had applied prior to its expiry. Such licence is currently in the process of renewal and is expected to be renewed upon the resumption of qualification certificate renewal processes that had been halted by the relevant regulatory authorities due to certain regulatory update procedures. As advised by our PRC legal adviser, there is no material legal impediment to renew such licences after such qualification certificate renewal processes have been resumed. We have not experienced any refusal of the renewal application of any material licences or permits necessary for the operation of our business. Further information on the material licences and permits necessary for the operation of our business is set out in Appendix III Regulatory Overview. LEGAL AND REGULATORY PROCEEDINGS From time to time we may be involved in legal proceedings or disputes in the ordinary course of business. During the Track Record Period and as at the Latest Practicable Date, no member of our Group was engaged in any litigation, claim or arbitration of material importance nor, to the best of our knowledge, is any litigation, claim or arbitration of material importance pending or threatened against any member of our Group. 117

123 BUSINESS NON-COMPLIANCE Except as disclosed below, during the Track Record Period and up to the Latest Practicable Date, we complied with the relevant laws and regulations in relation to our business in all material respects and there were no material breaches or violations of the laws or regulations applicable to our Group that would have a material adverse effect on our business or financial condition taken as a whole. Social insurance and housing provident fund contribution During the Track Record Period, some of our subsidiaries and branches did not register for and/or fully contribute to the social insurance and housing provident funds for certain employees. The reasons for such non-compliance is that during the Track Record Period, (i) some of our employees were reluctant to participate in our social insurance and housing provident fund plans; (ii) there were issues in the method and timing of contribution payments between the social insurance and housing provident fund regulations in our Group s locations and the various locations of our migrant workers; and (iii) some employees failed to complete their initial registration and applications of their social insurance and housing provident fund accounts, and we were unable to make contributions without relevant account details. Under the Regulations on Administration of Housing Fund ( 住房公積金管理條例 ), (i) for housing provident fund registrations that we fail to complete before the prescribed deadlines, we may be subject to a fine ranging from RMB10,000 to RMB50,000 for each non-compliant subsidiary or branch and (ii) for housing provident fund contributions that we fail to pay within the prescribed deadlines, we may be subject to any order by the relevant people s courttomake such payments. According to the Social Insurance Law of the PRC ( 中華人民共和國社會保險法 ), for outstanding social insurance contributions that we did not fully pay within the prescribed deadlines, we may be subject to a penalty rate of 0.05% compounded daily from the date the relevant contributions became payable. If payment is not made within the prescribed period, we may be liable to a fine of one to three times the outstanding contribution amount. The overdue contributions to the social insurance and housing provident funds and maximum penalty that we may be subject to are estimated to be approximately RMB9.6 million in aggregate. During the Track Record Period, an administrative penalty was imposed on a branch of COPL PRC Holding and it was ordered to pay the overdue contribution the social insurance in the amount of RMB751, Such amount had been paid in full in September Our Directors are of the view that no provision is required to be made in respect of the outstanding amount and potential penalty arising from the overdue contributions to the social insurance and housing provident funds, after taking into consideration various factors including the nature and amount of the non-compliance, the potential financial impact on our Group and the advice of our PRC legal adviser in relation to the risk of a penalty being imposed on our Group. Rectification actions taken and latest status We have implemented the following internal control measures to ensure that our Group complies with the relevant regulations in relation to social insurance and housing provident fund contributions prior to the Listing: (a) established a policy on the management of social insurance and housing provident funds for employees of our Company; 118

124 BUSINESS (b) (c) notifications and training materials relating to social insurance and housing provident fund have been circulated to the relevant personnel and administrative departments in all of our Company s branches; and the internal audit team has updated the internal audit plan of 2015 to cover the item relating to compliance on the administration of staff contribution to social insurance and housing provident fund in order to monitor its implementation at different levels. Our Company engaged an independent consulting firm (the Internal Controls Consultant ), as the Company s internal controls consultant in April 2015 to review the remediation taken by our Company for this non-compliance incident, including the policy, notifications, training materials and the internal audit plan and has no further recommendation. The internal controls review was conducted by the Internal Controls Consultant under a non-assurance engagement and based on information provided by our Company. Please see Internal Controls below for further details on the internal control measures adopted by us. Save as disclosed above, as advised by our PRC legal adviser, we are in compliance with the laws and regulations for social insurance and housing provident fund in all material aspects. Save as disclosed above, during the Track Record Period and up to the Latest Practicable Date, we have not received any demand from the relevant governmental authorities asking us to pay the unpaid social insurance and housing provident fund contributions. Pursuant to the Deed of Indemnity, COHL has undertaken to indemnify us in respect of any demand from the relevant government authorities for payment of and/or any penalty imposed as a result of the unpaid social insurance and housing provident fund contributions which occurred prior to the Listing Date. Taking into consideration the indemnity from COHL, such non-compliance with the laws and regulations relating to the social insurance and housing provident fund will not have a material adverse impact on our financial position and operation. Internal Controls The Audit Committee of our Board is responsible for the development and review of our internal control policies and practices. To ensure future compliance with the applicable laws and regulations (including the Listing Rules) after the Listing, and to avoid recurrence of the past non-compliance incident described above, we have adopted the following internal control measures in addition to our current internal control system to improve our corporate governance and internal control: (a) at the monthly meeting held by our general manager office, discussion will be held on any update or issue on our Group s compliance with the applicable laws and regulations, and our internal audit department shall be responsible to monitor and follow up on any new legal and regulatory requirements and our compliance with them; 119

125 BUSINESS (b) (c) annual review of the efficiency of our internal control system will be made by our internal audit department in conjunction with our financial and review functions. The annual review shall cover all the key internal control functions, including the internal control on finance, operation and compliance matters, and review of the compliance of all operating departments with their contractual obligations and the applicable laws and regulations; we have appointed a company secretary to identify relevant requirements of the Listing Rules, Companies Ordinance and SFO and to co-ordinate relevant training sessions of such; (d) we will adopt codified internal control manuals on operations, management, procurement, finance, human resources, legal matters and corporate governance, setting out the internal approval and review procedures to be followed by our employees as soon as practicable prior to the Listing; (e) (f) (g) (h) we will engage a PRC legal adviser to provide legal advice to us and ensure our future compliance with PRC laws and regulations as soon as practicable prior to the Listing; our Directors have attended a training session in June 2015 conducted by our Hong Kong legal adviser on, among other things, the obligations, on-going corporate governance requirements and the duties of directors of a company listed on the Stock Exchange; our audit committee, which comprises our Independent Non-executive Directors, will independently review our financial control, internal control and risk management systems to ensure our management has performed its duty to have an effective internal control system; and we have appointed Somerley Capital Limited as our compliance adviser to advise us on compliance matters in relation to the Listing Rules. Indemnity by COHL Pursuant to the Deed of Indemnity, COHL has agreed to indemnify our Group against any costs, expenses, claims, liabilities, penalties, losses or damages incurred or suffered by our Group arising from any non-compliance incident mentioned above. Our Directors are satisfied that COHL has sufficient resources to honour their obligations to provide indemnities in respect of the aforesaid non-compliance incident against our Group under the Deed of Indemnity. 120

126 BUSINESS Views of our Directors and the Joint Sponsors As stated in above, we have taken the necessary rectification actions in respect of such past non-compliance incidents. Based on the above and having considered the facts and causes of the issues described above and the stronger internal controls measures taken by us to prevent the recurrence of the identified issues, our Directors are of the view, and the Joint Sponsors concur, that our internal controls system is adequate and effective for its current operations and consider that the noncompliance incidents do not have any material impact on the suitability of our Directors under Rules 3.08 and 3.09 of the Listing Rules and our suitability for listing under Rule 8.04 of the Listing Rules. 121

127 FINANCIAL INFORMATION You should read the following discussion and analysis in conjunction with our audited financial information together with the accompanying notes, set out in the Accountant s Report included as Appendix I to this listing document. Our audited financial information is prepared in conformity with HKFRS, which may differ in certain material respects from generally accepted accounting principles in other jurisdictions, including the United States. You should read the whole of the Accountant s Report included as Appendix I to this listing document and not rely merely on the information contained in this section. Pursuant to the COGO Equity Transfer Agreement, we acquired COGO Acquired Companies, the financial information of which is only reflected in our financial information for the five months ended and as at 31 May As such, our financial information for the five months ended and as at 31 May 2015 may not be comparable to our financial information for the years ended and as at 31 December 2012, 2013 and 2014 and for the five months ended 31 May The following discussion contains certain forward-looking statements that involve risks and uncertainties. Our actual results reported in future periods could differ materially from those discussed below. Factors that could cause or contribute to such differences include those discussed in Risk Factors and Business and elsewhere in this listing document. Unless the context otherwise requires, financial information described in this section is described on a consolidated basis. OVERVIEW We are one of the leading property management companies in the PRC 1, according to China Index Academy, with operations also covering Hong Kong and Macau. As at 31 May 2015, our properties under management consisted of residential communities, commercial properties and government properties with an aggregate GFA under management of 67.6 million sq.m.. We manage mid- to high-end properties and strive to retain and add value to the properties under our management by providing high-quality and sophisticated services to our customers and maximising customer satisfaction. We have two main business segments:. property managment services, which primarily include (i) services such as security, repair and maintenance, cleaning and garden landscape maintenance provided to mid- to high-end residential communities (including mixed-use properties), commercial properties and government properties and (ii) services to other enterprises, such as (for property developers) pre-delivery services, move-in assistance services, delivery inspection services, engineering service quality monitoring and (for other property management companies) consulting services; and 1 By scale of operation, operational performance and efficiency, quality of services, development potential and social responsibility, among other factors. 122

128 FINANCIAL INFORMATION. value-added services, which primarily include (i) engineering services such as (for property developers) automation consulting and engineering product sales and (for property management companies) inspection services, repair and maintenance services and equipment upgrade services and (ii) community leasing, sales and other services where residents and tenants of the properties under our management are offered a diversified range of online and offline services (such as common area rental assistance, purchase assistance and rental assistance for properties that have been delivered to owners by developers and household assistance services) through our O2O platform. We strive to provide quality and sophisticated services to our customers through our automated, standardised and specialised processes which allow us to strengthen our operating efficiency and effectively control our costs. Through our integrated platform of services, we aim to provide service offerings which meet our customers needs in order to diversify our revenue base and improve our market position. Our revenue increased from HK$1,444.9 million for the year ended 31 December 2012 to HK$1,844.1 million for the year ended 31 December 2013 and further to HK$2,163.7 million for the year ended 31 December 2014, representing a CAGR of 22.4% from 2012 to Our revenue increased from HK$807.5 million for the five months ended 31 May 2014 to HK$932.7 million for the five months ended 31 May 2015, representing an increase of 15.5%. Our profit attributable to owners of the Company increased from HK$61.5 million for the year ended 31 December 2012 to HK$85.5 million for the year ended 31 December 2013 and further to HK$97.1 million for the year ended 31 December 2014, representing a CAGR of 25.6% from 2012 to Our profit attributable to owners of the Company increased from HK$32.9 million for the five months ended 31 May 2014 to HK$41.1 million for the five months ended 31 May 2015, representing an increase of 24.9%. BASIS OF PREPARATION Our Company was incorporated in the Cayman Islands as an exempted company with limited liability in the Cayman Islands on 26 June In preparation for the Listing, we implemented the Reorganisation, as detailed in History and Corporate Structure Reorganisation. Following the Reorganisation, our Company became the holding company of all the companies now comprising our Group. Our financial information has been prepared as if our Company had always been the holding company of our Group using the principles of merger accounting, except for COGO Acquired Companies, the financial information of which has been included in our financial information since 31 March 2015 using the principles of acquisition accounting. For more information regarding the basis of preparation of our financial information included in this listing document, please see the Accountant s Report set forth in Appendix I to this listing document. 123

129 FINANCIAL INFORMATION KEY FACTORS AFFECTING OUR RESULTS OF OPERATIONS Our results of operations are affected by a number of factors, many of which may be beyond our control, including those factors set out in Risk Factors and those set out below. Business Mix Our business and results of operations are affected by our business mix. Our profit margins vary across different business segments, depending on the different products and services offered and the contractual arrangements within each business segment. During the Track Record Period, the revenue contribution by each business segment is set forth in the table below: Year ended 31 December Five months ended 31 May HK$ 000 %of Revenue HK$ 000 %of Revenue HK$ 000 %of Revenue HK$ 000 %of Revenue HK$ 000 %of Revenue (unaudited) Property management services under lump sum basis ,224, ,524, ,764, , , Property management services under commission basis , , , , , Other services , , , , , Total of property management services... 1,391, ,741, ,035, , , Engineering services , , , , , Community leasing, sales and other services , , , , , Total of value-added services... 53, , , , , Total revenue... 1,444, ,844, ,163, , , The table below sets forth our gross profit and gross profit margins by business segment for the periods indicated: Year ended 31 December Five months ended 31 May Gross Profit (HK$ 000) Gross Profit Margin (%) Gross Profit (HK$ 000) Gross Profit Margin (%) Gross Profit (HK$ 000) Gross Profit Margin (%) Gross Profit (HK$ 000) Gross Profit Margin (%) Gross Profit (HK$ 000) Gross Profit Margin (%) (unaudited) Property management services under lump sum basis , , , , , Property management services under commission basis , , , , , Other services , , , , , Total of property management services , , , , , Engineering services , , , , , Community leasing, sales and other services , , , , , Total of value-added services... 30, , , , , Total , , , , , Our financial condition is subject to our business segment mix and product mix. Any change in the structure of revenue contribution from business segments or change in profit margin of any segment may have a corresponding impact on our overall gross profit margin. 124

130 FINANCIAL INFORMATION Our gross profit margins differ among our product lines within each business segment. As a result, changes in the structure of revenue contribution from each product line or a change in gross profit margin from a product line may also affect our results of operations. During the Track Record Period, the proportion of our property management service contracts charged under commission basis increased. During this same period, we increased the gross profit margin of our property management services charged under lump sum basis mainly through certain cost-saving initiatives, such as energy-saving measures to lower utility costs and automation of our processes to reduce labour costs. Our GFA under management and Fee-charging GFA During the Track Record Period, we generated the majority of our revenue from our property management services. Our business and results of operations depend on our ability to maintain and grow our GFA under management, which in turn is affected by our ability to obtain new service contracts, which are subject to a competitive bidding process. Over the Track Record Period, we have successfully increased our GFA under management through expansion of our operations. The table below sets forth our total GFA under management as at the dates indicated: As at 31 December As at 31 May (3) ( 000 sq.m.) % ( 000 sq.m.) % ( 000 sq.m.) % ( 000 sq.m.) % GFA under management under lump sum basis... 24, , , , GFA under management under commission basis.. 9, , , , Total GFA under management (1)(2).. 34, , , , Notes: (1) Our GFA under management may not be comparable to other similarly titled measures of other companies. (2) Our GFA under management for properties under our management in Hong Kong and Macau is the same as our fee-charging GFA for such properties. (3) COGOAcquiredCompanies,whichweacquiredon28May2015 pursuant to the COGO Acquisition, contributed 7,807.4 thousand sq.m. to our GFA under management as at 31 May 2015, 2,268.5 thousand sq.m. of which was managed under lump sum basis and 5,538.9 thousand sq.m. of which was managed under commission basis. 125

131 FINANCIAL INFORMATION A portion of our total GFA under management does not generate management service fees because the relevant property relates to common areas of properties under our management. While our GFA under management and fee-charging GFA are generally proportional, our financial position and results of operations are also affected by our fee-charging GFA. The table below sets forth our fee-charging GFA as at the dates indicated: As at 31 December As at 31 May (3) ( 000 sq.m.) % ( 000 sq.m.) % ( 000 sq.m.) % ( 000 sq.m.) % Fee-charging GFA under lump sum basis... 19, , , , Fee-charging GFA under commission basis... 7, , , , Total fee-charging GFA (1)(2)... 27, , , , Notes: (1) Our fee-charging GFA may not be comparable to other similarly titled measures of other companies. (2) Our GFA under management for properties under our management in Hong Kong and Macau is the same as our fee-charging GFA for such properties. (3) COGOAcquiredCompanies,whichweacquiredon28May2015 pursuant to the COGO Acquisition, contributed 4,663.9 thousand sq.m. to our increase in fee-charging GFA as at 31 May 2015, thousand sq.m. of which was managed under lump sum basis and 3,989.4 thousand sq.m. of which was managed under commission basis. Pricing of Our Property Management Service Contracts During the Track Record Period, we generated our revenue mostly from our property management service contracts which were awarded to us through tender processes conducted by either property developers or property owners associations. When we submit a tender for a new engagement, we generally price our services based on a number of factors, including (i) our estimated expenses, based on factors including the scope and quality of the services proposed, (ii) the classifications, types and locations of the properties, (iii) the pricing for comparable properties, (iv) the local government s guidance price on property management fees, if any, and (v) our estimation of our competitors pricing. Our pricing also varies with the level of service coverage we provide to properties under our management, which is determined based on certain pre-set packages of property management services selected by our customers. We have to achieve a balance between pricing our projects sufficiently competitive while maintaining our image as a quality property management service provider for mid- to high-end properties and ensuring an attractive profit margin. Pricing is particularly important for our property management service contracts where fees are charged under lump sum basis since we are paid management fees for our services regardless of the actual amount of property management expenses actually incurred under such contracts. During the Track Record Period, our property management business, from contracts charged under lump sum basis consistently generated an overall gross profit with gross profit 126

132 FINANCIAL INFORMATION margin increasing from 9.4% for the year ended 31 December 2012 to 12.7% for the year ended 31 December 2014, and increasing to 13.6% for the five months ended 31 May In the event that the amount of property management fees provided for under the contract is insufficient to cover all the property management expenses incurred, we may suffer a loss for the relevant properties. For more information, please see Risk Factors Risks Relating to Our Business and Industry We charge management fees for certain properties that we manage under lump sum basis, which could subject us to losses. Currently, some of our property management service contracts do not provide for price adjustment mechanisms during the contracted service period in the event that our costs incurred are higher than expected. However, in the past, we have been able to increase our property management fees for certain property management service contracts upon the renewal of these contracts with property owners associations or by obtaining the requisite approval from property owners under the local regulations. For more information, please see Business Our Property Management Services Types of Property Management Service Contracts Contracts with property owners associations regarding property management services. Failure to balance various factors in determining our pricing could materially and adversely affect our financial performance and results of operations. Rising Labour Costs The property management business is a labour-intensive industry. A substantial portion of our expenses relate to the cost of labour. For the years ended 31 December 2012, 2013 and 2014 and the five months ended 31 May 2014 and 2015, our labour costs for our own employees and sub-contracting costs comprised 69.1%, 66.6%, 68.2%, 68.8% and 70.3% of our direct operating expenses, respectively. During the same periods, our staff costs accounted for 67.7%, 66.8%, 74.7%, 78.0% and 75.4% of our administrative expenses, respectively. During the Track Record Period, our expenses related to the cost of labour increased significantly due to (i) an increase in our headcount resulting from an increase in our GFA under management and (ii) a rise in minimum wages and the market price of labour. For the years ended 31 December 2012, 2013 and 2014 and the five months ended 31 May 2014 and 2015, our labour costs under direct operating expenses and sub-contracting costs totalled HK$839.7 million, HK$1,000.0 million, HK$1,193.9 million, HK$448.6 million and HK$530.0 million, respectively. For the same periods, our staff costs under administrative expenses totalled HK$107.8 million, HK$165.0 million, HK$227.5 million, HK$93.1 million and HK$99.2 million, respectively. Despite rising cost of labour, we implemented certain cost-saving measures, such as remote monitoring systems and carpark management systems, to partially offset the increases in such costs. We strive to balance our need to manage our cost of labour while ensuring we maintain a high level of quality in our services and products. Increases in our cost of labour may continue to affect our profitability. Urbanisation of PRC and PRC Regulations Property management services to residential communities constitute a significant portion of our operations. Residential communities accounted for 92.9%, 94.0%, 94.2% and 94.6% of our GFA under management for the years ended 31 December 2012, 2013 and 2014 and the five months ended 31 May 2015, respectively. Our business depends to a large extent on the 127

133 FINANCIAL INFORMATION number and size of residential communities in the cities in which we currently operate. The rate of urbanisation in the PRC will affect the growth in the number of residential communities seeking property management services, which in turn will affect our ability to increase our GFA under management. A deceleration in the rate of urbanisation in the PRC will adversely affect our future growth in revenue. In addition, our revenue is affected by the pricing of the property management fees that we charge, which is subject to applicable government regulations. For example, during the Track Record Period, the PRC government imposed certain restrictions on our ability to raise the property management fees that we charge. Going forward, however, we expect such governmental price controls to relax pursuant to the National Development and Reform Commission on the Price Control of Some Services Liberalisation Opinion Notice ( 國家發展改革委關於放開部分服務價格意見的通知 ( 發改價格 [2014]2755 號 )), which was promulgated on 17 December For more information, please see Appendix III Regulatory Overview PRC Regulatory Overview Legal Regulations on Enterprises Engaging in Property Management Services. We believe the implementing regulations of this notice will allow us greater flexibility in our pricing in the future. However, we expect that our profitability will continue to be affected in part by applicable government regulations. Competition Our industry is highly competitive and fragmented, and we compete with other property management service providers based on a number of factors, including scale, branding, profitability and service quality. According to China Index Academy, there were fewer than 20 property management companies in the PRC with GFA under management exceeding 50 million sq.m. as at 31 December Within our value-added services segment, we face intense competition from a range of competitors. Our engineering services business competes with other property management companies as well as engineering companies providing similar services. Our community leasing, sales and other services business competes with various types of vendors who directly offer the same products and services to residents and property owners of the properties we manage through channels other than our platform. Please also see Business Our Competitive Strengths and Industry Overview Competition Competitive Landscape. Our ability to effectively compete with our competitors and maintain or improve our market position depends on our ability to differentiate our Company from other competitors in the industry through ensuring the high quality and consistency of the services that we provide. Furthermore, our ability to maintain our reputation as a leading property management service provider for mid- to high-end properties will affect our ability to procure new and renew existing property management service contracts and expand our GFA under management. If we fail to procure new and renew existing property service contracts and expand our GFA under management, the profitability of our business may suffer. COMPARABILITY OF FINANCIAL INFORMATION On 28 May 2015, we acquired COGO Acquired Companies for a cash consideration of approximately RMB50.0 million (equivalent to approximately HK$63.2 million). The costs related to the COGO Acquisition are included in our administrative expenses for the five months ended 31 May The fair value of the net assets acquired amounted to HK$63.2 million. 128

134 FINANCIAL INFORMATION Pursuant to the COGO Equity Transfer Agreement, we assumed the profit and loss of COGO Acquired Companies beginning from 31 March For the period between 31 March 2015 and 31 May 2015, COGO Acquired Companies contributed approximately HK$9.2 million to our revenue and approximately HK$2.5 million to our Group s profit. As the COGO Acquisition was accounted for using acquisition accounting, the financial information of COGO Acquired Companies is only reflected in our financial information for the five months ended and as at 31 May Our financial information for the years ended and as at 31 December 2012, 2013 and 2014 do not reflect the operations of COGO Acquired Companies. As such, our financial information for the five months ended and as at 31 May 2015 may not be comparable to our financial information for the years ended and as at 31 December 2012, 2013 and 2014 and for the five months ended 31 May CRITICAL ACCOUNTING POLICIES, ESTIMATES AND JUDGMENTS The discussion and analysis of our operating results and financial position are based on our audited consolidated financial statements, which have been prepared in accordance with HKFRS. Our operating results and financial position are sensitive to accounting methods, assumptions and estimates. The assumptions and estimates are based on our industry experience and various factors including our management s expectations of future events which they believe to be reasonable. Actual results may differ from these estimates and assumptions. The selection of critical accounting policies, the estimates and judgments and other uncertainties affecting application of other policies and the sensitivity of reported results to changes in conditions and assumptions are factors to be considered when reviewing our consolidated financial statements. Our significant accounting policies are summarised in note 5 in the Accountant s Report set out in Appendix I to this listing document. We believe that the following critical accounting policies involve the most significant estimates and judgments used in the preparation of the consolidated financial statements. The accounting policies, judgments and estimates made in preparing the financial statements have not changed during the Track Record Period. Furthermore, the estimates of our financial performance based on the accounting policies and certain subjective judgments and assumptions made by the management have not produced materially different results when compared to our actual results of operations. Going forward, we will continue to use similar accounting policies, assumptions and subjective judgments to report our future results of operations and financial condition. Revenue Recognition Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods sold and services provided in the normal course of business, net of discounts. Property management services and value-added services Revenue from property management services and value-added services is recognised when services are rendered. 129

135 FINANCIAL INFORMATION For property management service income from properties managed under lump sum basis, where our Group acts as principal, our Group is entitled to revenue at the value of the property management service fee received by the properties. For property management service income from properties managed under commission basis, where our Group acts as an agent of the property owners, our Group is entitled to revenue at a pre-determined percentage of the property management fee received by the properties. Allowances on doubtful receivables We make allowances on doubtful receivables based on an assessment of the recoverability of the receivables. Allowances are provided on receivables where events or changes in circumstances indicate that the receivable may not be collectible. The identification of doubtful receivables requires the use of judgment and estimates. To determine whether there is any objective evidence of doubtful receivables, our management takes into consideration a number of indicators, including, among others, subsequent settlement status, historical write-off experience and management fee collection rate of the residents in estimating the future cash flows from the receivables. Where the expectation is different from the original estimate, such difference will impact the carrying amount of trade and other receivables and doubtful debt expenses in the periods in which such estimate has been changed. Impairment of payments on behalf of management offices under commission basis We have receivables arising from the payments on behalf of management offices in our property management services business. It mainly relates to advances made to the management offices and costs paid centrally and shared by these management offices. Significant management estimation is required to determine whether the management offices have the ability to settle these receivables due to our Group. To determine whether there is any objective evidence of impairment loss, our management takes into consideration a number of indicators, including, among others, subsequent settlement status, historical write-off experience, the financial performance of the communities and management fee collection rate of the communities in estimating the future cashflows from the communities. Where the expectation is different from the original estimate, such difference will impact the carrying amount of payments on behalf of management offices and doubtful debt expenses in the periods in which such estimate has been changed. Fair value of investment properties Investment properties are carried as at 31 December 2012, 2013, 2014 and 31 May 2015 at their fair values of approximately HK$57.0 million, HK$65.4 million, HK$70.4 million and HK$72.6 million, respectively. The fair values were based on a valuation on these properties conducted by an independent firm of professional valuers using property valuation techniques 130

136 FINANCIAL INFORMATION which involve certain assumptions of market conditions. Favourable or unfavourable changes to these assumptions would result in changes in the fair values of our investment properties and corresponding adjustments to the amount of gain or loss recognised in profit or loss. Useful lives and impairment assessment of property, plant and equipment Property, plant and equipment are long-lived but may be subject to technical obsolescence. The annual depreciation charges are affected by the estimated useful lives that our management allocates to each type of property, plant and equipment. Our management performs annual reviews to assess the appropriateness of the estimated useful lives. Such reviews take into account the technological changes, prospective economic utilisation and physical condition of the assets concerned. Our management also regularly reviews whether there are any indications of impairment and will recognise an impairment loss if the carrying amount of an asset is higher than its recoverable amount which is the greater of its net selling price or its value in use. In determining the value in use, management assesses the present value of the estimated future cash flows expected to arise from the continuing use of the asset and from its disposal at the end of its useful life. Estimates and judgments are applied in determining these future cash flows and the discount rate. Our management estimates the future cash flows based on certain assumptions, such as market competition and development and the expected growth in our business. Impairment assessment of amounts due from fellow subsidiaries and related companies In determining whether there is objective evidence of impairment loss, our management takes into consideration the estimation of future cash flows generated by our fellow subsidiaries and related companies, which is based on the plan of the management of the respective group companies and an associate under the direction of COLI. Where the future plan or the future cash flow is different from the original estimate, a material impairment loss may arise. Current taxation and deferred taxation We are subject to taxation in the PRC, Hong Kong and Macau. Judgment is required in determining the amount of the provision for taxation and the timing of payment of the related taxation. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of our business. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact on the income tax and deferred tax provisions in the periods in which such determinations are made. Deferred tax assets relating to certain temporary differences and tax losses are recognised whenever our management considers it is probable that future taxable profit will be available against which the temporary differences or tax losses can be utilised. Where the expectation is different from the original estimate, such differences will impact on the recognition of deferred taxation assets and taxation in the periods in which such estimate is changed. 131

137 FINANCIAL INFORMATION SUMMARY OF FINANCIAL INFORMATION Consolidated Income Statement and Consolidated Statement of Comprehensive Income Consolidated Income Statement Year ended 31 December Five months ended 31 May HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 (unaudited) Revenue ,444,850 1,844,067 2,163, , ,658 (1) Direct operating expenses.... (1,215,755) (1,501,155) (1,750,598) (652,420) (753,724) 229, , , , ,934 Other income and gains, net... 10,555 16,463 18,350 5,319 7,525 Gain arising from changes in fair value of investment properties 3,279 6,516 5,177 3,304 2,253 Administrative expenses (159,122) (247,062) (304,344) (119,419) (131,620) Operating profit , , ,309 44,327 57,092 Share of profits of an associate Financecosts... (26) Profit before tax , , ,466 44,395 57,136 Income tax expenses (22,534) (33,447) (35,378) (11,510) (16,074) Profit for the years/periods attributable to owners of thecompany... 61,549 85,528 97,088 32,885 41,062 (2) EARNINGS PER SHARE (HK cents) Basic and diluted Dividends... Notes: (1) For the period between 31 March 2015, the date beginning from which COPL PRC Holding assumed the profit and loss of COGO Acquired Companies pursuant to the COGO Equity Transfer Agreement, and 31 May 2015, COGO Acquired Companies contributed approximately HK$9,168,000 to our Group s revenue. (2) For the period between 31 March 2015, the date beginning from which COPL PRC Holding assumed the profit and loss of COGO Acquired Companies pursuant to the COGO Equity Transfer Agreement, and 31 May 2015, COGO Acquired Companies contributed approximately HK$2,486,000 to our profit attributable to owners of the Company. 132

138 FINANCIAL INFORMATION Consolidated Statement of Comprehensive Income Year ended 31 December Five months ended 31 May HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 (unaudited) Profit for the year/periods... 61,549 85,528 97,088 32,885 41,062 Other comprehensive income Items that may be reclassified to profit or loss Exchange differences on translation of subsidiaries of the Company (100) 14,896 (1,603) (6,349) 1,918 Total comprehensive income for the years/periods attributable to owners of the Company , ,424 95,485 26,536 42,

139 FINANCIAL INFORMATION Consolidated Statement of Financial Position As at 31 December As at 31 May (1) HK$ 000 HK$ 000 HK$ 000 HK$ 000 Non-current Assets Investment properties ,026 65,441 70,402 72,621 Property, plant and equipment ,094 40,997 45,440 44,731 Prepaid lease payments for land ,313 5,020 4,545 4,352 Interest in an associate Deferredtaxassets... 1,850 3,147 2,527 2, , , , ,827 Current Assets Inventories... 4,521 9,208 6,882 2,459 Trade and other receivables , , , ,790 Deposits and prepayments ,164 6,263 12,198 18,193 Prepaid lease payment for land Amounts due from fellow subsidiaries , , ,228 25,953 Amounts due from related companies ,274 1,336 2,617 1,339 Taxprepaid Bank balances and cash ,632 1,081,914 1,088,601 1,286,524 1,209,800 1,600,367 1,818,036 1,702,716 Current Liabilities Trade and other payables , , , ,600 Receipts in advance , , , ,050 Deposits , , , ,401 Amounts due to fellow subsidiaries , , ,809 15,321 Amount due to a related company Tax liabilities ,593 52,226 74,075 78,259 Bankborrowing , ,867 1,276,111 1,408,234 1,266,631 Net Current Assets , , , ,085 Total Assets Less Current Liabilities , , , ,912 Capital and Reserves Sharecapital... Reserves , , , ,429 Total equity attributable to owners of the Company , , , ,429 Non-current liabilities Deferred tax liabilities ,164 8,306 6,556 6, , , , ,

140 FINANCIAL INFORMATION Note: (1) On 28 May 2015, we acquired COGO Acquired Companies for a cash consideration of approximately RMB50.0 million (equivalent to approximately HK$63.2 million). The fair values of aggregate assets acquired and liabilities assumed due to the COGO Acquisition are as follows: HK$ 000 Property,plantandequipment Inventories Tradeandotherreceivables,andprepayments Amountduefromarelatedcompany... 66,923 Cashandcashequivalents... 29,535 Tradeandotherpayables... (26,436) Receiptsinadvanceanddeposits... (7,390) Taxliabilities... (518) 63,161 Cashconsiderationpaid... (63,161) For details regarding the basis of preparation of our financial information and its presentation in the consolidated financial statements, please see the section entitled Basis of Preparation. DESCRIPTION OF SELECTED INCOME STATEMENT LINE ITEMS Revenue During the Track Record Period, we derived our revenue from the following two business segments:. property management services, which primarily include (i) services such as security, repair and maintenance, cleaning and garden landscape maintenance provided to mid- to high-end residential communities (including mixed-use properties), commercial properties and government properties and (ii) services to other enterprises, such as (for property developers) pre-delivery services, move-in assistance services, delivery inspection services, engineering service quality monitoring and (for other property management companies) consulting services; and. value-added services, which primarily include (i) engineering services such as (for property developers) automation consulting and engineering product sales and (for property management companies) inspection services, repair and maintenance services and equipment upgrade services and (ii) community leasing, sales and other services where residents and tenants of the properties under our management are offered a diversified range of online and offline services (such as common area rental assistance, purchase assistance and rental assistance for properties that have been delivered to owners by developers and household assistance services) through our O2O platform. 135

141 FINANCIAL INFORMATION The following table sets forth a breakdown of revenue by major product lines under each of our business segments for the periods indicated: Year ended 31 December Five months ended 31 May HK$ 000 %of Revenue HK$ 000 %of Revenue HK$ 000 %of Revenue HK$ 000 %of Revenue HK$ 000 %of Revenue (unaudited) Property management services under lump sum basis ,224, ,524, ,764, , , Property management services under commission basis , , , , , Other services , , , , , Total of property management services... 1,391, ,741, ,035, , , Engineering services , , , , , Community leasing, sales and other services , , , , , Total of value-added services... 53, , , , , Total revenue... 1,444, ,844, ,163, , , During the Track Record Period, the revenue contribution from our operations by geographical region is set forth in the table below: Year ended 31 December Five months ended 31 May HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 (unaudited) Hua Nan Region (1) , , , , ,152 HuaDongRegion (2) , , , , ,531 Hua Bei Region (3) , , , , ,054 Northern Region (4) , , ,081 75,700 79,865 Western Region (5) , , , , ,809 Hong Kong and Macau , , , , ,247 Total (6)... 1,444,850 1,844,067 2,163, , ,658 Notes: (1) Includes Changsha, Foshan, Ganzhou, Guangzhou, Guilin, Nanning, Shantou, Shenzhen, Wuhan, Xiamen, Zhongshan and Zhuhai, as at 31 May (2) Includes Changzhou, Hangzhou, Hefei, Shanghai, Nanchang, Nanjing, Nantong, Ningbo, Suzhou, Wuxi, Yancheng and Yangzhou, as at 31 May (3) Includes Beijing, Hohhot, Jinan, Tianjin and Weifang, as at 31 May (4) Includes Changchun, Dalian, Harbin, Jilin, Qingdao, Shenyang, Yantai and Zibo, as at 31 May (5) Includes Chengdu, Chongqing, Kunming, Lanzhou, Urumqi, Xi an and Yinchuan, as at 31 May (6) The above categorisation is based on our internal policies and may not be comparable to similarly titled terms used by other companies. 136

142 FINANCIAL INFORMATION For the majority of properties managed under lump sum basis, we record the full amount of our property management fees charged to the property owners as our revenue. For the majority of properties charged under commission basis, we recognise a pre-determined percentage (typically 10% in the PRC) of the property management fees as our revenue. Throughout the Track Record Period, we increased our proportion of GFA under management charged under commission basis. The following table sets forth a breakdown of our GFA under management by properties managed under lump sum basis and properties managed under commission basis for the periods indicated: As at 31 December As at 31 May (3) ( 000 sq.m.) % ( 000 sq.m.) % ( 000 sq.m.) % ( 000 sq.m.) % GFA under management under lump sum basis... 24, , , , GFA under management under commission basis.. 9, , , , Total GFA under management (1)(2).. 34, , , , Notes: (1) Our GFA under management may not be comparable to other similarly titled measures of other companies. (2) Our GFA under management for properties under our management in Hong Kong and Macau is the same as our fee-charging GFA for such properties. (3) COGOAcquiredCompanies,whichweacquiredon28May2015 pursuant to the COGO Acquisition, contributed 7,807.4 thousand sq.m. to our GFA under management as at 31 May 2015, 2,268.5 thousand sq.m. of which was managed under lump sum basis and 5,538.9 thousand sq.m. of which was managed under commission basis. Within our value-added services segment, we have implemented a number of initiatives to prepare for further business expansion. Our engineering operations were halted in 2012 for internal business integration and then re-launched in Within our community leasing, sales and other services sub-segment, a wide range of new services were launched in 2013 to grow our business. Subsequently in 2014, in order to grow our business, we established a dedicated task force and realigned our offerings, exiting certain non-core services that did not meet our expansion strategies. Direct Operating Expenses Our direct operating expenses primarily comprise labour costs, sub-contracting costs, equipment repair and maintenance costs, utility costs, cost of inventories recognised as expenses, business tax and other levies and other costs. 137

143 FINANCIAL INFORMATION The table below sets forth the breakdown of our operating expenses by main components for the periods indicated, both in terms of actual costs and as a percentage of total direct operating expenses. Year ended 31 December Five months ended 31 May HK$ 000 % HK$ 000 % HK$ 000 % HK$ 000 % HK$ 000 % (unaudited) Costs by Components: Labour costs , , , , , Sub-contracting costs , , , , , Equipment repair and maintenance costs , , , , , Utility costs , , , , , Cost of inventories recognised as expenses , , , , , Business tax and other levies... 65, , , , , Community social events-planning , , , , , Depreciation and amortisation.. 4, , , , , Others , , , , , Total direct operating expenses... 1,215, ,501, ,750, , , During the Track Record Period, the main factors affecting our total direct operating expenses were labour costs, sub-contracting costs (which mainly represent amounts paid to external providers of cleaning and garden landscape maintenance services), equipment repair and maintenance costs and utility costs. The amount of labour costs and sub-contracting costs was mainly affected by the staff headcount, due to increases in our GFA under management, as well as the average amount of remuneration paid, due to increases in minimum wage and the market price of labour. Our labour costs amounted to 55.0%, 51.7%, 53.6%, 54.9% and 56.0% of our total direct operating expenses for the years ended 31 December 2012, 2013 and 2014 and the five months ended 31 May 2014 and 2015, respectively. A significant component of our labour costs consists of labour costs for our property management services, such as security services, repair and maintenance services and designated managers for specific buildings at properties under our management. Our sub-contracting costs amounted to 14.1%, 14.9%, 14.6%, 13.9% and 14.3% of our total direct operating expenses for the years ended 31 December 2012, 2013 and 2014 and the five months ended 31 May 2014 and 2015, respectively. Our sub-contracting costs primarily relate to our provision of cleaning services and also include sub-contracting costs for garden landscape maintenance under our property management services segment. Our equipment repair and maintenance costs amounted to 8.7%, 9.3%, 9.6%, 9.4% and 8.6% of our total direct operating expenses for the years ended 31 December 2012, 2013 and 2014 and the five months ended 31 May 2014 and 2015, respectively. Our equipment repair and maintenance costs primarily relate to repair and maintenance of building hardware, such as elevators and water pipes, of the properties under our management. Our utility costs amounted to 9.8%, 8.8%, 7.8%, 7.3% and 6.4% of our total direct operating expenses for the years ended 31 December 2012, 2013 and 2014 and the five months ended 31 May 2014 and 2015, respectively. While utility costs have remained a significant 138

144 FINANCIAL INFORMATION component of our total direct operating expenses, their proportion of our total direct operating expenses has decreased over the Track Record Period due to cost-saving initiatives such as converting to LED light bulbs and implementing water efficiency measures. Gross Profit and Gross Profit Margin The gross profit margins of our property management services segment depend on the contractual arrangements of the services rendered. During the Track Record Period, we charged property management fees either under commission basis or under lump sum basis, depending on the nature and requirements of individual communities, pre-delivery service fees on a pertransaction basis and fees for consultancy services. For our properties managed under lump sum basis, we recognised the costs we incurred in connection with performing our services as direct operating expenses. For the majority of our properties managed under commission basis, we are entitled to retain a pre-determined percentage (typically 10.0% in the PRC) of the management fees payable by the property owners. The remaining property management fees are reserved as property management working capital to cover the expenses incurred in managing properties under commission basis. Although we normally enter into employment contracts with the on-site staff and we are the contracting party to sub-contracting arrangements, the residents of the properties we manage under commission basis typically bear the relevant costs associated with the on-site staff and sub-contracting arrangements. The table below sets forth our gross profit and gross profit margins by major product lines under each business segment for the periods indicated: Year ended 31 December Five months ended 31 May Gross Profit (HK$ 000) Gross Profit Margin (%) Gross Profit (HK$ 000) Gross Profit Margin (%) Gross Profit (HK$ 000) Gross Profit Margin (%) Gross Profit (HK$ 000) Gross Profit Margin (%) Gross Profit (HK$ 000) Gross Profit Margin (%) (unaudited) Property management services under lump sum basis , , , , , Property management services under commission basis , , , , , Other services , , , , , Total of property management services , , , , , Engineering services , , , , , Community leasing, sales and other services , , , , , Total of value-added services... 30, , , , , Total , , , , , The gross profit margin of property management services under lump sum basis was affected by the pricing of our property management fees and our cost management initiatives. During the Track Record Period, in order to increase our profitability, we implemented various cost management initiatives, such as employing remote monitoring systems to reduce labour costs and adopting energy-saving measures to reduce utility costs. 139

145 FINANCIAL INFORMATION In general, we did not incur any direct operating expenses with respect to our revenue from property management services under commission basis. As a result, the gross profit margin of our property management services under commission basis was typically 100.0%. The gross profit margin of our value-added services was affected by our product mix as well as certain business restructuring initiatives implemented to prepare for further business expansion. These initiatives had an impact on the level of business activities performed and cost structure due to organisational changes. Other Income and Gains, Net Other income and gains primarily consist of (i) interest income on bank deposits, (ii) unconditional government grants and (iii) other miscellaneous income. The table below sets forth the breakdown of net other income and gains for the periods indicated. Year ended 31 December Five months ended 31 May HK$ 000 % HK$ 000 % HK$ 000 % HK$ 000 % HK$ 000 % (unaudited) Other income and gains include: Interest income on bank deposits , , , , , Unconditional government grants , , , , , Others... 2, , , , Total other income and gains, net. 10, , , , , During the Track Record Period, our interest income on bank deposits increased primarily due to an increase in our bank deposits, which mainly resulted in an increase in cash from our property management fees received from properties managed under lump sum basis. Certain of our operating subsidiaries receive non-recurring government grants, at the discretion of the relevant local government, aimed at enhancing the development of the local property management industry. Gain Arising from Changes in Fair Value of Investment Properties Our investment properties primarily comprise carpark spaces and an office property. Investment properties are stated at fair value on the consolidated statement of financial position as non-current assets as at each financial statement date based on the valuations prepared by the independent property valuer. Changes in fair value of our investment properties are recognised in the consolidated income statement. 140

146 FINANCIAL INFORMATION Administrative Expenses Administrative expenses consist of compensation for administrative staff costs, office expenses, traveling expenses, rental costs, provision for doubtful debts, bank charges, entertainment expenses and others. The table below sets forth a breakdown of our administrative expenses for the periods indicated: Year ended 31 December Five months ended 31 May %of HK$ 000 % revenue HK$ 000 % Administrative Expenses %of revenue HK$ 000 % %of revenue HK$ 000 % (unaudited) %of revenue HK$ 000 % Staffcosts , , , , , Office expenses , , , , , Travelling expenses.. 4, , , , , Entertainment expenses... 2, , , Rentalcosts... 5, , , , , Provision for doubtful debts... 8, , , , , Bankcharges... 2, , , , , Others... 13, , , , , %of revenue Total , , , , ,

147 FINANCIAL INFORMATION During the Track Record Period, our staff costs and office expenses increased due to the establishment of municipal management centres as part of our business strategy to facilitate our expansion and to bolster our control measures. With an effective system of municipal management centres set up during the Track Record Period, we believe we are well-positioned to achieve economies of scale when managing further increases in our GFA under management nationwide. Meanwhile, we also aim to leverage our management infrastructure to more effectively roll out cost management and other business initiatives to achieve cost savings, strengthen quality control and generate additional revenue. Share of Profits of an Associate Our share of results of an associate consists of our share of profits of COPL Windsor Heights (which is primarily engaged in the property management business), in which we held a 25% equity interest during the Track Record Period, with the remaining interest held by Independent Third Parties. Income Tax Expense Our income tax expense consists primarily of current tax. Current tax primarily consists of the PRC Enterprise Income Tax ( EIT ), Hong Kong profits tax and Macau complementary income tax. Under the PRC EIT Law, our PRC subsidiaries are subject to PRC income tax at the statutory enterprise income tax rate of 25%. Our PRC EIT tax expense was HK$22.9 million, HK$32.6 million, HK$34.8 million, HK$11.0 million and HK$15.8 million for the years ended 31 December 2012, 2013 and 2014 and the five months ended 31 May 2014 and 2015, respectively. Our Hong Kong subsidiaries are subject to Hong Kong profits tax, which is calculated at the rate of 16.5% on estimated assessable profit. Our Hong Kong profits tax expense was HK$0.7 million, HK$1.1 million, HK$1.6 million, HK$0.6 million and HK$0.7 million for the years ended 31 December 2012, 2013 and 2014 and the five months ended 31 May 2014 and 2015, respectively. Our Macau subsidiaries are subject to Macau complementary income tax at the prevailing tax rate of 12%. Our Macau complementary income tax expense was nil, HK$0.1 million, HK$0.1 million, HK$0.1 million and nil for the years ended 31 December 2012, 2013 and 2014 and the five months ended 31 May 2014 and 2015, respectively. 142

148 FINANCIAL INFORMATION The income tax expenses for the periods can be reconciled to the profit before tax as follows: Year ended 31 December Five months ended 31 May HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 (unaudited) Profit before tax , , ,466 44,395 57,136 Tax at the applicable tax rate of 25%... 21,021 29,744 33,117 11,099 14,284 Tax effect of share of results of anassociate... (69) (36) (39) (17) (17) Tax effect of expenses not deductible for tax purpose , ,139 Tax effect of income not taxable fortaxpurpose... (28) (82) (58) (16) (30) Effect of different tax rates applicable to subsidiaries operating in Hong Kong and Macau... (273) (377) (867) (411) (204) Income tax at concessionary tax rate... (185) (408) (687) (316) (235) Taxeffectoftaxlossesnot recognised... 1,983 4,217 3,349 3,003 2,403 Utilisation of tax losses previously not recognised... (268) (1,107) (263) (2,117) (1,202) (Over)/under-provision in prior years... (4) (2) 53 Others... (633) 551 (518) 150 (117) Income tax expenses for the year/period... 22,534 33,447 35,378 11,510 16,074 Our effective tax rate for the years ended 31 December 2012, 2013 and 2014 and the five months ended 31 May 2014 and 2015 was 26.8%, 28.1%, 26.7%, 25.9% and 28.1%, respectively, which exceeds the applicable tax rate, primarily due to the effect of losses not recognised for tax purposes. Pursuant to the EIT Law, the Notice of the State Administration of Taxation on Issuing the Interim Measures for the Administration of Collection of Enterprise Income Tax on the Basis of Consolidation of Trans-regional Business Operations ( 國稅發 [2008]28: 國家稅務總局關於印發 跨地區經營匯總納稅企業所得稅徵收管理暫行辦法 的通知 ) (No. 28 [2008] of the State Administration of Taxation) effective from 1 January 2009 to 31 December 2012, the Announcement of the State Administration of Taxation on Issuing the Measures for the Consolidated Collection of Enterprise Income Tax on Trans-regional Business Operation ( 國家稅務總局關於印發 跨地區經營匯總納稅企業所得稅徵收管理辦法 的公告 ( 國家稅務總局公告 2012 年第 57)) (No. 57 of the State Administration of Taxation) effective on and from 1 January 143

149 FINANCIAL INFORMATION 2013 in the PRC, the assessable profits and Enterprise Income Tax payable by a resident enterprise shall be determined based on the combined results of itself and its management bodies which do not constitute separate legal entities. On this basis, some of our property management subsidiaries combined the assessable profits and losses of certain management offices of the properties managed by us under commission basis when they filed tax returns. As a result of the combined tax returns arrangement, we have utilised the tax losses of certain loss-making management offices. According to our policy, in the event that the loss-making management offices become profitable resulting in assessable profits in subsequent years, the assessable profits of the property will be incorporated in our combined tax returns, and we are obliged to make tax payments arising from such profits on behalf of the relevant properties until the tax losses of the relevant properties, previously utilised by us, are fully recovered by the relevant property or such property s tax losses have expired. When filing the tax returns for each reporting period, our property management subsidiaries filed combined tax returns, and under those combined tax returns, the assessable profits included the profit or loss of the property management subsidiaries plus the profit or loss of the management offices managed by our property management subsidiaries under commission basis. Our property management subsidiaries pay the Enterprise Income Tax based on the assessable profits of the combined tax filings by debiting the income tax payable and crediting the bank balances. The utilisation of such tax losses of communities and the deferral of our Group s payment of Enterprise Income Tax provision had no effect on our consolidated profit or loss during the Track Record Period. For financial accounting purposes, our Group has made relevant provision by debiting the income tax expenses and crediting income tax payable based on assessable profits at the applicable tax rates of our property management subsidiaries. Our Directors confirm that our Group has made all the required tax filings under the relevant tax laws and regulations in the PRC, Hong Kong and Macau, has paid all required taxes when due and has not received any penalty notice from the local tax bureaus which could result in a material adverse effect on our Group. RESULTS OF OPERATIONS Five Months Ended 31 May 2015 Compared to Five Months Ended 31 May 2014 Revenue Revenue increased by 15.5% from HK$807.5 million for the five months ended 31 May 2014 to HK$932.7 million for the five months ended 31 May The increase in revenue was primarily due to an increase in revenue from property management services and, to a lesser extent, an increase in revenue from value-added services.. Property Management Services. Revenue from property management services constituted 96.1% and 95.3% of our total revenue for the five months ended 31 May 2014 and 2015, respectively. Revenue from property management services increased by 14.6% from HK$775.7 million for the five months ended 31 May 2014 to HK$888.7 million in the five months ended 31 May 2015, which was mainly attributable to an increase in our total GFA under management and supplemented by an increase in our 144

150 FINANCIAL INFORMATION pricing for property management fees for certain properties upon contract renewal or obtaining requisite approval. For the five months ended 31 May 2015, we increased our total GFA under management by approximately 11.2 million sq.m. from 56.4 million sq.m. to 67.6 million sq.m., of which 7.8 million sq.m. was due to the COGO Acquisition.. Value-added Services. Revenue from value-added services constituted 3.9% and 4.7% of our total revenue for the five months ended 31 May 2014 and 2015, respectively. Revenue from value-added services increased from HK$31.8 million for thefivemonthsended31may2014tohk$44.0millionforthefivemonthsended31 May 2015 primarily due to the expansion of our community leasing, sales and other services business to new locations. Direct operating expenses Direct operating expenses increased by 15.5% from HK$652.4 million for the five months ended 31 May 2014 to HK$753.7 million for the five months ended 31 May The increase in direct operating expenses was primarily due to increases in labour costs of our own employees as a result of (i) a rise in headcount due to our increased GFA under management and expansion for our community leasing, sales and other services business into new locations and (ii) a general increase in salaries and wages. Gross profit and gross profit margin Our gross profit increased by 15.3% from HK$155.1 million for the five months ended 31 May 2014 to HK$178.9 million for the five months ended 31 May Our gross profit margin remained relatively stable at 19.2% for the five months ended 31 May 2014 and Property Management Services. The gross profit margin of our property management services remained relatively stable at 18.2% and 18.0% for the five months ended 31 May 2014 and Value-added Services. The gross profit margin of our value-added services remained relatively stable at 43.5% and 42.6% for the five months ended 31 May 2014 and Other income and gains, net Our other income and gains increased from HK$5.3 million for the five months ended 31 May 2014 to HK$7.5 million for the five months ended 31 May The increase was primarily due to increases in interest income on bank deposits and unconditional government grants. Gain arising from changes in fair value of investment properties Gain arising from changes in fair value of investment properties decreased from HK$3.3 million for the five months ended 31 May 2014 to HK$2.3 million for the five months ended 31 May 2015, primarily due to the market value of our investment properties growing at a slower pace for the five months ended 31 May

151 FINANCIAL INFORMATION Administrative expenses Administrative expenses increased by 10.2% from HK$119.4 million for the five months ended 31 May 2014 to HK$131.6 million for the five months ended 31 May The increase was primarily due to increases in staff costs, which resulted from (i) an increase in headcount due to the establishment of municipal management centres to support the expansion of our operations and (ii) a general increase in salaries and wages. Share of profits of an associate Share of profits of an associate remained at HK$0.1 million for the five months ended 31 May 2014 and Income tax expenses Income tax expenses increased from HK$11.5 million for the five months ended 31 May 2014 to HK$16.1 million for the five months ended 31 May 2015, primarily due to an increase in profit before tax. Profit for the periods attributable to owners of the Company In light of the foregoing, profit for the periods attributable to owners of the Company increased from HK$32.9 million for the five months ended 31 May 2014 to HK$41.1 million for the five months ended 31 May Year Ended 31 December 2014 Compared to Year Ended 31 December 2013 Revenue Revenue increased by 17.3% from HK$1,844.1 million for the year ended 31 December 2013 to HK$2,163.7 million for the year ended 31 December The increase in revenue was primarily due to an increase in revenue from property management services and, to a lesser extent, an increase in revenue from value-added services.. Property Management Services. Revenue from property management services constituted 94.4% and 94.1% of our total revenue for the years ended 31 December 2013 and 2014, respectively. Revenue from property management services increased by 16.9% from HK$1,741.3 million for the year ended 31 December 2013 to HK$2,035.5 million in the year ended 31 December 2014, which was mainly attributable to an increase in our total GFA under management and supplemented by an increase in our pricing for property management fees for certain properties upon contract renewal or obtaining requisite approval. For the year ended 31 December 2014, we increased our total GFA under management by approximately 10.5 million sq.m. from 45.9 million sq.m. to 56.4 million sq.m.. 146

152 FINANCIAL INFORMATION. Value-added Services. Revenue from value-added services constituted 5.6% and 5.9% of our total revenue for the years ended 31 December 2013 and 2014, respectively. Revenue from value-added services increased from HK$102.8 million for the year ended 31 December 2013 to HK$128.3 million for the year ended 31 December 2014 primarily due to the expansion of our engineering services, partially offset by a decrease in revenue from community leasing, sales and other services due to realignment of our offerings. Direct operating expenses Direct operating expenses increased by 16.6% from HK$1,501.2 million for the year ended 31 December 2013 to HK$1,750.6 million for the year ended 31 December The increase in direct operating expenses was primarily due to increases in labour costs of our own employees as a result of (i) a rise in headcount due to our increased GFA under management and (ii) a general increase in salaries and wages. Gross profit and gross profit margin Our gross profit increased by 20.5% from HK$342.9 million for the year ended 31 December 2013 to HK$413.1 million for the year ended 31 December Our gross profit margin increased from 18.6% for the year ended 31 December 2013 to 19.1% for the year ended 31 December Property Management Services. The gross profit margin of our property management services increased from 17.1% for the year ended 31 December 2013 to 17.9% for the year ended 31 December 2014, primarily due to (i) an increase in our gross profit margins for property management services under lump sum basis, which was achieved by managing certain new properties with more favourable pricing, increasing our property management fees under certain existing contracts and implementing certain cost-saving initiatives and (ii) changes in our product mix to increase the proportion of our property management services under commission basis.. Value-added Services. The gross profit margin of our value-added services decreased from 44.3% for the year ended 31 December 2013 to 37.4% for the year ended 31 December 2014, primarily due to lower gross profit margins from our community leasing, sales and other services business due to an increase in direct operating cost arising from a dedicated task force established in This was partially offset by an increase in gross profit margin from our expanding engineering operations. Other income and gains, net Our other income and gains increased from HK$16.5 million for the year ended 31 December 2013 to HK$18.4 million for the year ended 31 December The increase was primarily due to (i) an increase in interest income on bank deposits, resulting from an increase in cash received as property management fees from properties managed under lump sum basis and (ii) an increase in government grants. 147

153 FINANCIAL INFORMATION Gain arising from changes in fair value of investment properties Gain arising from changes in fair value of investment properties decreased from HK$6.5 million for the year ended 31 December 2013 to HK$5.2 million for the year ended 31 December 2014, primarily due to the market value of our investment properties growing at a slower pace in the year ended 31 December Administrative expenses Administrative expenses increased by 23.1% from HK$247.1 million for the year ended 31 December 2013 to HK$304.3 million for the year ended 31 December The increase was primarily due to increases in staff costs, which resulted from (i) an increase in headcount due to the establishment of municipal management centres to support the expansion of our operations and (ii) a general increase in salaries and wages. Share of profits of an associate Share of profits of an associate increased from HK$0.1 million for the year ended 31 December 2013 to HK$0.2 million for the year ended 31 December 2014, due to an increase in the profits of our associate, COPL Windsor Heights. Income tax expenses Income tax expenses increased from HK$33.4 million for the year ended 31 December 2013 to HK$35.4 million for the year ended 31 December 2014, primarily due to an increase in profit before tax. Profit for the year attributable to owners of the Company In light of the foregoing, profit for the year attributable to owners of the Company increased from HK$85.5 million for the year ended 31 December 2013 to HK$97.1 million for the year ended 31 December Year Ended 31 December 2013 Compared to Year Ended 31 December 2012 Revenue Revenue increased by 27.6% from HK$1,444.9 million for the year ended 31 December 2012 to HK$1,844.1 million for the year ended 31 December The increase in revenue was primarily due to an increase in revenue from property management services and, to a lesser extent, an increase in revenue from value-added services.. Property Management Services. Revenue from property management services constituted 96.3% and 94.4% of our total revenue for the years ended 31 December 2012 and 2013, respectively. Revenue from property management services increased by 25.1% from HK$1,391.5 million for the year ended 31 December 2012 to HK$1,741.3 million in the year ended 31 December 2013, which was mainly attributable to an increase in our total GFA under management and supplemented by an increase in our pricing for property management fees for certain properties upon contract renewal or obtaining requisite approval. For the year ended 31 December 2013, we increased our total GFA under management by approximately 11.8 million sq.m. from 34.1 million sq.m. to 45.9 million sq.m.. 148

154 FINANCIAL INFORMATION. Value-added Services. Revenue from value-added services constituted 3.7% and 5.6% of our total revenue for the years ended 31 December 2012 and 2013, respectively. Revenue from value-added services increased from HK$53.4 million for the year ended 31 December 2012 to HK$102.8 million for the year ended 31 December 2013, primarily due to (i) the re-launching of certain engineering services that were halted in 2012 for a restructuring of our engineering operations and (ii) our active expansion into more diversified product offerings in connection with our community leasing, sales and other services sub-segment. Direct operating expenses Direct operating expenses increased 23.5% from HK$1,215.8 million for the year ended 31 December 2012 to HK$1,501.2 million for the year ended 31 December The increase in direct operating expenses was primarily due to increases in labour costs of our own employees as a result of (i) a rise in headcount due to our increased GFA under management and (ii) a general increase in salaries and wages. Gross profit and gross profit margin Our gross profit increased by 49.7% from HK$229.1 million for the year ended 31 December 2012 to HK$342.9 million for the year ended 31 December Our gross profit margin increased from 15.9% for the year ended 31 December 2012 to 18.6% for the year ended 31 December 2013, primarily due to an increase in our gross profit margin from our property management services segment.. Property Management Services. The gross profit margin of our property management services increased from 14.3% for the year ended 31 December 2012 to 17.1% for the year ended 31 December 2013, primarily due to a rise in our gross profit margin from property management services under lump sum basis from 9.4% to 12.2%, which mainly resulted from our cost-saving initiatives, such as implementing a cost control management platform, employing remote monitoring systems to reduce labour costs and converting to LED lighting to reduce utility costs, supplemented by managing certain new properties with more favourable pricing and increasing our property management fees under certain existing contracts.. Value-added Services. The gross profit margin of our value-added services decreased from 57.5% for the year ended 31 December 2012 to 44.3% for the year ended 31 December 2013, primarily due to a decrease in the gross profit margin of our engineering services sub-segment resulting from an increase in labour costs from an increase in headcount to set up our designated engineering services operating subsidiary. 149

155 FINANCIAL INFORMATION Other income and gains, net Our other income and gains increased from HK$10.6 million for the year ended 31 December 2012 to HK$16.5 million for the year ended 31 December The increase was primarily due to an increase in interest income on bank deposits, resulting from an increase in cash received as property management fees from properties managed under lump sum basis. Gain arising from changes in fair value of investment properties Gain arising from changes in fair value of investment properties increased from HK$3.3 million for the year ended 31 December 2012 to HK$6.5 million for the year ended 31 December 2013, primarily due to the market value of our investment properties growing at a faster pace in the year ended 31 December Administrative expenses Administrative expenses increased by 55.3% from HK$159.1 million for the year ended 31 December 2012 to HK$247.1 million for the year ended 31 December The increase was primarily due to an increase in staff cost resulting from increased headcount to support our expanding operations and a general increase in salaries and wages. Share of profits of an associate Share of profits of an associate decreased from HK$0.3 million for the year ended 31 December 2012 to HK$0.1 million for the year ended 31 December 2013 due to a decrease in the profits of our associate, COPL Windsor Heights. Income tax expense Income tax expenses increased from HK$22.5 million for the year ended 31 December 2012 to HK$33.4 million for the year ended 31 December 2013, primarily due to an increase in profit before tax. Profit for the year attributable to owners of the Company In light of the foregoing, profit for the year attributable to owners of the Company increased from HK$61.5 million for the year ended 31 December 2012 to HK$85.5 million for the year ended 31 December

156 FINANCIAL INFORMATION DESCRIPTION OF CERTAIN ITEMS IN STATEMENT OF FINANCIAL POSITION Trade and Other Receivables Trade Receivables Our trade receivables mainly arise from property management fee receivables for properties managed under lump sum basis and, to a lesser extent, from our engineering operations in the value-added services segment. The table below sets forth a breakdown of our trade receivables by business segment as at the dates indicated: As at 31 December As at 31 May HK$ 000 HK$ 000 HK$ 000 HK$ 000 Trade receivables, net of provision Property management services , , , ,830 Value-added services ,805 6,330 15,206 15, , , , ,598 The increase in our trade receivables from property management services from HK$122.0 million as at 31 December 2012 to HK$165.5 million as at 31 December 2014 was primarily due to an increase in our GFA under management. The increase in our trade receivables from property management services from HK$165.5 million as at 31 December 2014 to HK$251.8 million as at 31 May 2015 was primarily due to payment patterns of residents in the PRC resulting in lower collection rates in the first half of the year. In certain areas in which we operate, customers have a habit of making payments in the second half of the year. As a result, we experience a relatively higher cash collection rate in the second half of the year and a lower cash collection rate during or around the Lunar New Year period. Our trade receivables in our value-added services segment consist primarily of trade receivables from our engineering services business. Trade receivables from value-added services amounted to HK$5.8 million, HK$6.3 million, HK$15.2 million and HK$15.8 million as at 31 December 2012, 2013 and 2014 and 31 May 2015, respectively. The increases throughout the Track Record Period were primarily due to the expansion of our engineering services business. Property management services income from properties managed under lump sum basis in the PRC is received in accordance with the terms of the relevant property management service contracts. Income from property management services is due for payment by the residents upon the issuance of a demand note. Property management services income from properties managed under lump sum basis in Hong Kong has an average credit period of 60 days or less. Provision of repair and maintenance, automation and other equipment upgrade services income is received in accordance with the terms of the relevant contractual arrangements, normally within 60 days from the issuance of payment requests. 151

157 FINANCIAL INFORMATION Other value-added services income is due for payment upon the issuance of a demand note. In determining the recoverability of trade receivables from the property management services, our Group takes into consideration a number of indicators, including, among others, subsequent settlement status, historical write-off experience and management fee collection rate of the residents in estimating the future cashflows from the receivables. For the provision of repair and maintenance, automation and other equipment upgrade and other value-added services, before accepting any new customer, our Group assesses the potential customer s credit quality and determines credit rating limits for each customer. Credit limits of customers are reviewed once a year. In determining the recoverability of trade receivables from provision of repair and maintenance, automation and other equipment upgrade and other value-added services, our Group considers any change in the credit quality of the trade receivable from the date on which the credit was initially granteduptothereportingdate. In order to enhance the timeliness of property management fees and other payments, we have undertaken certain measures aimed at boosting our collections of trade and other receivables. We actively collect our receivables through collection measures such as home visits, mailing reminders to residents, posting payment status notices, ing payment reminders and sending payment reminders through our O2O mobile APP. During the Track Record Period, we achieved a high success rate in collecting our receivables. The table below sets forth our trade receivable turnover days: As at 31 December As at 31 May Trade receivable turnover days (1) Note: (1) Calculated as trade receivables as at the end of the relevant period divided by revenue for that relevant period, then multiplied by the number of days in the relevant period. Our trade receivable turnover days remained relatively stable for the years ended 31 December 2012, 2013 and The increase in our trade receivable turnover days from the year ended 31 December 2014 to the five months ended 31 May 2015 was due primarily to payment patterns of residents in the PRC leading to lower collection rates in the first half of the year. 152

158 FINANCIAL INFORMATION The following is an aging analysis of trade receivables based on invoice date at the end of each reporting period: As at 31 December As at 31 May HK$ 000 HK$ 000 HK$ 000 HK$ 000 Trade receivables, aged 0 30 days ,883 37,524 55,699 73, days... 39,861 45,044 38,319 92, days... 58,520 73,247 78, , years... 20,476 24,757 22,532 17,570 Over 2 years ,829 21,125 29,573 32, , , , ,438 Less: provision for impairment (22,809) (33,430) (43,907) (48,840) 127, , , ,598 Movements in our provision for impairment of trade receivables are as follows: As at 31 December As at 31 May HK$ 000 HK$ 000 HK$ 000 HK$ 000 At the beginning of the reporting period 13,831 22,809 33,430 43,907 Provision for receivables impairment.. 13,395 15,486 18,451 9,097 Unused amounts reversed (4,407) (5,633) (7,892) (4,147) Exchangerealignment... (10) 768 (82) (17) At the end of the reporting period.. 22,809 33,430 43,907 48,840 Included in our trade receivable balance are debtors with carrying amounts of approximately HK$22.8 million, HK$33.4 million, HK$43.9 million and HK$48.8 million as at 31 December 2012, 2013 and 2014 and 31 May 2015 respectively, which are fully impaired. We did not hold any collateral over these balances. 153

159 FINANCIAL INFORMATION Based on the amounts we have been able to recover historically and our management s assessment of the credit quality of our customers, we believe that our management has made sufficient provisions for impairment of trade receivables during the Track Record Period. As at 31 May 2015, HK$153.4 million of our trade receivables as at 31 December 2014 had been settled. Other Receivables Our other receivables consist of payments on behalf of management offices under commission basis, payments on behalf of property owners, sub-contractors and staff and other miscellaneous deposits such as petty cash. The table below sets forth a breakdown of our other receivables as at the dates indicated: As at 31 December As at 31 May HK$ 000 HK$ 000 HK$ 000 HK$ 000 Other receivables Payments on behalf of management offices under commission basis ,285 31,991 51,572 85,168 Less: provision for receivables impairment (22,003) (22,691) (22,614) (22,602) Payments on behalf of management offices under commission basis, net of provision ,282 9,300 28,958 62,566 Payments on behalf of property owners, sub-contractors and staff ,263 19,211 16,701 23,427 Others... 6,417 6,696 9,911 14,199 25,962 35,207 55, ,192 Payments on behalf of management offices under commission basis During the Track Record Period, we have extended certain payments on behalf of management offices of properties managed under commission basis under the following circumstances:. before the establishment of a bank account by the management office of the property under management (typically for newly developed properties);. salaries, social security payments and social welfare payments that are consolidated and paid by our Group;. utility costs that are consolidated and paid by our Group;. centralised procurement costs; 154

160 FINANCIAL INFORMATION. properties under our management prior to delivery to property owners; or. management offices experiencing difficulties with liquidity due to changes in regulations such as minimum wage. We record payments on behalf of management offices under commission basis as other receivables under current assets. Under our Group s policy, such payments on behalf of management offices under commission basis must be settled within a set period of time depending on the nature of the payment. For payments made on behalf of management offices under commission basis due to our Group s centralised payment procedures, such payments are generally settled within the month that the payment is made. For payments made on behalf of management offices of properties at the pre-delivery stage, payments are generally settled within three months to a year after units are delivered to the property owners. In order to ensure a high recovery rate of payments on behalf of management offices under commission basis, our Company adopts the following measures:. ensure the early establishment of bank accounts for management offices;. settle receivables with management offices on a monthly basis;. enhance the liquidity of management offices by collecting property management fees promptly on a monthly basis;. enhance the liquidity of management offices by improving profitability through raising property management fees and cost management initiatives such as implementing energy-saving measures; and. set credit limits on payment on behalf of management offices based on the property s expected cash flows and consider termination of property management service contract if such limits are exceeded. 155

161 FINANCIAL INFORMATION During the Track Record Period, our payments on behalf of management offices under commission basis increased primarily due to the expansion of our GFA under management under commission basis. The increase from 31 December 2014 to 31 May 2015 was also, to a lesser extent, due to the advances provided by us to finance the initial operations of a number of newly developed properties under our management. In general, we aim to collect these advances within a period of between three months and a year after the commencement of operations. Meanwhile, we were able to collect cash payments from such management offices. Movements in payments on behalf of management offices of properties under commission basis are as follows: As at 31 December As at 31 May HK$ 000 HK$ 000 HK$ 000 HK$ 000 Opening balance of payments on behalf of management offices under commission basis ,739 25,285 31,991 51,572 Additional payments on behalf of management offices under commission basis ,242 97, , ,189 Payments collected from management offices under commission basis.... (69,690) (91,778) (203,187) (110,596) Exchangerealignment... (6) 892 (81) 3 Closing balance of payments on behalf of management offices under commission basis ,285 31,991 51,572 85,168 Impairment provision (22,003) (22,691) (22,614) (22,602) Payments on behalf of management offices under commission basis, net of provision... 3,282 9,300 28,958 62,566 In determining the recoverability of payments on behalf of management offices under commission basis, we take into consideration a number of indicators, including, among others, subsequent settlement status, historical write-off experience, the financial performance of the communities and management fee collection rate of the communities in estimating the future cashflows from the receivables. Included in our payments on behalf of management offices are balances with carrying amounts of approximately HK$22.0 million, HK$22.7 million, HK$22.6 million and HK$22.6 million as at 31 December 2012, 2013 and 2014 and 31 May 2015, respectively, which are fully impaired. We did not hold any collateral over these balances. We have no additional provision or reversal of provision for impairment of payments on behalf of management offices under commission basis during the years ended 31 December 2012, 2013 and 2014 and the five months ended 31 May 2014 and

162 FINANCIAL INFORMATION Payments on behalf of property owners, sub-contractors and staff Payments on behalf of property owners, sub-contractors and staff consist of utility fee payments on behalf of property owners, sub-contractors and staff. The increase from 31 December 2012 to 31 December 2013 was primarily due to expansion of our GFA under management. The decrease from 31 December 2013 to 31 December 2014 was primarily due to our intensified collection efforts. The increase from 31 December 2014 to 31 May 2015 was primarily due to expansion of our GFA under management. Deposits and Prepayments Our deposits and prepayments consist mainly of prepaid energy fees and engineering fees. Our deposits and prepayments amounted to HK$6.2 million, HK$6.3 million, HK$12.2 million and HK$18.2 million as at 31 December 2012, 2013 and 2014 and 31 May 2015, respectively. The increase from 31 December 2012 to 31 May 2015 was primarily due to the expansion of our GFA under management, leading to an increase in prepaid energy fees. Amounts Due From/To Fellow Subsidiaries and Related Companies The table below sets forth our breakdown of our amounts due from/to fellow subsidiaries and related companies: As at 31 December As at 31 May HK$ 000 HK$ 000 HK$ 000 HK$ 000 Amounts due from fellow subsidiaries: Trade nature ,033 65, ,820 25,953 Non-trade nature , , , , , ,228 25,953 Amounts due from related companies: Tradenature... 1,274 1,336 2,617 1,339 1,274 1,336 2,617 1,339 Amounts due to fellow subsidiaries: Trade nature ,445 62,942 19,064 15,321 Non-trade nature , , , , , ,809 15,321 Amounts due to a related company: Tradenature Amounts due from or to fellow subsidiaries and related companies include amounts of a trade nature, such as utility payments to be paid to property developers when property owners first receive title to property units, and amounts of a non-trade nature, such as inter-company loans. Such amounts were unsecured, interest-free and repayable on demand. The amounts due from and to fellow subsidiaries (of non-trade nature) have been settled prior to the Listing. 157

163 FINANCIAL INFORMATION Trade and Other Payables Our trade payables mainly represent payables arising from sub-contracting fees for properties managed under lump sum basis. Our trade payables amounted to HK$75.6 million, HK$131.5 million, HK$169.1 million and HK$173.2 million, as at 31 December 2012, 2013 and 2014 and 31 May 2015, respectively. This increase throughout the Track Record Period was primarily due to the expansion of our GFA under management leading to an increased need for cleaning services and repair and maintenance services that we provide through sub-contractors. Our suppliers and sub-contractors generally grant us a credit period ranging from 30 to 60 days. The table below sets forth an aging analysis of our trade payables as at the dates indicated, based on invoice dates: As at 31 December As at 31 May HK$ 000 HK$ 000 HK$ 000 HK$ 000 Trade payables, aged 0 30 days ,735 50,010 73,054 82, days... 22,697 22,904 22,291 24,001 Over 90 days ,179 58,574 73,789 66,479 75, , , ,161 As at 31 May 2015, HK$138.7 million of our trade payables as at 31 December 2014 had been settled. The table below sets forth a breakdown of our other payables as at the dates indicated: As at 31 December As at 31 May HK$ 000 HK$ 000 HK$ 000 HK$ 000 Other payables Temporary receipts from management offices under commission basis ,150 77,439 76,600 82,995 Accrued staff costs , , , ,763 Temporary receipts from property owners , , , ,391 Payables for business tax and other levies... 17,467 20,682 24,942 22,738 Other payables ,036 75,933 59,853 75, , , , ,439 Our other payables mainly consist of temporary receipts from management offices under commission basis, accrued staff costs, temporary receipts from property owners, payables for business tax and other levies and sundry accrued charges. The increase from 31 December 2012 to 31 December 2013 was primarily due to the expansion of our GFA under management resulting in increased accrued staff costs and increased temporary receipts from property owners for utility costs. The increase from 31 December 2013 to 31 December 2014 was primarily due to an increase in accrued staff costs resulting from the expansion of our GFA 158

164 FINANCIAL INFORMATION under management, partially offset by settlement of certain other miscellaneous payables upon the establishment of management offices after development of the properties completed. The decrease from 31 December 2014 to 31 May 2015 was primarily due to a decrease in accrued staff costs resulting from the distribution of accrued funds for staff bonuses in February. Investment Properties Our investment properties mainly consist of property used for carpark spaces for rental and office space. Our investment properties amounted to HK$57.0 million, HK$65.4 million, HK$70.4 million and HK$72.6 million as at 31 December 2012, 2013 and 2014 and 31 May These increases were primarily due to gains arising from changes in fair value of investment properties. Receipts in Advance Receipts in advance consist of property management fees received in advance and amounted to HK$153.6 million, HK$194.1 million, HK$219.8 million and HK$215.1 million as at 31 December 2012, 2013 and 2014 and 31 May The increases through 31 December 2012, 2013 and 2014 were primarily due to the expansion of our GFA under management leading to an increase in property management fees received in advance. The decrease from 31 December 2014 to 31 May 2015 was primarily due to payment patterns of residents in the PRC leading to lower payment levels in the first half of the year. Deposits Deposits primarily consist of deposits from residents and tenants for renovation works and property management fee deposits and amounted to HK$145.0 million, HK$140.7 million, HK$178.0 million and HK$160.4 million as at 31 December 2012, 2013 and 2014 and 31 May These fluctuations throughout the Track Record Period are primarily due to timing differences in the commencement and completion of renovation works by residents and tenants of the properties under our management. 159

165 FINANCIAL INFORMATION CURRENT ASSETS AND CURRENT LIABILITIES The following table sets out our current assets and current liabilities as at the dates indicated: As at 31 December As at 31 May (1) HK$ 000 HK$ 000 HK$ 000 HK$ 000 Current Assets Inventories... 4,521 9,208 6,882 2,459 Trade and other receivables , , , ,790 Deposits and prepayments ,164 6,263 12,198 18,193 Prepaid lease payment for land Amounts due from fellow subsidiaries. 291, , ,228 25,953 Amount due from related companies.. 1,274 1,336 2,617 1,339 Taxprepaid Bank balances and cash ,632 1,081,914 1,088,601 1,286,524 1,209,800 1,600,367 1,818,036 1,702,716 Current Liabilities Trade and other payables , , , ,600 Receipts in advance , , , ,050 Deposits , , , ,401 Amounts due to fellow subsidiaries , , ,809 15,321 Amount due to a related company Tax liabilities ,593 52,226 74,075 78,259 Bankborrowing , ,867 1,276,111 1,408,234 1,266,631 Net Current Assets , , , ,085 Note: (1) On 28 May 2015, we acquired COGO Acquired Companies for a cash consideration of approximately RMB50.0 million (equivalent to approximately HK$63.2 million). The fair values of aggregate assets acquired and liabilities assumed due to the COGO Acquisition are as follows: HK$ 000 Inventories Tradeandotherreceivables,andprepayments Amountduefromarelatedcompany... 66,923 Cashandcashequivalents... 29,535 Tradeandotherpayables... (26,436) Receiptsinadvanceanddeposits... (7,390) Tax liabilities (518) 62,635 Property,plantandequipment ,161 Cashconsiderationpaid... (63,161) 160

166 FINANCIAL INFORMATION NET CURRENT ASSETS We had net current assets of HK$210.9 million, HK$324.3 million, HK$409.8 million and HK$436.1 million as at 31 December 2012, 2013 and 2014 and 31 May The increase from 31 December 2012 to 31 December 2013 was primarily due to an increase in bank balances and cash and an increase in trade and other receivables due to the expansion of our GFA under management, partially offset by an increase in trade and other payables due to the expansion of our GFA under management. The increase from 31 December 2013 to 31 December 2014 was primarily due to an increase in amounts due from fellow subsidiaries as our Group extended certain loans of a nontrade nature to fellow subsidiaries, partially offset by an increase in trade and other payables due to the expansion of our GFA under management. Theincreasefrom31December2014to31May2015wasprimarilydueto(i)anincrease in trade and other receivables and (ii) an increase in bank balances and cash. The increase was partially offset by the settlement of amounts due from/to fellow subsidiaries of a non-trade nature prior to the Listing. The key components of our current assets as at 31 May 2015 included bank balances and cash and trade and other receivables. As at the same date, the key components of our current liabilities included trade and other payables and receipts in advance. INDEBTEDNESS Bank Borrowing During the years ended 31 December 2012, 2013 and 2014, our Company did not have any external indebtedness. As at 31 May 2015, we had a revolving bank loan facility of HK$200 million, of which HK$164 million had been utilised. The loan facility was entered into by our subsidiary, COPL HK Holding, and guaranteed by our Company. The loan facility is denominated in Hong Kong dollars and will incur interest at a floating rate of 1.7% per annum above HIBOR. The loan facility contains certain covenants which require our Company to maintain its 100% shareholding in COPL HK Holding. The following table sets forth our bank borrowing as at the dates indicated: As at 31 December As at 31 May HK$ 000 HK$ 000 HK$ 000 HK$ 000 Bank loan: Unsecured and repayable within one year , ,000 As our bank balances and cash exceeded our bank borrowings (if any), we were in a net cash position as at 31 December 2012, 2013 and 2014 and 31 May

167 FINANCIAL INFORMATION Performance Bonds and Contingent Liabilities During the Track Record Period, we provided counter-indemnities amounting to HK$23.8 million, HK$23.7 million, HK$37.1 million and HK$39.4 million as at 31 December 2012, 2013 and 2014 and 31 May 2015, respectively, for guarantees issued in respect of certain property management service contracts for which we are required to provide performance bonds in the ordinary course of business. This increase was primarily due to an increase in accumulation of property management service contracts which required performance bonds in Hong Kong. In order to guarantee satisfactory completion of a property management service contract by the service provider, certain customers from certain government or public bodies may request the service provider to procure performance bonds issued by a bank or an insurance institution in favour of the customers according to the contract terms and conditions. Generally, the amount of performance bonds or surety bonds required for each property management service contract would not exceed 10% of the tender sums. The performance bonds or surety bonds normally expire after completion of the project or as specified in the relevant contract. Such performance bonds are generally released upon the due completion of the contracted work or by a stipulated date. During the Track Record Period, no performance bond was called by our customers by reason of non-performance of any of our projects. As at 31 May 2015, and except as disclosed above, we had no material contingent liabilities or guarantees. We are not currently involved in any significant litigation and we are not aware of any outstanding or threatened significant litigation. If we are involved in any such significant litigation that we may incur a loss in an amount that can be reasonably estimated according to available information at that time, we will record the loss or contingent liability accordingly. As at 31 May 2015, except as disclosed in this listing document, and apart from intra-group liabilities, we did not have any other debt securities, term-loan borrowings, indebtedness, acceptance credits, hire purchase commitments, mortgages, charges, debentures, loan capital, bank loans and overdrafts, finance leases, liabilities under acceptances, acceptance credits, contingent liabilities or guarantees outstanding. We confirm that there had not been any material adverse change in our indebtedness and contingent liabilities since 31 May 2015 and up to the date of this listing document. 162

168 FINANCIAL INFORMATION LIQUIDITY AND CAPITAL RESOURCES Overview During the Track Record Period, our liquidity requirements arose principally from meeting our working capital requirements. During the Track Record Period, our principal sources of funds to finance our working capital, capital expenditure and other capital requirements were internally generated cash flows and advances from fellow subsidiaries. We intend to fund our future capital requirements using cash generated from our operations, bank borrowings and funds raised from capital market activities (if necessary). We currently do not expect any significant changes in the mix and the relative costs of our capital resources. Cash Flow The table below summarises our consolidated cash flow statement for the periods indicated: For the five months ended For the year ended 31 December 31 May HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 (unaudited) Net cash from/(used in) operating activities , , ,152 (152,640) (102,691) Net cash (used in)/from investing activities (11,995) (6,827) (133,445) (127,320) 374,672 Net cash from/(used in) financing activities ,971 35,201 20,438 5,740 (73,745) Net increase/(decrease) in cash and cash equivalents. 198, ,198 10,145 (274,220) 198,236 Cash and cash equivalents at the beginning of the year/ period , ,632 1,081,914 1,081,914 1,088,601 Effect of foreign exchange rate changes... (252) 27,084 (3,458) (9,943) (313) Cash and cash equivalents at the end of the year/period.. 751,632 1,081,914 1,088, ,751 1,286,524 Net cash from/(used in) operating activities Cash generated from operating activities primarily reflects net cash generated from property management fees collected. Our cash flows from operating activities can be affected by factors such as the timing of our receipts of trade and other receivables and our payments of trade and other payables in the ordinary course of business. For the five months ended 31 May 2015, net cash used in operating activities was HK$102.7 million. Operating cash inflow before changes in working capital was HK$61.8 million, primarily attributable to profit before tax for the year of HK$57.1 million, as adjusted by net impairment provision for trade and other receivables of HK$5.0 million and depreciation and amortisation of HK$6.5 million. Changes in working capital contributed to a cash outflow of 163

169 FINANCIAL INFORMATION HK$152.6 million consisting primarily of (i) an increase in trade and other receivables, deposits and prepayments of HK$139.8 million partially due to the payment patterns of residents of the PRC resulting in lower cash payments in the first half of the year, and (ii) a decrease in trade and other payables, receipts in advance and deposits of HK$101.6 million, partially offset by a decrease in amounts due from fellow subsidiaries of a trade nature of HK$86.7 million. Income tax paid was HK$12.0 million for the period. For the five months ended 31 May 2014, net cash used in operating activities was HK$152.6 million. Operating cash inflow before changes in working capital was HK$46.7 million, primarily attributable to profit before tax for the year of HK$44.4 million, as adjusted by net impairment provision for trade and other receivables of HK$4.2 million and depreciation and amortisation of HK$5.2 million. Changes in working capital contributed to a cash outflow of HK$191.2 million consisting primarily of (i) an increase in trade and other receivables, deposits and prepayments of HK$135.4 million partially due to the payment patterns of residents of the PRC resulting in lower cash payments in the first half of the year, (ii) a decrease in trade and other payables, receipts in advance and deposits of HK$53.9 million and (iii) a decrease in amounts due to fellow subsidiaries of a trade nature of HK$13.6 million, partially offset by a decrease in amounts due from fellow subsidiaries of a trade nature of HK$12.3 million. Income tax paid was HK$8.1 million for the period. For the year ended 31 December 2014, net cash from operating activities was HK$123.2 million. Operating cash inflow before changes in working capital was HK$142.0 million, primarily attributable to profit before tax for the year of HK$132.5 million, as adjusted by net impairment provision for trade and other receivables of HK$10.6 million and depreciation and amortisation of HK$14.7 million. Changes in working capital contributed to a cash outflow of HK$3.6 million consisting primarily of (i) an increase in trade and other receivables, deposits and prepayments of HK$50.0 million, (ii) an increase in amounts due from fellow subsidiaries of a trade nature of HK$48.0 million and (iii) a decrease in amounts due to fellow subsidiaries of a trade nature of HK$43.6 million, partially offset by an increase in trade and other payables, receipts in advance and deposits of HK$137.0 million. Income tax paid was HK$15.2 million for the period. For the year ended 31 December 2013, net cash from operating activities was HK$274.8 million. Operating cash inflow before changes in working capital was HK$127.1 million, primarily attributable to profit before tax for the year of HK$119.0 million, as adjusted by net impairment provision for trade and other receivables of HK$9.9 million and depreciation and amortisation of HK$13.3 million. Changes in working capital contributed to a cash inflow of HK$167.1 million consisting primarily of an increase in trade and other payables, receipts in advance and deposits of HK$218.7 million, partially offset by an increase in trade and other receivables, deposits and prepayments of HK$53.8 million. Income tax paid was HK$19.4 million for the period. For the year ended 31 December 2012, net cash from operating activities was HK$201.1 million. Operating cash inflow before changes in working capital was HK$96.4 million, primarily attributable to profit before tax for the year of HK$84.1 million, as adjusted by net impairment provision for trade and other receivables of HK$9.0 million and depreciation and amortisation of HK$10.6 million. Changes in working capital contributed to a cash inflow of HK$108.6 million consisting primarily of (i) an increase in trade and other payables, receipts in advance and 164

170 FINANCIAL INFORMATION deposits of HK$166.1 million and (ii) an increase in amounts due to fellow subsidiaries of a trade nature of HK$12.9 million, partially offset by (i) an increase in amounts due from fellow subsidiaries of a trade nature of HK$43.5 million and (ii) an increase in trade and other receivables, deposits and prepayments of HK$23.1 million. Income tax paid was HK$3.8 million for the period. Net cash (used in)/from investing activities Cash used in investing activities primarily reflects advances to fellow subsidiaries, purchase of property, plant and equipment and our acquisition of subsidiaries. Cash generated from investing activities primarily reflects repayment of amounts due from fellow subsidiaries and related companies prior to the Listing. Our net cash from investing activities was HK$374.7 million for the five months ended 31 May 2015, primarily reflecting (i) repayment from fellow subsidiaries of HK$356.9 million and (ii) repayment from a related company of HK$66.9 million, partially offset by (i) our acquisition of subsidiaries (net of cash and cash equivalents acquired) of HK$33.6 million and (ii) our acquisition of CSCECL Acquired Companies and COHL Acquired Company in connection with the Reorganisation for HK$14.9 million. Our net cash used in investing activities was HK$127.3 million for the five months ended 31 May 2014, primarily reflecting advances to fellow subsidiaries of HK$126.7 million. Our net cash used in investing activities was HK$133.4 million for the year ended 31 December 2014, primarily reflecting (i) advances to fellow subsidiaries of HK$125.3 million and (ii) purchases of property, plant and equipment of HK$19.2 million primarily for furniture, fixtures and office equipment, partially offset by interest received of HK$10.6 million. Our net cash used in investing activities was HK$6.8 million for the year ended 31 December 2013, primarily reflecting purchases of property, plant and equipment of HK$18.4 million primarily for furniture, fixtures and office equipment, partially offset by (i) interest received of HK$8.5 million and (ii) net proceeds on disposals of property, plant and equipment of HK$1.6 million. Our net cash used in investing activities was HK$12.0 million for the year ended 31 December 2012, primarily reflecting (i) purchases of property, plant and equipment of HK$12.5 million primarily for furniture, fixtures and office equipment and (ii) advances to fellow subsidiaries of HK$4.2 million, partially offset by interest received of HK$4.0 million. Netcashfrom/(usedin)financing activities Cash generated from financing activities primarily reflects capital contributions from former shareholders of CSCECL Acquired Companies and COHL Acquired Company prior to the Reorganisation and advances from fellow subsidiaries. Cash used in financing activities primarily reflects our settlement of amounts due to fellow subsidiaries prior to the Listing. Our net cash used in financing activities was HK$73.7 million for the five months ended 31 May 2015, due to repayments to fellow subsidiaries of HK$237.7 million, partially offset by new bank loans raised of HK$164.0 million. 165

171 FINANCIAL INFORMATION Our net cash from financing activities was HK$5.7 million for the five months ended 31 May 2014, due to advances from fellow subsidiaries of HK$5.7 million. Our net cash from financing activities was HK$20.4 million for the year ended 31 December 2014, due to advances from fellow subsidiaries of HK$20.4 million. Our net cash from financing activities was HK$35.2 million for the year ended 31 December 2013, primarily reflecting capital contributions from former shareholders of CSCECL Acquired Companies and COHL Acquired Company prior to the Reorganisation of HK$26.2 million and advances from fellow subsidiaries of HK$9.0 million. Our net cash from financing activities was HK$9.0 million for the year ended 31 December 2012, primarily reflecting advances from fellow subsidiaries of HK$8.4 million. CAPITAL EXPENDITURE During the Track Record Period, we incurred capital expenditures mainly for our property, plant and equipment to fund the establishment of the municipal management centres, which facilitated the expansion of the geographical scope of our operations. Our capital expenditures, which represent additions to property, plant and equipment, were HK$12.5 million, HK$18.4 million, HK$19.2 million, HK$4.7 million and HK$5.2 million for the years ended 31 December 2012, 2013 and 2014 and the five months ended 31 May 2014 and 2015, respectively. We anticipate that the funds needed to finance our capital expenditures in the future will be financed by internal resources. We estimate our capital expenditure (mainly for the purchase of our property, plant and equipment) for the year ended 31 December 2015 to be approximately HK$23.4 million. If necessary, we may raise additional funds on terms that are acceptable to us. Our current plan with respect to future capital expenditures may be subject to change based on the implementation of our business plan, including market conditions and our outlook of future business conditions. As we continue to expand, we may incur additional capital expenditures. COMMITMENTS Operating Lease Commitments As Lessor We lease out certain investment properties as office space to tenants for a term of four years, where the tenants do not have an option to terminate such leases. The following table sets out the future minimum lease payments of the tenants with whom we contracted as at the dates indicated: As at 31 December As at 31 May HK$ 000 HK$ 000 HK$ 000 HK$ 000 Withinoneyear In the second to fifth year inclusive

172 FINANCIAL INFORMATION As Lessee We leased certain office premises under operating lease arrangements during the Track Record Period. The leases typically have a term of one to five years. The following table sets out our future minimum lease payments under non-cancellable operating lease commitments as at the dates indicated: As at 31 December As at 31 May HK$ 000 HK$ 000 HK$ 000 HK$ 000 Withinoneyear... 5,144 6,517 11,822 12,778 In the second to fifth year inclusive... 3,266 3,751 20,808 18,359 8,410 10,268 32,630 31,137 KEY FINANCIAL METRICS The table below sets forth a summary of our key financial metrics during the Track Record Period: For the year ended 31 December For the five months ended 31 May Financial metric Formula Rates of return: Return on equity.... Return on total assets... Profit for the year/period attributable to owners of the Company divided by total equity attributable to owners of the Company as at the date indicated x 100% Profit for the year/period attributable to owners of the Company divided by total assets as at the date indicated x 100% 20.2% 19.9% 18.4% 7.4% (annualised: 17.8%) (1) 4.7% 5.0% 5.0% 2.2% (annualised: 5.4%) (1) As at As at 31 December 31 May Financial metric Formula Liquidity: Current ratio Gearing: Gearing ratio (2) Current assets divided by current liabilities Total borrowings divided by total equity attributable to owners of the Company n.a. n.a. n.a. 29.6% Notes: (1) Annualised rates are calculated by multiplying the relevant rate by twelve and dividing the product by five. (2) Our Group was in a net cash position as at 31 December 2012, 2013 and 2014 and 31 May

173 FINANCIAL INFORMATION Return on Equity Our return on equity was 20.2%, 19.9% and 18.4% for the years ended 31 December 2012, 2013 and 2014, respectively. Our return on equity was 7.4% for the five months ended 31 May 2015, representing an annualised return of 17.8%. Despite year-on-year increases in the profit attributable to owners of the Company during the Track Record Period, our return on equity decreased slightly mainly due to an increase in total equity attributable to owners of the Company from retained earnings. Return on Total Assets Our return on total assets was 4.7%, 5.0% and 5.0% for the years ended 31 December 2012, 2013 and 2014, respectively, and remained stable because the growth in profit attributable to owners of the Company was in line with the growth in total assets. Our return on total assets was 2.2% for the five months ended 31 May 2015, representing an annualised return of 5.4%. The annualised return of 5.4% for the five months ended 31 May 2015 was slightly higher than the return in prior years mainly because of the settlement of amounts due from fellow subsidiaries which led to a decrease in total assets. Current Ratio Our current ratio remained relatively stable at 1.2, 1.3, 1.3 and 1.3 as at 31 December 2012, 2013 and 2014 and as at 31 May Gearing Ratio We did not have any borrowings as at 31 December 2012, 2013 and Our gearing ratio was 29.6% as at 31 May 2015 due to the HK$164.0 million unsecured short-term bank loan drawn down from a HK$200.0 million revolving loan facility. As our bank balances and cash exceeded our bank borrowings (if any), we were in a net cash position as at 31 December 2012, 2013 and 2014 and 31 May MARKET RISKS Credit risk At the end of each reporting period, our Group s maximum exposure to credit risk which will cause a financial loss to our Group due to failure to discharge an obligation by a counterparty arises from the carrying amount of the relevant recognised financial assets as stated in our financial information at the end of such reporting period. In order to minimise credit risk, our management has monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, our Group reviews the recoverable amount of each individual trade receivable balance at the end of each reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, our Directors consider that our Group s credit risk is significantly reduced. 168

174 FINANCIAL INFORMATION Our Group had no concentration of credit risk in respect of trade receivables, with exposure spread over a number of customers, e.g. residents in the properties with fees charged under lump sum basis managed by our Group and customers from value-added services. In order to enhance the timeliness of property management fees and other payments, our Group has undertaken effective measures aimed at boosting the collection of trade receivables. Our Group s credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit-rating agencies or state-owned banks in the PRC. For more information, please see note 8 of the Accountant s Report set out in Appendix I to this listing document. Liquidity risk In the management of our liquidity risk, our Group monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance our Group s operations and mitigate the effects of fluctuations in cash flows. The following table analyses the contractual undiscounted cash flows of our Group s financial liabilities by relevant maturity groupings based on the remaining period from the yearend date to the earliest date our Group and our Company can be required to pay. The table includes both interest and principal cash flows. To the extent that interest flows are floating rate, the undiscounted amount is derived from a flat rate based on the relevant rate at the end of the reporting period. Within 1 year or on demand Total undiscounted cash flows Carrying amount HK$ 000 HK$ 000 HK$ 000 As at 31 December 2012 Trade and other payables , , ,879 Deposits , , ,044 Amounts due to fellow subsidiaries , , , , , ,699 Within 1 year or on demand Total undiscounted cash flows Carrying amount HK$ 000 HK$ 000 HK$ 000 As at 31 December 2013 Trade and other payables , , ,754 Deposits , , ,685 Amounts due to fellow subsidiaries , , ,249 Amounts due to a related company ,029,806 1,029,806 1,029,

175 FINANCIAL INFORMATION Within 1 year or on demand Total undiscounted cash flows Carrying Amount HK$ 000 HK$ 000 HK$ 000 As at 31 December 2014 Trade and other payables , , ,542 Deposits , , ,029 Amounts due to fellow subsidiaries , , ,809 1,114,380 1,114,380 1,114,380 Within 1 year or on demand Total undiscounted cash flows Carrying amount HK$ 000 HK$ 000 HK$ 000 As at 31 May 2015 Trade and other payables , , ,600 Deposit , , ,401 Amounts due to fellow subsidiaries ,321 15,321 15,321 Bank borrowings , , , , , ,322 HEDGING RISK During the Track Record Period, we did not enter into any hedging arrangements. DIVIDENDS AND DISTRIBUTABLE RESERVES Dividends No dividend has been paid or proposed by our Company during the Track Record Period. Our Board has the discretion as to whether to declare any dividend for any year and, if it decides to declare a dividend, how much dividend to declare. The amount of any dividends to be declared or paid in the future will depend on, among other things, our results of operations, cash flows and financial condition, operating and capital requirements and other applicable laws and regulations and other factors. Our Board has the discretion to declare dividends subject to the Cayman Companies Law and our Articles of Association. Our Articles of Association provide that dividends may be declared and paid out of our profits, realised or unrealised, or from any reserve set aside from profits which our Directors determine is no longer needed. With the sanction of an ordinary resolution, dividends may also be declared and paid out of a share premium account or any other fund or account which can be authorised for this purpose in accordance with the Cayman Companies Law and our Articles of Association. Distributable Reserves As at 31 May 2015, distributable reserves of our Company amounted to HK$4.4 million. 170

176 FINANCIAL INFORMATION WORKING CAPITAL After taking into consideration the financial resources available to us, including our internally generated cash and our available credit and financing facilities and in the absence of unforeseeable circumstances, our Directors confirm that we have sufficient working capital for our present requirements for at least the next 12 months from the date of this listing document. Our Directors confirm that we did not have any material default in payment of creditors and accruals, bank borrowings and other debt financing obligations and/or breach of finance covenants during the Track Record Period. RELATED PARTY TRANSACTIONS During the Track Record Period, our Group entered into certain related party transactions, details of which are set out in note 35 to the Accountant s Report set out in Appendix I to this listing document. Our Directors confirm that these related party transactions were conducted on normal commercial terms and they would not distort our track record results or make our historical results not reflective of our future performance. OFF-BALANCE SHEET ARRANGEMENTS During the Track Record Period and as at the Latest Practicable Date, we had no material off-balance sheet arrangements. LISTING EXPENSES In relation to the Listing, our Company expects to incur listing expenses in an aggregate amount of approximately HK$30.0 million, of which approximately HK$8.5 million was incurred and recognised by our Company during the Track Record Period. All of our Company s listing expenses will be borne by COLI. NO MATERIAL ADVERSE CHANGE Our Directors have confirmed that, as at the date of this listing document, there has been no material adverse change in our financial or trading position or prospects of our Company since 31 May 2015, being the date to which our latest audited financial information was prepared. DISCLOSURE REQUIRED UNDER THE LISTING RULES We confirm that, as at the Latest Practicable Date, there was no circumstance that would give rise to a disclosure requirement under Rules to of the Listing Rules. RECENT DEVELOPMENTS Our Directors confirm that, so far as they are aware, there have been no material changes in our financial or trading position or the general economic and market conditions, or legal or regulatory regimes in the jurisdictions or industry in which we operate that have materially and adversely affected our Group s business, operations or financial position since 31 May 2015 and up to the Latest Practicable Date. UNAUDITED PRO FORMA FINANCIAL INFORMATION For more information, please see Appendix II to this listing document. 171

177 SHARE CAPITAL SHARE CAPITAL OF OUR COMPANY The following is a description of the authorised and issued share capital of our Company as at the date of this listing document and immediately following the Listing. Authorised share capital Nominal Value (HK$) 30,000,000,000 Shares as the date of this listing document HK$30,000,000 Issued and to be issued, fully paid or credited as fully paid 3,286,860,460 Shares in issue as at the date of this listing document HK$3,286, Details of the changes in the share capital of our Company are set out in Appendix VI General Information A. Further Information About Our Company. ASSUMPTIONS The above table assumes that the Listing will become unconditional and does not take into account any Shares which may be issued or repurchased by our Company pursuant to the general mandates granted to our Directors to issue or repurchase Shares as described below. RANKING Our Shares are ordinary shares in the share capital of our Company and will rank equally in all respects with each other, and will qualify for all dividends and other distributions declared, made or paid by our Company following the Listing. GENERAL MANDATES GRANTED TO THE DIRECTORS Subject to the Listing becoming unconditional, general mandates have been granted to our Directors to allot and issue Shares and to repurchase Shares. For details of such general mandates, see Appendix VI General Information A. Further Information About Our Company. 172

178 SUBSTANTIAL SHAREHOLDERS So far as is known to any Director or chief executive of our Company as at the Latest Practicable Date, immediately following the completion of the Spin-off, the following persons (other than a Director or chief executive of our Company) will have an interest and/or short position (as applicable) in our Shares or the underlying Shares which would fall to be disclosed to our Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or will, directly or indirectly, be interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of our Group, once our Shares are listed on the Stock Exchange: Interests and Long Positions in Shares Approximate percentage of interest (%) Name of Shareholder Capacity Number of Shares held or interested Silver Lot Development Limited Beneficial owner [REDACTED] [REDACTED] ( Silver Lot )... COHL (1)... Beneficialowner [REDACTED] [REDACTED] Interest of controlled [REDACTED] corporation CSCECL (2)... Interestofcontrolled [REDACTED] [REDACTED] corporation CSCEC (2)... Interestofcontrolled [REDACTED] [REDACTED] corporation JP Morgan Chase & Co Beneficial owner [REDACTED] [REDACTED] Investment manager [REDACTED] [REDACTED] Custodian corporation/ approved lending agent Notes: (1) [REDACTED] (2) [REDACTED] Save as disclosed above, as at the Latest Practicable Date, none of our Directors or chief executive of our Company is aware of any other person (other than a Director or chief executive of our Company) who will, immediately following the completion of the Spin-off, have an interest or short position in our Shares or the underlying Shares which would fall to be disclosed to our Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who is, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of our Group. 173

179 RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS OUR CONTROLLING SHAREHOLDERS AND FELLOW ASSOCIATES Prior to the Spin-off, our Group primarily operates as the flagship property management company under and as a part of COLI Group and includes the Acquired Companies (being the property management companies acquired pursuant to the Internal Transfers from COHL and COLI and the COGO Acquisition). On completion of the Spin-off, our Company will become a non-wholly owned subsidiary of COHL. We will operate independently from Remaining COLI Group, and our Controlling Shareholders and their close associates (together, our Controlling Shareholders and Fellow Associates ), details of which are set out below. Our Controlling Shareholders and Fellow Associates operate separate businesses which do not overlap each other. CSCEC 中國建築工程總公司 (China State Construction Engineering Corporation) ( CSCEC ), a state-owned corporation organised and existing under the laws of the PRC, is our ultimate Controlling Shareholder and an investment holding company principally engaged in building construction, which holds approximately 56.15% of the equity interests in CSCECL as at the Latest Practicable Date. CSCEC and its subsidiaries from time to time (excluding our Group) are referred to as CSCEC Group. CSCECL 中國建築股份有限公司 (China State Construction Engineering Corporation Limited) ( CSCECL ), a joint stock company established in the PRC and whose shares are listed on the Shanghai Stock Exchange (stock code: ), is a conglomerate principally engaged in building construction, international contracting, real estate development and investment, infrastructure construction and investment and design and prospecting. CSCECL and its subsidiaries from time to time (excluding our Group) are referred to as CSCECL Group. COHL China Overseas Holdings Limited ( COHL ), a company incorporated in Hong Kong, is a wholly-owned subsidiary of CSCECL, and the direct controlling shareholder of COLI. On completion of the Spin-off, it will also become our direct Controlling Shareholder. COHL is principally engaged in investment holding. COHL and its subsidiaries (excluding our Group) are referred to as COHL Group. COLI COLI, a company incorporated in Hong Kong and whose shares are listed on the Main Board of the Stock Exchange (stock code: 688), is owned as to approximately 61.18% by COHL as at the Latest Practicable Date. COLI Group is principally engaged in the business of property development and investment and other operations on completion of the Spin-off. 174

180 RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS CSCIHL CSCIHL, a company incorporated in the Cayman Islands with limited liability and whose shares are listed on the Main Board of the Stock Exchange (stock code: 3311), is owned as to approximately 58.22% by COHL as at the Latest Practicable Date. CSCIHL and its subsidiaries are principally engaged in building construction, civil engineering works, infrastructure investments and project consultancy businesses. Far East Global Far East Global Group Limited ( Far East Global ), a company incorporated in the Cayman Islands with limited liability and whose shares are listed on the Main Board of the Stock Exchange (stock code: 830), is owned as to approximately 74.06% by CSCIHL as at the Latest Practicable Date. Far East Global and its subsidiaries are principally engaged in contracting and engineering business, including design, engineering, manufacture, installation, maintenance, project consultancy and management services. COGO China Overseas Grand Oceans Group Limited ( COGO ), a company incorporated in Hong Kong with limited liability and whose shares are listed on the Main Board of the Stock Exchange (stock code: 81), is owned as to approximately 37.98% by COLI as at the Latest Practicable Date. COGO Group is principally engaged in real estate development and investment in the PRC. 175

181 RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS The simplified corporate structure of our Controlling Shareholders and Fellow Associates on completion of the Spin-off is set out below. CSCEC (Established in the PRC) 56.15% CSCECL (Established in the PRC) (Stock Code: ) 100% COHL (Incorporated in Hong Kong) 58.22% CSCIHL (Incorporated in the Cayman Islands) (Stock Code: 3311) COLI (Incorporated in Hong Kong) (Stock Code: 688) 61.18% 61.18% Our Company (Incorporated in the Cayman Islands) Far East Global (Incorporated in the Cayman Islands) (Stock Code: 830) 74.06% 37.98% COGO (Incorporated in Hong Kong) (Stock Code: 81) DELINEATION OF OUR GROUP S BUSINESS FROM OUR CONTROLLING SHAREHOLDERS AND FELLOW ASSOCIATES Our Group s Business Our Group has been and will continue to be principally engaged in property management business in the PRC, Hong Kong and Macau. Our Group provides property management services, which contributed over 90% of our Group s revenue for the financial year ended 31 December Our Group also provides value-added services such as engineering services and community leasing, sales and other services. Each of our Controlling Shareholders and Fellow Associates (including Remaining COLI Group) is engaged in a separate business area which does not overlap with our Group s property management business, save for the CSCEC Retained Operations (as defined below) and the CSCECL Retained Operations (as defined below). In particular, following the completion of the Spin-off, Remaining COLI Group will no longer engage in the business of property management and will principally engage in the business of property development and investment and other operations. 176

182 RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS Retained Operations As mentioned in History and Corporate Structure Reorganisation, the property management business and the related group companies of our Controlling Shareholders and Fellow Associates, to the extent practicable, have been acquired by our Group, save for certain stand-alone property management operations which have been retained by (i) CSCEC Group (the CSCEC Retained Operations ) and (ii) CSCECL Group (the CSCECL Retained Operations ). The CSCEC Retained Operations and the CSCECL Retained Operations are referred to as the Retained Operations. Given the nature and scope of the Retained Operations, neither CSCEC nor CSCECL intends to inject all or part of the CSCEC Retained Operations or the CSCECL Retained Operations, respectively, into our Group. CSCEC Retained Operations As at the Latest Practicable Date, the CSCEC Retained Operations are carried out by two subsidiary units wholly-owned by CSCEC, which comprise property management operations and such operations had no specific focus on any particular type of properties. For the year ended 31 December 2014, based on information provided by CSCEC, the aggregate unaudited revenue and aggregated unaudited loss of CSCEC Retained Operations were approximately RMB17,790,000 and RMB2,670,000, respectively, being unaudited figures as the CSCEC Retained Operations have not been grouped or viewed by CSCEC as a business segment for financial or management purposes. As at 31 December 2014, based on information provided by CSCEC and after reasonable enquiries made by our Directors, 29 projects or properties were managed under the CSCEC Retained Operations in aggregate and the GFA under management was approximately 1,193,000 sq.m. in aggregate. Set out below are the details of the CSCEC Retained Operations as at 31 December 2014: No. CSCEC s subsidiary units Cities of property management operations Projects/ properties under management 1. China State Construction Property Management Co. ( 中建物業管理公司 ) Beijing, Zhengzhou and Huizhou Lanzhou Changxin Property Management Company Limited ( 蘭州昌欣物業管理有限公司 ) Lanzhou

183 RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS Reasons for excluding the CSCEC Retained Operations from our Group The CSCEC Retained Operations were not included as part of CSCECL at the time of the listing of CSCECL on the Shanghai Stock Exchange in The CSCEC Retained Operations comprise only a few projects in which had been undertaken by the two subsidiary units of CSCEC, as described above. These property management operations retained had no specific focus on any particular type of properties. The CSCEC Retained Operations did not achieve the level of profitability and business sustainability for inclusion as part of CSCECL during its listing in For the same reason, they have not been included as part of our Group. CSCECL Retained Operations As at the Latest Practicable Date, CSCECL, through its individually operated subsidiaries, including construction bureaus and design institutes, maintain certain discrete property management operations, which are incidental and supporting functions to its building construction and investment business. The CSCECL Retained Operations comprise property management services to property development projects or properties held by CSCECL s various subsidiaries including construction bureaus and design institutes, or public-private partnership projects managed by them, from time to time. Supporting in nature and insignificant size The CSCECL Retained Operations do not comprise a single business unit within CSCECL and have not been organised as a business segment. They are treated as incidental and supporting functions that have been independently developed to meet the needs of the individual property development projects held or managed by the respective subsidiaries including construction bureaus and design institutes. As at the Latest Practicable Date, the CSCECL Retained Operations were carried out by 13 individually operated subsidiaries including construction bureaus and design institutes of CSCECL across 15 provinces of the PRC. These subsidiaries, including construction bureaus and design institutes of CSCECL, are separately and principally engaged in construction and investment business in the PRC targeting different geographical locations and/or segment of the construction industry in the PRC. For the year ended 31 December 2014, based on information provided by CSCECL and after reasonable enquiries made by our Directors, the aggregate unaudited revenue and aggregate unaudited loss of the CSCECL Retained Operations were approximately RMB249,860,000 and approximately RMB11,750,000, being unaudited figures as the CSCECL Retained Operations have not been grouped or viewed by CSCECL as one business segment for financial or management purposes. As at 31 December 2014, based on information provided by CSCECL, the aggregate number of property development projects managed and the GFA under management under the CSCECL Retained Operations were 268 and approximately 15,820,060 sq.m., respectively. 178

184 RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS Set out below were the details of the CSCECL Retained Operations as at 31 December 2014: No. CSCECL s subsidiary construction bureaus and design institutes Provinces/ cities of property management operations Projects under management 1. 中建一局 (China Construction First Building (Group) Corporation Limited) 2. 中建二局 (China Construction Second Engineering Bureau Ltd.) 3. 中建三局 (China Construction Third Engineering Bureau Co. Ltd.) 4. 中建四局 (China Construction Fourth Engineering Division Corp. Ltd.) 5. 中建五局 (China Construction Fifth Engineering Bureau Co. Ltd.) 6. 中建六局 (China Construction Sixth Engineering Division Corp. Ltd.) 7. 中建七局 (China Construction Seventh Engineering Division Corp. Ltd.) 8. 中建八局 (China Construction Eighth Engineering Division Corp. Ltd.) 9. 中建新疆建工 (CSCEC Xinjiang Construction & Engineering (Group) Co. Ltd.) 10. 中建西南院 (China Southwest Architectural Design and Research Institute Corp. Ltd.) 11. 中建西北院 (China Northwest Architectural Design and Research Institute Corp. Ltd.) 12. 中建發展 (China State Construction Development Co. Ltd.) 13. 中建裝飾 (China State Decoration Group Co. Ltd.) Beijing, Jiangsu 26 province and Shijianzhuang Beijing, Luoyang, 46 Panjin, Tangshan, Shanghai, Huaibei, Pingdingshan, Langfang, Chongqing and Shenzhen Wuhan 16 Anhui province, 4 Guizhou province and Zunyi Hunan province 23 Tianjin 64 Zhengzhou and 11 Wuhu Shanghai 5 Xinjiang province 54 Chengdu 3 Shaanxi province 6 Chengdu 1 Shenzhen 9 Individual management and operations The establishment of the independent CSCECL s subsidiaries including construction bureaus and design institutes can be traced back to 1980s and 1990s when most of these entities were established and commenced their business in the construction and investment industry. CSCECL was established in the PRC in 2007 and became the holding company of these independent entities. The CSCECL s subsidiaries including construction bureaus and design institutes have therefore been organised independently, and each entity separately manages and operates its construction and investment business in its own responsible geographical region and/or segment of the construction industry in the PRC. As these entities developed and evolved over time and being self-sufficient with their own management, operations and responsible geographical region, they have remained independent of the management of CSCECL without much incentive to change. As such, these entities under CSCECL have remained under the same organisational structure since their establishment and have subsisted notwithstanding the listing of CSCECL. 179

185 RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS Reasons for excluding the CSCECL Retained Operations from our Group As mentioned in History and Corporate Structure, CSCECL s property development business and the related group companies were acquired by COLI Group pursuant to the Asset Injection. Certain property development projects, which are held by CSCECL s various subsidiaries including construction bureaus and design institutes, have been excluded from the Asset Injection and were not acquired by COLI Group. As such, the CSCECL Retained Operations, which are supporting operations for such projects, have remained and will remain in CSCECL Group. Further, CSCECL, as a listed company with its own management team, makes its own business decisions and operates independently of COLI and our Company. As such, the CSCECL Retained Operations have been and will continue to be carried out separately and independently of Remaining COLI Group and our Group, and COLI and our Company are not in position to procure CSCECL to transfer the CSCECL Retained Operations, which are supporting operations for the property development projects which CSCECL has decided to retain as agreed pursuant to the Asset Injection. Competition, if any, is not extreme Based on the information and reasons set out above, our Directors do not regard that the competition between our Group s business and the CSCEC Retained Operations or the CSCECL Retained Operations, if any, is extreme. The CSCEC Retained Operations and the CSCECL Retained Operations have not been organised as a business segment of CSCEC or CSCECL, nor would they, in our view, attain sustainable business viability and competitiveness in their current form. Rather, they are treated as incidental and supporting functions of CSCEC and CSCECL which have been independently developed to meet the needs of the individual construction and/or property development projects held or managed by the respective subsidiary units, subsidiaries including construction bureaus and design institutes, and had no specific focus on any particular type of properties, unlike our Group. By contrast, our Group s business is a branded, premium property management service provider which is different, clearly distinguishable and delineated from the CSCEC Retained Operations and the CSCECL Retained Operations. 180

186 RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS Set out below are the key differences between our Group s property management business and the Retained Operations. Business model Business objective Properties managed Key customers Competitive landscape Our Group s property management business Branded, premium property management service provider with a range of services, including general property management services and value-added services Add value to the properties under our management by providing quality services to our customers and maximising customer satisfaction Mid- to high-end residential communities (including mixeduse properties), commercial properties and government properties Property developers such as Remaining COLI Group, residents and tenants of the properties we manage, and third parties such as government authorities Compete with other property management service providers primarily on scale, branding, profitability and service quality. The Retained Operations No specific business model. Support operations which have not been organised as a business segment for revenue-generating purpose No specific business objective No specific focus No specific focus No specific competitive landscape as they have no specific focus on properties they managed 181

187 RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS Even if competition arises between the Group s business and the CSCEC Retained Operations or the CSCECL Retained Operations, the risk for any conflict of interest between our Group and CSCEC or CSCECL is low as the respective management and operation of CSCEC or CSCECL and its subsidiaries including construction bureaus and design institutes are independent of each other. Based on the above, and taking into consideration the relatively small size, nature, scope and business viability of the CSCEC Retained Operations and the CSCECL Retained Operations as compared with our Group s business, our Directors are of the view that competition between our Group s business and the CSCEC Retained Operations or the CSCECL Retained Operations, if any, is not extreme. Save as disclosed above, none of our Controlling Shareholders and Fellow Associates has any interest in a business, other than our Group s business, which competes or is likely to compete, either directly or indirectly, with our Group s business. In addition, on [.] 2015 each of CSCEC and CSCECL has given a non-competition undertaking in favour of our Company, details of which are set out below. NON-COMPETE UNDERTAKINGS To ensure a clear delineation of our Group s property management business (on the one hand) and CSCEC and CSCECL (on the other hand) following the completion of the Spin-off, CSCEC and CSCECL have entered into the following deeds of non-competition with our Company (the Deeds of Non-competition ). CSCEC s undertakings On [.] 2015, CSCEC entered into the CSCEC Deed of Non-competition with our Company pursuant to which it has, among other things, irrevocably and unconditionally undertaken to our Company that at any time during the Relevant Period (as defined below), CSCEC shall not and shall within its power procure its Close Associates (as defined below) (other than members of our Group) not to, directly or indirectly, engage in, invest in, participate in, or attempt to participate in, whether on its own account or with each other or in conjunction with or on behalf of any person or company, property management business in the PRC, Hong Kong and Macau as described in Business Overview (the Restricted Business ), save for the Excluded Business (as defined below). 182

188 RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS For the above purpose: (i) (ii) (iii) Close Associates means those close associates (as defined under the Listing Rules) whose operations can be directly influenced by CSCEC; Relevant Period means the period commencing from the Listing Date and ending on the earlier of (a) the date on which CSCEC and its Close Associates (whether individually or in aggregate) cease to be interested in, directly or indirectly, 50% or more of the issued share capital of our Company; and (b) the date on which our Shares cease to be listed on the Stock Exchange; and Excluded Business means the CSCEC Retained Operations and the business of the listed subsidiaries of CSCEC, including but not limited to CSCECL, COLI, CSCIHL, Far East Global and COGO and their respective subsidiaries. CSCECL s undertakings On [.] 2015, CSCECL entered into the CSCECL Deed of Non-competition with our Company pursuant to which it has, among other things, irrevocably and unconditionally undertaken to our Company that at any time during the Relevant Period (as defined below), CSCECL shall not and shall within its power procure its Close Associates (as defined below) (other than members of the Group) not to, directly or indirectly, engage in, invest in, participate in, or attempt to participate in, whether on its own account or with each other or in conjunction with or on behalf of any person or company, the Restricted Business, save for the CSCECL Retained Operations. Independently-operated Associates (as defined below) shall not be subject to the Deed of Non-competition by CSCECL. As a listed company, CSCECL has agreed to establish an internal policy to manage any potential competition which may arise in the future with our Group whereby CSCECL and our Group shall negotiate under the general principle that our Group s interest will take priority in the event of any such potential competition. For the above purpose: (i) Close Associates means those close associates (as defined under the Listing Rules) whose operations can be directly influenced by CSCECL and exclude the Independently-operated Associates; (ii) Independently-operated Associates means CSCECL s Close Associates (as defined under the Listing Rules) which are listed companies, including but not limited to COLI, CSCIHL, Far East Global and COGO and their respective subsidiaries; and (iii) Relevant Period means the period commencing from the Listing Date and ending on the earlier of (a) the date on which CSCECL and its Close Associates (whether individually or in aggregate) cease to be interested in, directly or indirectly, 50% or more of the issued share capital of our Company; and (b) the date on which our Shares cease to be listed on the Stock Exchange. 183

189 RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS Other undertakings In order to protect the interests of our Company and our Shareholders, each of CSCEC and CSCECL has undertaken that in the event that any actual or potential conflict of interest arises, they will abstain from voting on any resolution of our Shareholders in relation to the relevant transaction. In addition, each of CSCEC and CSCECL has undertaken to provide our Company with all information necessary for the enforcement of the undertakings in the Deeds of Non-competition by our Company and would make an annual declaration on compliance with such deed in our annual report. CORPORATE GOVERNANCE MEASURES Our Company has adopted the following measures to manage the conflict of interests arising from potential competition, if any, between our Group and CSCEC or CSCECL with an overriding aim of safeguarding the interests of our Shareholders: (a) (b) (c) our Independent Non-executive Directors will review the Deeds of Non-competition on an annual basis; each of CSCEC and CSCECL has undertaken to provide all information necessary to our Company for the annual review by our Independent Non-executive Directors and the enforcement of the Deeds of Non-competition; each of CSCEC and CSCECL will provide a confirmation on compliance pursuant to their undertakings under the Deeds of Non-competition in our annual report; (d) our Company will disclose the decision made and/or matter reviewed by our Independent Non-executive Directors relating to compliance and enforcement of the Deeds of Non-competition in our annual reports and/or by way of an announcement; (e) (f) (g) our Directors will comply with the Articles of Association which require the interested Director not to vote (nor be counted in the quorum) on any Board resolution approving any contract or arrangement or other proposal in which he/she or any of his/her close associate is materially interested; our Directors, including our Independent Non-executive Directors, will be entitled to seek independent professional advice from external parties in appropriate circumstances at our Company s expense; our Directors will (i) report any conflict or potential conflict of interest involving CSCEC, CSCECL and/or our Controlling Shareholders and Fellow Associates to our Independent Non-executive Directors as soon as practicable upon becoming aware of such conflict; (ii) convene a Board meeting to review and evaluate the implications and risk exposure of such conflict; (iii) monitor any material irregular business activities. The conflicted Directors will be required to abstain from participating in the Board meetings where resolutions with material potential conflicts of interest are discussed; 184

190 RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS (h) (i) (j) our Company will monitor potential or proposed transaction between our Group and our connected persons, and ensure compliance with Chapter 14A of the Listing Rules including, where applicable, the announcement, reporting, annual review and independent Shareholders approval requirements; our Company has appointed Somerley Capital Limited as its compliance adviser to provide advice and guidance to our Group in respect of compliance with the applicable laws and Listing Rules including various requirements relating to directors duties and internal control; and our Company s audit committee will conduct a review on the effectiveness of the above internal control measures on an annual basis. INDEPENDENCE FROM OUR CONTROLLING SHAREHOLDERS AND FELLOW ASSOCIATES Having considered the matters described above and the following factors, our Directors are of the view that our Group is capable of carrying on its business independently from our Controlling Shareholders and Fellow Associates following the completion of the Spin-off: Business and operations independence Our Group will be able to operate independently from our Controlling Shareholders and Fellow Associates (including Remaining COLI Group) for the reasons set out as follows. Independent business operations As explained in Delineation of our Group s business from our Controlling Shareholders and Fellow Associates above, the business operations of our Group are separate from and independent of those of our Controlling Shareholders and Fellow Associates (including Remaining COLI Group). Save for certain continuing connected transactions in the ordinary course of business of our Group set out in Connected Transactions, the customers, subcontractors and suppliers of our Group are parties other than our Controlling Shareholders and Fellow Associates (including Remaining COLI Group). The continuing connected transactions will be conducted on normal commercial terms in accordance with the pricing policy of each of our Group and our Controlling Shareholders and Fellow Associates (including Remaining COLI Group) and are not prejudicial to the interests of any of them. Majority of customers are third-party property owners Although almost 90% of the total GFA under management by our Group were properties developed by our Controlling Shareholders and Fellow Associates (including Remaining COLI Group), the majority of the customers of our Group are property owners other than our Controlling Shareholders and Fellow Associates (including Remaining COLI Group). More than 80% of the revenue of our Group for the financial year ended 31 December 2014 were generated from customers other than our Controlling Shareholders and Fellow Associates (including Remaining COLI Group). 185

191 RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS Standard tender process directed by the PRC government Although almost 90% of the total GFA under management by our Group in the PRC were property development projects developed by our Controlling Shareholders and Fellow Associates, our Group does not enjoy a preferential right to be engaged as the initial property management service provider. The need for initial property management service arises before a property development project is fit for occupation (i.e. the pre-delivery stage). Our Group secures initial property management service engagements in the PRC (the Initial Property Management Contract ) mainly through a standard tender process regulated by applicable PRC laws and regulations. This is also the case where such engagements relate to PRC property development projects developed by our Controlling Shareholders and Fellow Associates (including Remaining COLI Group). Such government regulated tender process ensures that our Group does not enjoy any preferential treatment in the process and is not granted an Initial Property Management Contract simply due to its shareholding relationship with our Controlling Shareholders and Fellow Associates (including Remaining COLI Group) and that independence is maintained among them. The fact that a substantial amount of GFA under management by our Group are property development projects developed by our Controlling Shareholders and Fellow Associates (including Remaining COLI Group) should not be regarded as undue reliance of our Group on our Controlling Shareholders and Fellow Associates (including Remaining COLI Group). Rather, it reflects the Group s experience and ability to win the tender as the initial property management service provider under a tender process directed by the PRC government. Property owners choice At the post-delivery stage of the property development projects where the property units have been wholly or partially sold and fit for occupation by individual owners, the owners associations or the owners of such property units have the right to select (or replace) the property management service provider. Our Controlling Shareholders and Fellow Associates (including Remaining COLI Group) does not have any influence over the selection (or replacement) of the property management service provider by individual owners. As the majority of these property owners (i.e. the customers of the Group) are parties other than our Controlling Shareholders and Fellow Associates (including Remaining COLI Group), there is no undue reliance by our Group on our Controlling Shareholders and Fellow Associates (including Remaining COLI Group) for generation of revenue at the post-delivery stage. Third-party property developers in Hong Kong and Macau Almost 90% of the GFA under management by our Group in Hong Kong and Macau are developed by parties other than our Controlling Shareholders and Fellow Associates (including Remaining COLI Group) as at 31 December As such, our Group does not rely on our Controlling Shareholders and Fellow Associates (including Remaining COLI Group) for property management business, whether at the pre-delivery stage or not, in Hong Kong and Macau. 186

192 RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS Quality of services Our Group believes that the quality of our services is key to our success. Since the commencement of business operations in the PRC, our Group has not been replaced as the property management service provider in the PRC at the post-delivery stage (save for some instances where our Group initiated the cessation of service due to factors such as low profit margin) for property development projects developed by our Controlling Shareholders and Fellow Associates (including Remaining COLI Group). In Hong Kong and Macau, our Group was replaced for approximately one-fourth of the property development projects developed by our Controlling Shareholders and Fellow Associates (including Remaining COLI Group) since its commencement of business operations in Hong Kong and Macau as its tender price was higher than that of its competitors during the tendering process at the post-delivery stage. However, as mentioned above, for Hong Kong and Macau, our Group mainly provides property management services for property development projects developed by parties other than our Controlling Shareholders and Fellow Associates (including Remaining COLI Group) and the occasions of replacement only represent an insignificant part of the business of our Group. The above reflects a high renewal rate whereby a high number of third-party property owners choose to continue with the property management services provided by our Group at the post-delivery stage. Based on the above, there is no undue reliance by our Group on our Controlling Shareholders and Fellow Associates (including Remaining COLI Group) in relation to its business and operations and our Group will be able to operate independently of our Controlling Shareholders and Fellow Associates (including Remaining COLI Group) upon Listing. Financial independence Our Group will be able to maintain financial independence from our Controlling Shareholders and Fellow Associates (including Remaining COLI Group) for the reasons set out as follows: No financial reliance on our Controlling Shareholders and Fellow Associates (including Remaining COLI Group) During the Track Record Period, COLI had obtained a banking facility from a bank for the issue of bonds (including performance bonds, payment bonds and bid bonds) up to HK$750 million, of which a sublimit of HK$100 million is available to a subsidiary of our Group against a corporate guarantee issued by COLI. The corporate guarantee provided by COLI has been replaced by a corporate guarantee provided by our Company on 28 May Such subsidiary of our Company has also obtained a revolving loan facility from the same bank of HK$200,000,000 on 28 May 2015 against a corporate guarantee issued by our Company. As at 31 May 2015, there was no inter-company loan or balance between our Group and our Controlling Shareholders and Fellow Associates (including Remaining COLI Group), save for the inter-company balances arising from the ongoing connected transactions between our Group and our Controlling Shareholders and Fellow Associates (including Remaining COLI Group). 187

193 RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS Save for the sublimit of the banking facility mentioned above, our Group has not in the three financial years ended 31 December 2014 and the five months ended 31 May 2015 obtained any credit or bank facilities. Given (i) the circumstances mentioned above with regard to the banking facilities and (ii) the nature of property management business which does not require substantial capital outlay, our Directors consider that our Group will be able to finance its own operations and function independently without reliance on our Controlling Shareholders and Fellow Associates (including Remaining COLI Group). Independent financial system Our Group will have its own financial and accounting system independent of that of our Controlling Shareholders and Fellow Associates (including Remaining COLI Group). Accounting functions and financial decision making will be carried out by our Group independently and according to its own business needs and financial conditions. Based on the above, our Group will be able to finance its own operations and function independently without reliance on our Controlling Shareholders and Fellow Associates (including Remaining COLI Group). Management independence Board composition The Board comprises nine Directors with five Executive Directors, one Non-executive Director and three Independent Non-executive Directors. Our Executive Directors, one of whom is also the chief executive officer of our Group, and the senior management team members will not have any board member and senior management role in our Controlling Shareholders and Fellow Associates (including Remaining COLI Group) upon the Listing. Our Non-executive Director, Mr. Hao Jian Min, is also an executive director, the chairman and chief executive officer of COLI and holds board member and senior management roles in our Controlling Shareholders and Fellow Associates (including Remaining COLI Group). He will remain in his existing roles in our Controlling Shareholders and Fellow Associates (including Remaining COLI Group) after the Listing. Roles of the board members Our Executive Directors and chief executive officer, who will report to the Board, will have dedicated responsibilities for our Group and will oversee the day-to-day operation and management of the Group. It is expected that our Non-executive Director will take up a strategic role in formulating the development plans and in particular, the development of possible further synergies between our Group and our Controlling Shareholders and Fellow Associates (including Remaining COLI Group) to the mutual benefit of both groups. 188

194 RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS Abstention from voting In the event of any actual or potential conflict of interest between our Controlling Shareholders and Fellow Associates (including Remaining COLI Group) and our Group, our Non-executive Director (who will continue to have a role with our Controlling Shareholders and Fellow Associates (including Remaining COLI Group)) will abstain from voting on the relevant Board resolution and the other Directors will vote and decide on the relevant matter. Given the arrangements mentioned above, our Directors believe that each of our Controlling Shareholders and Fellow Associates (including Remaining COLI Group) and our Group is managed and operates independently of each other in the interests of their respective shareholders as a whole. Administrative Independence During the Track Record Period, Remaining COLI Group had provided certain corporate management, office and other administrative functions to the Group, which had been discontinued since 1 June Please refer to Connected Transactions Discontinued Connected Transactions for more details. Upon Listing, all essential administrative functions, such as accounts and finance, company secretarial, information technology, human resources and investor relations, will be carried out independently by our Group without the support of our Controlling Shareholders and Fellow Associates (including Remaining COLI Group). Our Company operates in a separate office leased from Remaining COLI Group. 189

195 CONNECTED TRANSACTIONS Our Group has entered into certain transactions with parties who will, upon completion of the Spin-off, become our connected persons, and certain transactions will continue following the Listing Date, thereby constituting connected transactions under the Listing Rules. CONTINUING CONNECTED TRANSACTIONS WITH COLI We have entered into a number of transactions with members of Remaining COLI Group. Since COLI is a subsidiary of COHL, our Controlling Shareholder, members of Remaining COLI Group will be connected persons of our Group upon Listing. Master COLI Property Management Services Agreement (a) Description of the transaction Remaining COLI Group is expected to continue to engage our Group to provide property management services to Remaining COLI Group s residential communities and commercial properties in the PRC, Hong Kong and Macau. On [.] 2015, our Company and COLI entered into a framework agreement (the Master COLI Property Management Services Agreement ) pursuant to which the parties agreed and confirmed that the provision of property management services by our Group to Remaining COLI Group have been and will continue to be conducted on terms set out therein for the period from 1 June 2015 and ending on 31 May Under the Master COLI Property Management Services Agreement, the prices and terms of the contracts for the provision of property management services shall be determined in the ordinary course of business on normal commercial terms, negotiated on arm s length basis and at prices and on terms no more favourable than those provided to the customers of our Group who are Independent Third Parties. Our Group will need to go through a tender process before being selected and appointed as service provider of Remaining COLI Group. The price and terms of our Group s tender submitted to Remaining COLI Group are subject to a standard and systematic tender submission procedure maintained by our Group, which applies to tenders submitted to both connected persons and Independent Third Parties, so as to ensure that the prices and terms of the proposed tenders submitted by our Group to Remaining COLI Group are no more favourable than those submitted to Independent Third Parties. (b) Historical transaction amounts The historical amounts paid to our Group by Remaining COLI Group for the three financial years ended 31 December 2014 and the five months ended 31 May 2015 were approximately HK$179.5 million, HK$234.9 million, HK$278.1 million and HK$84.2 million, respectively. 190

196 CONNECTED TRANSACTIONS (c) Caps on future transaction amounts The maximum total amounts paid to our Group by Remaining COLI Group under the Master COLI Property Management Services Agreement for the period between 1 June 2015 and 31 December 2015 shall not exceed HK$264.4 million, for each of the two years ending 31 December 2017 shall not exceed HK$405.0 million and HK$470.5 million, respectively, and for the period between 1 January 2018 and 31 May 2018 shall not exceed HK$220.4 million. These caps were calculated with reference to (i) the historical amounts paid to our Group by Remaining COLI Group in respect of the provision of property management services; and (ii) the expected demand of Remaining COLI Group for property management services for the period from 1 June 2015 to 31 May 2018 with reference to the estimated gross floor area of new property projects expected to be developed by Remaining COLI Group, the estimated number of property development projects at pre-delivery stage, the estimated labour and utilities costs and the estimated number of unsold units. (d) Listing Rules requirements As the applicable percentage ratios (as defined under the Listing Rules) in respect of each of the caps under the Master COLI Property Management Services Agreement are, on an annual basis, 5% or more, the transactions contemplated under the Master COLI Property Management Services Agreement will, upon Listing, be subject to the annual review, reporting, announcement and independent shareholders approval requirements under Chapter 14A of the Listing Rules. Master Engineering Services Agreement (a) Description of the transaction Remaining COLI Group is expected to engage our Group as its sub-contractor for the provision of engineering services, including automation projects, specialised engineering, and repair and maintenance and upgrade projects of equipment and machinery to Remaining COLI Group s residential communities and commercial properties in the PRC from time to time. On [.] 2015, our Company and COLI entered into a framework agreement (the Master Engineering Services Agreement ) pursuant to which the parties agreed and confirmed that the provision of engineering services by our Group to Remaining COLI Group have been and will continue to be conducted on terms set out therein for the period from 1 June 2015 and ending on 31 May Under the Master Engineering Services Agreement, the prices and terms of the contracts with respect to the engineering services shall be determined in the ordinary course of business on normal commercial terms, negotiated on arm s length basis and at prices and on terms no more favourable than those provided to the customers of our Group who are Independent Third Parties. Our Group will need to go through a tender process before being selected and appointed as service provider of Remaining COLI Group. The price and terms of our Group s tenders submitted to Remaining COLI Group are subject to a standard and systematic tender submission procedure maintained by our Group, which applies to tenders submitted to both 191

197 CONNECTED TRANSACTIONS connected persons and Independent Third Parties, so as to ensure that the prices and terms of the proposed tenders submitted by our Group to Remaining COLI Group are no more favourable than those submitted to Independent Third Parties. (b) Historical transaction amounts The historical amounts paid to our Group by Remaining COLI Group for the three financial years ended 31 December 2014 and the five months ended 31 May 2015 were approximately HK$7.9 million, HK$16.2 million, HK$24.3 million and HK$2.4 million, respectively. (c) Caps on future transaction amounts The maximum total amounts paid to our Group by Remaining COLI Group under the Master Engineering Services Agreement for the period between 1 June 2015 and 31 December 2015 shall not exceed HK$25.5 million, for each of the two years ending 31 December 2017 shall not exceed HK$29.8 million and HK$31.6 million, respectively, and for the period between 1 January 2018 and 31 May 2018 shall not exceed HK$14.0 million. These caps were calculated with reference to (i) the historical amounts paid to our Group by Remaining COLI Group in respect of the provision of engineering services; and (ii) the expected demand of Remaining COLI Group for engineering services for the period from 1 June 2015 to 31 May 2018, with reference to the estimated number of new property projects expected to be developed by Remaining COLI Group, the estimated number of automation projects and the demand for repair and maintenance and upgrade projects by Remaining COLI Group. (d) Listing Rules requirements As the applicable percentage ratios (defined under the Listing Rules) in respect of each of the caps under the Master Engineering Services Agreement are, on an annual basis, 0.1% or more but less than 5%, the transactions contemplated under the Master Engineering Services Agreement will, upon Listing, be subject to the annual review, reporting and announcement requirements but exempt from the independent shareholders approval requirements under Chapter 14A of the Listing Rules. Master Lease Agreement (a) Description of the transaction Our Group is expected to continue to lease properties owned by Remaining COLI Group in the ordinary and usual course of business of our Group from time to time. On [.] 2015, our Company and COLI entered into a framework agreement (the Master Lease Agreement ) pursuant to which the parties agreed and confirmed that the lease of properties by our Group from Remaining COLI Group have been and will continue to be conducted on terms set out therein for the period from 1 June 2015 and ending on 31 May

198 CONNECTED TRANSACTIONS Members of our Group may lease properties from members of Remaining COLI Group in accordance with the terms of the Master Lease Agreement, subject to the tenancy agreement recording other detailed terms and conditions in relation to each particular property leased and shall be on normal commercial terms and terms no more faviourable than those offered to Independent Third Parties. The rent for such properties shall be determined by Remaining COLI Group and our Group with reference to the prevailing market rent level of similar properties in the vicinity of the properties leased. (b) Historical transaction amounts The historical total rent paid by our Group to Remaining COLI Group for the three financial years ended 31 December 2014 and the five months ended 31 May 2015 were approximately HK$4.0 million, HK$3.7 million, HK$4.5 million and HK$2.4 million, respectively. (c) Caps on future transaction amounts The maximum total rent for the lease of properties under the Master Lease Agreement for the period between 1 June 2015 and 31 December 2015 shall not exceed HK$3.9 million, for each of the two years ending 31 December 2017 shall not exceed HK$6.6 million and HK$6.7 million, respectively, and for the period between 1 January 2018 and 31 May 2018 shall not exceed HK$2.9 million. These caps were calculated with reference to (i) the existing amount of leases entered into between Remaining COLI Group and our Group; and (ii) the inflation rate and expected future business needs of our Group for the lease of properties. (d) Listing Rules requirements As the applicable percentage ratios (as defined under the Listing Rules) in respect of each of the caps under the Master Lease Agreement are, on an annual basis, 0.1% or more but less than 5%, the transactions contemplated under the Master Lease Agreement will, upon Listing, be subject to the annual review, reporting and announcement requirements but exempt from the independent shareholders approval requirements under Chapter 14A of the Listing Rules. Transitional Trademark Licensing Arrangement (a) Description of the transaction The Trademarks used by our Group as set out in Appendix VI General Information B. Further Information About the Business of our Company 2. Intellectual Property Rights of our Group were owned by COLI TM and COLI Property (which are members of Remaining COLI Group). On 9 June 2015, COPL Trademark Holding, a member of our Group, entered into the COLI TM Trademark Assignment with COLI TM and the COLI Property Trademark Assignment with COLI Property, pursuant to which COLI TM and COLI Property have each agreed to transfer the Trademarks to COPL Trademark Holding for a nominal consideration. 193

199 CONNECTED TRANSACTIONS Under the Transitional Trademark Licensing Arrangement, COLI TM and COLI Property, each as licensor, have agreed to grant to our Group, as licensee, an exclusive right for the use of the Trademarks at nil consideration pursuant to the Trademarks Assignments. The term of the Transitional Trademark Licensing Arrangement shall expire upon the completion of the registration of COPL Trademark Holding as the registered owner of the Trademarks. (b) Listing Rules requirements Given the nil consideration paid by our Group under the Transitional Trademark Licensing Arrangement, the applicable percentage ratios (as defined under the Listing Rules) in respect of such arrangement will be, on an annual basis, less than 0.1%. As such, the Transitional Trademark Licensing Arrangement will constitute a de minimis continuing connected transaction exempt from the reporting, announcement, annual review and independent shareholders approval requirements under Chapter 14A of the Listing Rules. CONTINUING CONNECTED TRANSACTIONS WITH CSCIHL We have entered into a number of transactions with members of CSCIHL Group. Since CSCIHL is a subsidiary of COHL, our Controlling Shareholder, members of CSCIHL Group will be connected persons of our Group upon Listing. Master Security Services Agreement (a) Description of the transaction CSCIHLGroupisexpectedtoengageourGrouptoprovidesecurityservicesforthework sites of CSCIHL Group in Hong Kong. On 26 June 2015, our Company and CSCIHL entered into a framework agreement (the Master Security Services Agreement ) to govern the provision of security services by our Group to CSCIHL Group for a term from 1 July 2015 and ending on 30 June Members of our Group which hold the relevant licences may provide security services to the work sites of CSCIHL Group in Hong Kong (the Security Services ). If any contract is granted in favour of any member of our Group as a result of the standard and independent tender process of CSCIHL Group, such member of our Group may act as a security service provider for the work sites of CSCIHL Group in Hong Kong based on the terms of the successful tender. Under the Master Security Services Agreement, the prices and terms of the contracts with respect to the Security Services shall be determined in the ordinary course of business on normal commercial terms, negotiated on arm s length basis and at prices and on terms no more favourable than those provided to customers of our Group who are Independent Third Parties. Our Group will need to go through a tender process before being selected and appointed as service provider of CSCIHL Group. The price and terms of our Group s tenders submitted to CSCIHL Group for the Security Services are subject to a standard and systematic tender submission procedure maintained by our Group, which applies to tenders submitted to both 194

200 CONNECTED TRANSACTIONS connected persons and Independent Third Parties, so as to ensure that the prices and terms of theproposedtenderssubmittedbyourgrouptocscihlgrouparenomorefavourablethan those submitted to Independent Third Parties. (b) Historical transaction amounts The historical contract sum awarded to our Group by CSCIHL Group for the year ended 31 December 2013 and the year ended 31 December 2014 were approximately HK$16.2 million and HK$3.2 million, respectively. (c) Caps on future transaction amounts The maximum total contract sum that may be awarded to our Group by CSCIHL Group under the Master Security Services Agreement for the period between 1 July 2015 and 31 December 2015 shall not exceed HK$25.0 million, for each of the two years ending 31 December 2017 shall not exceed HK$30.0 million and HK$30.0 million, respectively, and for the period between 1 January 2018 and 30 June 2018 shall not exceed HK$25.0 million. These caps were calculated with reference to (i) the historical total contract sum awarded to our Group by CSCIHL Group; and (ii) the total estimated contract sum of security services contractsinhongkongforcscihlgroupinthethreeyearperiodcommencingon1july2015 and ending on 30 June 2018, estimated with reference to CSCIHL Group s future growth and expansion in its construction works in Hong Kong for such period. (d) Listing Rules requirements As the applicable percentage ratios (as defined under the Listing Rules) in respect of each of the caps under the Master Security Services Agreement are, on an annual basis, 0.1% or more but less than 5%, the transactions contemplated under the Master Security Services Agreement will, upon Listing, be subject to the annual review, reporting and announcement requirements but exempt from the independent shareholders approval requirements under Chapter 14A of the Listing Rules. Insurance and Performance Bond Services (a) Description of the transaction Our Group is expected to continue to (i) purchase insurance services (including, but not limited, to property all risks insurance and public liability linsurance) provided by CSCIHL Group in Hong Kong where an insurance premium will be charged; and (ii) engage CSCIHL Group to provide performance bonds to guarantee the performance of the property management service contracts of our Group in Hong Kong in favour of the customers of our Group, where a certain percentage of the project contract sum will be charged as service fee (collectively, the Insurance and Performance Bond Services ) from time to time. Members of our Group may from time to time enter into further specific contracts with CSCIHL Group which will set out the detailed terms in relation to the Insurance and Performance Bond Services. 195

201 CONNECTED TRANSACTIONS As a general principle, the prices and terms of the contracts with respect to the Insurance and Performance Bond Services shall be determined in the ordinary course of business on normal commercial terms, negotiated on arm s length basis and at prices and on terms no more favourable than those paid to insurers of our Group who are Independent Third Parties. Members of our Group will obtain quotations from independent insurance institutions (directly or indirectly through independent insurance brokers) or banks and CSCIHL Group. If the price and terms offered by members of CSCIHL Group are equal to or better than those offered by independent insurance institutions on the condition that the insurer also satisfies all other essential requirements (including but not limited to paying ability, financial strength, specialisation, historical relationship and record of claim refusal), such member of our Group may probably accept the quotation from such member of CSCIHL Group. (b) Historical transaction amounts The historical service fees paid by our Group to CSCIHL Group for the three financial years ended 31 December 2014 and the five months ended 31 May 2015 were approximately HK$2,350,000, HK$781,000, HK$315,000 and HK$97,000, respectively. (c) Estimated future transaction amounts The estimated fees for the Insurance and Performance Bond Services for the period between 1 June 2015 and 31 December 2015 shall be no more than HK$472,000, for each of the two years ending 31 December 2017 shall be no more than HK$752,000 and HK$650,000, respectively, and for the period between 1 January 2018 and 31 May 2018 shall be no more than HK$550,000. (d) Listing Rules requirements As the applicable percentage ratios (as defined under the Listing Rules) in respect of the estimated future transaction amount for the Insurance and Performance Bond Services will be, on an annual basis, less than 0.1%, or less than 5% and less than HK$3,000,000, the Insurance and Performance Bond Services will constitute a de minimis continuing connected transaction exempt from the reporting, announcement, annual review and independent shareholders approval requirements under Chapter 14A of the Listing Rules. Lease of CSCIHL Properties (a) Description of the transaction Our Group is expected to continue to lease properties owned by CSCIHL Group (the CSCIHL Properties ) in the ordinary and usual course of business of our Group from time to time. Members of our Group may lease CSCIHL Properties from members of CSCIHL Group subject to the tenancy agreement recording other detailed terms and conditions in relation to each particular CSCIHL Properties leased and shall be on normal commercial terms as offered 196

202 CONNECTED TRANSACTIONS to other Independent Third Parties. The rent for the CSCIHL Properties shall be determined by CSCIHL Group and our Group with reference to the prevailing market rent level of similar properties in the vicinity of the CSCIHL Properties leased. (b) Historical transaction amounts The historical total rent paid by our Group to CSCIHL Group for the three financial years ended 31 December 2014 and the five months ended 31 May 2015 were approximately HK$47,000, HK$47,000, HK$47,000 and HK$19,000, respectively. (c) Estimated future transaction amounts The estimated total rent for leasing of CSCIHL Properties for the period between 1 June 2015 and 31 December 2015 shall be no more than HK$28,000, for each of the two years ending 31 December 2017 shall be no more than HK$48,000 and HK$50,000, and for the period between 1 January 2018 and 31 May 2018 shall be no more than HK$50,000. (d) Listing Rules requirements As the applicable percentage ratios (as defined under the Listing Rules) in respect of the estimated future transaction amount for the leasing of CSCIHL Properties will be, on an annual basis, less than 0.1%, or less than 5% and less than HK$3,000,000, the leasing of CSCIHL Properties will constitute a de minimis continuing connected transaction exempt from the reporting, announcement, annual review and independent shareholders approval requirements under Chapter 14A of the Listing Rules. Provision of property management services to CSCIHL Group (a) Description of the transaction Our Group is expected to continue to provide property management services to certain office premises in Hong Kong leased by CSCIHL Group in the ordinary and usual course of business of our Group from time to time and on normal commercial terms as offered to other Independent Third Parties. (b) Historical transaction amounts The historical fees paid to our Group by CSCIHL Group for the three financial years ended 31 December 2014 and the five months ended 31 May 2015 were approximately HK$117,000, HK$125,000, HK$125,000 and HK$52,000, respectively. (c) Estimated future transaction amounts The estimated total fees for provision of property management services to CSCIHL Group for the period between 1 June 2015 and 31 December 2015 shall be no more than HK$81,000, for each of the two years ending 31 December 2017 shall be no more than HK$141,000 and HK$141,000, respectively, and for the period between 1 January 2018 and 31 May 2018 shall be no more than HK$59,

203 CONNECTED TRANSACTIONS (d) Listing Rules requirements As the applicable percentage ratios (as defined under the Listing Rules) in respect of the estimated future transaction amount for the provision of property management services to CSCIHL Group will be, on an annual basis, less than 0.1%, or less than 5% and less than HK$3,000,000, the provision of property management services to CSCIHL Group will constitute a de minimis continuing connected transaction exempt from the reporting, announcement, annual review and independent shareholders approval requirements under Chapter 14A of the Listing Rules. CONTINUING CONNECTED TRANSACTIONS WITH COGO We have entered into transactions with members of COGO Group. Since COGO is an associate of COHL, our Controlling Shareholder, members of COGO Group will be connected persons of our Group upon Listing. Master COGO Property Management Services Agreement (a) Description of the transaction On 1 June 2015, our Company and COGO entered into a framework agreement (the Master COGO Property Management Services Agreement ) to govern the provision of property management services by our Group to COGO Group for a term from 1 June 2015 and ending on 31 May Members of our Group may provide property management services to the members of COGO Group in respect of (i) property development projects developed by COGO Group prior to delivery thereof to buyers; (ii) the unsold portion of the property development projects developed by or property development projects held for investment by COGO Group; and (iii) pre-sale display units of the property development projects developed by COGO Group. If any contract is granted in favour of any member of our Group as a result of the standard and independent tender process or the selection process of COGO Group, such member of our Group may act as property management service provider for COGO Group based on the terms of the specific tender or property management contract. Under the Master COGO Property Management Services Agreement, the prices and terms of the contracts for the provision of property management services shall be determined in the ordinary course of business on normal commercial terms, negotiated on arm s length basis and at prices and on terms no more favourable than those provided to the customers of our Group who are Independent Third Parties. Our Group will need to go through a tender process or a selection process before being selected and appointed as service provider of COGO Group. The price and terms of the Group s tender submitted to COGO Group are subject to a standard and systematic tender submission procedure or quotation submission procedure maintained by the Group, which applies to tenders or quotations submitted to both connected persons and Independent Third Parties, so as to ensure that the prices and terms of the proposed tenders or quotations submitted by our Group to COGO Group are no more favourable than those submitted to Independent Third Parties. 198

204 CONNECTED TRANSACTIONS (b) Historical transaction amounts The historical amounts paid to our Group by COGO Group for the two financial years ended 31 December 2014 and the three months ended 31 March 2015 were approximately RMB5,677,000 (equivalent to approximately HK$7,153,000), RMB5,042,000 (equivalent to approximately HK$6,353,000) and RMB14,208,000 (equivalent to approximately HK$17,902,000), respectively. (c) Caps on future transaction amounts The maximum total amounts paid to our Group by COGO Group under the Master COGO Property Management Services Agreement for the period between 1 June 2015 and 31 December 2015 shall not exceed RMB30 million (equivalent to approximately HK$37.8 million), for each of the two years ending 31 December 2017 shall not exceed RMB50 million (equivalent to approximately HK$63 million) and RMB60 million (equivalent to approximately HK$75.6 million), respectively, and for the period between 1 January 2018 and 31 May 2018 shall not exceed RMB35 million (equivalent to approximately HK$44.1 million). These caps were calculated with reference to (i) the historical amounts paid to our Group by COGO Group; (ii) estimated demand of COGO Group for property management services for the period from 1 June 2015 to 31 May 2018, taking into account property management transactions to be conducted under existing contracts and future property development plans of COGO Group; and (iii) other factors such as COGO s business plans and inflation. (d) Listing Rules requirements As the applicable percentage ratios (as defined under the Listing Rules) in respect of each of the caps under the Master COGO Property Management Services Agreement are, on an annual basis, 0.1% or more but less than 5%, the transactions contemplated under the Master COGO Property Management Services Agreement will, upon Listing, be subject to the annual review, reporting and announcement requirements but exempt from independent shareholders approval requirements under Chapter 14A of the Listing Rules. TRANSACTIONS WITH OUR DIRECTORS AND OTHER INDIVIDUALS We have entered into transactions with our Directors and other individuals who will be connected persons of our Group upon Listing. Residential Services It is expected our Group shall continue to provide property management services (the Residential Services ) in its ordinary and usual course of business and on normal commercial terms to owners, residents or tenants of residential properties who are individuals and are connected persons of our Group upon Listing. These individuals include (a) our Directors and chief executive of our Group, (b) supervisors of the PRC subsidiaries of our Group, the associates of the persons mentioned in paragraphs (a) and (b) above, and deemed connected persons referred to under Rule 14A.21(1) and (2) of the Listing Rules of our Group (the Individuals ). 199

205 CONNECTED TRANSACTIONS As the Residential Services: (i) (ii) (iii) (iv) are ordinarily provided by our Group for the own consumption and private use of the Individuals; are not used by the Individuals for their businesses or contemplated businesses; will be consumed or used by the Individuals in the same state as when they were purchased; and are provided on terms which are on no more favourable to the Individuals than those to the Independent Third Parties, such Residential Services will fall into the exemption under Rule 14A.97 of the Listing Rules, and will be exempt from the reporting, announcement, annual review and independent shareholders approval requirements under Chapter 14A of the Listing Rules. DISCONTINUED CONNECTED TRANSACTIONS Administrative and management services During the Track Record Period, Remaining COLI Group had provided corporate management, office and other administrative functions and services to the Group. The historical amounts paid by our Group to Remaining COLI Group for three financial years ended 31 December 2014 were approximately HK$1.4 million, HK$1.9 million and HK$3.1 million, respectively. Such administrative and management services had been discontinued since 1 June 2015 and shall no longer be provided by Remaining COLI Group to our Group. WAIVER APPLICATION FOR NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS In respect of the Master Engineering Services Agreement, the Master Lease Agreement, the Master Security Services Agreement and the Master COGO Property Management Services Agreement described in this section which are subject to the reporting, announcement and annual review but exempt from the circular and independent shareholders approval requirements under the Listing Rules, we expect they will be carried out on a continuing basis and will extend over a period of time. Our Directors therefore consider that strict compliance with the announcement requirement under the Listing Rules would be impractical and unduly burdensome and would impose unnecessary administrative costs upon us. Accordingly, we have applied for[, and the Stock Exchange has granted to us], a waiver from strict compliance with the announcement requirement relating to continuing connected transactions under Rule 14A.105 of the Listing Rules in respect of the Master Engineering Services Agreement, the Master Lease Agreement, the Master Security Services Agreement and the Master COGO Property Management Services Agreement. In respect of the Master COLI Property Management Services Agreement described in this section which are subject to the reporting, announcement, annual review, circular and independent shareholders approval requirements under the Listing Rules, we expect they will be carried out on a continuing basis and will extend over a period of time. Our Directors therefore consider that strict compliance with the announcement, circular and independent shareholders approval requirements under the Listing Rules would be impractical and unduly 200

206 CONNECTED TRANSACTIONS burdensome and would impose unnecessary administrative costs upon us. Accordingly, we have applied for[, and the Stock Exchange has granted to us], a waiver from strict compliance with the announcement, circular and independent shareholders approval requirements relating to continuing connected transactions under Rule 14A.105 of the Listing Rules in respect of the Master COLI Property Management Services Agreement. We will, however, comply at all times with the other applicable provisions under Chapter 14A of the Listing Rules in respect of these non-exempt continuing connected transactions. In the event of any future amendments to the Listing Rules imposing more stringent requirements than those as at the date of this listing document on the continuing connected transactions referred to in this section, we will take immediate steps to ensure compliance with such new requirements. Confirmation from Directors Our Directors (including our Independent Non-executive Directors) are of the view that the continuing connected transactions described in this section have been entered into in the ordinary and usual course of our business and are on normal commercial terms. Our Directors (including our Independent Non-executive Directors) are of the view that the non-exempt continuing connected transactions described in this section have been and will be entered into in the ordinary and usual course of our Group s business, on normal commercial terms or better, that are fair and reasonable and in the interests of our Shareholders as a whole, and that the proposed annual caps for the non-exempt continuing connected transactions referred to in this section are fair and reasonable, and in the interests of our Shareholders as a whole. Confirmation from the Joint Sponsors The Joint Sponsors have reviewed the relevant information and historical figures prepared and provided by our Company relating to the non-exempt continuing connected transactions described in this section, have also conducted due diligence by discussing the non-exempt continuing connected transactions with our Company, and have obtained various representations from our Company and other members of our Group. Based on the Joint Sponsors due diligence, the Joint Sponsors are of the view that the non-exempt continuing connected transactions in respect of the Master COLI Property Management Services Agreement, the Master Engineering Services Agreement, the Master Lease Agreement, the Master Security Services Agreement and the Master COGO Property Management Services Agreement have been and will be entered into in the ordinary and usual course of our Group s business, on normal commercial terms or better, that are fair and reasonable and in the interests of our Shareholders as a whole, and that the proposed annual caps for the non-exempt continuing connected transactions referred to in this section are fair and reasonable, and in the interests of our Shareholders as a whole. 201

207 DIRECTORS AND SENIOR MANAGEMENT BOARD OF DIRECTORS The Board consists of nine Directors, three of whom are Independent Non-executive Directors. The following table sets out certain information concerning the Directors: Name Age Position Principal Responsibilities Mr. Hao Jian Min ( 郝建民 ) Ms. Wang Qi ( 王琦 ) Mr. Luo Xiao ( 羅肖 ) Mr. Shi Yong ( 史勇 ) Mr. Yang Ou ( 楊鷗 ) Mr. Kam Yuk Fai ( 甘沃輝 ) Mr. Lim Wan Fung, Bernard Vincent ( 林雲峯 ) Mr. Suen Kwok Lam ( 孫國林 ) Mr. Yung Wing Ki, Samuel ( 容永祺 ) 50 Chairman and Nonexecutive Director 49 Vice Chairman, Executive Director and Chief Executive Officer 43 Executive Director and Vice President 46 Executive Director and Vice President 37 Executive Director and Vice President 51 Executive Director and Deputy Chief Financial Officer 57 Independent Non-executive Director 68 Independent Non-executive Director 56 Independent Non-executive Director Giving strategic advice and formulating development plans of the Group Overall strategic direction and business operations of the Group Supervision, financial and information management of the Group Human resources and administrative management of the Group Operations and business development of the property management business of our Group in the PRC Financial management of the Group Giving independent strategic advice and guidance on the business and operations of the Group Giving independent strategic advice and guidance on the business and operations of the Group Giving independent strategic advice and guidance on the business and operations of the Group Date of Appointment as Director 2 January 2014 Date of Joining or Involvement in the Business of our Group September June 2015 March June 2015 May June 2015 May June 2015 June June 2015 May 2015 [.] 2015 [.] 2015 [.] 2015 [.] 2015 [.] 2015 [.]

208 DIRECTORS AND SENIOR MANAGEMENT SENIOR MANAGEMENT OF OUR COMPANY The Chief Executive Officer and members of the senior management of the Group, together with our executive Directors, are responsible for the day-to-day operations and management of the business of the Group. In addition to our Executive Directors, members of the senior management of our Group include the following: Name Age Position in the Group Roles and Responsibilities Mr. Wong Kai-sang ( 黃繼生 ) Mr. Liu Zhonghua ( 劉忠華 ) Mr. Wang Zhigang ( 王知剛 ) Ms. Li Xiaohua ( 李曉華 ) 59 Senior Vice President Overall operation and business development of the property management business of our Group in Hong Kong and Macau 50 Vice President Operation of the property management business of our Group in Hong Kong and Macau 42 Assistant President Operation of the property management business of our Group in the PRC 40 Assistant President Human resources and administrative management of the property management business of our Group in the PRC Date of Appointment as Senior Management Member Date of Joining or Involvement in the Business of our Group 25 June 2015 January June 2015 October June 2015 September June 2015 December

209 DIRECTORS AND SENIOR MANAGEMENT DIRECTORS Chairman and Non-executive Director Mr. Hao Jian Min Chairman and Non-executive Director Hao Jian Min, aged 50, holds a Master degree in Architecture and Civil Engineering from Harbin Institute of Technology in the PRC and a Master degree in Business Administration from Fordham University in the U.S. obtained in July 2001 and May 2003 respectively. He was designated as Chairman and Non-executive Director of our Company on 25 June 2015 and is responsible for giving strategic advice and formulating development plans of our Group. Prior to joining our Group, Mr. Hao joined CSCEC in 1987 and joined COLI Group in He was appointed as a director of a subsidiary of COLI in 1997 and as a director of certain other subsidiaries of COLI subsequently. Mr. Hao was appointed as executive director of COLI in September 2005, vice chairman of COLI in November 2006 and chief executive officer of COLI in June He was appointed as chairman of COLI in August 2013 and continues to be the chief executive officer of COLI. Besides acting as the chairman and non-executive director of our Company, the executive director, chairman and chief executive officer of COLI and a director of certain subsidiaries of COLI, Mr. Hao is currently the chairman and non-executive director of COGO and a director of certain subsidiaries of COHL (which is a substantial shareholder of our Company within the meaningofpartxvofthesfo). Mr. Hao has approximately 28 years of experience in construction and property business. Executive Directors Ms. Wang Qi Vice Chairman, Executive Director and Chief Executive Officer Wang Qi, aged 49, was appointed as Vice Chairman, Executive Director and Chief Executive Officer of our Company on 25 June She is responsible for the overall strategic direction and business operations of our Group. Ms. Wang has approximately 27 years of experience in the construction design, property development and property management sectors. Prior to joining our Group, she served as a structural design engineer at the Robotic Design Institute ( 機械部設計院 ) from 1988 to Ms. Wang joined COLI Group in October 1997 and has served in positions including manager, director and deputy general manager of Beijing China Overseas Property Limited ( 北京中海地產有限公司 ) until September From September 2006 to March 2011, she was the general manager of China Overseas Land & Investment (Xian) Limited ( 中海發展 ( 西安 ) 有限公司 ). From March 2011 to April 2014, she served as the assistant president of COLI. From March 2011 onwards, Ms. Wang served as the chairman of the board of COPL PRC Holding, and has been principally responsible for overseeing the property management business of our Group in the PRC. From February 2014 to June 2015, she was the general manager for the South China region of COLI Property and the chairman of the board of each of Shenzhen China Overseas Property Limited ( 深圳中海地產有限公司 ), China Overseas Land & Investment (Guangzhou) Limited ( 中海發展 ( 廣州 ) 有限公司 ), 204

210 DIRECTORS AND SENIOR MANAGEMENT China Overseas Property (Foshan) Limited ( 中海地產 ( 佛山 ) 有限公司 ), Zhongshan City China Overseas Property Development Limited ( 中山市中海房地產開發有限公司 ), Changsha China Overseas Xingye Property Limited ( 長沙中海興業房地產有限公司 ), Xiamen China Overseas Property Limited ( 廈門中海地產有限公司 ) and Fuzhou China Overseas Property Limited ( 福州中海地產有限公司 ). From April 2014 to June 2015, she was the vice president of COLI. Ms. Wang graduated from Hefei University of Technology in the PRC in August 1988 majoring in Civil Engineering, and has been a qualified senior engineer since September Mr. Luo Xiao Executive Director and Vice President Luo Xiao, aged 43, was appointed as Executive Director and Vice President of our Company on 25 June He is responsible for supervision, financial and information management of our Group. Mr. Luo has approximately 19 years of experience in finance, auditing and corporate governance. Prior to joining our Group, he worked for the auditing bureau of CSCEC from August 1996 to August From August 2001 to October 2006, he held the positions of assistant general manager and deputy general manager of the intendance and audit department of COHL. From October 2006 to February 2012, Mr. Luo acted as the general manager of the efficiency monitoring department of a subsidiary of COLI as well as the general manager of the efficiency management department of COLI, and was mainly responsible for the supervision and audit of its business. From February 2012 to December 2013, Mr. Luo was the general manager of the client relationship department of COLI and was responsible for the management and development of client relationships. Mr. Luo became a supervisor of COPL PRC Holding in May 2011 and the vice chairman of its board since August 2012, and has been responsible for overseeing the financial and legal matters of the property management business of our Group in the PRC. Mr. Luo graduated from Zhongnan University of Economics and Law in the PRC with a Bachelor of Economics in Accounting in July 1996 and a Master of Business Administration in June He has been a qualified senior accountant since November Mr. Shi Yong Executive Director and Vice President Shi Yong, aged 46, was appointed as Executive Director and Vice President of our Company on 25 June He is responsible for human resources and administrative management of our Group. Mr. Shi has approximately 23 years of experience in corporate human resources management. Prior to joining the Group, he worked for the human resources department of CSCEC from August 1991 to November From November 2001 to February 2012, he held various positions in COHL Group and COLI Group including deputy general manager of China Overseas Xingye (Xian) Limited ( 中海興業 ( 西安 ) 有限公司 ), deputy general manager of Shenzhen China Overseas Property Limited ( 深圳中海地產有限公司 ) and general manager of Zhongshan China Overseas Real Estate Development Limited ( 中山市中海房地產開發有限公司 ). From February 2012 to June 2015, Mr. Shi was the general manager of the integrated management department of COGO and from December 2013 to June 2015, a director of a subsidiary of COGO. He has been involved in human resources matters of our Group since May Mr. Shi graduated from Tianjin University in the PRC with a dual Bachelor degree in Civil Engineering and Technical Economics in July He has been a qualified senior economist since September

211 DIRECTORS AND SENIOR MANAGEMENT Mr. Yang Ou Executive Director and Vice President Yang Ou, aged 37, was appointed as Executive Director and Vice President of our Company on 25 June He is responsible for the operations and business development of the property management business of our Group in the PRC. Mr. Yang has over 13 years of industry experience in property development and management. From June 2002 to December 2008, he was the director and deputy general manager of COPL Chengdu and from September 2008 to March 2009, he has served as the director and assistant general manager of China Overseas Xingye (Chengdu) Development Limited ( 中海興業 ( 成都 ) 發展有限公司 ). From March 2009 to February 2012, he was the director and general manager of the client relationship department of COLI. He served as the general manager of COPL PRC Holding and the property management department of COLI from February 2012 to January 2014, being responsible for the overall management and operation of the business of our Group in the PRC. From July 2013 to February 2014, he was the chairman of the board of three subsidiaries of our Group engaged in value-added services. From January 2014 to June 2015, he was the general manager of a subsidiary of COGO engaged in real estate development. Mr. Yang graduated from Nanjing University of Science and Technology in the PRC with a Bachelor of Engineering degree in Materials Science in June He obtained his Master degree in Architecture and Civil Engineering from Chongqing University in the PRC in December 2006 and a Master degree in Business Administration from National University of Singapore in Singapore in June He obtained qualifications in securities practice in December 2001, as a senior economist (business administration specialty in December 2009; materials science and engineering in June 2011) and as a senior engineer in architecture and civil engineering in August Since September 2014, he has been an instructor at the VENCI-CIH Learning Center ( 英國特許房屋經理學會中國學習中心 ). Since December 2014 and May 2015 respectively, Mr. Yang has been the corporate mentor of the MBA Education Centre of Shantou University and Southwest Jiaotong University in the PRC. Mr. Kam Yuk Fai Executive Director and Deputy Chief Financial Officer Kam Yuk Fai, MBA, FCCA, CPA, aged 51, was appointed as an Executive Director and Deputy Chief Financial Officer of our Company on 25 June He is responsible for the financial management of our Group. Mr. Kam has over 27 years of experience in the fields of accounting, auditing and finance. Prior to March 2010, he had held various senior finance positions,andfrom1997to2010heservedinacompanylistedonthemainboardofthestock Exchange and his last held position was the group financial controller. He had held positions in COGO from March 2010 to June 2015 and his last held position in COGO was the general manager of its Finance & Treasury Department (HK). He had been a member of the Advisory Panel to the Business and IT Studies of the School of Continuing Education, Hong Kong Baptist University from 1 January 2009 to 31 December 2010, and is currently a trustee of Hong Kong Open Printshop Limited, a non-profit charitable organisation in Hong Kong. Mr. Kam is a qualified accountant, being a fellow member of the Association of Chartered Certified Accountants in May 1996 and an associate member of the Hong Kong Institute of Certified Public Accountants in July He graduated from the Hong Kong Polytechnic (now Hong 206

212 DIRECTORS AND SENIOR MANAGEMENT Kong Polytechnic University) with a Professional Diploma in Accountancy in November 1986, and also held a Master degree in Business Administration from the University of Strathclyde in Britain in November Independent Non-executive Directors Mr. Lim Wan Fung, Bernard Vincent Independent Non-executive Director Lim Wan Fung, Bernard Vincent, JP, PPHKIA, MHKIUD, aged 57, was appointed as Independent Non-executive Director of our Company on [.] He is responsible for giving independent strategic advice and guidance on the business and operations of our Group. He has been a principal of AD+RG Architecture Design and Research Group Ltd. since February He is a Registered Architect (Hong Kong) and has been a member of the Hong Kong Institute of Architects (HKIA) since November 1984, Authorized Person (List of Architects) (Hong Kong) since May 1985, a member of Royal Institute of British Architects since March 1985, Asia Pacific Economic Cooperation (APEC) Architect since December 2005, PRC Class 1 Registered Architect Qualification ( 中華人民共和國一級註冊建築師 ) since August He was appointed as a Justice of the Peace in 2008 by the Government of Hong Kong. He became member of Shenzhen Registered Architects Association ( 深圳市註冊建築師協會 ) in September He has also been a National Committee member of the 12th Chinese People s Political Consultative Conference of the PRC ( 中國人民政治協商會議第十二屆全國委員會委員 )infebruary 2013 and Committee member of the 3rd Chinese People s Political Consultative Conference of Chongqing City ( 中國人民政治協商會議重慶市第三屆委員會委員 ) in 2008, an Adjunct Professor of the School of Architecture of The Chinese University of Hong Kong in 2014, member of the Hong Kong Housing Authority, chairman of its Building Committee and member of its Strategic Planning Committee and the Subsidised Housing Committee since April 2012, member of the Advisory Committee on Education Development Fund of Education Bureau since September 2014, chairman of Advisory Board of Nan Lian Garden of Home Affairs Bureau since November 2012 and Committee Member of the Chinese General Chamber of Commerce since November Mr. Lim has also been a member of the Hong Kong Housing Society Supervisory Board since September 2013 and member of the Council for Sustainable Development of Environment Bureau since February Mr. Lim was a president of Hong Kong Institute of Architects, a president of the Hong Kong Institute of Urban Design and a member of Town Planning Board from 2004 to 2010, a member of Antiquities Advisory Board of Development Bureau from 2005 to 2010, an adviser to the Guangdong Registered Architects Association ( 廣東省註冊建築師協會 )in2008andamemberof the Energy Advisory Committee of Environment Bureau from 2004 to Mr. Lim obtained a Bachelor of Arts in Architectural Studies (1st Hons) from the University of Hong Kong in November 1979, a Bachelor degree in Architecture (Distinction) from the University of Hong Kong in November 1981 and a Master of Science in Urban Planning from the University of Hong Kong in November

213 DIRECTORS AND SENIOR MANAGEMENT Mr. Suen Kwok Lam Independent Non-executive Director Suen Kwok Lam, MH, JP, BBS, aged 68, was appointed as Independent Non-executive Director of our Company on [.] He is responsible for giving independent strategic advice and guidance on the business and operations of our Group. He has over 40 years of experience in property management, and served in Hsin Chong Real Estate Management Ltd. from 1970 to 1997 with the last held position of director and general manager. Mr. Suen joined Henderson Land Development Company Limited (stock code: 12), a company listed on the Main Board of Stock Exchange, in 1997 and has been an executive director thereof since January He previously served as an executive director of Henderson Investment Limited (stock code: 97), a company listed on the Main Board of the Stock Exchange, from July 1999 until his retirement in June He is the vice president of Hong Kong Institute of Real Estate Administrators and obtained individual membership of the Real Estate Developers Association of Hong Kong in January He was the president of the Hong Kong Association of Property Management Companies from 2003 to He was awarded the Medal of Honour in 2005, appointed as a Justice of the Peace in 2011 and awarded the Bronze Bauhinia Star in 2015 by the Government of Hong Kong respectively. He is a member of the 13th Chinese People s Political Consultative Conference of the Shunde District of Foshan City ( 中國人民政治協商會議佛山市順德區第十三屆委員會委員 ), and was a member of the 10th Chinese People s Political Consultative Conference of Changsha City ( 中國人民政治協商會議長沙市第十屆委員會委員 ) from 2008 to He is also the president and vice chairman of Federation of Hong Kong Guangdong Community Organisations. Mr. Suen was also elected as an Honorary Fellow by the Hong Kong Institute of Housing in Mr. Yung Wing Ki, Samuel Independent Non-executive Director Yung Wing Ki, Samuel, MH, JP, SBS, aged 56, was appointed as Independent Nonexecutive Director of our Company on [.] He is responsible for giving independent strategic advice and guidance on the business and operations of our Group. Mr. Yung has over 33 years of experience in the insurance sector. He is currently an executive district director of AIA International Limited and an independent non-executive director of China South City Holdings Limited (stock code: 1668), a company listed on the Main Board of the Stock Exchange. He has been an independent non-executive director of China Overseas Insurance Limited ( COIL ), a wholly-owned subsidiary of CSCIHL, since 14 October 2014 and was also a member of the audit committee of COIL since 15 December He was an independent nonexecutive director of Group Sense (International) Limited (stock code: 601), a company listed on the Main Board of the Stock Exchange ( Group Sense ), from January 1995 to September He was also a member of the audit committee of the board of Group Sense from March 1999 to September 2013 and the chairman of the audit committee of the board of Group Sense from 2004 to September Mr. Yung is also presently a member of the National Committee of the Chinese People s Political Consultative Conference, the founding president of Hong Kong Professionals and Senior Executives Association and the chairman of Betting and Lotteries Commission of Home Affairs Bureau. Mr. Yung was elected the Ten Outstanding Young Persons Award in He was awarded the Medal of Honor in 2001, appointed as a Justice of the Peace in 2007 and awarded the Silver Bauhinia Star in 2011 by the Government of Hong 208

214 DIRECTORS AND SENIOR MANAGEMENT Kong respectively. He was also a Standing member of the Chinese People s Political Consultative Conference of Jilin ( 中國人民政治協商會議吉林省委員會常務委員 ), Standing Committee member of All-China Youth Federation, member of Commission on Strategic Development of Hong Kong, member of Central Policy Unit, chairman of Hong Kong United Youth Association, chairman of Top Outstanding Young Persons Association, board member of General Agents and Managers Association International and chairman of its International Committee, president of The Life Underwriters Association of Hong Kong and chairman of General Agents and Managers Association of Hong Kong. He was awarded an Executive Master degree in Business Administration from the Hong Kong University of Science and Technology and has attained certain professional qualifications, including Certified Financial Planner, Registered Financial Consultant, fellow Chartered Financial Practitioner, Certified Manager of Financial Advisor and Chartered Insurance Agency Manager. In view of Mr. Yung s professional qualifications, experience in internal controls and experience in reviewing or analysing audited financial statements of a listed company in Hong Kong, the Directors believe that Mr. Yung has the appropriate accounting or related finance management expertise for the purpose of Rule 3.10 of the Listing Rules. Save as disclosed in Directors and Senior Management Directors above and in Appendix VI General Information C. Further Information about Directors and Shareholders 1. Directors, none of our Directors have held any other directorships in listed companies during the three years immediately preceding the date of this listing document and there is no other information in respect of our Directors to be disclosed pursuant to Rule 13.51(2) of the Listing Rules or any other matter that needs to be brought to the attention of our Shareholders. Save as disclosed in this listing document, none of our Directors has any relationship with any other Directors, senior management of our Company or substantial shareholders or Controlling Shareholders. Save as disclosed in Appendix VI General Information C. Further Information about Directors and Shareholders 1. Directors, none of our Directors has any existing or proposed service contract with our Company or any of its subsidiaries other than contracts expiring or determinable by the relevant member of our Group within one year without payment of compensation (other than statutory compensation). SENIOR MANAGEMENT Mr. Wong Kai-sang Senior Vice President Wong Kai-sang, aged 59, was appointed as Senior Vice President of our Company on 25 June He is responsible for the supervision of the overall operation and business development of the property management business of our Group in Hong Kong and Macau. He has approximately 25 years of property management experience in Hong Kong. From 1990 to 2005, he served roles such as director or group manager of various Hong Kong property management companies including First Pacific Davies Property Management Limited, Vigers China Limited and Urban Property Management Ltd.. Mr. Wong joined COPL HK Holding in January 2005 as general manager and has since then held positions including director and 209

215 DIRECTORS AND SENIOR MANAGEMENT general manager thereof. He has been a member of the Chartered Institute of Housing since August 1988 and the Hong Kong Institute of Housing since January 2001, and became a registered professional housing manager since April Mr. Wong graduated in August 1985 from the University of Hong Kong s Department of Extra Mural Studies with a diploma in Housing Management. Mr. Liu Zhonghua Vice President Liu Zhonghua, aged 50, was appointed as Vice President of our Company on 25 June He is responsible for operation of the property management business of our Group in Hong Kong and Macau. Mr. Liu has approximately 27 years of experience in electrical and mechanical engineering project management and 20 years of experience in property management in Hong Kong. Mr. Liu joined CSCEC in 1988, and joined COPL HK Holding in October 1995, and has since held positions including assistant general manager, director and deputy general manager of COPL HK Holding. From June 2003 onwards, he has been the director of COPL Security. From September 2005 and from January 2007 onwards, he has been the director of COPL Macau, COPL Building Management and COPL Mepork respectively. He graduated from the Chongqing Construction Engineering College ( 重慶建築工程學院 )intheprc with a Bachelor of Engineering in Industrial Electrical Automation July 1988 and from the University of South Australia in Australia with a Master degree in Business Administration in May He also obtained an Executive Master degree in Business Administration from Nankai University in the PRC in June Mr. Liu was elected Affiliate of The Hong Kong Institute of Housing in January 2005 and a member of Hong Kong Institute of Real Estate Administrators in March 2000, respectively. He is qualified as a senior engineer in electrical and mechanical engineering since July Mr. Wang Zhigang Assistant President Wang Zhigang, aged 42, was appointed as Assistant President of our Company on 25 June He is responsible for the operation of our Group s domestic property management business in the PRC. He has approximately 19 years of property management experience in the PRC. He joined COLI Group in July 1996 and was employed in a subsidiary of COLI until August From September 2001 to February 2012, he served in various subsidiaries of COPL PRC Holding in roles such as assistant general manager and general manager. From October 2010 to August 2013, he was also the deputy general manager and then the general manager of China Overseas Property (Commercial Property) Management Company ( 中海物業 ( 商業物業 ) 管理公司 ), a commercial properties branch of COPL PRC Holding. He has been the deputy general manager of COPL PRC Holding since August Mr. Wang graduated from Tongji University in the PRC with a Bachelor degree in Materials Science in July 1996, and a Master degree in Construction and Civil Engineering from Huazhong University of Science and Technology in the PRC in December Ms.LiXiaohua Assistant President Li Xiaohua, aged 40, was appointed as Assistant President of our Company on 25 June She is responsible for the human resources and administrative management of the property management business of our Group in the PRC. She has approximately 16 years of 210

216 DIRECTORS AND SENIOR MANAGEMENT human resources experience in the PRC. She joined COLI Group in 1999, and has served various positions in COLI Group including assistant general manager of the human resources department from September 2007 to December 2010 and deputy general manager of COLI Group s property management department, which oversees COPL PRC Holding and other PRC subsidiaries of our Group from December 2010 to September Ms. Li served as deputy general manager of COPL PRC Holding from August 2012 onwards. She graduated from Provincial Party School of Liaoning Province in the PRC with a degree in Accounting in December COMPANY SECRETARY Mr. Ko Hiu Fung Mr. Ko Hiu Fung, aged 41, was appointed as Company Secretary of our Company on 25 June He is responsible for company secretarial matters of our Group. Mr. Ko holds a Bachelor degree in Law from University of Glamorgan in Wales and a Master degree in Law from the University of Hong Kong and is a qualified barrister in Hong Kong, England and Wales. Mr. Ko has over 17 years experience in the legal profession and had been the corporate counsel and company secretary of various listed companies in Hong Kong. BOARD COMMITTEES Our Board has established the audit committee, the remuneration committee and the nomination committee and delegated various responsibilities to these committees, which assist our Board in discharging its duties and overseeing particular aspects of our Group s activities. Audit committee We established an audit committee on [.] 2015 with written terms of reference in compliance with Rule 3.21 of the Listing Rules and paragraph C.3 of the CG Code. The duties of our audit committee include, without limitation, (a) making recommendations to our Board on the appointment, re-appointment and removal of the external auditor, approving the remuneration and terms of engagement of the external auditor, and any questions of its resignation or dismissal; (b) monitoring integrity of our financial statements, our annual report and accounts and our half-year report, and reviewing significant financial reporting judgments contained therein; and (c) reviewing our financial controls, internal control and risk management systems. Our audit committee consists of Mr. Lim Wan Fung, Bernard Vincent, Mr. Suen Kwok Lam and Mr. Yung Wing Ki, Samuel. Mr. Yung Wing Ki, Samuel is the chairman of the audit committee. Remuneration committee We established a remuneration committee on [.] 2015 with written terms of reference in compliance with Rule 3.25 of the Listing Rules and paragraph B.1 of the CG Code. The duties of our remuneration committee, under the principle that no Director should be involved in deciding his own remuneration, include, without limitation, (a) making recommendations to our Board on our policy and structure for the remuneration of all of our Directors and senior management and on the establishment of a formal and transparent procedure for developing remuneration policies; (b) making recommendations to our Board on the remuneration packages of our 211

217 DIRECTORS AND SENIOR MANAGEMENT executive Directors and senior management, including benefits in kind, pension rights and compensation payments, including any compensation payable for loss or termination of their offices or appointments, and making recommendations to our Board of the remuneration of our Non-executive Directors; and (c) reviewing and approving our management s remuneration proposals with reference to our Board s corporate goals and objectives. Our remuneration committee consists of Mr. Hao Jian Min, Mr. Lim Wan Fung, Bernard Vincent, Mr. Suen Kwok Lam and Mr. Yung Wing Ki, Samuel. Mr. Suen Kwok Lam is the chairman of the remuneration committee. Nomination committee We established a nomination committee on [.] 2015 with written terms of reference in compliance with paragraph A.5 of the CG Code. The duties of our nomination committee include, without limitation, (a) reviewing the structure, size and composition (including the skills, knowledge and experience) of our Board at least annually and making recommendations on any proposed changes to our Board to complement our corporate strategy; (b) identifying individuals suitably qualified to become members of our Board and selecting or making recommendations to our Board on the selection of individuals nominated for directorships; (c) assessing the independence of our Independent Non-executive Directors; and (d) making recommendations to our Board on the appointment or re-appointment of our Directors and succession planning for our Directors, in particular the chairman and the chief executive. Our nomination committee consists of Mr. Hao Jian Min, Mr. Lim Wan Fung, Bernard Vincent, Mr. Suen Kwok Lam and Mr. Yung Wing Ki, Samuel. Mr. Hao Jian Min is the chairman of the nomination committee. REMUNERATION OF THE DIRECTORS AND THE FIVE HIGHEST PAID INDIVIDUALS For the years ended 31 December 2012, 2013 and 2014 and the five months ended 31 May 2015, no fees, salaries, allowances, discretionary payments, bonuses and contribution to pension schemes were paid by our Group to our Directors at the time. It is estimated that under the arrangements currently in force, the aggregate compensation payable to our Directors for the year ending 31 December 2015 will be approximately HK$3,190,000. We will maintain relevant liability insurance for our Directors in accordance with paragraph A.1.8 of the CG Code. During the Track Record Period, none of the five highest paid individuals of our Group included any of our Directors at the time. The aggregate amount of fees, salaries, allowances, discretionary payments, bonuses and contribution to pension schemes paid by our Group to the five highest paid individuals for the years ended 31 December 2012, 2013 and 2014 and the five months ended 31 May 2015 was HK$10,906,000, HK$10,695,000, HK$11,370,000 and HK$1,483,000, respectively. During the Track Record Period, no remuneration was paid to, or receivable by, our Directors at the time or the five highest paid individuals of our Group as an inducement to join or upon joining our Group. No compensation was paid to, or receivable by, such individuals during the Track Record Period for the loss of any office in connection with the management of the affairs of any member of our Group. 212

218 DIRECTORS AND SENIOR MANAGEMENT During the Track Record Period, none of our Directors at the time waived any remuneration and/or emoluments. Save as disclosed above, no other payments have been paid or are payable in respect of during the Track Record Period to our Directors at the time or the five highest paid individuals of our Group. Information on the service contracts and letters of appointment entered into between our Company and our Directors is set out in Appendix VI General Information C. Further Information about Directors and Shareholders 1. Directors. COMPLIANCE ADVISER We have appointed Somerley Capital Limited as our compliance adviser pursuant to Rule 3A.19 of the Listing Rules to provide advisory services to our Company. In compliance with Rule 3A.23 of the Listing Rules, we must consult with, and if necessary, seek advice from, the compliance adviser on a timely basis in the following circumstances: (a) before the publication of any regulatory announcement, circular or financial report including share issues and share repurchases; (b) where a transaction, which might be a notifiable or connected transaction, is contemplated; (c) (d) where the Group s business activities, developments or results deviate from any forecast, estimate or other information in this listing document; and where the Stock Exchange makes an inquiry of our Company concerning unusual movements in the price or trading volume of our Shares, the possible development of a false market in our Shares or any other matters. The term of the appointment of the compliance adviser will commence on the Listing Date and will end on the date on which our Company distributes its annual report in respect of its financial results for the first full financial year commencing after the Listing Date. 213

219 APPENDIX I ACCOUNTANT S REPORT The following is the text of a report received from the Company s reporting accountant, PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this listing document. It is prepared and addressed to the directors of the Company and to the Joint Sponsors pursuant to the requirements of Auditing Guideline Prospectus and the Reporting Accountant issued by the Hong Kong Institute of Certified Public Accountants. [Date] The Directors China Overseas Property Holdings Limited Merrill Lynch Far East Limited HSBC Corporate Finance (Hong Kong) Limited Dear Sirs, We report on the financial information of China Overseas Property Holdings Limited (the Company ) and its subsidiaries (together, the Group ), which comprises the consolidated statements of financial position as at 31 December 2012, 2013 and 2014 and 31 May 2015, and the consolidated income statements, the consolidated statements of comprehensive income, the consolidated statements of changes in equity and the consolidated statements of cash flows for each of the years ended 31 December 2012, 2013 and 2014 and the five months ended 31 May 2015 (the Relevant Periods ), and a summary of significant accounting policies and other explanatory information. This financial information has been prepared by the directors of the Company and is set out in Sections I to III below for inclusion in Appendix I to the listing document of the Company dated [date] (the Listing Document ) in connection with the initial listing of shares of the Company on the Main Board of The Stock Exchange of Hong Kong Limited. The Company was incorporated in the Cayman Islands on 26 June 2006 as an exempted company with limited liability under the Companies Law, Cap 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands. Pursuant to a group reorganisation as described in Note 2 of Section II headed Reorganisation below, which was completed on 28 May 2015, the Company became the holding company of the subsidiaries now comprising the Group (the Reorganisation ). I-1

220 APPENDIX I ACCOUNTANT S REPORT As at the date of this report, the Company has direct and indirect interests in the subsidiaries and associate as set out in Notes 2 and 21 of Section II below. All of these companies are private companies or, if incorporated or established outside Hong Kong, have substantially the same characteristics as a Hong Kong incorporated private company. The audited financial statements of the other companies now comprising the Group as at the date of this report for which there are statutory audit requirements have been prepared in accordance with the relevant accounting principles generally accepted in their place of incorporation. The details of the statutory auditors of these companies are set out in Note 2 of Section II. The directors of the Company have prepared the consolidated financial statements of the Company and its subsidiaries now comprising the Group for the Relevant Periods, in accordance with Hong Kong Financial Reporting Standards ( HKFRSs ) issued by the Hong Kong Institute of Certified Public Accountants (the HKICPA ) (the Underlying Financial Statements ). The directors of the Company are responsible for the preparation of the Underlying Financial Statements that gives a true and fair view in accordance with HKFRSs. We have audited the Underlying Financial Statements in accordance with Hong Kong Standards on Auditing (the HKSAs ) issued by the HKICPA pursuant to separate terms of engagement with the Company. The financial information has been prepared based on the Underlying Financial Statements, with no adjustment made thereon. Directors Responsibility for the Financial Information The directors of the Company are responsible for the preparation of the financial information that gives a true and fair view in accordance with HKFRSs, and for such internal control as the directors determine is necessary to enable the preparation of financial information that is free from material misstatement, whether due to fraud or error. Reporting Accountant s Responsibility Our responsibility is to express an opinion on the financial information and to report our opinion to you. We carried out our procedures in accordance with the Auditing Guideline Prospectuses and the Reporting Accountant issued by the HKICPA. Opinion In our opinion, the financial information gives, for the purpose of this report, a true and fair view of the financial position of the Group as at 31 December 2012, 2013 and 2014 and 31 May 2015 and of the Group s financial performance and cash flows for the Relevant Periods then ended. I-2

221 APPENDIX I ACCOUNTANT S REPORT Review of stub period comparative financial information We have reviewed the stub period comparative financial information set out in Sections I to II below included in Appendix I to the Listing Document which comprises the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the five months ended 31 May 2014 and a summary of significant accounting policies and other explanatory information (the Stub Period Comparative Financial Information ). The directors of the Company are responsible for the preparation and presentation of the Stub Period Comparative Financial Information in accordance with the accounting policies set out in Note 5 of Section II below. 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 of the Stub Period Comparative Financial Information 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 HKSAs 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 purpose of this report is not prepared, in all material respects, in accordance with the accounting policies set out in Note 5 of Section II below. I-3

222 APPENDIX I ACCOUNTANT S REPORT I. FINANCIAL INFORMATION OF THE GROUP The following is the financial information of the Group prepared by the directors of the Company as at 31 December 2012, 2013 and 2014 and 31 May 2015 and for each of the years ended 31 December 2012, 2013 and 2014 and the five months ended 31 May 2014 and 2015 (the Financial Information ): Consolidated Income Statement Year ended 31 December Five months ended 31 May Section II Note HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 (unaudited) Revenue ,444,850 1,844,067 2,163, , ,658 Direct operating expenses.. (1,215,755) (1,501,155) (1,750,598) (652,420) (753,724) 229, , , , ,934 Other income and gains, net ,555 16,463 18,350 5,319 7,525 Gain arising from changes in fair value of investment properties ,279 6,516 5,177 3,304 2,253 Administrative expenses.... (159,122) (247,062) (304,344) (119,419) (131,620) Operating profit , , ,309 44,327 57,092 Share of profits of an associate Financecosts (26) Profit before tax , , ,466 44,395 57,136 Income tax expenses (22,534) (33,447) (35,378) (11,510) (16,074) Profit for the years/periods attributable to owners of the Company ,549 85,528 97,088 32,885 41,062 EARNINGS PER SHARE (HK cents) Basic and diluted Dividends I-4

223 APPENDIX I ACCOUNTANT S REPORT Consolidated Statement of Comprehensive Income Year ended 31 December Five months ended 31 May HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 (unaudited) Profit for the years/periods ,549 85,528 97,088 32,885 41,062 Other comprehensive income Items that may be reclassified to profit or loss Exchange differences on translation of subsidiaries of thecompany... (100) 14,896 (1,603) (6,349) 1,918 Total comprehensive income for the years/periods attributable to owners of the Company.. 61, ,424 95,485 26,536 42,980 I-5

224 APPENDIX I ACCOUNTANT S REPORT Consolidated Statement of Financial Position As at 31 December As at 31 May Section II Note HK$ 000 HK$ 000 HK$ 000 HK$ 000 Non-current Assets Investment properties ,026 65,441 70,402 72,621 Property, plant and equipment ,094 40,997 45,440 44,731 Prepaid lease payments for land. 20 5,313 5,020 4,545 4,352 Interest in an associate Deferred tax assets ,850 3,147 2,527 2, , , , ,827 Current Assets Inventories ,521 9,208 6,882 2,459 Trade and other receivables , , , ,790 Deposits and prepayments ,164 6,263 12,198 18,193 Prepaid lease payment for land Amounts due from fellow subsidiaries , , ,228 25,953 Amounts due from related companies ,274 1,336 2,617 1,339 Taxprepaid Bank balances and cash ,632 1,081,914 1,088,601 1,286,524 1,209,800 1,600,367 1,818,036 1,702,716 Current Liabilities Trade and other payables , , , ,600 Receipts in advance , , , ,050 Deposits , , , ,401 Amounts due to fellow subsidiaries , , ,809 15,321 Amount due to a related company Tax liabilities ,593 52,226 74,075 78,259 Bankborrowing , ,867 1,276,111 1,408,234 1,266,631 Net Current Assets , , , ,085 Total Assets Less Current Liabilities , , , ,912 Capital and Reserves Sharecapital Reserves , , , ,429 Total equity attributable to owners of the Company , , , ,429 Non-current liabilities Deferred tax liabilities ,164 8,306 6,556 6, , , , ,912 I-6

225 APPENDIX I ACCOUNTANT S REPORT Consolidated Statement of Changes in Equity Share capital Translation reserve Attributable to owners of the Company PRC statutory reserve Special reserves Retained profits HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 (Note 30(b)(i)) At 1 January ,463 33,891 6, , ,133 Profitfortheyear... 61,549 61,549 Exchange differences on translation of subsidiaries of thecompany... (100) (100) Total comprehensive income fortheyear... (100) 61,549 61,449 Capital contribution from former shareholders to Acquired Companies prior to Reorganisation Transfer to PRC statutory reserve (118) At 31 December 2012 and 1 January ,363 34,009 6, , ,199 Profitfortheyear... 85,528 85,528 Exchange differences on translation of subsidiaries of thecompany... 14,896 14,896 Total comprehensive income fortheyear... 14,896 85, ,424 Capital contribution from former shareholders to Acquired Companies prior to Reorganisation ,225 26,225 Transfer to PRC statutory reserve (345) At 31 December 2013 and 1 January ,259 34,354 33, , ,848 Profitfortheyear... 97,088 97,088 Exchange differences on translation of subsidiaries of thecompany... (1,603) (1,603) Total comprehensive income fortheyear... (1,603) 97,088 95,485 Transfer to PRC statutory reserve (584) At 31 December ,656 34,938 33, , ,333 Total I-7

226 APPENDIX I ACCOUNTANT S REPORT Share capital Translation reserve Attributable to owners of the Company PRC statutory reserve Special reserves Retained profits HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 (Note 30(b)(i)) (unaudited) At 1 January ,259 34,354 33, , ,848 Profitfortheperiod... 32,885 32,885 Exchange differences on translation of subsidiaries of thecompany... (6,349) (6,349) Total comprehensive income fortheperiod... (6,349) 32,885 26,536 At 31 May ,910 34,354 33, , ,384 At 1 January ,656 34,938 33, , ,333 Profitfortheperiod... 41,062 41,062 Exchange differences on translation of subsidiaries of thecompany... 1,918 1,918 Total comprehensive income fortheperiod... 1,918 41,062 42,980 Acquisition of Acquired Companies in connection with the Reorganisation (Note 2).. (14,884) (14,884) At 31 May ,574 34,938 18, , ,429 Total I-8

227 APPENDIX I ACCOUNTANT S REPORT Consolidated Statement of Cash Flows Year ended 31 December Five months ended 31 May Section II Note HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 (unaudited) OPERATING ACTIVITIES Profit before tax , , ,466 44,395 57,136 Adjustments for: Share of profits of an associate (276) (146) (157) (68) (70) Financecosts Impairment provision for trade and other receivables, net ,988 9,853 10,559 4,170 4,950 Depreciation and amortization ,634 13,256 14,724 5,197 6,529 Gain arising from changes in fair value of investment properties.. (3,279) (6,516) (5,177) (3,304) (2,253) Interest income (3,994) (8,500) (10,611) (3,691) (4,474) Loss on disposals of property, plant and equipment Operating cash flows before movements in working capital , , ,963 46,723 61,844 (Increase)/decrease in inventories (628) (4,463) 2,291 (2,150) 4,516 Increase in trade and other receivables, deposits and prepayments (23,174) (53,826) (49,989) (135,422) (139,814) (Increase)/decrease in amounts due from fellow subsidiaries trade..... (43,504) 2,051 (47,959) 12,278 86,733 Increase in amounts due from related companies trade (1,275) (21) (1,217) (1,117) 1,333 Increase/(decrease) in trade and other payables, receipts in advance and deposits , , ,017 (53,874) (101,616) Increase/(decrease) in amounts due to fellow subsidiaries trade ,877 4,617 (43,601) (13,581) (3,730) (Decrease)/increase in amounts due to related companies trade..... (1,841) 118 (117) 2,641 Cash generated from/(used in) operations , , ,388 (144,502) (90,734) Income taxes paid (3,809) (19,432) (15,236) (8,138) (11,957) NET CASH FROM/(USED IN) OPERATING ACTIVITIES. 201, , ,152 (152,640) (102,691) I-9

228 APPENDIX I ACCOUNTANT S REPORT Year ended 31 December Five months ended 31 May Section II Note HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 (unaudited) INVESTING ACTIVITIES Interest received ,994 8,500 10,611 3,691 4,474 Dividend received from anassociate Purchase of property, plant and equipment..... (12,461) (18,376) (19,205) (4,684) (5,238) Acquisition of subsidiaries (net of cash and cash equivalents acquired) (33,626) Acquisition of Acquired Companies in connection with the Reorganisation... 2 (14,884) (Advance to)/repayment from fellow subsidiaries non-trade (4,192) 1,409 (125,335) (126,687) 356,910 Repayment from a related company... 66,923 Net proceeds on disposals of property, plant and equipment , NET CASH (USED IN)/FROM INVESTING ACTIVITIES.. (11,995) (6,827) (133,445) (127,320) 374,672 FINANCING ACTIVITIES Capital contribution from former shareholders to Acquired Companies prior to Reorganisation ,225 Advance from/(repayment to) fellow subsidiaries non-trade ,354 8,976 20,438 5,740 (237,745) Newbankborrowing ,000 NET CASH FROM/(USED IN) FINANCING ACTIVITIES.. 8,971 35,201 20,438 5,740 (73,745) NET INCREASE/ (DECREASE) IN CASH AND CASH EQUIVALENTS 198, ,198 10,145 (274,220) 198,236 CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR/PERIOD , ,632 1,081,914 1,081,914 1,088,601 EFFECT OF FOREIGN EXCHANGE RATE CHANGES... (252) 27,084 (3,458) (9,943) (313) CASH AND CASH EQUIVALENTS AT END OF THE YEAR/PERIOD ,632 1,081,914 1,088, ,751 1,286,524 I-10

229 APPENDIX I ACCOUNTANT S REPORT II. NOTES TO THE FINANCIAL INFORMATION 1. GENERAL China Overseas Property Holdings Limited (formerly known as China Overseas Management Services (International) Limited) (the Company ) was incorporated in the Cayman Islands on 26 June 2006 as an exempted company with limited liability under the Companies Law, Cap. 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands. The address of its registered office is Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands and its principal place of business is 10th Floor, Three Pacific Place, 1 Queen s Road East, Hong Kong. The Company s parent company is China Overseas Land & Investment Limited ( COLI ), a company incorporated in Hong Kong and its shares are listed on The Stock Exchange of Hong Kong Limited (the Stock Exchange ), and its ultimate holding company is China State Construction Engineering Corporation ( CSCEC ), an entity established in the People s Republic of China (the PRC ) and the PRC government is a substantial shareholder of CSCEC. The Company is an investment holding company. The Company and its subsidiaries (together, the Group ) are principally engaged in provision of property management and value-added services. The financial statements are presented in Hong Kong dollars ( HK$ ), which is the same as the functional currency of the Company. 2. REORGANISATION In preparation for the listing of the shares of the Company on the Main Board of The Stock Exchange of Hong Kong Limited, the Company, together with its subsidiaries and its other acquired companies as stated below, now comprising the Group have undergone a reorganisation (the Reorganisation ) which comprised of the following steps: (i) (ii) (iii) (iv) On 15 May 2015, 淄博中海投資有限公司 ( COHL Zibo PM Holding ) (as vendor), a wholly-owned subsidiary of China Overseas Holdings Limited ( COHL ), an intermediate holding company of the Company, and 北京中建物業管理有限公司 ( CSPM Beijing ) (as purchaser), a wholly-owned subsidiary of COLI, entered into an agreement whereby COHL Zibo PM Holding agreed to transfer the entire equity interests of 淄博中海親頤物業服務有限公司 ( CSPM Zibo or COHL Acquired Company ) to CSPM Beijing at a consideration of RMB1 (equivalent to approximately HK$1). The consideration was settled in cash on 27 May 2015 and the aforesaid transfer was properly and legally completed on 28 May On 15 May 2015, 重慶中海興業實業有限公司 ( COLI Chongqing PM Holding ) (as vendor), a wholly-owned subsidiary of COLI, and CSPM Beijing (as purchaser) entered into an agreement whereby COLI Chongqing PM Holding agreed to transfer the entire equity interests of 重慶海投物業管理有限公司 ( CSPM Chongqing ) to CSPM Beijing at a consideration of RMB1 (equivalent to approximately HK$1). The consideration was settled in cash on 27 May 2015 and the aforesaid transfer was properly and legally completed on 28 May On 15 May 2015, 中建國際建設有限公司 ( COLI Beijing PM Holding ) (as vendor), a wholly-owned subsidiary of COLI, and 中海物業管理有限公司 ( COPL PRC Holding ) (as purchaser) entered into an agreement whereby COLI Beijing PM Holding agreed to transfer the entire equity interests of CSPM Beijing to COPL PRC Holding at a consideration of RMB11,748,000 (equivalent to approximately HK$14,884,000). The consideration was settled in cash on 27 May 2015 and the aforesaid transfer was properly and legally completed on 28 May On 18 May 2015, 中海宏洋地產集團有限公司 ( COGO Property ) (as vendor), a wholly-owned subsidiary of China Overseas Grand Oceans Group Limited ( COGO ), an associate of COLI, and COPL PRC Holding (as purchaser) entered into an agreement whereby COGO Property agreed to transfer the entire equity interests of 中海宏洋物業管理有限公司 ( COGOPM Holding ) to COPL PRC Holding at a consideration of approximately RMB50,000,000 (equivalent to approximately HK$63,161,000) which was determined after arm s length negotiations between the parties by reference to the fair value of COGOPM Holding. The consideration was settled in cash on 27 May 2015 and the aforesaid transfer was properly and legally completed on 28 May 2015 (see note 32). I-11

230 APPENDIX I ACCOUNTANT S REPORT Pursuant to the equity transfer agreement between COGO Property and COPL PRC Holding, profit and loss of COGOPM Holding is responsible by the purchaser after 31 March Upon completion of the above transfers, the Company became the holding company of the companies now comprising the Group. During the years ended 31 December 2012, 2013 and 2014 and the five months ended 31 May 2014 and 2015 and as at the date of this report, the Company has direct and indirect interests in the following subsidiaries: Name of subsidiary China Overseas Property Services Limited Place of incorporation/ establishment Date of incorporation/ establishment Registered/ issued and paid up capital Attributable equity interest of the Group Direct Indirect % % Principal activities Place of operations Hong Kong 23 December 1986 HK$ Real estate management and investment holding Hong Kong (i) Macau 8 September 2005 MOP25, Real estate management Macau (ii) Gold Court (Macau) Property Services Limited 中海物業管理有限公司..... PRC 7 April 1995 RMB50,000, Real estate management and investment holding China Overseas Property Hong Kong 8 May 2015 HK$1 100 Holding of trade mark Hong Kong (iii) Management Trade Mark Limited China Overseas Building Hong Kong 16 May 1991 HK$ Real estate management Hong Kong (i) Management Limited... China Overseas Security Hong Kong 28 May 2003 HK$2 100 Provision of security Hong Kong (i) Services Limited services Mepork Services Limited... Hong Kong 30 May 1989 HK$ Provision of building Hong Kong (i) cleaning, maintenance and security services 上海中海物業管理有限公司... PRC 26 June 1995 RMB5,050, Real estate management PRC (iv) 深圳市中海樓宇科技有限公司.. PRC 29 June 1998 RMB5,000, Provision of repair and maintenance services PRC (iv) 深圳市海惠萬家網絡信息技術有限公司 (Formerly known as 深圳市中海社區環境工程有限公司 ) PRC 14 August 1998 RMB2,000, Provision of automation and other equipment upgrade services 深圳市中海電梯工程有限公司.. PRC 28 December 1998 RMB5,000, Provision of repair and PRC (iv) maintenance services of elevators 長春中海物業管理有限公司... PRC 14 November 2003 RMB1,000, Real estate management PRC (iv) 成都中海物業管理有限公司... PRC 25 May 2001 RMB3,000, Real estate management PRC (iv) 中海物業管理廣州有限公司... PRC 28 August 1995 RMB15,800, Real estate management PRC (iv) 北京中海物業管理有限公司... PRC 21 January 1999 RMB5,000, Real estate management PRC (iv) 廣州中海機電工程有限公司... PRC 23 December 1999 RMB1,000, Provision of repair and PRC (iv) maintenance services 北京中建物業管理有限公司... PRC 23 August 2003 RMB25,000, Real estate management PRC (iv), (v) 重慶海投物業管理有限公司... PRC 21 September 2012 RMB500, Real estate management PRC (ii) 淄博中海親頤物業服務有限公司 (Formerly known as 淄博 PRC 18 January 2013 RMB1,000, Real estate management PRC (ii) 中海投物業服務有限公司 ). 中海宏洋物業管理有限公司... PRC 8 October 1998 RMB50,000, Real estate management PRC (vi) 廣州市光大花園物業管理 PRC 15 February 2000 RMB3,000, Real estate management PRC (vi) 有限公司 呼和浩特市中海物業服務 PRC 13 June 2010 RMB3,000, Real estate management PRC (vi) 有限公司 PRC PRC Notes (iv) (iv) I-12

231 APPENDIX I ACCOUNTANT S REPORT Notes: (i) The statutory financial statements of these subsidiaries for the years ended 31 December 2012, 2013 and 2014 were prepared in accordance with Hong Kong Financial Reporting Standards and audited by PricewaterhouseCoopers, Certified Public Accountants. (ii) (iii) (iv) No audited financial statements were issued for these subsidiaries as they are not required to issue audited financial statements under the statutory requirements of the places of incorporation. No audited financial statements were issued for the subsidiary as it was newly incorporated during the five months ended 31 May The statutory financial statements of entities established in the PRC for the Relevant Period or since respective date of establishment, where there is a shorter period were prepared in accordance with the relevant accounting policies and financial regulations applicable to enterprises established in the PRC. They were audited by the following firms of certified public accountants registered in the PRC. Name of company Periods covered Name of auditors 中海物業管理有限公司... Eachofthethreeyearsended 北京正順祥會計師事務所 31 December 2014 上海中海物業管理有限公司... Eachofthethreeyearsended 上海新高信會計師事務所有限公司 31 December 2014 深圳市中海樓宇科技有限公司... Eachofthethreeyearsended 深圳巨源至合會計師事務所 ( 普通合伙 ) 31 December 2014 深圳市海惠萬家網絡信息技術有限公司 Each of the three years ended 深圳巨源至合會計師事務所 ( 普通合伙 ) (Formerly known as 深圳市中海社區環境工程有限公司 ) December 2014 深圳市中海電梯工程有限公司... Eachofthethreeyearsended 深圳巨源至合會計師事務所 ( 普通合伙 ) 31 December 2014 長春中海物業管理有限公司... Eachofthethreeyearsended 吉林萬鑫會計師事務所 31 December 2014 成都中海物業管理有限公司... Eachofthethreeyearsended 四川中砝會計師事務所有限責任公司 31 December 2014 中海物業管理廣州有限公司... Eachofthethreeyearsended 廣州志信會計師事務所有限公司 31 December 2014 北京中海物業管理有限公司... Eachofthethreeyearsended 北京正順祥會計師事務所 31 December 2014 廣州中海機電工程有限公司... Eachofthethreeyearsended 廣州志信會計師事務所有限公司 31 December 2014 北京中建物業管理有限公司... Eachofthetwoyearsended 深圳巨源至合會計師事務所 ( 普通合伙 ) 31 December 2013 For the year ended 31 December 2014 北京正順祥會計師事務所 (v) On 18 March 2013, the subsidiary had additional capital contribution of RMB19,990,000 (equivalent to approximately HK$26,225,000) from its former shareholder. Upon the completion of such capital contribution, the subsidiary had registered and paid up capital of RMB25,000,000. (vi) The subsidiaries were acquired by COPL PRC Holding on 28 May I-13

232 APPENDIX I ACCOUNTANT S REPORT 3. BASIS OF PRESENTATION The companies now comprising the Group, excluding COGOPM Holding and its subsidiaries, were under common control of COHL immediately before and after the Reorganisation. Accordingly, the Reorganisation is regarded as a business combination under common control, and for the purpose of this report, the Financial Information has been prepared using the principles of merger accounting, as prescribed in Hong Kong Accounting Guideline 5 Merger Accounting for Common Control Combinations issued by the Hong Kong Institute of Certified Public Accountants. The Financial Information has been prepared by including the financial information of the Company and other companies now comprising the Group, excluding COGOPM Holding and its subsidiaries, under the common control of COHL immediately before and after the Reorganisation as if the current group structure had been in existence throughout the periods presented, or since the date when the companies first came under the control of COHL, whichever is a shorter period. The net assets of CSPM Beijing, CSPM Chongqing and CSPM Zibo (together, the Acquired Companies ) were combined using the existing book values from COHL s perspective. No amount is recognised in consideration for goodwill or excess of acquirer s interest in the net fair value of acquiree s identifiable assets, liabilities and contingent liabilities over cost at the time of business combination under common control, to the extent of the continuation of the controlling party s interest. Inter-company transactions, balances and unrealised gains/losses on transactions between group companies are eliminated on consolidation. The acquisition of COGOPM Holding and its subsidiaries was a business combination accounted for using the acquisition method. Accounting Adjustments under Common Control Combination The following is a reconciliation of the effect arising from the common control combination on the consolidated statements of financial position. The consolidated statement of financial position as at 31 December 2012: The Group The Acquired Companies Adjustments Consolidated HK$ 000 HK$ 000 HK$ 000 HK$ 000 (note) Total assets less liabilities ,632 (6,433) 304,199 Sharecapital... 6,797 (6,797) Translationreserve... 24,058 (695) 23,363 PRCstatutoryreserve... 34,009 34,009 Specialreserve... 6,797 6,797 Retainedprofits ,565 (12,535) 240,030 Totalequity ,632 (6,433) 304,199 I-14

233 APPENDIX I ACCOUNTANT S REPORT The consolidated statement of financial position as at 31 December 2013: The Group The Acquired Companies Adjustments Consolidated HK$ 000 HK$ 000 HK$ 000 HK$ 000 (note) Total assets less liabilities ,616 5, ,848 Sharecapital... 33,022 (33,022) Translationreserve... 38,939 (680) 38,259 PRCstatutoryreserve... 34,354 34,354 Specialreserve... 33,022 33,022 Retainedprofits ,323 (27,110) 325,213 Totalequity ,616 5, ,848 The consolidated statement of financial position as at 31 December 2014: The Group The Acquired Companies Adjustments Consolidated HK$ 000 HK$ 000 HK$ 000 HK$ 000 (note) Total assets less liabilities , ,333 Sharecapital... 33,022 (33,022) Translationreserve... 37,360 (704) 36,656 PRCstatutoryreserve... 34,938 34,938 Specialreserve... 33,022 33,022 Retainedprofits ,042 (31,325) 421,717 Totalequity , ,333 The consolidated statement of financial position as at 31 May 2015: The Group The Acquired Companies Adjustments Consolidated HK$ 000 HK$ 000 HK$ 000 HK$ 000 (note) Investmentinacquiredcompanies... 14,884 (14,884) Other assets less liabilities ,171 4, ,429 Total assets less current liabilities ,055 4,258 (14,884) 554,429 Sharecapital... 33,022 (33,022) Translationreserve... 39,276 (702) 38,574 PRCstatutoryreserve... 34,938 34,938 Specialreserve... 18,138 18,138 Retainedprofits ,841 (28,062) 462,779 Totalequity ,055 4,258 (14,884) 554,429 Note: The above adjustment represents an adjustment to eliminate the share capital of the combining entities against the investment cost. The difference of approximately HK$6,797,000, HK$33,022,000, HK$33,022,000 and HK$18,138,000 as at 31 December 2012, 2013 and 2014, and 31 May 2015 have been made to the special reserve in the Financial Information. I-15

234 APPENDIX I ACCOUNTANT S REPORT 4. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS The Group has not early applied the following new and revised Hong Kong Accounting Standards ( HKAS(s) ), Hong Kong Financial Reporting Standards ( HKFRS(s) ), amendments and interpretations (hereinafter collectively referred to as the new and revised HKFRSs ) issued by the Hong Kong Institute of Certified Public Accountants (the HKICPA ) that have been issued but are not yet effective. Amendments to HKAS 1 Disclosure Initiative 2 Amendments to HKAS 16 and HKAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation 2 Amendments to HKAS 16 and HKAS 41 Agriculture: Bearer Plants 2 Amendments to HKAS 19 Employee Benefits: Defined Benefit Plans Employees Contributions 1 Amendment to HKAS 27 Equity Method in Separate Financial Statements 2 Amendments to HKFRS 10 and HKAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture 2 Amendments to HKFRS 10, Investment Entities: Applying the Consolidation Exception 2 HKFRS 12 and HKAS 28 (2011) Amendments to HKFRS 11 Accounting for Acquisitions of Interests in Joint Operations 2 HKFRS 9 (2014) Financial Instruments 4 HKFRS 14 Regulatory Deferral Accounts 2 HKFRS 15 Revenue from Contracts with Customers 3 Annual Improvements Project Annual Improvements Cycle 1 Annual Improvements Project Annual Improvements Cycle 1 Annual Improvements Project Annual Improvements Cycle Effective for annual periods beginning on or after 1 July 2014 Effective for annual periods beginning on or after 1 January 2016 Effective for annual periods beginning on or after 1 January 2017 Effective for annual periods beginning on or after 1 January 2018 The Group has already commenced an assessment of the impact of these new or revised standards and amendments, certain of which may be relevant to the Group s operations and may give rise to changes in disclosure, recognition and remeasurement of certain items in the Financial Information. The Group has early adopted the New Listing requirements with the new Hong Kong Companies Ordinance (Cap. 622) which takes effect on 1 April SIGNIFICANT ACCOUNTING POLICIES Basis of Preparation The Financial Information has been prepared in accordance with HKFRS(s) issued by the HKICPA. In addition, the Financial Information includes applicable disclosures required by the Rules Governing the Listing of Securities on the Hong Kong Stock Exchange and the Hong Kong Companies Ordinance. The Financial Information has been prepared on the historical cost basis except for investment properties, which are measured at fair values, as explained in the accounting policies set out below. Historical cost is generally based on the consideration given in exchange for goods. The principal accounting policies are set out below. Basis of Consolidation The Financial Information incorporates the financial information of the Company and entities controlled by the Company (its subsidiaries). A subsidiary is an entity (including a structured entity) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. I-16

235 APPENDIX I ACCOUNTANT S REPORT Where necessary, adjustments are made to the financial information of subsidiaries to bring their accounting policies in line with those used by other members of the Group. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. Business Combinations Business combination involving entities under common control in accordance with Accounting Guideline 5 Merger Accounting for Common Control Combination The Financial Information incorporates the financial statement items of the combining entities or businesses in which the common control combination occurs as if they had been consolidated from the date when the combining entities or businesses first came under the control of the controlling party. The net assets of the combining entities or businesses are consolidated using the existing book values from the controlling party s perspective. No amount is recognised in respect of goodwill or excess of acquirer s interest in the net fair value of acquirer s identifiable assets, liabilities and contingent liabilities over cost at the time of common control combination, to the extent of the continuation of the controlling party s interest. The Financial Information include the results of each of the combining entities or businesses from the earliest date presented or since the date when the combining entities or businesses first came under the common control, where this is a shorter period, regardless of the date of the common control combination. Other business combination Except for the acquisition of the Acquired Companies, which are accounted for using the merger basis of accounting, other business combinations are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred. At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value, except that deferred tax assets or liabilities and assets or liabilities related to employee benefit arrangements are recognised and measured in accordance with HKAS 12 Income Taxes and HKAS 19 Employee Benefits respectively. Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer s previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain. Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity s net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests proportionate share of the recognised amounts of the acquiree s identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Other types of non-controlling interests are measured at their fair value or when applicable, on the basis specified in another standard. Where the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted, with the corresponding adjustments made against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the measurement period (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date. I-17

236 APPENDIX I ACCOUNTANT S REPORT The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is remeasured at subsequent reporting dates in accordance with HKAS 39, or HKAS 37 Provisions, Contingent Liabilities and Contingent Assets, as appropriate, with the corresponding gain or loss being recognised in profit or loss. When a business combination is achieved in stages, the Group s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date (i.e. the date when the Group obtains control), and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss where such treatment would be appropriate if that interest was disposed of. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see above), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed as at the acquisition date that, if known, would have affected the amounts recognised as at that date. Investments in Subsidiaries Investments in subsidiaries are included in the Company s statement of financial position at cost less any identified impairment loss. The results of subsidiaries are accounted for by the Company on the basis of dividend received or receivable. Impairment testing of the investments in subsidiaries is required upon receiving a dividend from these investments if the dividend exceeds the total comprehensive income of the subsidiary in the period the dividend is declared or if the carrying amount of the investment in the separate financial statements exceeds the carrying amount in the Financial Information of the investee s net assets including goodwill. Interests in Associates An associate is an entity over which the investor has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. The results and assets and liabilities of associates are incorporated in this Financial Information using the equity method of accounting. Under the equity method, interests in associates are initially recognised in the Financial Information at cost and adjusted thereafter to recognise the Group s share of the profit or loss and other comprehensive income of the associates. When the Group s share of losses of an associate equals or exceeds its interest in that associate (which includes any long-term interests that, in substance, form part of the Group s net investment in the associate), the Group discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of that associate. Any excess of the cost of acquisition over the Group s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate recognised at the date of acquisition is recognised as goodwill, which is included within the carrying amount of the investment. Any excess of the Group s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss. The requirements of HKAS 39 are applied to determine whether it is necessary to recognise any impairment loss with respect to the Group s investment in an associate. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with HKAS 36 Impairment of Assets asasingleassetby comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount. Any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with HKAS 36 to the extent that the recoverable amount of the investment subsequently increases. I-18

237 APPENDIX I ACCOUNTANT S REPORT When a group entity transacts with its associate, profits and losses resulting from the transactions with the associate are recognised in the Group s Financial Information only to the extent of interests in the associate that are not related to the Group. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group. Investment Properties Investment properties are properties held to earn rentals and/or for capital appreciation (including properties under construction for such purposes). Investment properties include land held for undetermined future use, which is regarded as held for capital appreciation purpose. Investment properties are initially measured at cost, including any directly attributable expenditure. Subsequent to initial recognition, investment properties are measured at their fair values. Gains or losses arising from changes in the fair value of investment properties are included in profit or loss for the period in which they arise. An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from its disposals. Any gain or loss arising on derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the profit or loss in the period in which the item is derecognised. Property, Plant and Equipment Property, plant and equipment including land (classified as finance leases) and buildings held for use in the production or supply of goods or services, or for administrative purposes, are stated in the Financial Information at cost less subsequent accumulated depreciation and accumulated impairment losses, if any. Depreciation is provided to write off the cost of items of property, plant and equipment over their estimated useful lives and after taking into account of their estimated residual value, using the straight-line method. Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease. However, when there is no reasonable certainty that ownership will be obtained by the end of the lease term, assets are depreciated over the shorter of the lease term and their useful lives. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss. Impairment Losses on Tangible Assets At the end of the reporting period, the Group reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cashgenerating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or a cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or a cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss. I-19

238 APPENDIX I ACCOUNTANT S REPORT Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or a cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately. Financial Instruments Financial assets and financial liabilities are recognised in the Financial Information when a group entity becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss. Financial Assets The Group s financial assets are classified into loans and receivables. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace. Effective interest method The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset, or, where appropriate, a shorter period to the net carrying amount on initial recognition. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables (including trade and other receivables, deposits, amounts due from fellow subsidiaries and related companies, and bank balances and cash) are carried at amortised cost using the effective interest method, less any identified impairment losses (see accounting policy on impairment of financial assets below). Impairment of financial assets Financial assets are assessed for indicators of impairment at the end of the reporting period. Financial assets are considered to be impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the financial assets have been affected. Objective evidence of impairment could include:. significant financial difficulty of the issuer or counterparty; or. breach of contract, such as default or delinquency in interest or principal payments; or. it becoming probable that the borrower will enter bankruptcy or financial re-organisation. For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group s past experience of collecting payments, an increase in the number of delayed payments in the portfolio, observable changes in national or local economic conditions that correlate with default on receivables and deteriorated value in collateral assets. I-20

239 APPENDIX I ACCOUNTANT S REPORT For financial assets carried at amortised cost, the amount of the impairment loss recognised is the difference between the asset s carrying amount and the present value of the estimated future cash flows discounted at the financial asset s original effective interest rate. The carrying amount of the financial asset is reduced by the impairment loss directly recognised in profit or loss. For financial assets measured at amortised cost, if, in a subsequent period, the amount of impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment losses was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised. Financial Liabilities and Equity Instruments Financial liabilities and equity instruments issued by a group entity are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs. Financial liabilities (including trade and other payables, deposits, amounts due to fellow subsidiaries and a related company, and bank borrowing) are measured at amortised cost, using the effective interest method. Effective interest method The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that discounts estimated future cash payments (including all fees and points paid or received that form as integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition. Interest expense is recognised on an effective interest basis. Derecognition The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group continues to recognise the asset to the extent of its continuing involvement and recognises an associated liability. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received. The Group derecognises financial liability when, and only when, the Group s obligations are discharged, cancelled or expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss. Offsetting Financial Instruments Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the company or the counterparty. Inventories Inventories, representing consumables, are stated at the lower of cost and net realisable value. Cost is calculated using the first-in, first-out method. I-21

240 APPENDIX I ACCOUNTANT S REPORT Cash and Cash Equivalents In the consolidated statement of cash flows, cash and cash equivalents include cash in hand and deposits held at call with banks. Borrowing Costs All borrowing costs are recognised in profit or loss in the period in which they are incurred. Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the Group s management. The Group s management has been identified as the Board of Directors that makes strategic decisions. Foreign Currencies In preparing the financial information of each individual group entity, transactions in currencies other than the functional currency of that entity (foreign currencies) are recorded in the respective functional currency (i.e. the currency of the primary economic environment in which the entity operates) at the rates of exchanges prevailing on the dates of the transactions. At the end of the reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are recognised in profit or loss in the period in which they arise. Exchange differences arising on the retranslation of nonmonetary items carried at fair value are included in profit or loss for the period. For the purposes of presenting the Financial Information, the assets and liabilities of the Group s foreign operations are translated into the presentation currency of the Group (i.e. Hong Kong dollars) at the rate of exchange prevailing at the end of the reporting period, and their income and expenses are translated at the average exchange rates for the year/period, unless exchange rates fluctuate significantly during the period, in which case, the exchange rates prevailing at the dates of transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity under the heading of translation reserve (attributable to non-controlling interests as appropriate). On the disposal of a foreign operation (i.e. a disposal of the Group s entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, or a disposal involving loss of significant influence over an associate that includes a foreign operation), all of the exchange differences accumulated in equity in respect of that operation attributable to the owners of the Company are reclassified to profit or loss. In addition, in relation to a partial disposal of a subsidiary that does not result in the Group losing control over the subsidiary, the proportionate share of accumulated exchange differences are re-attributed to non-controlling interests and are not recognised in profit or loss. For all other partial disposals (i.e. partial disposals of associates that do not result in the Group losing significant influence), the proportionate share of the accumulated exchange differences is reclassified to profit or loss. Goodwill and fair value adjustments on identifiable assets acquired arising on an acquisition of a foreign operation are treated as assets and liabilities of that foreign operation and retranslated at the rate of exchange prevailing at the end of the reporting period. Exchange differences arising are recognised in equity under the heading of translation reserve. Leasing Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lease. All other leases are classified as operating leases. The Group as lessor Rental income from operating leases is recognised in profit or loss on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised as an expenseonastraight-linebasisovertheleaseterm. I-22

241 APPENDIX I ACCOUNTANT S REPORT The Group as lessee Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Leasehold Land and Building When a lease includes both land and building elements, the Group assesses the classification of each element as a finance or an operating lease separately based on the assessment as to whether substantially all the risks and rewards incidental to ownership of each element have been transferred to the Group, unless it is clear that both elements are operating leases, in which case the entire lease is classified as an operating lease. Specifically, the minimum lease payments (including any lump-sum upfront payments) are allocated between the land and the building elements in proportion to the relative fair values of the leasehold interests in the land element and building element of the lease at the inception of the lease. To the extent the allocation of the lease payments can be made reliably, interest in leasehold land that is accounted for as an operating lease is presented as prepaid lease payments for land in the Financial Information and is amortised over the lease term on a straight-line basis except for those that are classified and accounted for as investment properties under the fair value model. Taxation Income tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year/period. Taxable profit differs from profit before tax as reported in the Financial Information because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period. Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the Financial Information and the corresponding tax base used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, associates and joint ventures except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at the end of the reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. I-23

242 APPENDIX I ACCOUNTANT S REPORT Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset is realised, based on tax rate (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Current and deferred tax is recognised in profit or loss. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis. Revenue Recognition Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods sold and services provided in the normal course of business, net of discounts. Property management services and value-added services Revenue from property management services and value-added services is recognised when services are rendered. For property management service income from properties managed under lump sum basis, where the Group acts as principal, the Group entitles to revenue at the value of property management service fee received by the properties. For property management service income from properties managed under commission basis, where the Group acts as an agent of the property owner, the Group entitles revenue at a pre-determined percentage of the property management fee received by the properties. Dividend Income Dividend income from investments is recognised when the Group s rights to receive payment have been established. Interest Income Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial assets to that asset s net carrying amount on initial recognition. Government grants Unconditional government grant is recognised in profit or loss of the period in which it becomes receivable. Employee benefits Retirement Benefit Costs A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. Payments to the Mandatory Provident Fund Scheme and other state-managed retirement benefit schemes are charged as an expense when employees have rendered service entitling them to the contributions. Bonus Plans The Group recognises a liability and an expense for bonuses, based on a formula that takes into consideration the profit attributable to the owners of the Company after certain adjustments. The Group recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation. I-24

243 APPENDIX I ACCOUNTANT S REPORT Employee Leave Entitlements Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by employees up to the end of the reporting period. Employee entitlements to sick leave and maternity leave are not recognised until the time of leave. Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognised for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense. Dividend Distribution Dividend distribution of the Company s shareholders is recognised as a liability in the Group s and the Company s financial information in the period in which the dividends are approved by the Company s shareholders or directors, where appropriate. 6. KEY SOURCES OF ESTIMATION UNCERTAINTY In the application of the Group s accounting policies, which are described in note 5, the Group is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. The key assumptions concerning the future, and other key sources of estimation uncertainty at the end of reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below: (a) Allowances on doubtful receivables The Group makes allowances on doubtful receivables based on an assessment of the recoverability of the receivables. Allowances are provided on receivable where events or changes in circumstances indicate that the receivable may not be collectible. The identification of doubtful receivables requires the use of judgment and estimates. To determine whether there is any objective evidence of doubtful receivables, the Group takes into consideration a number of indicators, including, among others, subsequent settlement status, historical write-off experience and management fee collection rate of the residents in estimating the future cashflows from the receivables. Where the expectation is different from the original estimate, such difference will impact the carrying amount of trade and other receivables and doubtful debt expenses in the periods in which such estimate has been changed. I-25

244 APPENDIX I ACCOUNTANT S REPORT (b) Impairment of payments on behalf of management offices under commission basis The Group has receivables arising from the payments on behalf of management offices in the property management services business. It mainly relates to advances made to the management offices and costs paid centrally and shared by these management offices. Significant management estimation is required to determine whether the management offices have the ability to settle these receivables due to the Group. To determine whether there is any objective evidence of impairment loss, the management takes into consideration a number of indicators, including, among others, subsequent settlement status, historical write-off experience, the financial performance of the communities and management fee collection rate of the communities in estimating the future cashflows from the communities. Where the expectation is different from the original estimate, such difference will impact the carrying amount of payments on behalf of management offices and doubtful debt expenses in the periods in which such estimate has been changed. (c) Fair value of investment properties Investment properties are carried in the Financial Information as at 31 December 2012, 2013, 2014 and 31 May 2015 at their fair values of approximately HK$57,026,000, HK$65,441,000, HK$70,402,000 and HK$72,621,000, respectively. The fair values were based on a valuation on these properties conducted by an independent firm of professional valuer using property valuation techniques which involve certain assumptions of market conditions. Favourable or unfavourable changes to these assumptions would result in changes in the fair values of the Group s investment properties and corresponding adjustments to the amount of gain or loss recognised in profit or loss. (d) Useful lives and impairment assessment of property, plant and equipment Property, plant and equipment are long-lived but may be subject to technical obsolescence. The annual depreciation charges are affected by the estimated useful lives that the Group allocates to each type of property, plant and equipment. Management performs annual reviews to assess the appropriateness of the estimated useful lives. Such reviews take into account the technological changes, prospective economic utilisation and physical condition of the assets concerned. Management also regularly reviews whether there are any indications of impairment and will recognise an impairment loss if the carrying amount of an asset is higher than its recoverable amount which is the greater of its net selling price or its value in use. In determining the value in use, management assesses the present value of the estimatedfuturecashflowsexpectedtoarisefromthecontinuing use of the asset and from its disposal at the end of its useful life. Estimates and judgments are applied in determining these future cash flows and the discount rate. Management estimates the future cash flows based on certain assumptions, such as market competition and development and the expected growth in business. (e) Impairment assessment of amounts due from fellow subsidiaries and related companies In determining whether there is objective evidence of impairment loss, the Group takes into consideration the estimation of future cash flows generated by the fellow subsidiaries and related companies which is based on the plan of the management of the respective group companies and related companies under the direction of COLI. Where the future plan or the future cash flow is different from the original estimate, a material impairment loss may arise. (f) Current taxation and deferred taxation The Group is subject to taxation in Mainland China, Hong Kong and Macau. Judgment is required in determining the amount of the provision for taxation and the timing of payment of the related taxation. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the periods in which such determination are made. I-26

245 APPENDIX I ACCOUNTANT S REPORT Deferred tax assets relating to certain temporary differences and tax losses are recognised whenever management considers it is probable that future taxable profit will be available against which the temporary differences or tax losses can be utilised. Where the expectation is different from the original estimate, such differences will impact on the recognition of deferred taxation assets and taxation in the periods in which such estimate is changed. 7. CAPITAL RISK MANAGEMENT Capital risk The Group manages its capital to ensure that it will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The Group s overall strategy remains unchanged from prior year. The capital structure of the Group consists of debt, which mainly includes bank borrowing disclosed in note 29, cash and cash equivalents and equity of the Group, comprising issued share capital, retained profits and other reserves. The directors of the Company review the capital structure periodically. As part of this review, the directors of the Company assess budgets of major projects taking into account of the provision of funding, Based on the operating budgets, the directors consider the cost of capital and the risks associated with each class of capital and balances its overall capital structure through the payment of dividends, new share issues as well as the issue of new debt or the redemption of existing debts. The gearing ratio as at 31 December 2012, 2013 and 2014, and 31 May 2015 are as follows: As at As at 31 December 31 May Financial metric Formula Gearingratio... Totalborrowingsdividedby total equity attributable to owners of the Company n.a. n.a. n.a. 29.6% The Group was in a net cash position as at 31 December 2012, 2013 and 2014 and 31 May FINANCIAL INSTRUMENTS Details of the significant accounting policies and methods adopted (including the criteria for recognition, the bases of measurement, and the bases for recognition of income and expenses), for each class of financial assets, financial liabilities and equity instruments are disclosed in note 5. (a) Categories of financial instruments THE GROUP As at 31 December As at 31 May HK$ 000 HK$ 000 HK$ 000 HK$ 000 Financial assets Loans and receivables at amortised cost (including cash and cash equivalents) ,202,340 1,588,533 1,800,900 1,690,338 Financial liabilities Liabilitiesatamortisedcost... (808,699) (1,029,806) (1,114,380) (973,322) (b) Financial risk management objectives and policies The Group s major financial instruments include trade and other receivables, trade and other payables, deposits under current assets and current liabilities, amounts due from/to fellow subsidiaries and related companies, bank balances and cash, and bank borrowing. Details of the financial instruments are disclosed in respective notes. I-27

246 APPENDIX I ACCOUNTANT S REPORT Management monitors and manages the financial risks relating to the Group through internal risk assessment which analyses exposures by degree and magnitude of risks. These risks include market risk (including interest rate risk), credit risk and liquidity risk. The Group has no significant currency risk as it has no significant foreign denominated monetary assets and liabilities. Management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner. The Group does not enter into or trade financial instruments, including derivative financial instruments, for hedging or speculative purpose. There has been no change to the Group s exposure to these kinds of risks or the manner in which it manages and measures these risks. (i) Market risk The Group s activities expose it primarily to the financial risks of changes in interest rates. Interest rate risk The Group s cash flow interest rate risk relates primarily to its variable-rate bank balances amounting to approximately HK$751,632,000, HK$1,081,914,000, HK$1,088,601,000 and HK$1,286,524,000, and variable-rate bank borrowing amounting to approximately nil, nil, nil and HK$164,000,000 as at 31 December 2012, 2013 and 2014, and 31 May 2015, respectively. Bank borrowing issued at variable rates exposes the Group to cash flow interest rate risk which is partially offset by cash at banks held at variable rates. Management monitors interest rate exposure on dynamic basis and will consider hedging significant interest rate exposure should the need arise. Interest rate risk sensitivity analysis The analysis is prepared assuming the amount of assets/liabilities outstanding at the end of the reporting period was outstanding for the whole period. A 100 basis point increase or decrease is used as it represents management s assessment of the reasonably possible change in interest rates. If interest rates had been 100 basis points higher/lower and all other variables were held constant, the Group s profit before tax for the years ended 31 December 2012, 2013 and 2014, and five months ended 31 May 2014 and 2015 would increase/decrease by approximately HK$7,516,000, HK$10,819,000, HK$10,886,000, HK$3,324,000 (unaudited) and HK$4,677,000, respectively. This is mainly attributable to the Group s exposure to cash flow interest rates on its variable-rate bank balances and bank borrowing. (ii) Credit risk At the end of each reporting period, the Group s maximum exposure to credit risk which will cause a financial loss to the Group due to failure to discharge an obligation by the counterparties is arising from the carrying amount of the respective recognised financial assets as stated in the Financial Information at the end of each reporting period. In order to minimize the credit risk, the management of the Group has monitoring procedures to ensure that followup action is taken to recover overdue debts. In addition, the Group reviews the recoverable amount of each individual trade receivable balance at the end of each reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the directors of the Company consider that the Group s credit risk is significantly reduced. The Group had no concentration of credit risk in respect of trade receivables, with exposure spread over a number of customers, e.g. residents in the communities under the terms of lump sum basis managed by the Group and customers from value-added services. In order to enhance the timeliness of property management fee and other payments, the Group has undertaken effective measures aimed at boosting the collections of trade receivables. For the amounts due from fellow subsidiaries and related companies, the Group had not encountered any difficulties in collecting from the related party in the past, and is not aware of any financial difficulties experienced by the fellow subsidiaries and related companies. The details are disclosed in notes 24 and 28, respectively. I-28

247 APPENDIX I ACCOUNTANT S REPORT The Group had no concentration of credit risk in respect of the payments on behalf of management offices from communities under the terms of commission basis in its property management services business, with exposure spread over a number of communities managed by the Group. The Group records payments on behalf of management offices under commission basis as other receivables under current assets and record temporary receipts from management offices under commission basis as other payables under current liabilities. Under the Group s policy, such payments on behalf of management offices under commission basis must be settled within a set period of time depending on the nature of the payment. For payments made on behalf of management offices under commission basis due to the Group s centralised payment procedures, such payments are generally settled within the month that the payment is made. For payments made on behalf of management offices of properties at the pre-delivery stage, payments are generally settled within three months to a year after units are delivered to the property owners. In addition, the Group assesses the estimated future cash flow in respect of recovering from payment on behalf of management offices from communities under commission basis at the end of the reporting period to determine that adequate impairment losses are made. In this regard, the directors of the Company consider that the credit risk in respect of the receivables from management offices is significantly reduced. The Group s credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit-rating agencies or state-owned banks in the PRC. (iii) Liquidity risk In the management of the liquidity risk, the Group monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance the Group s operations and mitigate the effects of fluctuations in cash flows. The following table analyses the contractual undiscounted cash flows of the Group s financial liabilities by relevant maturity groupings based on the remaining period from the year-end date to the earliest date the Group and the Company can be required to pay. The table includes both interest and principal cash flows. To the extent that interest flows are floating rate, the undiscounted amount is derived from flat rate at the end of the reporting period. Within 1 year or on demand Total undiscounted cash flows Carrying amount HK$ 000 HK$ 000 HK$ 000 As at 31 December 2012 Tradeandotherpayables , , ,879 Deposits , , ,044 Amounts due to fellow subsidiaries , , , , , ,699 Within 1 year or on demand Total undiscounted cash flows Carrying amount HK$ 000 HK$ 000 HK$ 000 As at 31 December 2013 Tradeandotherpayables , , ,754 Deposits , , ,685 Amounts due to fellow subsidiaries , , ,249 Amountsduetoarelatedcompany ,029,806 1,029,806 1,029,806 I-29

248 APPENDIX I ACCOUNTANT S REPORT Within 1 year or on demand Total undiscounted cash flows Carrying amount HK$ 000 HK$ 000 HK$ 000 As at 31 December 2014 Tradeandotherpayables , , ,542 Deposits , , ,029 Amounts due to fellow subsidiaries , , ,809 1,114,380 1,114,380 1,114,380 Within 1 year or on demand Total undiscounted cash flows Carrying amount HK$ 000 HK$ 000 HK$ 000 As at 31 May 2015 Tradeandotherpayables , , ,600 Deposits , , ,401 Amountsduetofellowsubsidiaries... 15,321 15,321 15,321 Bankborrowing , , , , , ,322 (c) Fair value The fair value of financial assets and financial liabilities for disclosure purpose are determined in accordance with generally accepted pricing models based on discounted cash flow analysis. The directors of the Company consider that the carrying amounts of financial assets and financial liabilities of the Group recorded at amortised cost in the Financial Information approximate their fair values. 9. REVENUE Revenue comprises of proceeds from property management services and value-added services. An analysis of the Group s revenue for the years/periods is as follows: Year ended 31 December Five months ended 31 May HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 (unaudited) Property management services ,391,466 1,741,272 2,035, , ,667 Value-added services , , ,254 31,845 43,991 1,444,850 1,844,067 2,163, , , SEGMENT INFORMATION The Group is organised into business segments based on the nature of services, and information is prepared and reported to the Group s management, for the purposes of resource allocation and assessment of performance. The Group s operating and reportable segments under HKFRS 8 and the types of revenue are as follows: Property management Provision of (i) services such as security, repair and maintenance, cleaning and garden landscape maintenance provided to mid- to high-end residential communities (including mixed-use properties), commercial properties, government properties and construction sites and (ii) services to other enterprises, such as (for property developers) pre-delivery services, move-in assistance services, delivery inspection services, engineering service quality monitoring and (for other property management companies) consulting services. I-30

249 APPENDIX I ACCOUNTANT S REPORT Value-added services Provision of (i) engineering services such as (for property developers) automation consulting and engineering product sales and (for property management companies) inspection services, repair and maintenance services and equipment upgrade services and (ii) community leasing, sales and other services where residents and tenants of the properties under our management are offered a diversified range of online and offline services (such as common area rental assistance, purchase assistance and rental assistance for properties that have been delivered to owners by developers and household assistance services) through the O2O platform. Inter-segment revenue is charged at prevailing market rates and eliminated on consolidation. Segment revenue and results The following is an analysis of the Group s revenue and profit by reportable segments: Year ended 31 December 2012 Property management Value-added services Elimination Segments total HK$ 000 HK$ 000 HK$ 000 HK$ 000 Segment revenue fromexternalcustomers... 1,391,466 53,384 1,444,850 Inter-segmentsales (423) 1,391,466 53,807 (423) 1,444,850 Segmentprofit... 57,588 26,495 84,083 Year ended 31 December 2013 Property management Value-added services Elimination Segments total HK$ 000 HK$ 000 HK$ 000 HK$ 000 Segment revenue fromexternalcustomers... 1,741, ,795 1,844,067 Inter-segmentsales... 56,976 (56,976) 1,741, ,771 (56,976) 1,844,067 Segmentprofit... 89,689 29, ,975 Year ended 31 December 2014 Property management Value-added services Elimination Segments total HK$ 000 HK$ 000 HK$ 000 HK$ 000 Segment revenue fromexternalcustomers... 2,035, ,254 2,163,724 Inter-segmentsales... 26,353 (26,353) 2,035, ,607 (26,353) 2,163,724 Segmentprofit... 92,065 40, ,466 Five months ended 31 May 2014 (unaudited) Property management Value-added services Elimination Segments total HK$ 000 HK$ 000 HK$ 000 HK$ 000 Segment revenue fromexternalcustomers ,698 31, ,543 Inter-segmentsales... 7,440 (7,440) 775,698 39,285 (7,440) 807,543 Segmentprofit... 30,480 13,915 44,395 I-31

250 APPENDIX I ACCOUNTANT S REPORT Five months ended 31 May 2015 Property management Value-added services Elimination Segments total HK$ 000 HK$ 000 HK$ 000 HK$ 000 Segment revenue fromexternalcustomers ,667 43, ,658 Inter-segmentsales... 22,505 (22,505) 888,667 66,496 (22,505) 932,658 Segmentprofit... 39,550 17,586 57,136 The accounting policies of the reportable segments are the same as the Group s accounting policies described in note 5. Segment profit included profits from the Company, the subsidiaries and share of profits of an associate. This is the measure reported to the management of the Group for the purposes of resource allocation and performance assessment. Segment assets and liabilities The following is an analysis of the Group s assets and liabilities by reportable segment: At 31 December 2012 Property management Value-added services Segments total HK$ 000 HK$ 000 HK$ 000 Segmentassets... 1,192, ,945 1,310,230 Segment liabilities (994,894) (11,137) (1,006,031) At 31 December 2013 Property management Value-added services Segments total HK$ 000 HK$ 000 HK$ 000 Segmentassets... 1,534, ,429 1,715,265 Segment liabilities (1,233,380) (51,037) (1,284,417) At 31 December 2014 Property management Value-added services Segments total HK$ 000 HK$ 000 HK$ 000 Segmentassets... 1,759, ,729 1,941,123 Segment liabilities (1,363,162) (51,628) (1,414,790) At 31 May 2015 Property management Value-added services Segments total HK$ 000 HK$ 000 HK$ 000 Segmentassets... 1,649, ,588 1,827,543 Segment liabilities (1,215,855) (57,259) (1,273,114) For the purposes of monitoring segment performances and allocating resources between segments, all assets and liabilities are allocated to reportable segments. I-32

251 APPENDIX I ACCOUNTANT S REPORT Other Segment information Year ended 31 December 2012 Amounts included in the measurement of segment results and segment assets: Property management Value-added services Segments total HK$ 000 HK$ 000 HK$ 000 Addition to property, plant and equipment , ,461 Loss on disposals of property, plant and equipment Impairment provision for trade and other receivables, net ,988 8,988 Depreciationandamortisation... 10, ,634 Gain arising from changes in fair value of investment properties ,279 3,279 Shareofprofitsofanassociate Year ended 31 December 2013 Amounts included in the measurement of segment results and segment assets: Property management Value-added services Segments total HK$ 000 HK$ 000 HK$ 000 Addition to property, plant and equipment , ,376 Loss on disposals of property, plant and equipment Impairment provision for trade and other receivables, net ,853 9,853 Depreciationandamortisation... 13, ,256 Gain arising from changes in fair value of investment properties ,516 6,516 Shareofprofitsofanassociate Year ended 31 December 2014 Amounts included in the measurement of segment results and segment assets: Property management Value-added services Segments total HK$ 000 HK$ 000 HK$ 000 Addition to property, plant and equipment , ,205 Loss on disposals of property, plant and equipment Impairment provision for trade and other receivables, net ,559 10,559 Depreciationandamortisation... 14, ,724 Gain arising from changes in fair value of investment properties ,177 5,177 Shareofprofitsofanassociate Five months ended 31 May 2014 (unaudited) Amounts included in the measurement of segment results and segment assets: Property management Value-added services Segments total HK$ 000 HK$ 000 HK$ 000 Addition to property, plant and equipment , ,684 Loss on disposals of property, plant and equipment Impairment provision for trade and other receivables, net ,170 4,170 Depreciationandamortisation... 5, ,197 Gain arising from changes in fair value of investment properties ,304 3,304 Shareofprofitsofanassociate I-33

252 APPENDIX I ACCOUNTANT S REPORT Five months ended 31 May 2015 Amounts included in the measurement of segment results and segment assets: Property management Value-added services Segments total HK$ 000 HK$ 000 HK$ 000 Addition to property, plant and equipment , ,238 Impairment provision for trade and other receivables, net ,950 4,950 Depreciationandamortisation... 6, ,529 Gain arising from changes in fair value of investment properties ,253 2,253 Shareofprofitsofanassociate Revenue by types of services An analysis of the Group s revenue for the year/period by types of services is set out in note 9. Information about geographical areas The Group s property management and value-added services are carried out in Hong Kong, Macau and other regions in the PRC. The following table provides a geographical analysis of the Group s revenue from external customers (based on where the services are provided) and non-current assets (based on the location of assets). Revenue by geographical market Year ended 31 December Five months ended 31 May HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 (unaudited) Hua Nan Region , , , , ,152 Hua Dong Region , , , , ,531 Hua Bei Region , , , , ,054 Northern Region , , ,081 75,700 79,865 Western Region , , , , ,809 Hong Kong and Macau , , , , ,247 1,444,850 1,844,067 2,163, , ,658 Non-current assets by geographical market As at 31 December As at 31 May HK$ 000 HK$ 000 HK$ 000 HK$ 000 HuaNanRegion... 59,900 69,558 76,856 79,294 HuaDongRegion... 17,507 19,459 19,744 19,913 HuaBeiRegion... 4,508 5,373 7,631 7,571 NorthernRegion... 10,278 8,557 5,633 4,368 WesternRegion... 5,200 7,278 8,363 8,021 HongKongandMacau... 1,040 1,233 2,160 2,537 98, , , ,704 Note: Non-current assets exclude interest in an associate and deferred tax assets. Information about major customers There was no individual customer who accounted for over 10% of the Group s revenue for each of the years ended 31 December 2012, 2013 and 2014 and the five months ended 31 May 2014 and However, revenue from fellow subsidiaries of the Company in aggregate is disclosed in note 35(b) to the Financial Information. I-34

253 APPENDIX I ACCOUNTANT S REPORT 11. OTHER INCOME AND GAINS, NET Other income and gains include: Year ended 31 December Five months ended 31 May HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 (unaudited) Interest income on bank deposits... 3,994 8,500 10,611 3,691 4,474 Unconditional government grants.... 4,369 5,556 5,935 1,161 2, FINANCE COSTS Year ended 31 December Five months ended 31 May HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 (unaudited) Interest on bank borrowing wholly repayable within five years INCOME TAX EXPENSES Year ended 31 December Five months ended 31 May HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 (unaudited) Current tax: Hong Kong profits tax ,063 1, Macau complementary income tax PRC Enterprise Income Tax ( EIT ) 22,878 32,583 34,793 10,990 15,763 23,617 33,785 36,488 11,628 16,445 (Over)/under-provision in prior years: HongKongprofitstax... (4) (2) 53 (4) (2) 53 Deferred tax (note 31): Currentyear... (1,083) (334) (1,108) (118) (424) Total... 22,534 33,447 35,378 11,510 16,074 Hong Kong profits tax is calculated at 16.5% of the estimated assessable profit for the years ended 31 December 2012, 2013 and 2014 and for the five months ended 31 May 2014 and Under the Law of the People s Republic of China on Enterprise Income Tax (the EIT Law ) and Implementation Regulation of the EIT Law, the tax rate of PRC subsidiaries is 25% for the years ended 31 December 2012, 2013 and 2014 and for the five months ended 31 May 2014 and Macau complementary income tax is calculated at the prevailing tax rate of 12% in Macau for the years ended 31 December 2012, 2013 and 2014 and for the five months ended 31 May 2014 and I-35

254 APPENDIX I ACCOUNTANT S REPORT The income tax expenses for the years/periods can be reconciled to the profit before tax per the consolidated income statement as follows: Year ended 31 December Five months ended 31 May HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 (unaudited) Profit before tax , , ,466 44,395 57,136 Tax at the applicable tax rate of 25%. 21,021 29,744 33,117 11,099 14,284 Tax effect of share of results of anassociate... (69) (36) (39) (17) (17) Tax effect of expenses not deductible for tax purpose , ,139 Tax effect of income not taxable fortaxpurpose... (28) (82) (58) (16) (30) Effect of different tax rates applicable to subsidiaries operating in Hong Kong and Macau (273) (377) (867) (411) (204) Income tax at concessionary tax rate. (185) (408) (687) (316) (235) Tax effect of tax losses not recognised... 1,983 4,217 3,349 3,003 2,403 Utilisation of tax losses previously not recognised... (268) (1,107) (263) (2,117) (1,202) (Over)/under-provision in prior years. (4) (2) 53 Others... (633) 551 (518) 150 (117) Income tax expenses for the year/ period... 22,534 33,447 35,378 11,510 16,074 For certain branches engaged in property management services (the PM Branches ), the Group has elected to file combined tax return for the PM Entities incorporating assessable profit and tax losses attributable to the PM Branches as well as certain communities which are managed by the PM Branches under commission basis. As a result of such arrangement, the Group is able to temporarily utilise tax losses of loss making communities, resulting in deferral of payment of certain provision. The utilisation of such tax losses of communities and the deferral of the Group s payment of EIT provision had no effect on the consolidated income statement during the Relevant Periods. For financial accounting purposes, the Group has made relevant provision by debiting the income tax expenses and crediting tax liabilities based on assessable profits at the applicable tax rates of our property management subsidiaries. I-36

255 APPENDIX I ACCOUNTANT S REPORT 14. PROFIT FOR THE YEARS/PERIODS Profit for the years/periods has been arrived at after charging/(crediting): Year ended 31 December Five months ended 31 May HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 (unaudited) Professional fee in respect of thelisting... 3,256 Business tax and other levies ,210 86,620 96,839 36,509 42,031 Impairment provision for trade and other receivables, net ,988 9,853 10,559 4,170 4,950 Depreciation of property, plant and equipment, included in: direct operating expenses ,394 4,193 4,516 1,759 1,942 administrative expenses ,795 8,604 9,750 3,249 4,396 Amortisation of prepaid lease paymentsforland Staff costs including directors emoluments (Note) , ,603 1,165, , ,532 Sub-contractingcosts , , ,045 90, ,637 Equipment repair and maintenance costs , , ,564 61,418 64,713 Rental expenses in respect of land and building under operating leases 9,693 11,568 15,045 4,663 6,582 Utility costs , , ,360 47,567 48,118 Share of tax of an associate Loss on disposals of property, plant and equipment Cost of inventories recognised as expenses ,306 69,816 69,384 33,504 35,939 Rental income in respect of investment properties under operating lease ,273 1,328 1, Less: Outgoings (199) (203) (210) (88) (88) Rental income in respect of investment properties under operating lease, net ,074 1,125 1, During the Relevant Periods, auditor s remuneration in relation of audit services and non-audit services for the preparation of the Listing amounting to HK$4.0 million and HK$1.2 million was charged to the consolidated income statement. Note: The Group operates a Mandatory Provident Fund Scheme for all qualifying employees in Hong Kong. The assets of the scheme are held separately from those of the Group in funds under the control of the trustees. The employees of the Company s subsidiaries established in the PRC are members of a state-managed retirement scheme operated by the PRC government. These subsidiaries are required to contribute certain percentage of payroll costs to the retirement benefit scheme. The total cost recognised in the consolidated income statement of approximately HK$42 million, HK$62 million, HK$69 million, HK$28 million (unaudited) and HK$37 million for the years ended 31 December 2012, 2013 and 2014 and for the five months ended 31 May 2014 and 2015 respectively, which has been included in staff costs disclosed above, represents contributions payable to the schemes by the Group in respect of the current accounting period. I-37

256 APPENDIX I ACCOUNTANT S REPORT 15. DIRECTORS EMOLUMENTS The directors of the Company during the Relevant Periods are Kong Qingping (resigned with effect from 2 January 2014), Hao Jian Min (appointed with effect from 2 January 2014) and Xiao Xiao (resigned with effect from 25 June 2015). No emolument was paid or payable to any of the director during the Relevant Periods. On 25 June 2015, Hao Jian Min (the Chairman) is re-designated as a non-executive director of the Company. On 25 June 2015, the following executive directors are appointed: Executive directors Wang Qi Luo Xiao Shi Yong Yang Ou Kam Yuk Fai On [.], the following non-executive directors are appointed: Independent non-executive directors [Lim Wan Fung, Bernard Vincent] [Suen Kwok Lam] [YungWingKi,Samuel] No directors waived any emoluments during the years ended 31 December 2012, 2013 and 2014 and the five months ended 31 May 2014 and No directors received any emoluments as inducement to join or upon joining the Company or as compensation for loss of office during the years ended 31 December 2012, 2013 and 2014 and the five months ended 31 May 2014 and EARNINGS PER SHARE The calculation of the basic and diluted earnings per share attributable to the owners of the Company is based on the following data: Year ended 31 December Five months ended 31 May HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 (unaudited) Earnings Earnings for the purpose of basic earningspershare... 61,549 85,528 97,088 32,885 41,062 Number of shares Adjusted weighted average number of ordinary share for the purpose of basicearningspershare... 3,282,539,080 3,282,539,080 3,282,539,080 3,282,539,080 3,282,539,080 Basic earnings per share (HK cents) As there are no dilutive potential ordinary shares as at 31 December 2012, 2013 and 2014 and 31 May 2014 and 2015, the diluted earnings per share is equal to the basic earnings per share. The basic and diluted earnings per share as presented on the consolidated income statement have taken into account the Share Subdivision and Cash Capitalisation as described in note 36. I-38

257 APPENDIX I ACCOUNTANT S REPORT 17. DIVIDENDS No dividend has been paid or declared by the Company for each of the years ended 31 December 2012, 2013 and 2014 and the five months ended 31 May 2014 and INVESTMENT PROPERTIES Completed properties in the PRC HK$ 000 THE GROUP FAIR VALUE At1January ,757 Gainarisingfromchangesinfairvalueofinvestmentproperties... 3,279 Exchangerealignment... (10) At31December ,026 Gainarisingfromchangesinfairvalueofinvestmentproperties... 6,516 Exchangerealignment... 1,899 At31December ,441 Gainarisingfromchangesinfairvalueofinvestmentproperties... 5,177 Exchangerealignment... (216) At31December ,402 Gainarisingfromchangesinfairvalueofinvestmentproperties... 2,253 Exchangerealignment... (34) At31May ,621 An analysis of the investment properties of the Group at the end of reporting period is as follows: As at 31 December As at 31 May HK$ 000 HK$ 000 HK$ 000 HK$ 000 In the PRC Medium-termleases... 57,026 65,441 70,402 72,621 Valuation processes of the Group The fair values of the investment properties, including both land and building elements held by the Group at the end of reporting period have been arrived on the basis of a valuation carried out on that date by DTZ Debenham Tie Leung Limited. DTZ Debenham Tie Leung Limited is an independent firm of professional valuer not connected with the Group, who has appropriate qualification and recent experience in the valuation of similar properties in the relevant locations. The Group s finance team reviews the valuations performed by the independent valuer for financial reporting purposes. This team reports directly to the senior management. Discussions of valuation processes and results are held between the management and valuers at least once a year. At each financial year end the finance department:. Verifies all major inputs to the independent valuation report;. Assesses property valuations movements when compared to the prior year valuation report; and. Holds discussions with the independent valuer. All of the Group s investment properties held under operating leases to earn rentals or for capital appreciation purposes are measured using the fair value model and are classified and accounted for as investment properties. I-39

258 APPENDIX I ACCOUNTANT S REPORT Fair value measurements using significant unobservable inputs Direct comparison method is based on comparing the properties to be valued directly with other comparable properties, which have recently asked/transacted. However, given the heterogeneous nature of properties, appropriate adjustments are usually required to allow for any qualitative differences that may affect the price likely to be achieved by the properties under consideration. There were no changes to the valuation techniques during the years ended 31 December 2012, 2013 and 2014 and the five months ended 31 May 2014 and Information about fair value measurements using significant unobservable inputs Description Fair value at 31 December 2012 Valuation techniques Unobservable inputs Range of unobservable inputs HK$ 000 Completed investment properties in the PRC Office ,519 Direct comparison Unit price RMB14,500 per square metre Carparks ,507 Unit price RMB123,500 RMB430,000 per carpark space Total ,026 Description Fair value at 31 December 2013 Valuation techniques Unobservable inputs Range of unobservable inputs HK$ 000 Completed investment properties in the PRC Office ,136 Direct comparison Unit price RMB17,000 per square metre Carparks ,305 Unit price RMB124,000 RMB500,000 per carpark space Total ,441 Description Fair value at 31 December 2014 Valuation techniques Unobservable inputs Range of unobservable inputs HK$ 000 Completed investment properties in the PRC Office ,303 Direct comparison Unit price RMB19,500 per square metre Carparks ,099 Unit price RMB124,400 RMB580,000 per carpark space Total ,402 Description Fair value at 31 May 2015 Valuation techniques Unobservable inputs Range of unobservable inputs HK$ 000 Completed investment properties in the PRC Office ,889 Direct comparison Unit price RMB20,170 per square metre Carparks ,732 Unit price RMB128,400 RMB600,000 per carpark space Total ,621 Unit prices are estimated based on the independent valuer s view of recent sales asking or sales transactions within the subject properties and other comparable properties in close proximity, with prices adjusted for differences in key attributes such as location and environment, time and other relevant factors. The higher the price, the higher the fair value. I-40

259 APPENDIX I ACCOUNTANT S REPORT 19. PROPERTY, PLANT AND EQUIPMENT Furniture, Buildings Machinery and equipment Motor vehicles fixtures, and office equipment Total HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 THE GROUP COST At 1 January ,244 3,938 12,894 42,699 70,775 Exchangerealignment... (1) (1) (2) (10) (14) Additions ,870 7,876 12,461 Disposals... (54) (2,409) (1,672) (4,135) At 31 December ,243 4,598 14,353 48,893 79,087 Exchange realignment ,458 2,397 Additions... 1,230 3,765 13,381 18,376 Disposals... (660) (840) (4,747) (6,247) At 31 December ,595 5,322 17,711 58,985 93,613 Exchangerealignment... (40) (17) (50) (159) (266) Additions ,195 16,048 19,205 Disposals... (253) (372) (2,241) (2,866) At 31 December ,555 6,014 19,484 72, ,686 Exchangerealignment... (6) (3) (8) (28) (45) Additions ,670 5,238 Acquisition of subsidiaries (note 32) Disposals... (46) (606) (652) At 31 May ,549 6,007 20,146 77, ,753 DEPRECIATION At 1 January ,767 2,299 8,907 21,351 36,324 Exchangerealignment... (1) (1) (8) (10) Provided for the year ,216 8,008 10,189 Eliminated on disposals (37) (2,195) (1,278) (3,510) At 31 December ,283 2,709 7,928 28,073 42,993 Exchange realignment ,247 Provided for the year ,784 9,881 12,797 Eliminated on disposals (435) (475) (3,511) (4,421) At 31 December ,950 2,978 9,449 35,239 52,616 Exchangerealignment... (16) (10) (23) (87) (136) Provided for the year ,011 11,028 14,266 Eliminated on disposals (211) (348) (1,941) (2,500) At 31 December ,465 3,453 11,089 44,239 64,246 Exchangerealignment... (3) (1) (4) (15) (23) Provided for the period ,829 6,338 Eliminated on disposals (33) (506) (539) At31May ,681 3,740 12,054 48,547 70,022 CARRYING VALUES At 31 December ,960 1,889 6,425 20,820 36,094 At 31 December ,645 2,344 8,262 23,746 40,997 At 31 December ,090 2,561 8,395 28,394 45,440 At31May ,868 2,267 8,092 28,504 44,731 I-41

260 APPENDIX I ACCOUNTANT S REPORT An analysis of the carrying values of buildings is as follows: As at 31 December As at 31 May HK$ 000 HK$ 000 HK$ 000 HK$ 000 In the PRC Medium-termleases... 6,960 6,645 6,090 5,868 The above items of property, plant and equipment are depreciated on a straight-line basis at the following rates per annum: Buildings... Machineryandequipment... Motor vehicles, furniture, fixtures and officeequipment... Overtheshorterofthetermoftherelevantleaseor25years 3to10years 3to8years 20. PREPAID LEASE PAYMENTS FOR LAND HK$ 000 THE GROUP At1January ,205 Exchangerealignment... (2) Amortisation... (445) At31December ,758 Exchangerealignment Amortisation... (459) At31December ,479 Exchangerealignment... (18) Amortisation... (458) At31December ,003 Exchangerealignment... (2) Amortisation... (191) At31May ,810 THE GROUP As at 31 December As at 31 May HK$ 000 HK$ 000 HK$ 000 HK$ 000 Land use rights in the PRC Medium-termleases... 5,758 5,479 5,003 4,810 Analysed for reporting purposes as: Non-currentasset... 5,313 5,020 4,545 4,352 Currentasset ,758 5,479 5,003 4, INTEREST IN AN ASSOCIATE THE GROUP As at 31 December As at 31 May HK$ 000 HK$ 000 HK$ 000 HK$ 000 Costofinvestments,unlisted... Share of post-acquisition profits and other comprehensive income, net of dividends received I-42

261 APPENDIX I ACCOUNTANT S REPORT Set out below are the particulars of the associate at 31 December 2012, 2013 and 2014 and 31 May Name of entity Windsor Heights Estate Management Company Limited... Place of incorporation Place of operation As at 31 December As at 31 May Principal activities % % % % Hong Kong Hong Kong Property management The associate is accounted for using the equity method in the Financial Information. There are no significant contingent liabilities relating to the Group s interest in an associate. 22. INVENTORIES THE GROUP As at 31 December As at 31 May HK$ 000 HK$ 000 HK$ 000 HK$ 000 Consumables,atcost... 4,521 9,208 6,882 2, TRADE AND OTHER RECEIVABLES The following is an aged analysis of trade and other receivables based on invoice date presented at the end of the reporting period: THE GROUP As at 31 December As at 31 May HK$ 000 HK$ 000 HK$ 000 HK$ 000 Trade receivables (note (a)), aged 0 30days... 17,883 37,524 55,699 73, days... 39,861 45,044 38,319 92, days... 58,520 73,247 78, , years... 20,476 24,757 22,532 17,570 Over2years... 13,829 21,125 29,573 32, , , , ,438 Less:provisionforimpairment... (22,809) (33,430) (43,907) (48,840) 127, , , ,598 Payments on behalf of management offices under commission basis (note (b)) ,285 31,991 51,572 85,168 Less:provisionforimpairment... (22,003) (22,691) (22,614) (22,602) 3,282 9,300 28,958 62,566 Payments on behalf of property owners, sub-contractorsandstaff... 16,263 19,211 16,701 23,427 Otherreceivables... 6,417 6,696 9,911 14, , , , ,790 I-43

262 APPENDIX I ACCOUNTANT S REPORT (a) Trade Receivables Trade receivables are mainly arisen from property management services income from communities managed under lump sum basis and value-added services. Property management services income from properties managed under lump sum basis in the PRC are received in accordance with the terms of the relevant property service agreements. Service income from property management services is due for payment by the residents upon the issuance of demand note. Property management services income from properties managed under lump sum basis in Hong Kong has average credit period of not exceeding 60 days. Provision of repair and maintenance, automation and other equipment upgrade services income is received in accordance with the terms of the relevant contract agreements, normally within 60 days from the issuance of payment requests. Other value-added services income is due for payment upon the issuance of demand note. In determining the recoverability of trade receivables from the property management services, the Group takes into consideration a number of indicators, including, among others, subsequent settlement status, historical write-off experience and management fee collection rate of the residents in estimating the future cashflows from the receivables. For the provision of repair and maintenance, automation and other equipment upgrade and other value-added services, before accepting any new customer, the Group would assess the potential customer s credit quality and define credit rating limits of each customer. Limits attributed to customers are reviewed once a year. In determining the recoverability of trade receivables from provision of repair and maintenance, automation and other equipment upgrade and other value-added services, the Group considers any change in the credit quality of the trade receivable from the date on which the credit was initially granted up to the reporting date. The following is an ageing of trade receivables which are past due but not impaired based on due date: THE GROUP As at 31 December As at 31 May HK$ 000 HK$ 000 HK$ 000 HK$ days... 31,626 34,716 54,694 57, days... 38,482 44,086 36,791 68, days... 47,041 73,113 80,743 95, years... 11,740 18,588 14,814 21, , , , ,124 Included in the Group s trade receivable balance are debtors with carrying amounts of approximately HK$22.8 million, HK$33.4 million, HK$43.9 million and HK$48.8 million as at 31 December 2012, 2013 and 2014 and 31 May 2015 respectively, which are fully impaired. The Group did not hold any collateral over these balances. Movements on the Group s provision for impairment of trade receivables are as follows: THE GROUP As at 31 December As at 31 May HK$ 000 HK$ 000 HK$ 000 HK$ 000 At the beginning of the reporting period ,831 22,809 33,430 43,907 Provision for receivables impairment ,395 15,486 18,451 9,097 Unused amounts reversed (4,407) (5,633) (7,892) (4,147) Exchangerealignment... (10) 768 (82) (17) Attheendofthereportingperiod... 22,809 33,430 43,907 48,840 I-44

263 APPENDIX I ACCOUNTANT S REPORT (b) Payments on Behalf of Management Offices under Commission Basis Payments on behalf of management offices under commission basis represent the current amounts receivable from the property management offices of communities managed by the Group under the terms of commission basis. In determining the recoverability of payments on behalf of management offices under commission basis, the Group take into consideration a number of indicators, including, among others, subsequent settlement status, historical write-off experience, the financial performance of the communities and management fee collection rate of the communities in estimating the future cashflows from the receivables. Included in the Group s payments on behalf of management offices are balances with carrying amounts of approximately HK$22.0 million, HK$22.7 million, HK$22.6 million and HK$22.6 million as at 31 December 2012, 2013 and 2014 and 31 May 2015 respectively, which are fully impaired. The Group did not hold any collateral over these balances. The Group have no additional provision or reversal of provision for impairment of payments on behalf of management offices under commission basis during the years ended 31 December 2012, 2013 and 2014, and the five months ended 31 May 2014 and AMOUNTS DUE FROM FELLOW SUBSIDIARIES AND RELATED COMPANIES THE GROUP As at 31 December As at 31 May HK$ 000 HK$ 000 HK$ 000 HK$ 000 Amounts due from fellow subsidiaries Tradenature... 65,033 65, ,820 25,953 Non-tradenature , , , , , ,228 25,953 Amounts due from related companies Tradenature... 1,274 1,336 2,617 1,339 1,274 1,336 2,617 1,339 The following is an aged analysis of amounts due from fellow subsidiaries (trade nature) based on invoice date presented at the end of the reporting period: THE GROUP As at 31 December As at 31 May HK$ 000 HK$ 000 HK$ 000 HK$ days... 22,076 3,169 28,399 3, days... 18,142 19,538 16,855 3, days... 16,467 27,829 52,324 4, years ,742 4,603 9,670 Over2years... 8,251 9,739 10,639 4,619 65,033 65, ,820 25,953 I-45

264 APPENDIX I ACCOUNTANT S REPORT The following is an aged analysis of amounts due from related companies (trade nature) based on invoice date presented at the end of the reporting period: THE GROUP As at 31 December As at 31 May HK$ 000 HK$ 000 HK$ 000 HK$ days... 1,274 1, days days , years Over2years ,274 1,336 2,617 1,339 The non-trade nature balances of amounts due from fellow subsidiaries and related companies are unsecured, interest-free and repayable on demand. The trade amounts due from fellow subsidiaries and related companies are repayable based on normal trading terms. The related companies are joint ventures and associates of COLI. 25. BANK BALANCES AND CASH All bank deposits of the Group carry interest at market rates which range from 0.01% to 3.50%, 0.01% to 3.30%, 0.01% to 3.25% and 0.01% to 3.30%, per annum as at 31 December 2012, 2013 and 2014 and 31 May 2015, respectively. 26. TRADE AND OTHER PAYABLES The following is an aged analysis of trade and other payables presented based on invoice date at the end of the reporting period: THE GROUP As at 31 December As at 31 May HK$ 000 HK$ 000 HK$ 000 HK$ 000 Trade payables, aged 0 30days... 22,735 50,010 73,054 82, days... 22,697 22,904 22,291 24,001 Over90days... 30,179 58,574 73,789 66,479 75, , , ,161 Temporary receipts from management offices undercommissionbasis... 55,150 77,439 76,600 82,995 Accruedstaffcosts... 87, , , ,763 Temporary receipts from property owners , , , ,391 Payables for business tax and other levies ,467 20,682 24,942 22,738 Otherpayables... 56,036 75,933 59,853 75, , , , , RECEIPTS IN ADVANCE/DEPOSITS The amounts are prepaid property management fees and deposits received from property owners. I-46

265 APPENDIX I ACCOUNTANT S REPORT 28. AMOUNTS DUE TO FELLOW SUBSIDIARIES AND A RELATED COMPANY THE GROUP As at 31 December As at 31 May HK$ 000 HK$ 000 HK$ 000 HK$ 000 Amounts due to fellow subsidiaries Tradenature... 56,445 62,942 19,064 15,321 Non-tradenature , , , , , ,809 15,321 Amounts due to a related company Tradenature The following is an aged analysis of amounts due to fellow subsidiaries (trade nature) based on invoice date presented at the end of the reporting period: THE GROUP As at 31 December As at 31 May HK$ 000 HK$ 000 HK$ 000 HK$ days... 1, , days... 3,725 7, days... 39,560 34,881 18,655 11, years... 13,160 18,274 56,445 62,942 19,064 15,321 The following is an aged analysis of amount due to a related company (trade nature) based on invoice date presented at the end of the reporting period: THE GROUP As at 31 December As at 31 May HK$ 000 HK$ 000 HK$ 000 HK$ days The non-trade amounts due to fellow subsidiaries are unsecured, interest-free and repayable on demand. The trade nature amounts due to fellow subsidiaries and related companies are repayable based on normal trading terms. The related company is a joint venture of COLI. I-47

266 APPENDIX I ACCOUNTANT S REPORT 29. BANK BORROWING As at 31 December As at 31 May HK$ 000 HK$ 000 HK$ 000 HK$ 000 Bank loan unsecured , ,000 Borrowing of the Group as at 31 May 2015 is denominated in Hong Kong dollars, carries interest at the on Hong Kong Interbank Offered Rates plus a specified margin and is repayable within one year. 30. SHARE CAPITAL AND RESERVES (a) Share Capital Authorised shares: The Company was incorporated on 26 June 2006 with authorised share capital of HK$300,000,000, divided by 3,000,000,000 shares of HK$0.1 each. Issued shares: Number of shares issued and fully paid Share capital HK$ 000 As at 26 June 2006 (date of incorporation), 31 December 2012, 2013 and2014and31may (b) Reserves (i) (ii) PRC statutory reserve of the Group represents general and development fund reserve applicable to subsidiaries which was established in accordance with the relevant PRC regulations. The Reorganisation as described in note 2 is regarded as a business combination under common control. The Financial Information has been prepared using the principles of merger accounting and the excess of considerations over the net asset values of CSPM Beijing, CSPM Chongqing and CSPM Zibo as the result of Reorganisation is credited to special reserve. I-48

267 APPENDIX I ACCOUNTANT S REPORT 31. DEFERRED TAX The following are the major deferred tax assets and liabilities recognised by the Group and movements thereon during the current and prior years, without taking into consideration the offsetting of balances within the same taxation authority. Deferred tax assets/(liabilities) Allowance on doubtful debts Revaluation of investment properties THE GROUP Accelerated tax depreciation HK$ 000 HK$ 000 HK$ 000 HK$ 000 As1January ,397 (8,379) (1,415) (6,397) Credited/(charged) to profit or loss ,133 (820) (230) 1,083 Exchangerealignment... (2) 2 As31December ,528 (9,197) (1,645) (5,314) Credited/(charged) to profit or loss ,197 (1,629) (234) 334 Exchangerealignment (316) (55) (179) As31December ,917 (11,142) (1,934) (5,159) Credited/(charged) to profit or loss ,639 (1,294) (237) 1,108 Exchangerealignment... (21) As31December ,535 (12,400) (2,164) (4,029) Credited/(charged) to profit or loss ,086 (563) (99) 424 Exchangerealignment... (5) As31May ,616 (12,957) (2,262) (3,603) For the purpose of presentation in the Financial Information, certain deferred tax assets and liabilities have been offset. The following is the analysis of the deferred tax balances for financial reporting purposes: Total THE GROUP As at 31 December As at 31 May HK$ 000 HK$ 000 HK$ 000 HK$ 000 Deferredtaxassets... 1,850 3,147 2,527 2,880 Deferred tax liabilities (7,164) (8,306) (6,556) (6,483) (5,314) (5,159) (4,029) (3,603) Under the EIT Law of the PRC, withholding income tax is imposed on dividends declared in respect of profits earned by PRC subsidiaries from 1 January 2008 onwards. Deferred taxation amounting to approximately HK$17,412,000, HK$25,860,000, HK$35,048,000 and HK$39,379,000 as at 31 December 2012, 2013 and 2014 and 31 May 2015 respectively has not provided for in the Financial Information in respect of temporary differences attributable to accumulated profits of the PRC subsidiaries as the Group is able to control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. The Group had unused tax losses of approximately HK$10,187,000, HK$22,222,000, HK$34,566,000 and HK$31,496,000, as at 31 December 2012, 2013 and 2014 and 31 May 2015 respectively available for offsetting against future profits. No deferred tax asset has been recognised in respect of such tax losses due to the unpredictability of future profit streams. Included in the tax losses are losses of approximately HK$8,424,000, HK$18,029,000, HK$24,604,000 and HK$20,766,000, as at 31 December 2012, 2013 and 2014 and 31 May 2015, respectively that will expire within five years from the end of the reporting period. Other tax losses may be carried forward indefinitely. I-49

268 APPENDIX I ACCOUNTANT S REPORT 32. ACQUISITION OF SUBSIDIARIES On 18 May 2015, COGO Property (as vendor) and COPL PRC Holding (as purchaser) entered into an equity transfer agreement whereby COGO Property agreed to transfer the entire equity interests of COGOPM Holding to COPL PRC Holding at a consideration of approximately RMB50,000,000 (equivalent of approximately HK$63,161,000). COGOPM Holding, together with its wholly owned subsidiaries, 廣州市光大花園物業管理有限公司 and 呼和浩特市中海物業服務有限公司, are mainly engaged in property management business. Theacquisition-relatedcostshavebeenexpensedoffandareincludedinadministrativeexpensesintheFinancial Information. The following table summarised the consideration for the acquisition as mentioned above, the fair value of aggregate assets acquired and liabilities assumed at the acquisition date. Fair value on acquisition HK$ 000 Recognised amounts of identifiable assets acquired and liabilities assumed: Property,plantandequipment Inventories Tradeandotherreceivables,andprepayments Amountduefromarelatedcompany(note)... 66,923 Cashandcashequivalents... 29,535 Tradeandotherpayables... (26,436) Receiptsinadvanceanddeposits... (7,390) Tax liabilities (518) Totalidentifiablenetassetsacquired... 63,161 Net cash outflow arising from acquisition: Cashconsiderationpaid... (63,161) Cashandcashequivalentsacquiredof... 29,535 (33,626) Note: The amount due from a related company was settled as at 31 May For the period between 31 March 2015, the date when profit and loss of COGOPM Holding is responsible by the purchaser according to the equity transfer agreement, and 31 May 2015, COGO Acquired Companies had contributed to the Group s revenue and profit amounting to approximately HK$9,168,000 and HK$2,486,000 respectively. Had the acquisition of COGOPM Holding been completed on 1 January 2015, the Group s revenue and profit for the five months ended 31 May 2015 would have been approximately HK$946,832,000 and HK$42,619,000 respectively. 33. OPERATING LEASE COMMITMENT The Group as lessor Completed investment properties with carrying amounts of approximately HK$57,026,000, HK$65,441,000, HK$70,402,000 and HK$72,621,000, as at 31 December 2012, 2013 and 2014 and 31 May 2015, respectively, were let out under operating leases. Property rental income earned is approximately HK$1,273,000, HK$1,328,000, HK$1,424,000, HK$593,000 (unaudited) and HK$593,000, for the years ended 31 December 2012, 2013 and 2014 and for the five months ended 31 May 2014 and 2015, respectively. The office leased out has committed tenants for 4 years without termination options granted to tenants. I-50

269 APPENDIX I ACCOUNTANT S REPORT At the end of the reporting period, the Group had contracted with tenants for the following future minimum lease payments: THE GROUP As at 31 December As at 31 May HK$ 000 HK$ 000 HK$ 000 HK$ 000 Withinoneyear Inthesecondtofifthyearinclusive The Group as lessee At the end of the reporting period, the Group had commitments for future minimum lease payments under noncancellable operating leases which fall due: THE GROUP As at 31 December As at 31 May HK$ 000 HK$ 000 HK$ 000 HK$ 000 Withinoneyear... 5,144 6,517 11,822 12,778 In the second to fifth year inclusive ,266 3,751 20,808 18,359 8,410 10,268 32,630 31,137 Operating lease payments represent rentals payable by the Group for certain of its office properties. Leases are negotiated and rentals are fixed for 1 to 5 years. 34. PERFORMANCE GUARANTEES At the end of each reporting period, the Group provided counter indemnities to a fellow subsidiary and a bank amounting to approximately HK$23,823,000, HK$23,716,000, HK$37,096,000 and HK$39,361,000, as at 31 December 2012, 2013 and 2014 and 31 May 2015, respectively, for performance guarantees issued by the fellow subsidiary in respect of certain property management service contracts undertaken by the Group. 35. RELATED PARTY TRANSACTIONS Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control. Save as disclosed elsewhere in the Financial Information, the following is a summary of the significant transactions carried out between the Group and its related parties during each of the reporting periods, and balances as at the end of each of the reporting periods. (a) Year/period-end balances Details of balances with fellow subsidiaries and related companies are disclosed in notes 24 and 28, respectively. I-51

270 APPENDIX I ACCOUNTANT S REPORT (b) Transactions with related parties In addition to those disclosed in other sections of the Financial Information, the following significant related party transactions have been entered into by the Group during the years ended 31 December 2012, 2013 and 2014 and five months ended 31 May 2014 and 2015: Year ended 31 December Five months ended 31 May Nature of transaction Notes HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 (unaudited) Fellow subsidiaries Property management income.... (i) 169, , ,348 62,825 82,510 Engineering income (i) 8,499 18,013 26,501 5,845 2,832 Management fees expense (i) 1,382 1,927 3,083 1,284 Rental expense.... (ii) 3,986 3,700 4,499 1,666 2,359 Insurance fee expense (i) 2, Related companies Property management income.... (iii) 34,297 31,578 27,751 6,104 10,842 Engineering income (iii) 1,478 Notes: (i) Property management income, engineering income, management fees expense and insurance fee are charged at rates in accordance with respective contracts. (ii) (iii) (c) Rental expense is charged in accordance with respective tenancy agreements. The related companies are joint ventures and associates of fellow subsidiaries of the Company. The property management income and engineering income are charged at rates in accordance with respective contracts. Listing expenses The expenses relating to the Listing are estimated to be approximately HK$30,000,000 which are to be borne by COLI. As at 31 May 2015, the Group had listing expenses payable amounting to HK$8,456,000 which are to be borne and paid by COLI after the Relevant Periods. (d) Indemnity in relation to non-compliance with the laws and regulations relating to the social insurance and housing provident fund During the Relevant Periods, the Group did not register for nor fully contribute to the social insurance and housing provident funds for certain employees. According to the Social Insurance Law of the PRC ( 中華人民共和國社會保險法 ) and the Regulations on Administration of Housing Fund ( 住房公積金管理條例 ), the Group may be subject to overdue contributions and applicable penalty. The overdue contributions to the social insurance and housing provident funds and maximum penalty that the Group may be subject to are estimated to be approximately RMB9.6 million (equivalent to HK$12.2 million) in aggregate. On [.] 2015, COHL has entered into a deed of indemnity with and in favour of the Group that COHL has agreed to indemnify the Group against any costs, expenses, claims, liabilities, penalties, losses or damages incurred or suffered by the Group arising from any non-compliance incidents mentioned above. (e) Performance guarantees (i) COLI provided indemnities to a bank amounting to approximately HK$3,286,000, HK$5,626,000, HK$6,421,000 and nil, as at 31 December 2012, 2013 and 2014 and 31 May 2015, respectively, for performance guarantees issued by the bank in respect of certain property management service contracts undertaken by the Group. (ii) The Group provided counter indemnities to a fellow subsidiary amounting to approximately HK$23,823,000, HK$23,716,000, HK$37,096,000 and HK$29,766,000, as at 31 December 2012, 2013 and 2014 and 31 May 2015, respectively, for performance guarantees issued by the fellow subsidiary in respect of certain property management service contracts undertaken by the Group. I-52

271 APPENDIX I ACCOUNTANT S REPORT (f) Five highest paid individuals The emoluments paid/payable to the five highest paid individuals during each of the reporting periods are as follows: Year ended 31 December Five months ended 31 May HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 (unaudited) Short-term benefits ,878 10,665 11,336 1,470 1,468 Contribution to provident fund schemes ,906 10,695 11,370 1,482 1,483 These five individuals do not receive any emoluments as inducement to join or upon joining the Company or as compensation for loss of office during the year ended 31 December 2012, 2013 and 2014 and the five months ended 31 May 2014 and (g) Key management compensation The remuneration of the Company s directors and other members of key management of the Group during each of the reporting periods was as follows: Year ended 31 December Five months ended 31 May HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 (unaudited) Short-term benefits ,878 10,665 11,932 1,599 1,468 Contribution to provident fund schemes ,906 10,695 11,966 1,611 1,483 The emoluments of other members of key management of the Group were within the following bands: Year ended 31 December Five months ended 31 May HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 (unaudited) NiltoHK$500, HK$500,001 to HK$1,000, HK$1,000,001 to HK$1,500, HK$1,500,001 to HK$2,000, HK$ 2,500,001 to HK$3,000, HK$3,000,001 to HK$3,500, HK$3,500,001 to HK$4,000, The remuneration of directors and key executives is determined by reference to the performance of individuals and market trends. I-53

272 APPENDIX I ACCOUNTANT S REPORT (h) Transactions with other state-controlled entities in the PRC The Group operates in an economic environment predominated by entities directly or indirectly owned or controlled by the PRC government. In addition, the Group is itself part of a larger group of companies under CSCEC which is controlled by the PRC government. Apart from the transactions already disclosed above, the Group also conducts business with other state-controlled entities ( State-controlled Entities ). The directors of the Company consider those State-controlled Entities are independent third parties so far as the Group s businesses with them are concerned. Other than those disclosed in section (a) above, the directors of the Company consider that the other transactions with those State-controlled Entities are not significant to the Group. In addition, in the normal course of business, the Group has entered into various deposits with banks and financial institutions which are State-controlled Entities. In view of the nature of those transactions, the directors of the Company are of the opinion that quantitative information on the extent of transactions between the Group and the government related entities would not be meaningful. The Group is active in the provision of property management services and value-added services in various provinces in the PRC. The directors of the Company are of the opinion that it is impracticable to ascertain the identity of all the counterparties and accordingly whether the transactions are with State-controlled Entities. However, the directors are of the opinion that other than those disclosed in section (a) above, the transactions with State-controlled Entities are not significant to the Group s operations. 36. EVENT AFTER THE REPORTING PERIOD Changes in the Company s share capital Pursuant to the shareholder s resolutions dated [.], every issued and unissued share of a par value of HK$0.10 each in the share capital of the Company was subdivided into 100 Shares of a par value of HK$0.001 each (the Share Subdivision ). As such, immediately after the Share Subdivision, the Company had an authorised share capital of HK$300,000,000 divided into 300,000,000,000 shares of a par value of HK$0.001 each. Following the Share Subdivision, the authorised but unissued share capital of the Company was diminished by the cancellation of 270,000,000,000 unissued shares in the authorised share capital of the Company (the Diminution of Authorised Share Capital ). The Company has an authorised share capital of HK$30,000,000 divided into 30,000,000,000 shares. Following the Diminution of Authorised Share Capital, the Company allotted and issued 3,286,860,360 shares to COLI at an aggregate subscription price of HK$3,286, (the Cash Capitalisation ). Immediately after the Cash Capitalisation, COLI held 3,286,860,460 shares, representing the entire issued share capital of the Company. 37. STATEMENT OF FINANCIAL POSITION AND RESERVE MOVEMENT OF THE COMPANY As at 31 December As at 31 May HK$ 000 HK$ 000 HK$ 000 HK$ 000 Non-current Asset Investments in subsidiaries , , , ,524 Current Liabilities Amounts due to fellow subsidiaries , , ,115 Amountduetoasubsidiary , , , , ,119 Total Asset Less Current Liabilities... 4,530 4,463 4,409 4,405 Capital and Reserves Sharecapital... Retainedprofits(note(a))... 4,530 4,463 4,409 4,405 Total Equity... 4,530 4,463 4,409 4,405 I-54

273 APPENDIX I ACCOUNTANT S REPORT Note (a) Retained Profits Movement Retained Profits HK$ 000 THE COMPANY At1January ,580 Lossandtotalcomprehensiveincomefortheyear... (50) At31December ,530 Lossandtotalcomprehensiveincomefortheyear... (67) At31December ,463 Profitandtotalcomprehensiveincomefortheyear... (54) At31December ,409 THE COMPANY (unaudited) At1January ,463 Lossandtotalcomprehensiveincomefortheperiod... At31May ,463 THE COMPANY At1January ,409 Lossandtotalcomprehensiveincomefortheperiod... (4) At31May ,405 III. SUBSEQUENT FINANCIAL STATEMENTS No audited financial statements have been prepared by the Company or any of the companies now comprising the Group in respect of any period subsequent to 31 May 2015 and up to the date of this report. No dividend or distribution has been declared or made by the Company or any of the companies now comprising the Group in respect of any period subsequent to 31 May Yours faithfully, PricewaterhouseCoopers Certified Public Accountants Hong Kong I-55

274 APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION The information set forth in this appendix does not form part of the Accountant s report from PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, the Reporting Accountant of the Company, as set forth in Appendix I to this document, and is included herein for information only. The unaudited pro forma financial information should be read in conjunction with the section headed Financial Information in this document and the Accountant s Report set forth in Appendix I to this document. UNAUDITED PRO FORMA STATEMENT OF ADJUSTED NET TANGIBLE ASSETS [REDACTED] II-1

275 APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION [REDACTED] II-2

276 APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION [REDACTED] II-3

277 APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION [REDACTED] II-4

278 APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION [REDACTED] II-5

279 APPENDIX III REGULATORY OVERVIEW Our business operations are subject to extensive supervision and regulation from the PRC government, Hong Kong government and Macau government. This section sets out a summary of the main laws, regulations and policies in the PRC, Hong Kong and Macau with which we must comply. PRC REGULATORY OVERVIEW Legal Regulations on Foreign Investment Laws on Foreign-invested Enterprises The establishment, operation and management of enterprise entities in China are subject to the regulation of the Company Law of the People s Republic of China ( 中華人民共和國公司法 ) (Order No. 8 of the President of the PRC). The Company Law of the PRC was promulgated on 29 December 1993 and was amended on 25 December 1999, 28 August 2004, 27 October 2005 and 28 December 2013, respectively. According to the Company Law of the PRC, companies generally fall into two categories: limited liability companies and companies limited by shares. The Company Law of the PRC is also applicable to foreign-invested limited companies. However, unless otherwise specified by other laws regarding foreign investment, these laws shall prevail. The latest amendment of the Company Law of the PRC became effective as at 1 March Accordingly, unless otherwise specified by other relevant laws, administrative regulations and other regulations of the State Council, a term is no longer set for shareholders to fully pay in their contributions. Instead, shareholders need only to declare the capital amount they have promised to subscribe in the Articles of Association. In addition, the initial payment of the registered capital of a company is no longer subject to the limitation of the lowest amount, while the business licence of a company no longer lists its fully paid-in capital. Furthermore, the contributions of shareholders to registered capital no longer needs to be verified by a capital verification institution. The Law of the People s Republic of China on Foreign-Funded Enterprises ( 中華人民共和國外資企業法 ) (Order No. 41 of the President of the PRC), promulgated on 12 April 1986 and amended on 31 October 2000, is the basic legal basis for Chinese government to regulate exclusively foreign-owned enterprises. Under the Law on Foreign-Funded Enterprises, before establishing exclusively foreign-owned enterprises, investors shall apply for approval to the Ministry of Foreign Trade and Economic Cooperation (namely, the present day MOFCOM) under the administration of the State Council or any other administrative organ authorised by the State Council. In case of separation, merger or any other alteration of an important matter, the relevant matter shall be submitted to the approving organ for approval, and the proceedings of alteration registration shall have gone through at a national or a local agency of industrial and commercial administration. According to the Rules for the Implementation of the Law of the People s Republic of China on Foreign-funded Enterprises ( 中華人民共和國外資企業法實施細則 ) (Order No. 648 of the State Council), which was promulgated on 12 December 1990 and amended on 12 April 2001 and 19 February 2014, foreign-funded enterprises can only distribute and pay dividends from the accumulative profit determined in accordance with Chinese accounting standards and regulations. Foreign-funded enterprises must withdraw at least 10% of their respective after-tax profit (if any) and set aside as their legal reserve fund every year, until the total amount of this III-1

280 APPENDIX III REGULATORY OVERVIEW reserve fund reaches 50% of their registered capital, and can, at their discretion, withdraw some after-tax profit for the employee benefit and bonus fund. This type of reserve shall not be distributed as cash dividends. Foreign-invested Property Management Enterprises According to the Provisions on Guiding the Orientation of Foreign Investment ( 指導外商投資方向規定 ) (Order No. 346 of the State Council) (the Foreign Investment Orientation Provisions ), which was promulgated by the State Council on 11 February 2002 and came into effect on 1 April 2002, projects with foreign investment shall fall into four categories, namely encouraged, permitted, restricted and prohibited. The encouraged, restricted and prohibited projects with foreign investment shall be listed in the Foreign Investment Industrial Guidance Catalogue ( 外商投資產業指導目錄 ) (the Catalogue ), which was jointly amended by the National Development and Reform Commission ( NDRC ) and the MOFCOM, on 10 March 2015 and came into effect on 10 April 2015, while any project not listed in the Catalogue is deemed to be a permitted project for foreign investment. According to the Catalogue, the property management industry falls into the permitted category. Foreign-invested property management enterprises are permitted to be incorporated as a Sino-foreign equity joint venture, Sino-foreign cooperative joint venture or wholly foreign owned enterprise in accordance with the Catalogue and other relevant requirements of the laws and administrative regulations regarding foreign-invested enterprises. Foreign invested property management enterprises shall obtain approvals from the competent commercial authority and obtain the Approval Certificate for Foreign-invested Enterprise prior to their registration with the local Administration for Industry and Commerce. Legal Regulations over Foreign Exchange in the PRC According to the Regulations on the Control of Foreign Exchange ( 外匯管理條例 )(Order No. 193 of the State Council), which was promulgated by the State Council on 29 January 1996, came into effect on 1 April 1996 and was amended on 14 January 1997 and 5 August 2008, foreign exchange receipts of domestic institutions or individuals may be transferred to the PRC or deposited abroad. The conditions for transfer to the PRC or overseas deposit, time limit and other contents shall be specified by the foreign exchange control department of the State Council according to the international receipts and payments status and requirements of foreign exchange control. Foreign exchange receipts for current account transactions may be retained or sold to financial institutions engaged in the settlement or sale of foreign exchange according to the relevant provisions of the State. Domestic institutions or individuals that make direct investments abroad or are engaged in the distribution or trade of overseas valuable securities or derivative products shall go through the formalities for registration according to the provisions of the foreign exchange control department of the State Council. Such institutions or individuals shall submit the relevant documentation for examination and approval or record-filing prior to foreign exchange registration, if they shall be subject to the approval of or record-filling with the competent administration departments in advance as required by the State. The exchange rate for RMB follows a managed floating exchange rate system based on market demand and supply. III-2

281 APPENDIX III REGULATORY OVERVIEW According to the Regulations on Administration of Settlement, Sale and Payment of Foreign Exchange ( 結匯 售匯及付匯管理規定 ) (Yin Fa 1996 No. 210), which was promulgated by the PBOC on 20 June 1996, and came into effect on 1 July 1996, foreign exchange receipts under the current account of foreign-invested enterprises may be retained to the fullest extent specified by the foreign exchange bureau. Any portion in excess of such amount shall be sold to a designated foreign exchange bank or through a foreign exchange swap centre. According to the Notice on Improving of Relevant Business Operations Issues Concerning the Administration of the Payment and Settlement of Foreign Exchange Capital of Foreign- Invested Enterprises ( 關於完善外商投資企業外匯資本金支付結匯管理有關業務操作問題的通知 ) (Hui Zong Fa 2008 No. 142), which was promulgated by the SAFE and came into effect on 29 August 2008, (i) the capital verification of a foreign-invested enterprise shall be conducted by accountants before the foreign-invested enterprise applies for the payment and settlement of foreign currency capital, and (ii) the RMB funds converted from the foreign currency capital of a foreign-invested enterprise may only be used within its approved scope of business and cannot be used for equity investments or acquisitions within the PRC unless specifically provided for otherwise. The use of such RMB capital may not be changed without SAFE s approval, and may not, in any case, be used to repay or prepay RMB loans if such loans have not been used. According to the Regulations on the Administration of Foreign Exchange for the Foreign Investors Domestic Direct Investments ( 外國投資者境內直接投資外匯管理規定 ) (Hui Fa 2013 No. 21), which was promulgated by the SAFE on 11 May 2013 and came into effect on 13 May 2013, foreign investors domestic direct investments shall be registered for administration. Institutions and individuals involved in domestic direct investment activities shall go through registration formalities at the SAFE and its branches (the foreign exchange bureau ). Banks shall process business related to domestic direct investments according to the registration information of the foreign exchange bureau. The foreign exchange bureau shall carry out supervisory administration over the registration, account opening and change, fund receipt, payment and exchange settlement and sale of domestic direct investments. According to the Notice of the SAFE on Reforming the Foreign Exchange Capital Fund Settlement Administration Ways of Foreign-Invested Enterprises ( 國家外匯管理局關於改革外商投資企業外匯資本金結匯管理方式的通知 ) (Hui Fa 2015 No. 19), which was promulgated by the SAFE on 30 March 2015 and came into effect on 1 June 2015, the foreign exchange capital fund in the capital fund accounts of foreign-invested enterprises whose currency contribution equity confirmation is handled by the foreign exchange bureau (or whose currency contribution bookkeeping registration is handled by banks) can go through exchange settlement at banks according to actual operation requirements. The voluntary exchange settlement percentage of the foreign exchange capital fund of foreign-invested enterprises is temporarily fixed as 100%. The SAFE can timely adjust the above percentage according to the international balance of payments. III-3

282 APPENDIX III REGULATORY OVERVIEW Legal Regulations on Enterprises Engaging in Property Management Services The Qualification of Property Management Enterprises According to the Regulation on Property Management ( 物業管理條例 ) (Order No. 379 of the State Council), which was promulgated by the State Council on 8 June 2003, and came into effect on 1 September 2003 and was amended on 26 August 2007, a qualification system for enterprises engaging in property management activities has been adopted. According to the Measures for the Administration on Qualifications of Property Management Enterprises ( 物業管理企業資質管理辦法 ) (Order No. 125 of the MOHURD) (the Property Management Enterprises Qualification Measure ), which was promulgated by the MOHURD on 17 March 2004, came into effect on 1 May 2004 and which was amended on 26 November 2007, a newly established property management enterprise shall, within 30 days from the date of the receipt of its business licence, make an application for the property management qualification to the competent real estate administration department of the people s government of the municipalities directly under the PRC government or cities divided into districts in the locality of its industry and commerce registration. The competent departments of qualification examination and approval shall review the qualification and issue property management qualification certificates to the property management enterprises which meet the conditions for the corresponding qualification class. According to the Property Management Enterprises Qualification Measure, the qualifications of a property management enterprise shall be classified into first, second and third classes. For the different classes of the qualification, the Property Management Enterprises Qualification Measure has set out specific criteria for each class. Applicants have to meet detailed requirements in relation to their (i) registered capital; (ii) number of professional employees; (iii) types of properties managed; and (iv) areas of different types of properties managed. The competent construction administration department of the State Council shall be responsible for the issuance and administration of the first class qualification certificate of the property management enterprises. The competent construction administration departments of the people s government of provinces and autonomous regions shall be responsible for the issuance and administration of the second class qualification certificate of the property management enterprises, and the competent construction administration departments of the people s governments of municipalities directly under the central government shall be responsible for the issuance and administration of the second and the third class qualification certificate of the property management enterprises. The competent construction administration departments of the people s government of the cities divided into districts shall be responsible for the issuance and administration of the third class qualification certificate of the property management enterprises. Property management enterprises with the first class qualification are permitted to undertake any real estate management projects. The property management enterprises with the second class qualification are permitted to undertake the real estate management of residential projects under 300,000 sq.m. and non-residential projects under 80,000 sq.m. The property management enterprises with the third class qualification are permitted to undertake the real estate management of residential projects under 200,000 sq.m. and non-residential projects under 50,000 sq.m. Property management enterprises must undergo annual inspections to maintain their qualifications. III-4

283 APPENDIX III REGULATORY OVERVIEW If property management enterprises do not obtain the qualification certificates for property management enterprises, or if the projects they undertake exceed the operation scope of their qualification grade, the property management enterprises may be ordered to surrender any income unlawfully earned from such activities and to pay a fine. Appointment of the Property Management Enterprise AccordingtotheLawonProperty( 物權法 ) (Order No. 62 of the President of the PRC), which was promulgated by the National People s Congress on 16 March 2007 and came into effect on 1 October 2007, property owners can either manage the buildings and the ancillary facilities by themselves, or entrust the matter to a property management enterprise or other custodians. Property owners are entitled to replace the property management enterprise or other custodians employed by the developer. Property management enterprises or other custodians shall manage the buildings and the ancillary facilities within the district of the building as entrusted by the property owners, and shall be subject to the supervision by the property owners. According to the Regulation on Property Management, a general meeting of the property owners of a property can engage or dismiss the property management enterprise with affirmative votes of owners who exclusively own more than half of the total construction area of the building(s) and who account for more than half of the total number of the property owners. Before the formal engagement with a property management enterprise by a general meeting of the property owners, a written initial service contract shall be signed between the construction institutions (for example, a property development enterprise) and a property management enterprise. The property management contract sets out the terms according to which the property management enterprise undertakes to repair, maintain and manage all installations and equipment within the relevant buildings and ancillary areas. The initial service contract shall be terminated once a property management contract is signed between the property owners associations and the property management enterprise. According to the Temporary Measures on the Tendering and Bidding for Initial Property Management Services ( 前期物業管理招標投標管理暫行辦法 ) (Jian Zhu Fang 2003 No. 130), which was promulgated by the MOHURD on 26 June 2003 and came into effect on 1 September 2003, initial property management services shall be conducted by the property management enterprise employed by the developer before any property management enterprise has been engaged by the property owners and owners association. The developer of residential buildings and non-residential buildings located in the same property management areas shall engage the property management enterprises of the same and corresponding qualification through the process of tendering and bidding. The major procedures of tendering and bidding are: (i) compiling tendering documents; (ii) before issuing the tendering announcements or invitations, a report shall be made to the real estate administration department of the people s government at or above county level in the locality of the property; (iii) tendering, including public tendering and invitation tendering; (iv) bidding, bid opening, bid evaluation. After the property management enterprises submit their bids, the bid inviter shall organise for the bids to be opened. After bid opening, the bid-inviter representatives and property management experts shall establish a bid evaluation committee consisting of an odd number of five or more members, at least two thirds of whom shall be III-5

284 APPENDIX III REGULATORY OVERVIEW property management experts who are not representatives of the developer issuing the tender. The property management experts shall be selected on a random basis from a list of experts compiled by the local real estate administrative department. The members of the bid evaluation committee shall fulfill their duties earnestly, impartially, honestly and non-corruptively; (v) bid winning. Upon the bid evaluation committee completing the bid evaluation, the bid inviter shall determine the bid winner according to the recommendation of the bid evaluation committee; and (vi) the bid inviter and the bid winner sign the property management contract. In cases where there are less than three bidders or for small-scale properties, upon the approval of the competent real estate administration department of the people s government of the district and county in the locality of the property, the developer of the property may engage a property management enterprise directly through agreement with the property service enterprise. According to the Regulation on Property Management, if the developer of a residential property fails to appoint a property service enterprise through tendering and bidding or appoints a property service enterprise arbitrarily through agreement without due approval, the real estate administrative department of the people s government at or above county level shall order them to make due rectification within a specified time and issue a warning, and can impose a fine below RMB100,000. The Interpretations on Several Issues relating to the Specific Application of Laws on the Hearing of Property Management Service Disputes ( 關於審理物業服務糾紛案件具體應用法律若干問題的解釋 ) (Fa Shi 2009 No. 8), which was promulgated by the Supreme People s Court on 15 May 2009 and came into effect on 1 October 2009, provides the identification principles applied by the court when hearing disputes on specific matters between property owners and property management enterprises. Subject to The Interpretations on Several Issues relating to the Specific Application of Laws on the Hearing of Property Management Service Disputes, the property management service contracts entered into by property developers or property owners association on behalf of property owners according to the related regulations are legally binding on property owners, and the court shall not support a claim if property owners plead for the cause of not being a contract party. Furthermore, the court shall support a claim if property owners association or property owners appealed to the court to confirm that the clauses of property management service contracts which exempt the responsibility of property management enterprises or which aggravate the responsibility or exempt the rights of property owners association or property owners are invalid. Fees Charged by Property Management Enterprises According to the Measures on the Charges of Property Management Enterprise ( 物業服務收費管理辦法 ) (Fa Gai Jia Ge 2003 No. 1864), which was jointly promulgated by the NDRC and the MOHURD on 13 November 2003 and came into effect on 1 January 2004, property management enterprises are permitted to charge property owners fees for the maintenance, conservation and management of properties, ancillary facilities and related grounds, and the maintenance of the environmental health and order of relevant areas according to the relevant property management service contracts. III-6

285 APPENDIX III REGULATORY OVERVIEW The competent price administration department and construction administration department of the State Council shall be jointly responsible for the supervision over and administration of the fees charged by property management enterprises nationwide. The competent price administration departments of the people s government above county level and the competent property administration departments of the same level shall be jointly responsible for the supervision over and administration of the fees charged by property management enterprises in their respective administrative regions. The fees charged by property management enterprises shall be based on both government guidance prices and market regulated prices on the basis of the nature and features of the relevant properties. The specific pricing principles shall be determined by the competent price administration departments and property administration departments of the people s governments of each province, autonomous region and municipality directly under the central government. As agreed between the property owners and property management enterprise, the fees for the property management services can be charged either as (a) a lump sum of all property management fees collected, in which case the property owners pay fixed property management fees to the property management enterprise who shall enjoy or assume all the profits or losses as its own risk, or (b) a fixed percentage of the property management fees collected, in which case the property management enterprise may collect its service fees in the proportion or amount as agreed from the property management income in advance, the rest of which shall be exclusively used on the items as stipulated in the property management contract, and property owners shall enjoy or assume the surplus or shortage. Property management enterprises shall charge service fees at an expressly marked price in accordance with the regulations of the competent price administration departments of the people s government, and display its service items and standards, charged items and standards and other related contents on the noticeable positions in the management areas publicly. According to the Regulation on Property Management Service Fee with Clear Price Tag ( 物業服務收費明碼標價規定 ) (Fa Gai Jia Jian 2004 No. 1428), which was promulgated by the NDRC and the MOHURD on 19 July 2004 and came into effect on 1 October 2004, property management enterprises, during their provision of services to the property owners (inclusive of the property service as stipulated in the property management contract as well as other services requested by property owners), shall charge service fees at expressly marked prices, and display their service items, standards and other related contents. In case there is any change to the pricing standard, the property management enterprise shall adjust the related contents displayed and indicate the execution date of the new standards one month prior to the implementation of the new standards. If property management enterprises do not adopt the government guidance prices according to the regional regulations, they may be ordered to surrender any income unlawfully earned from such activity, pay a fine or, in a serious case, cease their business operations until their non-compliance has been rectified. III-7

286 APPENDIX III REGULATORY OVERVIEW According to the Notice of the NDRC on the Proposals of Lifting the Control of Some Service Prices ( 國家發展改革委關於放開部分服務價格意見的通知 ) (Fa Gai Jia Ge 2014 No. 2755), which was promulgated by the NDRC and came into effect on 17 December 2014, as for relevant service prices which meet competitive conditions, the competent pricing authorities of each province, autonomous region and municipality directly under the central government shall carry out relevant procedures, and lift price control, including the property service prices of nonpublic housing. The property service prices of non-public housing refer to the fees charged to property owners by property service enterprises which accept the appointment of property owners and carry out repair, maintenance and management over non-public housing and ancillary facilities and equipment and relevant sites and carry out the activities of maintaining the environmental hygiene and relevant order in the area of property management according to the property service contract. After the regulations came into effect, they shall be specifically enforced by various local pricing bureaus. Supervision over Pricing Costs by Property Management Service Providers According to the Measures on the Supervision over Pricing Costs by Property Management Service Providers (Trial) ( 物業服務定價成本監審辦法 ( 試行 ) ) (Fa Gai Jia Ge 2007 No. 2285), which was promulgated by the NDRC and the MOHURD on 10 September 2007 and came into effect on 1 October 2007, as for the formulation and implementation of the property service charging standards for which government guidance prices are carried out, the competent pricing authorities of the government shall carry out pricing cost supervision over relevant property service enterprises. The pricing cost of property management services is based on the average cost of property management services evaluated by the competent price administration department of people s government. The competent price administration department of the people s government is responsible for the supervision over and investigation of the pricing cost of property management services with the assistance of the competent property administration department of people s government. Property management service pricing costs shall consist of the staff costs, the daily operation and maintenance costs of the common parts and facilities of the property, gardening maintenance costs, sanitation and hygiene costs, security maintenance costs, insurance costs for the common parts, facilities and public liability, office expenses, management costs apportionment, depreciation for fixed assets and other costs agreed to by the property owners. Administration on the Special Fund for Residence Maintenance According to the Measures on the Special Fund for Residence Maintenance ( 住宅專項維修資金管理辦法 ) (Order No. 165 of the MOHURD and the MOF), which were jointly promulgated by the MOHURD and the MOF on 4 December 2007 and came into effect on 1 February 2008, a special fund shall be established for the maintenance, alteration and renovation of residential properties to be used after the expiration of the guarantee period for all communal areas, facilities and equipment of such residential properties. Residence maintenance funds shall be deposited into a special account under separate management by residents and subject to governmental supervision. The amount an individual property owner is required to contribute to the fund shall be determined with reference to the floor area of the property owners residence, the age of the property and the specific standards set by relevant local real estate authorities. Funds are entrusted to the local real estate authority until such time as they can be transferred III-8

287 APPENDIX III REGULATORY OVERVIEW to an account designated by the property owners association upon its establishment. Residence maintenance funds are held separately, must not be appropriated for improper purposes and must be used strictly in compliance with designated procedures. Administration on Parking Lots According to the Guidance on the Planning, Construction and Management of Urban Parking Facilities ( 關於城市停車設施規劃建設及管理的指導意見 ) (Jian Cheng 2010 No. 74), which was jointly promulgated by the MOHURD, the MPS and the NDRC and came into effect on 19 May 2010, a licensed management system with market access and exit standards shall be adopted by the open, fair and equitable selection of professional urban parking service enterprises. According to the Measures on Parking Service Fees for Vehicles ( 機動車停放服務收費管理辦法 ) (Ji Jia Ge 2000 No. 933), which was promulgated by the NDRC on 14 July 2000 and came into effect on 1 September 2000, the competent price administration departments of the people s government above the county level shall be responsible for the management of the charges for parking service fees for vehicles. Parking service fees for vehicles are determined under three basic pricing principles, including market-regulated pricing, government guided pricing and government pricing. The specific pricing shall be determined by the price administration departments of the people s government of each province, autonomous region and municipality directly under the central government on the basis of the number of vehicles and the supply-demand relationship of parking service in their respective administrative regions. The formulation or adjustment of standards for parking service fees adopting government guided pricing or government pricing shall be applied by the operators of the parking lots and approved by the competent price administration department of the people s government in its locality. Parking service fees shall be charged at expressly marked prices. The operator shall display the price notice in a noticeable position in the parking lot and toll gates, indicating the type of vehicles, service items, charging units and standards and telephone numbers for complaints and information in order to be supervised by members of the public. According to the Notice of the NDRC on the Proposals of Lifting the Control of Some Service Prices, as for relevant service prices which meet competitive conditions, the competent pricing authorities of each province, autonomous region and municipality directly under the central government shall carry out relevant procedures, and lift price control, including the parking service prices of residential communities. The parking service prices of residential communities refer to the fees charged to property owners of residential communities or users by property service enterprises or parking service enterprises which accept the appointment of property owners and provide property owners of residential communities or users with parking sites, facilities and parking order management service according to parking service contracts. III-9

288 APPENDIX III REGULATORY OVERVIEW Legal Supervision Over Enterprises Engaged in Repair and Maintenance Services of Such Special Equipment as Elevators According to the Special Equipment Safety Law of the PRC ( 中華人民共和國特種設備安全法 ), which was promulgated on 29 June 2013 and came into effect on 1 January 2014, and the Special Equipment Safety Supervision Regulations ( 特種設備安全監察條例 ) (Order No. 549 of the State Council), which was promulgated by the State Council on 11 March 2003, came into effect on 1 June 2003 and was amended on 24 January 2009, enterprises engaged in the installation, alteration, repair and daily maintenance of electromechanical special equipment such as elevators must obtain a Licence for the Installation, Alteration, Repair & Maintenance of Special Equipment ( 特種設備安裝改造維修許可證 ), and enterprises engaged in the daily maintenance of elevators must obtain an Elevator Maintenance Licence. The Licensing Rules on the Installation, Alteration and Repair of Electromechanical Special Equipments (For Trial Implementation) ( 機電類特種設備安裝改造維修許可規則 ( 試行 ) ) (the Licensing Rules ) (Guo Zhi Jian Guo 2003 No. 251), promulgated by the State Administration for Quality Supervision and Inspection and Quarantine and came into effect on 8 August 2003, provide specific requirements for licence applicants and detailed procedures regarding the application, acceptance, review and issuance of the licence. Applicants that meet all requirements may file an application with the safety supervision authorities for special equipment at the provincial or municipal levels and obtain the relevant licence after acceptance and investigation by the competent review agency. Enterprises shall conduct their business in accordance with the requirements stipulated in the Licensing Rules and shall be subject to administrative penalties for any violation thereof. Legal Supervision Over Enterprises Engaged in Services of Security Technology and Protection System According to Administrative Measures on Safety Technology and Protection Products (Order No. 12 of the State Bureau of Quality and Technical Supervision and the MPS), which was promulgated by these two departments on 16 June 2000 and came into effect on 1 September 2000, products of security technology and protection ( technology and protection products ) refer to exclusive products which are used to prevent robbery, theft, explosion, etc. and prevent infringement upon national, collective and individual property and personal safety and are listed in the Catalogue of Security Technology and Protection Products. Organs of public security are competent authorities of technical prevention, which are responsible for the quality industry supervision and administration of security technology and protection products. According to the Regulations on the Management of Safety Technology in Guangdong Province ( 廣東省安全技術防範管理條例 )( Regulations on Safety Technology )(theno.133bulletinof the 33rd Meeting of the 9th Provincial People s Congress, which was promulgated by the People s Congress of Guangdong Province on 7 July 2002, came into effect on 1 August 2002 and was amended on 23 July 2010, and its implementation measures, which was promulgated by the Guangdong Provincial Government on 15 November 2002 and came into effect on the same day, organs of public security at or above county level are responsible for the planning, management, direction and supervision of the technical prevention work in their administrative regions. Quality and technical supervision, industrial and commercial administration, construction and other administrative departments shall carry out technical prevention management within their respective duty scopes. The design, construction, acceptance and repair of technical prevention systems shall be carried out according to national standards. III-10

289 APPENDIX III REGULATORY OVERVIEW Without national standards, industry standards shall prevail; without industry standards, local standards and relevant technical standards shall prevail. Organs of public security shall carry out qualification level management over the designers, constructors and repairers of technical prevention systems. The Technical Prevention Office of Public Security Department of Guangdong Province shall carry out qualification level management over the designers, constructors and repairers of technical prevention systems, and uniformly print, produce and issue the Qualification Certificates of Design, Construction and Repair of Security Technology Prevention Systems of Guangdong Province ( 廣東省安全技術防範系統設計 施工 維修資格證 )( Qualification Certificates ). Qualification Certificates include four levels: the first level, the second level, the third level and the undetermined level. Those who fail to acquire the corresponding qualification certificates shall not engage in the design, construction and repair of technical prevention systems. Those who fail to acquire the corresponding qualification certificates but undertake design, construction and repair of technical prevention systems, shall be ordered by organs of public security at or above county level to make due rectification, and surrender the income they have obtained accordingly, and pay a fine ranging from RMB10,000 to RMB30,000. Regulations on Labour Employment and Social Security According to the Labour Law of the PRC ( 中華人民共和國勞動法 ) (Order No. 28 of the President) (the Labour Law ), which was promulgated by the Standing Committee of the National People s Congress on 5 July 1994, came into effect on 1 January 1995 and was amended on 27 August 2009, an employer shall develop and improve its rules and regulations to safeguard the rights of its workers. An employer shall develop and improve its labour safety and health system, stringently implement national protocols and standards on labour safety and health, conduct labour safety and health education for workers, guard against labour accidents and reduce occupational hazards. Labour safety and health facilities must comply with relevant national standards. An employer must provide workers with the necessary labour protection gear that complies with labour safety and health conditions stipulated under national regulations, as well as provide regular health checks for workers that are engaged in operations with occupational hazards. Labourers engaged in special operations shall have received specialised training and obtained the pertinent qualifications. An employer shall develop a vocational training system. Vocational training funds shall be set aside and used in accordance with national regulations and vocational training for workers shall be carried out systematically based on the actual conditions of the company. The Labour Contract Law ( 勞動合同法 ) (Order No. 65 of the President), which was promulgated by the SCNPC on 29 June 2007, came into effect on 1 January 2008, and was amended on 28 December 2012, and the Implementation Regulations on Labour Contract Law ( 勞動合同法實施條例 ) (Order No. 535 of the State Council), which was promulgated on 18 September 2008 and became effective since the same day, regulate both parties to a labour contract, namely the employer and the employee, and contain specific provisions involving the terms of the labour contract. It is stipulated under the Labour Contract Law and the Implementation Regulations on Labour Contact Law that a labour contract must be made in writing. An employer and an employee may enter into a fixed-term labour contract, a non-fixedterm labour contract, or a labour contract that concludes upon the completion of certain work assignments, after reaching agreement following due negotiations. An employer may legally terminate a labour contract and dismiss its employees after reaching agreement following due III-11

290 APPENDIX III REGULATORY OVERVIEW negotiations with the employee or by fulfilling the statutory conditions. Labour contracts concluded prior to the enactment of the Labour Law and subsisting within the validity period thereof shall continue to be honoured. With respect to a circumstance where a labour relationship has already been established but no formal contract has been made, a written labour contract shall be entered into within one month from the effective date of the Labour Contract Law. According to the Interim Regulations on the Collection and Payment of Social Insurance Premiums ( 社會保險費徵繳暫行條例 ) (Order 1999 No. 259 of the State Council), the Regulations on Work Injury Insurance ( 工傷保險條例 ) (Order No. 586 of the State Council), which was promulgated by the State Council on 20 December 2010, the Regulations on Unemployment Insurance ( 失業保險條例 ) (Order 1999 No. 258 of the State Council), and the Trial Measures on Employee Maternity Insurance of Enterprises ( 企業職工生育保險試行辦法 ) (Lao Bu Fa 1994 No. 504), enterprises in the PRC shall provide benefit plans for their employees, which include basic pension insurance, unemployment insurance, maternity insurance, work injury insurance and basic medical insurance. An enterprise must provide social insurance by processing social insurance registration with local social insurance agencies, and shall pay or withhold relevant social insurance premiums for or on behalf of its employees. The Law on Social Insurance ( 社會保險法 )(No.35ofthePresident),whichwas promulgated on 28 October 2010 and became effective on 1 July 2011, has consolidated pertinent provisions for basic pension insurance, unemployment insurance, maternity insurance, work injury insurance and basic medical insurance, and has elaborated in detail the legal obligations and liabilities of employers who do not comply with relevant laws and regulations on social insurance. According to the Regulations on the Administration of Housing Provident Fund ( 住房公積金管理條例 ) (Order No. 262 of the State Council), which was promulgated and became effective on 3 April 1999, and was amended on 24 March 2002, housing provident fund contributions by an individual employee and housing provident fund contributions by his or her employer shall belong to the individual employee. The employer shall timely pay and deposit housing provident fund contributions in full and late or insufficient payments shall be prohibited. The employer shall process housing provident fund payment and deposit registrations with the housing provident fund administration centre. With respect to companies who violate the above regulations and fail to process housing provident fund payment and deposit registrations or open housing provident fund accounts for their employees, such companies shall be ordered by the housing provident fund administration centre to complete such procedures within a designated period. Those who fail to process their registrations within the designated period shall be subject to a fine ranging from RMB10,000 to RMB50,000. When companies breach these regulations and fail to pay housing provident fund contributions in full when due, the housing provident fund administration centre shall order such companies to pay within a designated period, and may further apply to the People s Court for mandatory enforcement against those who still fail to comply after the expiry of such period. III-12

291 APPENDIX III REGULATORY OVERVIEW Regulations on Intellectual Property Rights Patent Law According to the Patent Law of the People s Republic of China ( 中華人民共和國專利法 ) (OrderNo.8ofthePresidentofthePRC),which was amended by the Standing Committee of the National People s Congress on 27 December 2008), the State Intellectual Property Office is responsible for management of national patent work. The patent management departments of the people s governments of each province, autonomous region and municipality directly under the central government are responsible for the patent management in their respective administrative regions. The principle of first-to-file is adopted by the Chinese patent system. That is to say, when two or more applicants apply for patent on the same invention or creation respectively, the patent right shall be granted to the first applicant. The application for patent right, invention or utility model must meet three standards: novelty, creativity and utility. The effective period of invention patent is 20 years, and the effective period of utility model and design patent is 10 years. Only after obtaining the permission or due authorisations of the patent holder, can others use the patent; otherwise they shall be regarded as infringing upon the patent right. Trademark Law Trademarks are protected by the Trademark Law of the People s Republic of China ( 中華人民共和國商標法 ) (Order No. 6 of the President of the PRC), which was amended by the Standing Committee of the National People s Congress on 30 August 2013, and the Regulations for the Implementation of the Trademark Law of the People s Republic of China ( 中華人民共和國商標法實施條例 ) (Order No. 651 of the State Council of the PRC), which was amended by the State Council on 29 April The trademark bureaus under the General Administration for Industry and Commerce are responsible for trademark registration and grant an effective period of 10 years for various registered trademarks. Trademark registrants can apply to renew the registration, and the effective period of renewed registration is the following 10 years. Trademark registrants can permit others to use their registered trademarks by concluding trademark licensing contracts, which must be filed and recorded at the trademark bureaus. The principle of first-to-file is adopted when trademark registration is handled under Chinese trademark law. If a trademark under registration application is identical to or similar to a trademark which has already been registered by others on the same type of commodity or services or similar commodity or services or a trademark which has already been examined and approved for use preliminarily, then the application for trademark registration may be rejected. Anyone who applies for trademark registration shall not impair any existing prior right of anyone else, or forestall others in registering a trademark which others have already begun to use and which has some influence. Copyright Law According to the Copyright Law of the PRC ( 中華人民共和國著作權法 ) (Order No. 26 of the President of the PRC), which was amended by the Standing Committee of the National People s Congress on 26 February 2010, with respect to all the works including but not limited to literature, art, natural science, social science, engineering technology and computer software, III-13

292 APPENDIX III REGULATORY OVERVIEW whether published or not, their composers (Chinese citizens, legal person or other organisations) are entitled to copyright. Copyright holders enjoy many rights, including right of publication, right of authorship and right of reproduction. The Measures for the Registration of Computer Software Copyright ( 計算機軟件著作權登記辦法 ) (Order 2002 No. 1 of the National Copyright Administration), which was promulgated by the General Administration of Press and Publication ( GAPP ) and came into effect on 20 February 2002, regulates the registration of software copyright, the exclusive licensing contracts and transfer contracts of software copyright. The GAPP is in charge of the national registration and management of software copyrights, and identifies the China Copyright Protection Centre as the agency of software registration. The China Copyright Protection Centre will grant registration certificates to applicants of computer software copyrights who and whose computer software copyrights conform to Measures for the Registration of Software Copyright and provisions of the Regulations on Protection of Computer Software ( 計算機軟件保護條例 ). According to the provisions of the Regulations of the Supreme People s Court on Several Issues Concerning the Application Law for Hearing Cases of Civil Disputes of Information Network Transmission Right ( 最高人民法院關於審理侵害信息網絡傳播權民事糾紛案件適用法律若干問題的規定 ) (Fa Shi 2012 No. 20), if network users and network service providers provide through information networks the works, performance, video and audio recording products in which the right owners enjoy the transmission right of information network without due permission, they shall be regarded as infringing upon the transmission right of information network. Domain Name In 2004, the Ministry of Information Industry (MII), predecessor of the Ministry of Industry and Information Technology (MIIT), promulgated the Measures on the Administrative of Domain Names for the Chinese Internet ( 中國互聯網絡域名管理辦法 ) (Order No. 30 of the MII of the PRC), which was promulgated by the former MII on 5 November 2004 and came into effect on 20 December According to the Measures on the Administrative of Domain Names, the MII is responsible for managing domain names of Chinese Internet. The principle of first-to-file is adopted for domain name services. Applicants of domain name registration shall provide the agency of domain name registration service with authentic, accurate and complete data concerning the domain names under application, and sign registration agreements with the agency. After completing the registration procedures, the applicants will become the holders of relevant domain names. Software Products The Administrative Measures on Software Products ( 軟件產品管理辦法 ), which was promulgated by the MIIT, superseded the original measures which had come into effect as at 2000, and came into effect as at April 2009 (Order No. 9 of the MIIT of the PRC), permits software developers and manufacturers to sell independently or through agents or allow others to use their software products, and can register software products developed in China at the software industry management department of the provincial people s government and file them at the MIIT. After completing the registration, they will obtain registration certificates with a valid term of five years for their software products, and apply for renewing upon the expiry of the valid III-14

293 APPENDIX III REGULATORY OVERVIEW term. According to the relevant policies of the State Council, software products developed in China, conform to relevant provisions of software management measures, and have been registered and filed according to software management measures, are entitled to several types of preferential treatments. According to the provisions of relevant policies of the State Council, the MIIT and other relevant departments can supervise and examine the research, development, production, sales, import and export of software products in the territory of the PRC. HONG KONG REGULATORY OVERVIEW The Laws and Regulations governing property management in Hong Kong The management of properties in Hong Kong is mainly governed by the Building Management Ordinance (the BMO ) and under the Deeds of Mutual Covenant ( DMCs ) of different developments. The BMO provides a statutory framework for the formation of Owners Corporations ( OCs ) to facilitate effective building management, as well as the procedures and governance of OCs to facilitate the day-to-day operations of OCs. Prior to the formation of OCs, the BMO also sets out certain terms and conditions to be incorporated in the DMCs enabling Owners committees to address building management issues in an effective manner. Property management companies, such as our Company, are usually appointed either directly under the DMCs, or otherwise engaged by OCs or owners committees as contracted parties to provide property management services, which include the carrying out of powers and performing duties under the BMO and the relevant DMCs to manage the concerned buildings. The management and maintenance of buildings therefore rest primarily with building owners through the OCs and/or owners committee, which may be delegated to property management companies. PursuanttotheprovisionsintheBMO,theSecretary for Home Affairs maintains a list of building management agents. In certain circumstances as set out in the BMO, the Secretary for Home Affairs may order that within such reasonable period as shall be specified in the order, the management committee of a building must appoint a building management agent for the purposes of managing that building. The Lands Tribunal may also, under certain limited circumstances specified in the BMO, appoint building management agents by order. At present, Hong Kong does not require mandatory licensing or registration to become a practitioner in the property management market. The property managers may voluntarily register with the Housing Managers Registration Board, established under the Housing Managers Registration Ordinance, who is responsible for registration and disciplinary control of property managers. The Hong Kong government has however proposed the Property Management Services Bill to regulate the property management market. Property management matters require multi-disciplinary professional knowledge, such as property management services for owners, management of property environment, building repair and maintenance, finance and asset management, facility management and legal knowledge. Their work also involves liaising with various government departments, non-governmental III-15

294 APPENDIX III REGULATORY OVERVIEW organisations and individual owners. Hence, property managers will often be involved in works of engineers, surveyors, technicians, security guards and other professionals, which are subject to various other statutory requirements. The DMCs In cases where a building is wholly owned by one single owner, the owner may either manage the building himself, or engage a property management company to manage the building on his behalf. In such cases, the rights and obligations of a property management company would depend on the terms of the management agreement made with the owner. In a multi-storey building, ownership is generally expressed in terms of undivided shares of and in the land (on which the building stands) and the building, together with the (a) the exclusiverightstotherelevantunitsand(b)rightsincommontousethecommonpartsofthe building. These matters are normally defined in a DMC. In these cases, the rights and obligations of a property management company would also depend on the terms of the DMC of the building concerned. A DMC is a private contractual agreement among the developer, the owners and the manager of a building. Apart from the undivided shares and rights of the owners, a DMC would normally also deal with other matters of the building concerned, such as: (a) (b) (c) (d) (e) (f) definition of common parts of the building; obligations and covenants of owners; appointment of property managers; procedures of owners committee and owners meetings; preparation of annual budgets and determination of management fees; and rights retained by the developer. The powers and duties of the manager to enforce the provisions in the DMC and to ensure observance of covenants in the DMC by the owners are sometimes also defined in the DMC. The BMO A DMC would be subject to the statutory provisions contained in the BMO. Apart from setting out the legal framework for formation, procedures and dissolution of OCs and defining powers and duties thereof, the BMO also contains provisions which affect the operation of DMCs and the daily operation and management of buildings. For instance, items listed in Schedule 1 to thebmoarepresumedtobecommonpartsof buildings unless they are specified or designed for exclusive use by individual owners under the DMC. III-16

295 APPENDIX III REGULATORY OVERVIEW Certain terms as set out in Schedule 7 to the BMO in relation to financial matters (e.g., preparation of financial budgets, keeping of accounts, matters relating to bank accounts, special funds) and managers (e.g., contracts entered into by manager, resignation/termination of manager) are mandatorily incorporated into every DMC in Hong Kong. Terms as set out in Schedule 8 to the BMO in relation to procedures of Owners committee and meetings of owners are, if consistent with a DMC, also impliedly incorporated. The BMO also contains specific provisions on requirements for the procurement of supplies, goods and services by OCs. Under the BMO, the procurement of all supplies, goods or services required by an OC in the exercise of its powers and the performance of its duties under the DMC (if any) or the BMO shall comply with such standards and guidelines as may be specified in a Code of Practice issued by the Secretary for Home Affairs. Under the BMO and the Code of Practice, any such procurement must be procured by invitation to tender if the value of service exceeds or is likely to exceed: (a) (b) the sum of HK$200,000; or a sum which is equivalent to 20% of the annual budget of the owners corporation, whichever is the lesser. Acceptance of a tender submitted for such purpose shall be decided by a resolution of the owners passed at a general meeting of the OCs. The above requirement for invitation to tender is exempted if: (a) (b) the relevant supplies, goods or services are of the same type as any supplies, goods or services which are for the time being supplied to the OC by a supplier; and the OC decides by a resolution of the owners passed at a general meeting that the relevant supplies, goods or services shall be procured from that supplier on such terms and conditions as specified in the resolution. If the above requirements are not complied with, the contract for the procurement of the relevant supplies, goods or services is not void by reason only that it does not comply with the above requirements. However, subject to order made by the Hong Kong court, the contract may be voided by the OC by a resolution of the owners passed at a general meeting, only for the reason that it does not comply with the above requirements. The Hong Kong court may make such orders (including whether the service contract is void or voidable) and give such directions in respect of the rights and obligations of the contractual parties as it thinks fit having regard to various circumstances, including but not limited to, whether the owners have benefited from the service contract and whether the owners have incurred any financial loss due to the service contract and the extent thereof. III-17

296 APPENDIX III REGULATORY OVERVIEW Likewise, managers are restricted from entering into any contract for the procurement of any supplies, goods or services the value of which exceeds or is likely to exceed the sum of HK$200,000 (or such other sum in substitution therefor as may be specified by notice in the Gazette), unless (a) the supplies, goods or services are procured by invitation to tender and (b) the procurement complies with the Code of Practice. In addition to the above requirements, managers are also restricted not to enter into any contract for the procurement of any supplies, goods or services the value of which exceeds or is likely to exceed a sum which is equivalent to 20% of the annual budget or such other percentage in substitution therefor as may be specified by notice in the Gazette unless the acceptance of the tender is decided by a resolution of the owners passed at a general meeting of the OC or at a meeting of owners (as the case may be). Property Management Services Bill The Home Affairs Department of the Hong Kong government proposed to legislate for a regulatory framework for the property management industry. As a result, the Property Management Services Bill (the Bill ) was gazetted on 25 April The Bill proposes (a) the establishment of a Property Management Services Authority (the Authority ) and (b) a mandatory licensing regime for the provision of property management services under the supervision of the Authority. Property management services are defined in the Bill to mean services prescribed by the Authority falling within the following categories: 1. general management services relating to a property; 2. management of the environment of a property; 3. repair, maintenance and improvement of a property; 4. finance and asset management relating to a property; 5. facility management relating to a property; 6. human resources management relating to personnel involved in the management of a property; and 7. legal services relating to the management of a property. The licensing regime is divided into two parts: (a) a single tier mandatory licensing regime for property management companies ( PMC ); and (b) a two-tier licensing regime for property management practitioners (PMP) who take up a supervisory or managerial role in the provision of property management services as registered professional property manager and licensed property management officer, with different levels of academic and professional qualifications and work experience. III-18

297 APPENDIX III REGULATORY OVERVIEW It is not proposed that front line staff be required to obtain licences. OCs managing their own buildings will also not be required to obtain PMC licences. The Authority will maintain a public register of licensees and issue codes of conduct to encourage conformance to a set of industry standards. The Authority may also make regulations on: (a) (b) (c) (d) (e) the information to be contained in, and the documents to accompany, an application for a licence or the renewal of a licence; the fees payable in an application for a licence or the renewal of a licence; the criteria for holding a licence; the fees payable for the issue of a licence or renewed licence; and the conditions that may be imposed on a licence or renewed licence. There will be prescribed information to be specified by the Authority which licensees must provide to their clients, which includes financial information and conflict of interests. Under the Bill, it is a criminal offence for a property management company or a property management practitioner to practise without a licence. The Authority may also conduct investigations and make disciplinary orders against licensees for disciplinary offences. The Authority may request information and documents from any person who may be able to assist in an investigation, and require that person to attend before an investigator to answer questions or respond to any written question relevant to the investigation. Failure to co-operate with the Authority without reasonable excuse is also a criminal offence under the Bill. Security and Guarding Services Ordinance Under Section 11 of the Security and Guarding Services Ordinance, no person other than a company acting under and in accordance with a licence issued in accordance with the Security and Guarding Service Ordinance shall supply, agree to supply, or hold itself out as supplying any individual to do security work for another person for reward. Under Schedule 2 of the Security and Guarding Services (Licensing) Regulation, there are three types of security work in which a company holding a licence may perform: (i) the provision of security guarding services, (ii) the provision of armoured transportation services and (iii) installation, maintenance or repairing of a security device or designing (for any particular premises or place) a security system incorporating a security device. The Security and Guarding Services Industry Authority was established on 1 June 1995 under Section 4 of the Security and Guarding Services Ordinance to administer a licensing scheme to regulate the security industry. III-19

298 APPENDIX III REGULATORY OVERVIEW MACAU REGULATORY OVERVIEW TheLawsandRegulationsgoverning property management in Macau There are currently no specific laws and regulations governing property management in Macau, whereby such activity is subject to the general rules of the Macau Civil Code relating to ownership rights, strata property, condominium management, provision of services and mandate. Articles of 1313 ff. of the Macau Civil Code determine that units that are part of a condominium (comprised of a single or more than one buildings), which are capable of being independent units, may be owned by different persons, under a strata regime. Each individual owner is the exclusive owner of his unit, and co-owner of the common parts of the condominium. The whole of the two rights is not divisible, i.e. neither may be sold separately, nor is it lawful to renounce to the common part as a means for the co-owner to release himself from the expenses necessary for their conservation and use. The administration of a condominium includes the acts tending to promote and regulate the use, fruition, and conservation of the common parts of the building, as well as other acts which, in accordance with the provisions of the Macau Civil Code, fall under the competence of the condominium bodies (normally, the general assembly of the condominium, and the administration). If the co-owners have not yet had a meeting, the de facto administrator or the property developer, or, if it exists, the entity responsible for the management of the condominium appointed by the property developer, shall call the first general meeting as soon as half of the units are sold or there is a 30% occupancy rate, in order to elect the administration, to approve the budget for that year and, if needed, to prepare the internal regulations and to decide on the amount of fire insurance to underwrite; they shall be jointly liable for the damage caused if they do not do so. Unless special provisions apply, resolutions are passed by a number of co-owners representing more than half of the total value of the condominium, being that each co-owner has in the meeting as many votes as the percentage or per thousand of his unit or units. The administration of the condominium is comprised of one or more administrators. The position of administrator may be remunerated in accordance with the terms and conditions set by the general assembly of the condominium or, in their absence, in accordance with the rules regulating the mandate contract (articles 1083 to 1110 of the Macau Civil Code). The administration s mandate cannot exceed 2 years, which can be renewed by a decision of the general assembly of the condominium. The administration of the condominium is elected and dismissed by the general assembly of the condominium; any clauses of any contracts subscribed by the co-owners or property developer providing otherwise, or any agreements transferring the administration of the condominium concluded without the assent of the general assembly of the condominium, shall be void. If an administration of the condominium voted by the general assembly of the condominium replaces the one that may have been selected by the property developer and any compensation is due for the unilateral revocation of the property management contract, payment of such a compensation is the sole responsibility of the property developer. III-20

299 APPENDIX III REGULATORY OVERVIEW The terms and conditions of the exercise of the administration of the condominium by a third party, namely a property management company such as our Company, must be stated in a service contract executed in writing. Any clause of such service contract granting the property management company a right to any compensation for non-renewal of the contract, or any similar clause, shall be void. The functions of the administration of the condominium, in addition to those that may be granted to it by the general assembly of the condominium, by the condominium regulations or by law, are: (a) to call the general assembly of the condominium; (b) to prepare the accounts, to present them, and to prepare the budget of income and expenses for each year; (c) to subscribe andmaintaininforceinsuranceagainsttheriskoffireandothertypesofrisks;(d)tocollect income and to effect payment of the condominium expenses; (e) to request from owners their share in the approved expenses; (f) to effect acts of conservation of the rights relating to common property; (g) to regulate the use of common goods and the provision of services of common interest, without prejudice to the condominium regulations; (h) to execute the resolutions of the general assembly of the condominium; (i) to initiate judicial action for the collection of the amounts; (j) to act on behalf of the totality of the owners before administrative authorities; (k) to ensure the dissemination of the rules relating to condominium security; (l) to ensure the maintenance of the car park markings and their identification; (m) to provide to interested parties the data it may have relating to the addresses where the calls of the meetings of the general assembly of the condominium should be sent; (n) to provide copies of the condominium regulations to owners and to third parties bound by them; and (o) to ensure the execution of the regulations and of legal provisions relating to the condominium. In cases where a building is wholly owned by one single owner and not under a strata regime, the owner may either manage the building himself, or engage a property management company to manage the building on his behalf. In such cases, the rights and obligations of a property management company would depend entirely on the terms of the management agreement made with the owner. Proposed regulations on property management Considering the recent development of Macau, reflected also in the increased number of buildings constituted under the strata regime, in 2006 the Macau government approved the restructuring of the Housing Bureau ( IH ) and increased its attributions, namely conferring to the IH the competency to coordinate the administration of private buildings. Since 2008 the IH has been promoting public discussion in relation to proposed legislation for a regulatory framework for the property management industry, which, among others, will subject property management companies to licensing in Macau. The latest report on the abovementioned public consultation was issued by the IH in March 2015, and the IH has declared it will introduce some changes to the proposed legislation in consequence thereof. While there is a firm intention from the Macau government to introduce legislation governing the administration of private buildings, it is unknown if and when such legislation will be approved and come into force in Macau. III-21

300 APPENDIX IV SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN COMPANIES LAW Set out below is a summary of certain provisions of the Memorandum and Articles of Association of our Company and of certain aspects of Cayman company law. Our Company was incorporated in the Cayman Islands as an exempted company with limited liability on 26 June 2006 under the Companies Law, Cap 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands (the Companies Law ). The Memorandum of Association (the Memorandum ) and the Articles of Association (the Articles ) comprise its constitution. 1. MEMORANDUM OF ASSOCIATION (a) (b) The Memorandum states, inter alia, that the liability of members of our Company is limited to the amount, if any, for the time being unpaid on our Shares respectively held by them and that the objects for which our Company is established are unrestricted (including acting as an investment company), and that our Company shall have and be capable of exercising all the functions of a natural person of full capacity irrespective of any question of corporate benefit, as provided in section 27(2) of the Companies Law and in view of the fact that our Company is an exempted company that our Company will not trade in the Cayman Islands with any person, firm or corporation except in furtherance of the business of our Company carried on outside thecaymanislands. Our Company may by special resolution alter its Memorandum with respect to any objects, powers or other matters specified therein. 2. ARTICLES OF ASSOCIATION The Articles were adopted on [.]. The following is a summary of certain provisions of the Articles: (a) Directors (i) Power to allot and issue shares and warrants Subject to the provisions of the Companies Law and the Memorandum and Articles and to any special rights conferred on the holders of any shares or class of shares, any share may be issued with or have attached thereto such rights, or such restrictions, whether with regard to dividend, voting, return of capital, or otherwise, as our Company may by ordinary resolution determine (or, in the absence of any such determination or so far as the same may not make specific provision, as the board may determine). Subject to the Companies Law, the rules of any Designated Stock Exchange (as defined in the Articles) and the Memorandum and Articles, any share may be issued on terms that, at the option of our Company or the holder thereof, they are liable to be redeemed. The board may issue warrants conferring the right upon the holders thereof to subscribe for any class of shares or securities in the capital of our Company on such terms as it may from time to time determine. IV-1

301 APPENDIX IV SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN COMPANIES LAW Subject to the provisions of the Companies Law and the Articles and, where applicable, the rules of any Designated Stock Exchange (as defined in the Articles) and without prejudice to any special rights or restrictions for the time being attached to any shares or any class of shares, all unissued shares in our Company shall be at the disposal of the board, which may offer, allot, grant options over or otherwise dispose of them to such persons, at such times, for such consideration and on such terms and conditions as it in its absolute discretion thinks fit, but so that no shares shall be issued at a discount. Neither our Company nor the board shall be obliged, when making or granting any allotment of, offer of, option over or disposal of shares, to make, or make available, any such allotment, offer, option or shares to members or others with registered addresses in any particular territory or territories being a territory or territories where, in the absence of a registration statement or other special formalities, this would or might, in the opinion of the board, be unlawful or impracticable. Members affected as a result of the foregoing sentence shall not be, or be deemed to be, a separate class of members for any purpose whatsoever. (ii) Power to dispose of the assets of our Company or any subsidiary There are no specific provisions in the Articles relating to the disposal of the assets of our Company or any of its subsidiaries. Our Directors may, however, exercise all powers and do all acts and things which may be exercised or done or approved by our Company and which are not required by the Articles or the Companies Law to be exercised or done by our Company in general meeting. (iii) Compensation or payments for loss of office Pursuant to the Articles, payments to any Director or past Director of any sum by way of compensation for loss of office or as consideration for or in connection with his retirement from office (not being a payment to which the Director is contractually entitled) must be approved by our Company in general meeting. (iv) Loans and provision of security for loans to Directors There are provisions in the Articles prohibiting the making of loans to Directors. (v) Disclosure of interests in contracts with our Company or any of its subsidiaries A Director may hold any other office or place of profit with our Company (except that of the auditor of our Company) in conjunction with his office of Director for such period and, subject to the Articles, upon such terms as the board may determine, and may be paid such extra remuneration therefor (whether by way of salary, commission, participation in profits or otherwise) in addition to any remuneration provided for by or pursuant to any other Articles. A Director may be or become a director or other officer of, or otherwise interested in, any company promoted by our Company or any other company in which our Company may be interested, and shall not be liable to account IV-2

302 APPENDIX IV SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN COMPANIES LAW to our Company or the members for any remuneration, profits or other benefits received by him as a director, officer or member of, or from his interest in, such other company. Subject as otherwise provided by the Articles, the board may also cause the voting power conferred by the shares in any other company held or owned by our Company to be exercised in such manner in all respects as it thinks fit, including the exercise thereof in favour of any resolution appointing our Directors or any of them to be directors or officers of such other company, or voting or providing for the payment of remuneration to the directors or officers of such other company. Subject to the Companies Law and the Articles, no Director or proposed or intended Director shall be disqualified by his office from contracting with our Company, either with regard to his tenure of any office or place of profit or as vendor, purchaser or in any other manner whatsoever, nor shall any such contract or any other contract or arrangementinwhichanydirectorisinanywayinterestedbeliabletobeavoided, nor shall any Director so contracting or being so interested be liable to account to our Company or the members for any remuneration, profit or other benefits realised by any such contract or arrangement by reason of such Director holding that office or the fiduciary relationship thereby established. A Director who to his knowledge is in any way, whether directly or indirectly, interested in a contract or arrangement or proposed contract or arrangement with our Company shall declare the nature of his interest at the meeting of the board at which the question of entering into the contract or arrangement is first taken into consideration, if he knows his interest then exists, or in any other case, at the first meeting of the board after he knows that he is or has become so interested. A Director shall not vote (nor be counted in the quorum) on any resolution of the board approving any contract or arrangement or other proposal in which he or any of his close associates (as defined in the Articles) is materially interested, but this prohibition shall not apply to any of the following matters, namely: (aa) any contract or arrangement for giving to such Director or his close associate(s) any security or indemnity in respect of money lent by him or any of his close associates or obligations incurred or undertaken by him or any of his close associates at the request of or for the benefit of our Company or any of its subsidiaries; (bb) any contract or arrangement for the giving of any security or indemnity to a thirdparty in respect of a debt or obligation of our Company or any of its subsidiaries for which the Director or his close associate(s) has himself/themselves assumed responsibility in whole or in part whether alone or jointly under a guarantee or indemnity or by the giving of security; IV-3

303 APPENDIX IV SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN COMPANIES LAW (cc) any contract or arrangement concerning an offer of shares or debentures or other securities of or by our Company or any other company which our Company may promote or be interested in for subscription or purchase, where the Director or his close associate(s) is/are or is/are to be interested as a participant in the underwriting or sub-underwriting of the offer; (dd) any contract or arrangement in which the Director or his close associate(s) is/are interested in the same manner as other holders of shares or debentures or other securities of our Company by virtue only of his/their interest in shares or debentures or other securities of our Company; or (ee) any proposal or arrangement concerning the adoption, modification or operation of a share option scheme, a pension fund or retirement, death, or disability benefits scheme or other arrangement which relates both to Directors, his close associates and employees of our Company or of any of its subsidiaries and does not provide in respect of any Director, or his close associate(s), as such any privilege or advantage not accorded generally to the class of persons to which such scheme or fund relates. (vi) Remuneration The ordinary remuneration of our Directors shall from time to time be determined by our Company in general meeting, such sum (unless otherwise directed by the resolution by which it is voted) to be divided amongst our Directors in such proportions and in such manner as the board may agree or, failing agreement, equally, except that any Director holding office for part only of the period in respect of which the remuneration is payable shall only rank in such division in proportion to the time during such period for which he held office. Our Directors shall also be entitled to be prepaid or repaid all travelling, hotel and incidental expenses reasonably expected to be incurred or incurred by them in attending any board meetings, committee meetings or general meetings or separate meetings of any class of shares or of debentures of our Company or otherwise in connection with the discharge of their duties as Directors. Any Director who, by request, goes or resides abroad for any purpose of our Company or who performs services which in the opinion of the board go beyond the ordinary duties of a Director may be paid such extra remuneration (whether by way of salary, commission, participation in profits or otherwise) as the board may determine and such extra remuneration shall be in addition to or in substitution for any ordinary remuneration as a Director. An executive Director appointed to be a managing director, joint managing director, deputy managing director or other executive officer shall receive such remuneration (whether by way of salary, commission or participation in profits or otherwise or by all or any of those modes) and such other benefits (including pension and/or gratuity and/or other benefits on retirement) and allowances as the board may from time to time decide. Such remuneration may be either in addition to or in lieu of his remuneration as a Director. IV-4

304 APPENDIX IV SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN COMPANIES LAW The board may establish or concur or join with other companies (being subsidiary companies of our Company or companies with which it is associated in business) in establishing and making contributions out of our Company s monies to any schemes or funds for providing pensions, sickness or compassionate allowances, life assurance or other benefits for employees (which expression as used in this and the following paragraph shall include any Director or ex-director who may hold or have held any executive office or any office of profit with our Company or any of its subsidiaries) and ex-employees of our Company and their dependents or any class or classes of such persons. The board may pay, enter into agreements to pay or make grants of revocable or irrevocable, and either subject or not subject to any terms or conditions, pensions or other benefits to employees and ex-employees and their dependents, or to any of such persons, including pensions or benefits additional to those, if any, to which such employees or ex-employees or their dependents are or may become entitled under any such scheme or fund as is mentioned in the previous paragraph. Any such pension or benefit may, as the board considers desirable, be granted to an employee either before and in anticipation of, or upon or at any time after, his actual retirement. (vii) Retirement, appointment and removal At each annual general meeting, one third of our Directors for the time being (or if their number is not a multiple of three, then the number nearest to but not less than one third) shall retire from office by rotation provided that every Director shall be subject to retirement at an annual general meeting at least once every three years. Our Directors to retire by rotation shall include any Director who wishes to retire and not offer himself for re-election. Any further Directors so to retire shall be those who have been longest in office since their last re-election or appointment but as between persons who became or were last re-elected Directors on the same day those to retire will (unless they otherwise agree among themselves) be determined by lot. There are no provisions relating to retirement of Directors upon reaching any age limit. Our Directors shall have the power from time to time and at any time to appoint any person as a Director either to fill a casual vacancy on the board or as an addition to the existing board. Any Director appointed to fill a casual vacancy shall hold office until the first general meeting of members after his appointment and be subject to reelection at such meeting and any Director appointed as an addition to the existing board shall hold office only until the next following annual general meeting of our Company and shall then be eligible for re-election. Neither a Director nor an alternate Director is required to hold any shares in our Company by way of qualification. A Director may be removed by an ordinary resolution of our Company before the expiration of his period of office (but without prejudice to any claim which such Director may have for damages for any breach of any contract between him and our Company) and the members may by ordinary resolution appoint another in his place IV-5

305 APPENDIX IV SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN COMPANIES LAW at the meeting at which such Director is removed. Unless otherwise determined by our Company in general meeting, the number of Directors shall not be less than two. There is no maximum number of Directors. The office of director shall be vacated: (aa) if he resigns his office by notice in writing delivered to our Company at the registered office of our Company for the time being or tendered at a meeting of the Board; (bb) becomes of unsound mind or dies; (cc) if, without special leave, he is absent from meetings of the board (unless an alternate director appointed by him attends) for six (6) consecutive months, and the board resolves that his office is vacated; (dd) if he becomes bankrupt or has a receiving order made against him or suspends payment or compounds with his creditors; (ee) if he is prohibited from being a director by law; (ff) if he ceases to be a director by virtue of any provision of law or is removed from office pursuant to the Articles. The board may from time to time appoint one or more of its body to be managing director, joint managing director, or deputy managing director or to hold any other employment or executive office our the Company for such period and upon such terms as the board may determine and the board may revoke or terminate any of such appointments. The board may delegate any of its powers, authorities and discretions to committees consisting of such Director or Directors and other persons as the board thinks fit, and it may from time to time revoke such delegation or revoke the appointment of and discharge any such committees either wholly or in part, and either as to persons or purposes, but every committee so formed shall, in the exercise of the powers, authorities and discretions so delegated, conform to any regulations that may from time to time be imposed upon it by the board. (viii) Borrowing powers The board may exercise all the powers of our Company to raise or borrow money, to mortgage or charge all or any part of the undertaking, property and assets (present and future) and uncalled capital of our Company and, subject to the Companies Law, to issue debentures, bonds and other securities of our Company, whether outright or as collateral security for any debt, liability or obligation of our Company or of any third party. Note: These provisions, in common with the Articles in general, can be varied with the sanction of a special resolution of our Company. IV-6

306 APPENDIX IV SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN COMPANIES LAW (ix) Proceedings of the Board The board may meet for the despatch of business, adjourn and otherwise regulate its meetings as it considers appropriate. Questions arising at any meeting shall be determined by a majority of votes. In the case of an equality of votes, the chairman of the meeting shall have an additional or casting vote. (x) Register of Directors and Officers The Companies Law and the Articles provide that our Company is required to maintain at its registered office a register of directors and officers which is not available for inspection by the public. A copy of such register must be filed with the Registrar of Companies in the Cayman Islands and any change must be notified to the Registrar within thirty (30) days of any change in such directors or officers. (b) Alterations to constitutional documents The Articles may be rescinded, altered or amended by our Company in general meeting by special resolution. The Articles state that a special resolution shall be required to alter the provisions of the Memorandum, to amend the Articles or to change the name of our Company. (c) Alteration of capital Our Company may from time to time by ordinary resolution in accordance with the relevant provisions of the Companies Law: (i) (ii) (iii) (iv) increase its capital by such sum, to be divided into shares of such amounts as the resolution shall prescribe; consolidate and divide all or any of its capital into shares of larger amount than its existing shares; divide its shares into several classes and without prejudice to any special rights previously conferred on the holders of existing shares attach thereto respectively any preferential, deferred, qualified or special rights, privileges, conditions or restrictions as our Company in general meeting or as the directors may determine; sub-divide its shares or any of them into shares of smaller amount than is fixed by the Memorandum, subject nevertheless to the provisions of the Companies Law, and so that the resolution whereby any share is sub-divided may determine that, as between the holders of the shares resulting from such sub-division, one or more of the shares may have any such preferred or other special rights, over, or may have such deferred rights or be subject to any such restrictions as compared with the others as our Company has power to attach to unissued or new shares; or IV-7

307 APPENDIX IV SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN COMPANIES LAW (v) cancel any shares which, at the date of passing of the resolution, have not been taken, or agreed to be taken, by any person, and diminish the amount of its capital by the amount of the shares so cancelled. Our Company may subject to the provisions of the Companies Law reduce its share capital or any capital redemption reserve or other undistributable reserve in any way by special resolution. (d) Variation of rights of existing shares or classes of shares Subject to the Companies Law, all or any of the special rights attached to the shares or any class of shares may (unless otherwise provided for by the terms of issue of that class) be varied, modified or abrogated either with the consent in writing of the holders of not less than three-fourths in nominal value of the issued shares of that class or with the sanction of a special resolution passed at a separate general meeting of the holders of the shares of that class. To every such separate general meeting the provisions of the Articles relating to general meetings will mutatis mutandis apply, but so that the necessary quorum (other than at an adjourned meeting) shall be two persons holding or representing by proxy not less than one-third in nominal value of the issued shares of that class and at any adjourned meeting two holders present in person or by proxy (whatever the number of shares held by them) shall be a quorum. Every holder of shares of the class shall be entitled to one vote for every such share held by him. The special rights conferred upon the holders of any shares or class of shares shall not, unless otherwise expressly provided in the rights attaching to the terms of issue of such shares, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith. (e) Special resolution-majority required Pursuant to the Articles, a special resolution of our Company must be passed by a majority of not less than three-fourths of the votes cast by such members as, being entitled so to do, vote in person or, in the case of such members as are corporations, by their duly authorised representatives or, where proxies are allowed, by proxy at a general meeting of which notice has been duly given in accordance with the Articles (see paragraph 2(i) below for further details). A copy of any special resolution must be forwarded to the Registrar of Companies in the Cayman Islands within fifteen (15) days of being passed. An ordinary resolution is defined in the Articles to mean a resolution passed by a simple majority of the votes of such members of our Company as, being entitled to do so, vote in person or, in the case of corporations, by their duly authorised representatives or, where proxies are allowed, by proxy at a general meeting held in accordance with the Articles. IV-8

308 APPENDIX IV SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN COMPANIES LAW (f) Voting rights Subject to any special rights or restrictions as to voting for the time being attached to any shares by or in accordance with the Articles, at any general meeting on a poll every member present in person or by proxy or, in the case of a member being a corporation, by its duly authorised representative shall have one vote for every fully paid share of which he is the holder but so that no amount paid up or credited as paid up on a share in advance of calls or installments is treated for the foregoing purposes as paid up on the share. A member entitled to more than one vote need not use all his votes or cast all the votes he uses in the same way. At any general meeting a resolution put to the vote of the meeting is to be decided by way of a poll save that the chairman of the meeting may in good faith, allow a resolution which relates purely to a procedural or administrative matter to be voted on by a show of hands in which case every member present in person (or being a corporation, is present by a duly authorised representative), or by proxy(ies) shall have one vote provided that where more than one proxy is appointed by a member which is a clearing house (or its nominee(s)), each such proxy shall have one vote on a show of hands. If a recognised clearing house (or its nominee(s)) is a member of our Company it may authorise such person or persons as it thinks fit to act as its representative(s) at any meeting of our Company or at any meeting of any class of members of our Company provided that, if more than one person is so authorised, the authorisation shall specify the number and class of shares in respect of which each such person is so authorised. A person authorised pursuant to this provision shall be deemed to have been duly authorised without further evidence of the facts and be entitled to exercise the same powers on behalf of the recognised clearing house (or its nominee(s)) as if such person was the registered holder of the shares of our Company held by that clearing house (or its nominee(s)) including, where a show of hands is allowed, the right to vote individually on a show of hands. Where our Company has any knowledge that any shareholder is, under the rules of the Designated Stock Exchange (as defined in the Articles), required to abstain from voting on any particular resolution of our Company or restricted to voting only for or only against any particular resolution of our Company, any votes cast by or on behalf of such shareholder in contravention of such requirement or restriction shall not be counted. (g) Requirements for annual general meetings An annual general meeting of our Company must be held in each year, other than the year of adoption of the Articles (within a period of not more than fifteen (15) months after the holding of the last preceding annual general meeting or a period of not more than eighteen (18) months from the date of adoption of the Articles, unless a longer period would not infringe the rules of any Designated Stock Exchange (as defined in the Articles)) at such time and place as may be determined by the board. IV-9

309 APPENDIX IV SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN COMPANIES LAW (h) Accounts and audit The board shall cause true accounts to be kept of the sums of money received and expended by our Company, and the matters in respect of which such receipt and expenditure take place, and of the property, assets, credits and liabilities of our Company and of all other matters required by the Companies Law or necessary to give a true and fair view of our Company s affairs and to explain its transactions. The accounting records shall be kept at the registered office or at such other place or places as the board decides and shall always be open to inspection by any Director. No member (other than a Director) shall have any right to inspect any accounting record or book or document of our Company except as conferred by law or authorised by the board or our Company in general meeting. However, an exempted company shall make available at its registered office in electronic form or any other medium, copies of its books of account or parts thereof as may be required of it upon service of an order or notice by the Tax Information Authority pursuant to the Tax Information Authority Law (2009 Revision) of the Cayman Islands. A copy of every balance sheet and profit and loss account (including every document required by law to be annexed thereto) which is to be laid before our Company at its general meeting, together with a printed copy of the Directors report and a copy of the auditors report, shall not less than twenty-one (21) days before the date of the meeting and at the same time as the notice of annual general meeting be sent to every person entitled to receive notices of general meetings of our Company under the provisions of the Articles; however, subject to compliance with all applicable laws, including the rules of the Designated Stock Exchange (as defined in the Articles), our Company may send to such persons summarised financial statements derived from our Company s annual accounts and the directors report instead provided that any such person may by notice in writing served on our Company, demand that our Company sends to him, in addition to summarised financial statements, a complete printed copy of our Company s annual financial statement and the directors report thereon. Auditors shall be appointed and the terms and tenure of such appointment and their duties at all times regulated in accordance with the provisions of the Articles. The remuneration of the auditors shall be fixed by our Company in general meeting or in such manner as the members may determine. The financial statements of our Company shall be audited by the auditor in accordance with generally accepted auditing standards. The auditor shall make a written report thereon in accordance with generally accepted auditing standards and the report of the auditor shall be submitted to the members in general meeting. The generally accepted auditing standards referred to herein may be those of a country or jurisdiction other than the Cayman Islands. If so, the financial statements and the report of the auditor should disclose this fact and name such country or jurisdiction. IV-10

310 APPENDIX IV SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN COMPANIES LAW (i) Notices of meetings and business to be conducted thereat An annual general meeting must be called by notice of not less than twenty-one (21) clear days and not less than twenty (20) clear business days. All other general meetings (including an extraordinary general meeting) must be called by notice of at least fourteen (14) clear days and not less than ten (10) clear business days. The notice must specify the time and place of the meeting and, in the case of special business, the general nature of that business. In addition notice of every general meeting shall be given to all members of our Company other than to such members as, under the provisions of the Articles or the terms of issue of the shares they hold, are not entitled to receive such notices from our Company, and also to the auditors for the time being of our Company. Notwithstanding that a meeting of our Company is called by shorter notice than that mentioned above if permitted by the rules of the Designated Stock Exchange, it shall be deemed to have been duly called if it is so agreed: (i) (ii) in the case of a meeting called as an annual general meeting, by all members of our Company entitled to attend and vote thereat; and in the case of any other meeting, by a majority in number of the members having a right to attend and vote at the meeting, being a majority together representing not less than ninety-five per cent (95%) of the total voting rights at the meeting of all the members. All business shall be deemed special that is transacted at an extraordinary general meeting and also all business shall be deemed special that is transacted at an annual general meeting with the exception of the following, which shall be deemed ordinary business: (aa) the declaration and sanctioning of dividends; (bb) the consideration and adoption of the accounts and balance sheet and the reports of the directors and the auditors; (cc) the election of directors in place of those retiring; (dd) the appointment of auditors and other officers; (ee) the fixing of the remuneration of the directors and of the auditors; (ff) the granting of any mandate or authority to the directors to offer, allot, grant options over or otherwise dispose of the unissued shares of our Company representing not more than twenty per cent (20%) in nominal value of its existing issued share capital; and (gg) the granting of any mandate or authority to the directors to repurchase securities of our Company. IV-11

311 APPENDIX IV SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN COMPANIES LAW (j) Transfer of shares All transfers of shares may be effected by an instrument of transfer in the usual or common form or in a form prescribed by the Designated Stock Exchange (as defined in the Articles) or in such other form as the board may approve and which may be under hand or, if the transferor or transferee is a clearing house or its nominee(s), by hand or by machine imprinted signature or by such other manner of execution as the board may approve from time to time. The instrument of transfer shall be executed by or on behalf of the transferor and the transferee provided that the board may dispense with the execution of the instrument of transfer by the transferee in any case in which it thinks fit, in its discretion, to do so and the transferor shall be deemed to remain the holder of the share until the name of the transferee is entered in the register of members in respect thereof. The board may also resolve either generally or in any particular case, upon request by either the transferor or the transferee, to accept mechanically executed transfers. The board in so far as permitted by any applicable law may, in its absolute discretion, at any time and from time to time transfer any share upon the principal register to any branch register or any share on any branch register to the principal register or any other branch register. Unless the board otherwise agrees, no shares on the principal register shall be transferred to any branch register nor may shares on any branch register be transferred to the principal register or any other branch register. All transfers and other documents of title shall be lodged for registration and registered, in the case of shares on a branch register, at the relevant registration office and, in the case of shares on the principal register, at the registered office in the Cayman Islands or such other place at which the principal register is kept in accordance with the Companies Law. The board may, in its absolute discretion, and without assigning any reason, refuse to register a transfer of any share (not being a fully paid up share) to a person of whom it does not approve or any share issued under any share incentive scheme for employees upon which a restriction on transfer imposed thereby still subsists, and it may also refuse to register any transfer of any share to more than four joint holders or any transfer of any share (not being a fully paid up share) on which our Company has a lien. The board may decline to recognise any instrument of transfer unless a fee of such maximum sum as any Designated Stock Exchange (as defined in the Articles) may determine to be payable or such lesser sum as our Directors may from time to time require is paid to our Company in respect thereof, the instrument of transfer, if applicable, is properly stamped, is in respect of only one class of share and is lodged at the relevant registration office or registered office or such other place at which the principal register is kept accompanied by the relevant share certificate(s) and such other evidence as the board may reasonably require to show the right of the transferor to make the transfer (and if the instrument of transfer is executed by some other person on his behalf, the authority of that person so to do). IV-12

312 APPENDIX IV SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN COMPANIES LAW The registration of transfers may be suspended and the register closed on giving notice by advertisement in a relevant newspaper and, where applicable, any other newspapers in accordance with the requirements of any Designated Stock Exchange (as defined in the Articles), at such times and for such periods as the board may determine and either generally or in respect of any class of shares. The register of members shall not be closed for periods exceeding in the whole thirty (30) days in any year. (k) Power for our Company to purchase its own shares Our Company is empowered by the Companies Law and the Articles to purchase its own Shares subject to certain restrictions and the Board may only exercise this power on behalf of our Company subject to any applicable requirements imposed from time to time by any Designated Stock Exchange (as defined in the Articles). (l) Power for any subsidiary of our Company to own shares in our Company and financial assistance to purchase shares of our Company There are no provisions in the Articles relating to ownership of shares in our Company by a subsidiary. Subject to compliance with the rules and regulations of the Designated Stock Exchange (as defined in the Articles) and any other relevant regulatory authority, our Company may give financial assistance for the purpose of or in connection with a purchase made or to be made by any person of any shares in our Company. (m) Dividends and other methods of distribution Subject to the Companies Law, our Company in general meeting may declare dividends in any currency to be paid to the members but no dividend shall be declared in excess of the amount recommended by the board. The Articles provide dividends may be declared and paid out of the profits of our Company, realised or unrealised, or from any reserve set aside from profits which the directors determine is no longer needed. With the sanction of an ordinary resolution dividends may also be declared and paid out of share premium account or any other fund or account which can be authorised for this purpose in accordance with the Companies Law. Except in so far as the rights attaching to, or the terms of issue of, any share may otherwise provide, (i) all dividends shall be declared and paid according to the amounts paid up on the shares in respect whereof the dividend is paid but no amount paid up on a share in advance of calls shall for this purpose be treated as paid up on the share and (ii) all dividends shall be apportioned and paid pro rata according to the amount paid up on the shares during any portion or portions of the period in respect of which the dividend is paid. Our Directors may deduct from any dividend or other monies payable to any member or in respect of any shares all sums of money (if any) presently payable by him to our Company on account of calls or otherwise. IV-13

313 APPENDIX IV SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN COMPANIES LAW Whenever the board or our Company in general meeting has resolved that a dividend be paid or declared on the share capital of our Company, the board may further resolve either (a) that such dividend be satisfied wholly or in part in the form of an allotment of shares credited as fully paid up, provided that the shareholders entitled thereto will be entitled to elect to receive such dividend (or part thereof) in cash in lieu of such allotment, or (b) that shareholders entitled to such dividend will be entitled to elect to receive an allotment of shares credited as fully paid up in lieu of the whole or such part of the dividend as the board may think fit. Our Company may also upon the recommendation of the board by an ordinary resolution resolve in respect of any one particular dividend of our Company that it may be satisfied wholly in the form of an allotment of shares credited as fully paid up without offering any right to shareholders to elect to receive such dividend in cash in lieu of such allotment. Any dividend, interest or other sum payable in cash to the holder of shares may be paid by cheque or warrant sent through the post addressed to the holder at his registered address, or in the case of joint holders, addressed to the holder whose name stands first in the register of our Company in respect of the shares at his address as appearing in the register or addressed to such person and at such addresses as the holder or joint holders may in writing direct. Every such cheque or warrant shall, unless the holder or joint holders otherwise direct, be made payable to the order of the holder or, in the case of joint holders, to the order of the holder whose name stands first on the register in respect of such shares, and shall be sent at his or their risk and payment of the cheque or warrant by the bank on which it is drawn shall constitute a good discharge to our Company. Any one of two or more joint holders may give effectual receipts for any dividends or other moneys payable or property distributable in respect of the shares held by such joint holders. Whenever the board or our Company in general meeting has resolved that a dividend be paid or declared the board may further resolve that such dividend be satisfied wholly or in part by the distribution of specific assets of any kind. All dividends or bonuses unclaimed for one year after having been declared may be invested or otherwise made use of by the board for the benefit of our Company until claimed and our Company shall not be constituted a trustee in respect thereof. All dividends or bonuses unclaimed for six years after having been declared may be forfeited by the board and shall revert to our Company. No dividend or other monies payable by our Company on or in respect of any share shall bear interest against our Company. (n) Proxies Any member of our Company entitled to attend and vote at a meeting of our Company is entitled to appoint another person as his proxy to attend and vote instead of him. A member who is the holder of two or more shares may appoint more than one proxy to represent him and vote on his behalf at a general meeting of our Company or at a class meeting. A proxy need not be a member of our Company and shall be entitled to exercise the same powers on behalf of a member who is an individual and for whom he acts as IV-14

314 APPENDIX IV SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN COMPANIES LAW proxy as such member could exercise. In addition, a proxy shall be entitled to exercise the same powers on behalf of a member which is a corporation and for which he acts as proxy as such member could exercise if it were an individual member. Votes may be given either personally (or, in the case of a member being a corporation, by its duly authorised representative) or by proxy. (o) Call on shares and forfeiture of shares Subject to the Articles and to the terms of allotment, the board may from time to time make such calls upon the members in respect of any monies unpaid on the shares held by them respectively (whether on account of the nominal value of the shares or by way of premium). A call may be made payable either in one lump sum or by installments. If the sum payable in respect of any call or instalment is not paid on or before the day appointed for payment thereof, the person or persons from whom the sum is due shall pay interest on the same at such rate not exceeding twenty per cent. (20%) per annum as the board may agree to accept from the day appointed for the payment thereof to the time of actual payment, but the board may waive payment of such interest wholly or in part. The board may, if it thinks fit, receive from any member willing to advance the same, either in money or money s worth, all or any part of the monies uncalled and unpaid or installments payable upon any shares held by him, and upon all or any of the monies so advanced our Company may pay interest at such rate (if any) as the board may decide. If a member fails to pay any call on the day appointed for payment thereof, the board may serve not less than fourteen (14) clear days notice on him requiring payment of so much of the call as is unpaid, together with any interest which may have accrued and which may still accrue up to the date of actual payment and stating that, in the event of non-payment at or before the time appointed, the shares in respect of which the call was made will be liable to be forfeited. If the requirements of any such notice are not complied with, any share in respect of which the notice has been given may at any time thereafter, before the payment required by the notice has been made, be forfeited by a resolution of the board to that effect. Such forfeiture will include all dividends and bonuses declared in respect of the forfeited share and not actually paid before the forfeiture. A person whose shares have been forfeited shall cease to be a member in respect of the forfeited shares but shall, notwithstanding, remain liable to pay to our Company all monies which, at the date of forfeiture, were payable by him to our Company in respect of the shares, together with (if the board shall in its discretion so require) interest thereon from the date of forfeiture until the date of actual payment at such rate not exceeding twenty per cent. (20%) per annum as the board determines. (p) Inspection of register of members Pursuant to the Articles the register and branch register of members shall be open to inspection for at least two (2) hours during business hours by members without charge, or by any other person upon a maximum payment of HK$2.50 or such lesser sum specified by IV-15

315 APPENDIX IV SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN COMPANIES LAW the board, at the registered office or such other place at which the register is kept in accordance with the Companies Law or, upon a maximum payment of HK$1.00 or such lesser sum specified by the board, at the Registration Office (as defined in the Articles), unless the register is closed in accordance with the Articles. (q) Quorum for meetings and separate class meetings No business shall be transacted at any general meeting unless a quorum is present when the meeting proceeds to business, but the absence of a quorum shall not preclude the appointment of a chairman. Save as otherwise provided by the Articles the quorum for a general meeting shall be two members present in person (or, in the case of a member being a corporation, by its duly authorised representative) or by proxy and entitled to vote. In respect of a separate class meeting (other than an adjourned meeting) convened to sanction the modification of class rights the necessary quorum shall be two persons holding or representing by proxy not less than one-third in nominal value of the issued shares of that class. A corporation being a member shall be deemed for the purpose of the Articles to be present in person if represented by its duly authorised representative being the person appointed by resolution of the directors or other governing body of such corporation to act as its representative at the relevant general meeting of our Company or at any relevant general meeting of any class of members of our Company. (r) Rights of the minorities in relation to fraud or oppression There are no provisions in the Articles relating to rights of minority shareholders in relation to fraud or oppression. However, certain remedies are available to shareholders of our Company under Cayman law, as summarised in paragraph 3(f) of this Appendix. (s) Procedures on liquidation A resolution that our Company be wound up by the court or be wound up voluntarily shall be a special resolution. Subject to any special rights, privileges or restrictions as to the distribution of available surplus assets on liquidation for the time being attached to any class or classes of shares (i) if our Company shall be wound up and the assets available for distribution amongst the members of our Company shall be more than sufficient to repay the whole of the capital paid up at the commencement of the winding up, the excess shall be distributed pari passu amongst such members in proportion to the amount paid up on the shares held by them respectively and (ii) if our Company shall be wound up and the assets available for distribution amongst the members as such shall be insufficient to repay the whole of the paid-up capital, such assets shall be distributed so that, as nearly as may be, the losses shall be borne by the members in proportion to the capital paid up, or which ought to have been paid up, at the commencement of the winding up on the shares held by them respectively. IV-16

316 APPENDIX IV SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN COMPANIES LAW If our Company shall be wound up (whether the liquidation is voluntary or by the court) the liquidator may, with the authority of a special resolution and any other sanction required by the Companies Law divide among the members in specie or kind the whole or any part of the assets of our Company whether the assets shall consist of property of one kind or shall consist of properties of different kinds and the liquidator may, for such purpose, set such value as he deems fair upon any one or more class or classes of property to be divided as aforesaid and may determine how such division shall be carried out as between the members or different classes of members. The liquidator may, with the like authority, vest any part of the assets in trustees upon such trusts for the benefit of members as the liquidator, with the like authority, shall think fit, but so that no contributory shall be compelled to accept any shares or other property in respect of which there is a liability. (t) Untraceable members Pursuant to the Articles, our Company may sell any of the shares of a member who is untraceable if (i) all cheques or warrants in respect of dividends of the shares in question (being not less than three in total number) for any sum payable in cash to the holder of such shares have remained uncashed for a period of 12 years; (ii) upon the expiry of the 12 year period, our Company has not during that time received any indication of the existence of the member; and (iii) our Company has caused an advertisement to be published in accordance with the rules of the Designated Stock Exchange (as defined in the Articles) giving notice of its intention to sell such shares and a period of three (3) months, or such shorter period as may be permitted by the Designated Stock Exchange (as defined in the Articles), has elapsed since the date of such advertisement and the Designated Stock Exchange (as defined in the Articles) has been notified of such intention. The net proceeds of any such sale shall belong to our Company and upon receipt by our Company of such net proceeds, it shall become indebted to the former member of our Company for an amount equal to such net proceeds. (u) Subscription rights reserve The Articles provide that to the extent that it is not prohibited by and is in compliance with the Companies Law, if warrants to subscribe for shares have been issued by our Company and our Company does any act or engages in any transaction which would result in the subscription price of such warrants being reduced below the par value of a share, a subscription rights reserve shall be established and applied in paying up the difference between the subscription price and the par value of a share on any exercise of the warrants. IV-17

317 APPENDIX IV SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN COMPANIES LAW 3. CAYMAN ISLANDS COMPANY LAW Our Company is incorporated in the Cayman Islands subject to the Companies Law and, therefore, operates subject to Cayman law. Set out below is a summary of certain provisions of Cayman company law, although this does not purport to contain all applicable qualifications and exceptions or to be a complete review of all matters of Cayman company law and taxation, which may differ from equivalent provisions in jurisdictions with which interested parties may be more familiar: (a) Operations As an exempted company, our Company s operations must be conducted mainly outside thecaymanislands.ourcompanyisrequiredtofileanannualreturneachyearwiththe Registrar of Companies of the Cayman Islands and pay a fee which is based on the amount of its authorised share capital. (b) Share capital The Companies Law provides that where a company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount of the value of the premiums on those shares shall be transferred to an account, to be called the share premium account. At the option of a company, these provisions may not apply to premiums on shares of that company allotted pursuant to any arrangement in consideration of the acquisition or cancellation of shares in any other company and issued at a premium. The Companies Law provides that the share premium account may be applied by the company subject to the provisions, if any, of its memorandum and articles of association in (a) paying distributions or dividends to members; (b) paying up unissued shares of the company to be issued to members as fully paid bonus shares; (c) the redemption and repurchase of shares (subject to the provisions of section 37 of the Companies Law); (d) writing-off the preliminary expenses of the company; and (e) writing-off the expenses of, or the commission paid or discount allowed on, any issue of shares or debentures of the company. No distribution or dividend may be paid to members out of the share premium account unless immediately following the date on which the distribution or dividend is proposed to be paid, the company will be able to pay its debts as they fall due in the ordinary course business. The Companies Law provides that, subject to confirmation by the Grand Court of the Cayman Islands (the Court ), a company limited by shares or a company limited by guarantee and having a share capital may, if so authorised by its articles of association, by special resolution reduce its share capital in any way. The Articles includes certain protections for holders of special classes of shares, requiring their consent to be obtained before their rights may be varied. The consent of the specified proportions of the holders of the issued shares of that class or the sanction of a resolution passed at a separate meeting of the holders of those shares is required. IV-18

318 APPENDIX IV SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN COMPANIES LAW (c) Financial assistance to purchase shares of a company or its holding company Subject to all applicable laws, our Company may give financial assistance to Directors and employees of our Company, its subsidiaries, its holding company or any subsidiary of such holding company in order that they may buy Shares in our Company or shares in any subsidiary or holding company. Further, subject to all applicable laws, our Company may give financial assistance to a trustee for the acquisition of Shares in our Company or shares in any such subsidiary or holding company to be held for the benefit of employees of our Company, its subsidiaries, any holding company of our Company or any subsidiary of any such holding company (including salaried Directors). There is no statutory restriction in the Cayman Islands on the provision of financial assistance by a company to another person for the purchase of, or subscription for, its own or its holding company s shares. Accordingly, a company may provide financial assistance if the directors of the company consider, in discharging their duties of care and acting in good faith, for a proper purpose and in the interests of the company, that such assistance can properly be given. Such assistance should be on an arm s-length basis. (d) Purchase of shares and warrants by a company and its subsidiaries Subject to the provisions of the Companies Law, a company limited by shares or a company limited by guarantee and having a share capital may, if so authorised by its articles of association, issue shares which are to be redeemed or are liable to be redeemed at the option of the company or a shareholder and the Companies Law expressly provides that it shall be lawful for the rights attaching to any shares to be varied, subject to the provisions of the company s articles of association, so as to provide that such shares are to be or are liable to be so redeemed. In addition, such a company may, if authorised to do so by its articles of association, purchase its own shares, including any redeemable shares. However, if the articles of association do not authorise the manner and terms of purchase, a company cannot purchase any of its own shares unless the manner and terms of purchase have first been authorised by an ordinary resolution of the company. At no time may a company redeem or purchase its shares unless they are fully paid. A company may not redeem or purchase any of its shares if, as a result of the redemption or purchase, there would no longer be any issued shares of the company other than shares held as treasury shares. A payment out of capital by a company for the redemption or purchase of its own shares is not lawful unless immediately following the date on which the payment is proposed to be made, the company shall be able to pay its debts as they fall due in the ordinary course of business. Shares purchased by a company shall be treated as cancelled unless, subject to the memorandum and articles of association of the company, the directors of the company resolve to hold such shares in the name of the company as treasury shares prior to the purchase. Where shares of a company are held as treasury shares, the company shall be entered in the register of members as holding those shares, however, notwithstanding the foregoing, the company shall not be treated as a member for any purpose and shall not exercise any right in respect of the treasury shares, and any purported exercise of such a IV-19

319 APPENDIX IV SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN COMPANIES LAW right shall be void, and a treasury share shall not be voted, directly or indirectly, at any meeting of the company and shall not be counted in determining the total number of issued shares at any given time, whether for the purposes of the company s articles of association or the Companies Law. Further, no dividend may be declared or paid, and no other distribution (whether in cash or otherwise) of the company s assets (including any distribution of assets to members on a winding up) may be made to the company, in respect of a treasury share. A company is not prohibited from purchasing and may purchase its own warrants subject to and in accordance with the terms and conditions of the relevant warrant instrument or certificate. There is no requirement under Cayman Islands law that a company s memorandum or articles of association contain a specific provision enabling such purchases and the directors of a company may rely upon the general power contained in its memorandum of association to buy and sell and deal in personal property of all kinds. Under Cayman Islands law, a subsidiary may hold shares in its holding company and, in certain circumstances, may acquire such shares. (e) Dividends and distributions With the exception of section 34 of the Companies Law, there is no statutory provisions relating to the payment of dividends. Based upon English case law, which is regarded as persuasive in the Cayman Islands, dividends may be paid only out of profits. In addition, section 34 of the Companies Law permits, subject to a solvency test and the provisions, if any, of the company s memorandum and articles of association, the payment of dividends and distributions out of the share premium account (see paragraph 2(m) above for further details). (f) Protection of minorities The Cayman Islands courts ordinarily would be expected to follow English case law precedents which permit a minority shareholder to commence a representative action against or derivative actions in the name of the company to challenge (a) an act which is ultra vires the company or illegal, (b) an act which constitutes a fraud against the minority and the wrongdoers are themselves in control of the company, and (c) an irregularity in the passing of a resolution which requires a qualified (or special) majority. In the case of a company (not being a bank) having a share capital divided into shares, the Court may, on the application of members holding not less than one fifth of the shares of the company in issue, appoint an inspector to examine into the affairs of the company and to report thereon in such manner as the Court shall direct. Any shareholder of a company may petition the Court which may make a winding up order if the Court is of the opinion that it is just and equitable that the company should be wound up or, as an alternative to a winding up order, (a) an order regulating the conduct of the company s affairs in the future, (b) an order requiring the company to refrain from doing or continuing an act complained of by the shareholder petitioner or to do an act which the IV-20

320 APPENDIX IV SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN COMPANIES LAW shareholder petitioner has complained it has omitted to do, (c) an order authorising civil proceedings to be brought in the name and on behalf of the company by the shareholder petitioner on such terms as the Court may direct, or (d) an order providing for the purchase of the shares of any shareholders of the company by other shareholders or by the company itself and, in the case of a purchase by the company itself, a reduction of the company s capital accordingly. Generally claims against a company by its shareholders must be based on the general laws of contract or tort applicable in the Cayman Islands or their individual rights as shareholders as established by the company s memorandum and articles of association. (g) Management The Companies Law contains no specific restrictions on the power of directors to dispose of assets of a company. However, as a matter of general law, every officer of a company, which includes a director, managing director and secretary, in exercising his powers and discharging his duties must do so honestly and in good faith with a view to the best interests of the company and exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. (h) Accounting and auditing requirements A company shall cause proper books of account to be kept with respect to (i) all sums of money received and expended by the company and the matters in respect of which the receipt and expenditure takes place; (ii) all sales and purchases of goods by the company; and (iii) the assets and liabilities of the company. Proper books of account shall not be deemed to be kept if there are not kept such books as are necessary to give a true and fair view of the state of the company s affairs and to explain its transactions. (i) Exchange control There are no exchange control regulations or currency restrictions in the Cayman Islands. (j) Taxation Pursuant to section 6 of the Tax Concessions Law (1999 Revision) of the Cayman Islands, our Company has obtained an undertaking from the Governor-in-Cabinet: (1) that no law which is enacted in the Cayman Islands imposing any tax to be levied on profits, income, gains or appreciation shall apply to our Company or its operations; and (2) that the aforesaid tax or any tax in the nature of estate duty or inheritance tax shall not be payable on or in respect of the shares, debentures or other obligations of our Company. IV-21

321 APPENDIX IV SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN COMPANIES LAW The undertaking for our Company is for a period of twenty years from 25 July The Cayman Islands currently levy no taxes on individuals or corporations based upon profits, income, gains or appreciations and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to our Company levied by the Government of the Cayman Islands save certain stamp duties which may be applicable, from time to time, on certain instruments executed in or brought within the jurisdiction of the Cayman Islands. The Cayman Islands are a party to a double tax treaty entered into with the United Kingdom in 2010 but otherwise is not party to any double tax treaties. (k) Stamp duty on transfers No stamp duty is payable in the Cayman Islands on transfers of shares of Cayman Islands companies except those which hold interests in land in the Cayman Islands. (l) Loans to directors There is no express provision in the Companies Law prohibiting the making of loans by a company to any of its directors. (m) Inspection of corporate records Members of our Company will have no general right under the Companies Law to inspect or obtain copies of the register of members or corporate records of our Company. They will, however, have such rights as may be set out in our Company s Articles. An exempted company may maintain its principal register of members and any branch registers at such locations, whether within or without the Cayman Islands, as the directors may, from time to time, think fit. A branch register shall be kept in the same manner in which a principal register is by the Companies Law required or permitted to be kept. The company shall cause to be kept at the place where the company s principal register is kept a duplicate of any branch register duly entered up from time to time. There is no requirement under the Companies Law for an exempted company to make any returns of members to the Registrar of Companies of the Cayman Islands. The names and addresses of the members are, accordingly, not a matter of public record and are not available for public inspection. However, an exempted company shall make available at its registered office, in electronic form or any other medium, such register of members, including any branch register of members, as may be required of it upon service of an order or notice by the Tax Information Authority pursuant to the Tax Information Authority Law (2009 Revision) of the Cayman Islands. (n) Winding up A company may be wound up compulsorily by order of the Court voluntarily; or, under supervision of the Court. The Court has authority to order winding up in a number of specified circumstances including where it is, in the opinion of the Court, just and equitable to do so. IV-22

322 APPENDIX IV SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN COMPANIES LAW A company may be wound up voluntarily when the members so resolve in general meeting by special resolution, or, in the case of a limited duration company, when the period fixed for the duration of the company by its memorandum or articles expires, or the event occurs on the occurrence of which the memorandum or articles provides that the company is to be dissolved, or, the company does not commence business for a year from its incorporation (or suspends its business for a year), or, the company is unable to pay its debts. In the case of a voluntary winding up, such company is obliged to cease to carry on its business from the time of passing the resolution for voluntary winding up or upon the expiry of the period or the occurrence of the event referred to above. For the purpose of conducting the proceedings in winding up a company and assisting the Court, there may be appointed one or more than one person to be called an official liquidator or official liquidators; and the Court may appoint to such office such qualified person or persons, either provisionally or otherwise, as it thinks fit, and if more persons than one are appointed to such office, the Court shall declare whether any act hereby required or authorised to be done by the official liquidator is to be done by all or any one or more of such persons. The Court may also determine whether any and what security is to be given by an official liquidator on his appointment; if no official liquidator is appointed, or during any vacancy in such office, all the property of the company shall be in the custody of the Court. A person shall be qualified to accept an appointment as an official liquidator if he is duly qualified in terms of the Insolvency Practitioners Regulations. A foreign practitioner may be appointed to act jointly with a qualified insolvency practitioner. In the case of a members voluntary winding up of a company, the company in general meeting must appoint one or more liquidators for the purpose of winding up the affairs of the company and distributing its assets. A declaration of solvency must be signed by all the directors of a company being voluntarily wound up within twenty-eight (28) days of the commencement of the liquidation, failing which, its liquidator must apply to Court for an order that the liquidation continue under the supervision of the Court. Upon the appointment of a liquidator, the responsibility for the company s affairs rests entirely in his hands and no future executive action may be carried out without his approval. A liquidator s duties are to collect the assets of the company (including the amount (if any) due from the contributories), settle the list of creditors and, subject to the rights of preferred and secured creditors and to any subordination agreements or rights of set-off or netting of claims, discharge the company s liability to them (pari passu if insufficient assets exist to discharge the liabilities in full) and to settle the list of contributories (shareholders) and divide the surplus assets (if any) amongst them in accordance with the rights attaching to the shares. As soon as the affairs of the company are fully wound up, the liquidator must make up an account of the winding up, showing how the winding up has been conducted and the property of the company has been disposed of, and thereupon call a general meeting of the company for the purposes of laying before it the account and giving an explanation thereof. At least twenty-one (21) days before the final meeting, the liquidator shall send a IV-23

323 APPENDIX IV SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND CAYMAN COMPANIES LAW notice specifying the time, place and object of the meeting to each contributory in any manner authorised by the company s articles of association and published in the Gazette in the Cayman Islands. (o) Reconstructions There are statutory provisions which facilitate reconstructions and amalgamations approved by a majority in number representing seventy-five per cent. (75%) in value of shareholders or class of shareholders or creditors, as the case may be, as are present at a meeting called for such purpose and thereafter sanctioned by the Court. Whilst a dissenting shareholder would have the right to express to the Court his view that the transaction for which approval is sought would not provide the shareholders with a fair value for their shares, the Court is unlikely to disapprove the transaction on that ground alone in the absence of evidence of fraud or bad faith on behalf of management. (p) Compulsory acquisition Where an offer is made by a company for the shares of another company and, within four (4) months of the offer, the holders of not less than ninety per cent. (90%) of the shares which are the subject of the offer accept, the offeror may at any time within two (2) months after the expiration of the said four (4) months, by notice in the prescribed manner require the dissenting shareholders to transfer their shares on the terms of the offer. A dissenting shareholder may apply to the Court within one (1) month of the notice objecting to the transfer. The burden is on the dissenting shareholder to show that the Court should exercise its discretion, which it will be unlikely to do unless there is evidence of fraud or bad faith or collusion as between the offeror and the holders of the shares who have accepted the offer as a means of unfairly forcing out minority shareholders. (q) Indemnification Cayman Islands law does not limit the extent to which a company s articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the court to be contrary to public policy (e.g. for purporting to provide indemnification against the consequences of committing a crime). 4. GENERAL Conyers Dill & Pearman, our Company s special legal counsel on Cayman Islands law, have sent to our Company a letter of advice summarising certain aspects of Cayman Islands company law. This letter, together with a copy of the Companies Law, is available for inspection as referred to in the paragraph headed Documents available for inspection in Appendix VII. Any person wishing to have a detailed summary of Cayman Islands company law or advice on the differences between it and the laws of any jurisdiction with which he is more familiar is recommended to seek independent legal advice. IV-24

324 APPENDIX V TAXATION The following summary of certain PRC, Hong Kong, Macau and U.S. tax consequences of the acquisition, ownership and disposition of our Shares is based upon the laws, regulations, rulings and decisions now in effect, all of which are subject to change (possibly with retroactive effect). The summary does not purport to be a comprehensive description of all the tax considerations that may be relevant to a decision to acquire, own or dispose of our Shares and does not purport to apply to all categories of prospective investors, some of whom may be subject to special rules. Prospective investors should consult their own tax advisers concerning the application of PRC, Hong Kong, Macau, U.S. and other tax laws to their particular situation as well as any consequences of the acquisition, ownership and disposition of our Shares arising under the laws of any other taxing jurisdiction. The taxation of our Company and that of our Shareholders is described below. Where PRC, Hong Kong, Macau and U.S. tax laws are discussed, these are merely an outline of the implications of such laws. Investors should note that the following statements are based on advice received by our Company regarding taxation laws, regulations and practice in force as at the date of this listing document, which may be subject to change. A. OVERVIEW OF TAX IMPLICATIONS IN THE PRC 1. Corporate Income Tax According to the EIT Law (Order [2007] No. 63 of the President of the PRC), which was promulgated by the National People s Congress on 16 March 2007, and came into effect on 1 January 2008 and the Implementation Regulations on the Enterprises Income Tax Law ( 企業所得稅法實施條例 ) (Order [2007] No. 512 of the State Council), which was promulgated by the State Council on 6 December 2007, and came into effect on 1 January 2008, a uniform income tax rate of 25% will be applied to PRC enterprises, foreign-invested enterprises and foreign enterprises which have established production and operation facilities in the PRC. These enterprises are classified as either resident enterprises or non-resident enterprises. 2. Business Tax According to the Interim Regulations on Business Tax ( 營業稅暫行條例 )(OrderNo.136 of the State Council), which was promulgated by the State Council on 13 December 1993, came into effect on 1 January 1994, and was amended on 10 November 2008, and the Detailed Implementing Rules on the Temporary Regulations on Business Tax ( 營業稅暫行條例實施細則 ), which was promulgated by the MOF and the SAT and came into effect on 25 December 1993, was amended on 22 May 1997, 15 December 2008, and further amended on 28 October 2011, business tax is imposed on income derived from the furnishing of specified services and transferring of immovable property or intangible property at rates ranging from 3% to 20%, depending on the activity. V-1

325 APPENDIX V TAXATION 3. Value-added Tax According to the Temporary Regulations on Value-added Tax ( 增值稅暫行條例 ) (Order No. 538 of the State Council), which was promulgated by the State Council on 13 December 1993, came into effect on 1 January 1994 and was amended on 10 November 2008, and the Detailed Implementing Rules of the Temporary Regulations on Value-added Tax ( 增值稅暫行條例實施細則 ) (Order No. 65 of the MOF), which was promulgated by the MOF and came into effect on 25 December 1993, and was amended on 15 December 2008, and 28 October 2011, all taxpayers selling goods, providing processing, repairing or replacement services or importing goods within the PRC shall pay value-added tax. Except as otherwise stipulated. The tax rate of 17% shall be levied on general taxpayers selling or importing various goods; the tax rate of 17% shall be levied on the taxpayers providing processing, repairing or replacement service; the applicable rate for the export of goods by taxpayers shall be nil. Furthermore, according to the Trial Scheme for the Conversion of Business Tax to Valueadded Tax ( 營業稅改徵增值稅試點方案 ) (Cai Shui 2011 No. 110), which was promulgated by the MOF and the SAT, the State began to launch taxation reforms in a gradual manner with effect from 1 January 2012, whereby the collection of value-added tax in lieu of business tax items was implemented on a trial basis in regions showing significant radiating effects in economic development and providing outstanding reform examples, beginning with production service industries such as transportation and certain modern service industries. 4. Dividends Derived from Operations in the PRC According to the Implementation Regulations on the Enterprises Income Tax Law of the PRC ( 中華人民共和國企業所得稅法實施條例 ), PRC withholding tax at the rate of 10% is applicable to dividends payable to investors that are non-resident enterprises (who do not have an establishment or place of business in the PRC, or that have such establishment or place of business but to whom the relevant income tax is not effectively connected) to the extent that such dividends have their source within the PRC unless there is an applicable tax treaty between the PRC and the jurisdiction of the non-resident enterprise which may reduce or provide exemption to the relevant tax. Similarly, any gain realized on the transfer of shares by such investor is subject to 10% PRC income tax rate (or lower treaty rate if applicable) if such gain is regarded as income derived from sources within the PRC. According to the Arrangement between the PRC and Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income ( 內地和香港特別行政區關於對所得避免雙重徵稅和防止偷漏稅的安排 ), which was promulgated by the SAT on 21 August 2006 and came into effect on 8 December 2006, a company incorporated in Hong Kong will be subject to withholding tax at the lower rate of 5% on dividends it receives from a company incorporated in the PRC if it holds a 25% interest or more in the PRC company. According to the Notice on the Understanding and Identification of the Beneficial Owners in the Tax Treaty ( 關於如何理解和認定稅收協定中 受益所有人 的通知 ) (Guo Shui Han 2009 No. 601), which was promulgated by the SAT and became effective on 27 October 2009, tax treaty benefits will be denied to conduit or shell companies without business substance, and a beneficial ownership analysis will be used based on a substance-over-form principle to determine whether or not to grant tax treaty benefits. V-2

326 APPENDIX V TAXATION B. OVERVIEW OF TAX IMPLICATIONS IN HONG KONG 1. Hong Kong Taxation of our Company Profits Tax Our Company will be subject to Hong Kong profits tax in respect of profits arising in or derived from Hong Kong at the current rate of 16.5%. Dividend income derived by our Company from its subsidiaries will be excluded from Hong Kong profits tax. 2. Hong Kong Taxation of our Shareholders Dividends No tax is imposed in Hong Kong in respect of dividends in our Company pays to our Shareholders. Dividends paid to our Shareholders are free of withholding taxes in Hong Kong. Capital Gains and Profits Tax Hong Kong profits tax will not be payable by any Shareholders (other than our Shareholders carrying on a trade, profession or business in Hong Kong and holding our Shares for trading purposes) on any capital gains made on the sale or other disposal of our Shares. Stamp Duty Hong Kong stamp duty, currently charged at the ad valorem rate of 0.1% on the higher of the consideration for or the market value of our Shares, will be payable by the purchaser on every purchase, and by the seller on every sale, of Shares, whether or not the sale or purchase is on or off the Stock Exchange (in other words, a total of 0.2% is currently payable on a typical sale and purchase transaction involving our Shares). In addition, a fixed duty of HK$5.00 is currently payable on any instrument of transfer of Shares. Estate Duty Pursuant to the Revenue (Abolition of Estate Duty) Ordinance 2005, Hong Kong estate duty was abolished effective from 11 February No Hong Kong estate duty is payable by our Shareholders in relation to the Shares owned by them upon death and no estate clearance papers are needed for an application for a grant of representation in respect of our Shareholders whose deaths occur on or after 11 February V-3

327 APPENDIX V TAXATION C. OVERVIEW OF TAX IMPLICATIONS IN MACAU 1. Macau Taxation of our Company Our Company will be subject to Macau Complementary Income Tax in respect of profits arising in or derived from Macau, levied at progressive rates between 3% and 12%. Dividend income derived by our Company from its subsidiaries will be excluded from Macau Complementary Income Tax. No stamp or other issuance or transfer taxes or duties and no capital gains, income, withholding or other taxes are payable to Macau or to any political subdivision or taxing authority thereof or therein by or on behalf of our Company in connection with the Listing. 2. Macau Taxation of our Shareholders No stamp or other issuance or transfer taxes or duties and no capital gains, income, withholding or other taxes are payable to Macau or to any political subdivision or taxing authority thereof or therein by or on behalf of our Shareholders in connection with the Listing. D. OVERVIEW OF TAX IMPLICATIONS IN THE UNITED STATES 1. Certain United States Federal Income Tax Considerations The following discussion is a summary of certain U.S. federal income tax considerations under present law of holding COLI Shares at the time of the COLI Distribution, and the sale by COLI on behalf of a U.S. Holder (as defined below) of the Shares which such U.S. Holder would have otherwise received pursuant thereto. This summary deals only with our Shareholders that hold COLI Shares as capital assets and that use the U.S. dollar as their functional currency. This summary does not address tax considerations applicable to investors subject to special rules, such as certain financial institutions, persons owning directly, indirectly or constructively 10 percent or more of COLI s share capital, dealers or traders, insurance companies, tax exempt entities, persons holding their Shares as part of a hedge, straddle, conversion, constructive sale or other integrated transaction. It also does not address U.S. state and local tax considerations. EACH U.S. HOLDER OF COLI SHARES SHOULD SEEK ADVICE FROM AN INDEPENDENT TAX ADVISER ABOUT THE TAX CONSEQUENCES UNDER ITS OWN PARTICULAR CIRCUMSTANCES OF THE SALE BY COLI ON ITS BEHALF OF THE SHARES WHICH IT WOULD HAVE OTHERWISE RECEIVED PURSUANT TO THE COLI DISTRIBUTION. As used here, U.S. Holder means, for the purposes of the Spin-off, a beneficial owner of COLI Shares, and otherwise a beneficial owner of Shares that is, for U.S. federal income tax purposes, (i) a citizen or individual resident of the United States, (ii) a corporation or entity treated as such created or organised under the laws of the United States or its political subdivisions, (iii) a trust subject to the control of a U.S. person and the primary supervision of a U.S. court or (iv) an estate the income of which is subject to U.S. federal income tax without regard to its source. V-4

328 APPENDIX V TAXATION As used here, Non-U.S. Holder means a beneficial owner of Shares that is neither a U.S. Holder nor a partnership (or other entity treated as a partnership for U.S. federal income tax purposes). The tax consequences to a partner in a partnership (or other entity treated as a partnership for U.S. federal income tax purposes) generally will depend on the status of the partner and the activities of the partnership. Partners of a partnership that is a beneficial owner of Shares should consult their own tax advisers about the U.S. federal income tax consequences to them of the partnership participating in the Spin-off. The Spin-off and the Sale of Shares It is possible that the distribution of the Shares pursuant to the COLI Distribution may qualify as a tax-free distribution under Section 355 of the U.S. Internal Revenue Code of 1986, as amended ( Code ). Each U.S. Holder of COLI Shares should seek advice from an independent tax adviser regarding whether the COLI Distribution qualifies under Section 355 of the Code. If the distribution of the Shares pursuant to the COLI Distribution qualifies under Section 355 of the Code, a U.S. Holder (i) should be deemed to have received Shares without recognition of any income, gain or loss, (ii) should apportion its tax basis in the COLI Shares between such shares and the Shares deemed to have been received pursuant to the COLI Distribution in proportion to the relative fair market value of the COLI Shares and the Shares on the date of the COLI Distribution, (iii) should have a holding period for the Shares that includes the period during which the U.S. Holder held COLI Shares, and (iv) upon the sale of the Shares by COLI on its behalf, should recognise gain or loss equal to the difference between the sale price and its basis in the Shares determined in accordance with (ii) above (such gain or loss will be characterised as a long-term capital gain or loss if the holding period for the Shares, determined in accordance with (iii) above, exceeds one year). If the distribution of the Shares pursuant to the COLI Distribution does not qualify under Section 355 of the Code, a U.S. Holder should be treated as having received a dividend in an amount equal to the fair market value of the Shares on the date of the COLI Distribution to the extent of COLI s current and accumulated earnings and profits (this dividend generally would be treated as from sources outside the United States for foreign tax credit purposes, and should not be eligible for the dividends-received deduction generally allowed to U.S. corporations or for the reduced rate of tax on qualified dividend income available to certain non-corporate U.S. Holders). Any excess of the fair market value of the Shares on the date of the COLI Distribution over the earnings and profits would first be treated as a tax-free return of capital to the extent of the U.S. Holder s adjusted tax basis in the COLI Shares and, after such adjusted tax basis is reduced to zero, as a taxable capital gain. If the distribution of the Shares pursuant to the COLI Distribution does not qualify under Section 355 of the Code, the U.S. Holder should take tax basis in the Shares deemed to have been received upon the COLI Distribution equal to the fair market value of the Shares on the date of the COLI Distribution. Upon the sale of the Shares by COLI on the U.S. Holder s behalf, the U.S. Holder shall recognise gain or loss equal to the difference (if any) between the sale price and its basis in the Shares determined in accordance V-5

329 APPENDIX V TAXATION with the preceding sentence (such gain or loss will be characterised as a short-term capital gain or loss assuming the sale of the Shares by COLI on the U.S. Holder s behalf occurs less than one year after the COLI Distribution). If COLI were to have been a Passive Foreign Investment Company or PFIC for U.S. tax purposes (as discussed below) in any prior taxable year in which a U.S. Holder has held its COLI Shares, special rules would apply. The gain (but not the loss) recognised as a result of the COLI Distribution and the sale of the Shares received on such holders behalf if the COLI Distribution qualifies under Section 355 of the Code or, where the COLI Distribution does not qualify under Section 355 of the Code, the amount of the dividend received (to the extent that it represents a ratable portion of the total distributions on the COLI Shares during the year that are in excess of 125% of the average amount of distributions in respect of the COLI Shares during the three prior years), would be treated as an excess distribution and subject to special PFIC rules. In particular, the amount of the excess distribution will be (i) allocated rateably over the U.S. Holder s holding period, (ii) the amount allocated to the current taxable year and any year before COLI became a PFIC will be taxed as ordinary income in the current year and (iii) the amount allocated to each other taxable year will be taxed at the highest applicable marginal rate in effect for such year and an interest charge will be imposed to recover the deemed benefit from the deferred payment of the tax attributable to each such year. COLI has not made a determination whether it was a PFIC in any prior taxable year. Each U.S. Holder of COLI Shares should seek advice from its own tax adviser regarding COLI s possiblestatusasapficandthe consequences to them if COLI were a PFIC in any prior taxable year in which such holder held COLI Shares. A U.S. Holder that receives a currency other than U.S. dollars on the sale of the Shares will realise an amount equal to the U.S. dollar value of the currency received at the spot rate on the date of sale or other disposition (or, in the case of cash basis and electing accrual basis U.S. Holders, the settlement date). An accrual basis U.S. Holder that does not elect to determine the amount realised using the spot rate on the settlement date will recognise foreign currency gain or loss equal to the difference between the U.S. dollar value of the amount received based on the spot exchange rates in effect on the date of sale or other disposition and the settlement date. A U.S. Holder will have a tax basis in the currency received equal to the U.S. dollar value of the currency received at the spot rate on the settlement date. Any gain or loss realised on a subsequent disposition or conversion of the non-u.s. currency for a different U.S. dollar amount generally will be U.S. source ordinary income or loss. Passive Foreign Investment Company Considerations A company is treated as a Passive Foreign Investment Company (a PFIC ) foru.s.tax purposes in any taxable year in which either (i) at least 75% of its gross income is passive income or (ii) at least 50% of the quarterly average market value of its assets is attributable to assets that produce or are held to produce passive income. In applying these tests, a company is treated as having held its proportionate share of the assets and receiving its proportionate share of the income of any other corporation in which the company owned at least 25% by value of the shares. Passive income for this purpose generally includes dividends, interest, royalties, rent and capital gains. V-6

330 APPENDIX V TAXATION Neither COLI nor the Company expect to be a PFIC for the current taxable year. However, the PFIC status of a company is determined annually, and could change based on changes in its assets, income, activities and the structure through which the company holds property. As noted above, if COLI and/or the Company weredeterminedtobeapficforanyprior taxable year in which a U.S. Holder has held COLI Shares, for the current taxable year, or for future taxable years, the U.S. Holder may be subject to special rules on the COLI Distribution, the sale of the Shares by COLI on the U.S. Holder s behalforotherwise.eachu.s.holderof COLI Shares should seek advice from an independent tax adviser regarding the consequences resulting from an eventual determination of PFIC status of COLI or our Company. Medicare Tax on Net Investment Income Certain non-corporate U.S. Holders whose income exceeds certain thresholds generally will be subject to a 3.8 per cent. surtax tax on their net investment income (which generally includes, among other things, dividends on, and capital gain from the sale or other disposition of Shares). Non-corporate U.S. Holders should consult their own tax advisers regarding the possible effect of such tax on their deemed receipt and disposition of Shares. Reporting and Backup Withholding Dividends and proceeds from the sale of Shares may be reported to the United States Internal Revenue Service ( IRS ) unless the holder is a corporation or otherwise establishes a basis for exemption. Backup withholding may apply to reportable payments unless the holder makes the required certification, including providing its taxpayer identification number, or otherwise establishes a basis for exemption. Any amount withheld may be credited against a U.S. Holder s U.S. federal income tax liability or refunded to the extent it exceeds the holder s liability, provided the required information is timely furnished to the IRS. Certain U.S. Holders are required to report information with respect to Shares not held through an account with a financial institution to the IRS. Investors who fail to report required information could become subject to substantial penalties. Potential investors are encouraged to consult with their own tax advisers about these and any other reporting obligations arising from the COLI Distribution and sale of the Shares. V-7

331 APPENDIX VI GENERAL INFORMATION A. FURTHER INFORMATION ABOUT OUR COMPANY 1. Incorporation of our Company Our Company was incorporated on 26 June 2006 in the Cayman Islands under the Companies Law as an exempted company with limited liability as China Overseas Management Services (International) Limited. Our Company s name was changed to its present name of China Overseas Property Holdings Limited on 15 May Our Company was registered in Hong Kong under Part 16 of the Companies Ordinance as a non-hong Kong company on 23 December Our principal place of business in Hong Kong is at 19th Floor, China Overseas Building, No. 139 Hennessy Road and No. 138 Lockhart Road, Wanchai, Hong Kong. In compliance with the requirements of the Companies Ordinance, Mr. Hao Jian Min of Flat C, 12th Floor, Hoover Tower, Tower 5, 8 St. Francis Yard, Wanchai, Hong Kong has been appointed as the authorised representative of our Company on 2 January 2014 for the acceptance of service of process and any notices required to be served on our Company in Hong Kong. As our Company was incorporated in the Cayman Islands, its operations are subject to Cayman Islands law and to its constitution, which comprises the Memorandum and Articles. A summary of certain relevant parts of the Memorandum and the Articles and certain relevant aspects of the Companies Law is set out in Appendix IV Summary of the Constitution of our Company and Cayman Companies Law. 2. Changes in Share Capital of our Company (a) Changes in share capital As at the date of incorporation of our Company, the authorised share capital of our Company was HK$300,000,000 divided into 3,000,000,000 ordinary shares of a par value of HK$0.10 each. One ordinary share of a par value of HK$0.10 was allotted and issued to Codan Trust Company (Cayman) Limited on 26 June 2006, which was then transferred to COLI on the same date. On [.] 2015: (i) (ii) every issued and unissued share of a par value of HK$0.10 each in the share capital of our Company was subdivided into 100 Shares of a par value of HK$0.001 each (the Share Subdivision ) such that immediately after the Share Subdivision, our Company had an authorised share capital of HK$300,000,000 divided into 300,000,000,000 Shares of a par value of HK$0.001 each, of which 100 Shares were issued to COLI; following the Share Subdivision, the authorised but unissued share capital of our Company was diminished by the cancellation of 270,000,000,000 unissued Shares in the authorised share capital of our Company (the Diminution of Authorised Share Capital ). Following the Diminution of Authorised Share Capital, our Company has an authorised share capital of HK$30,000,000 divided into 30,000,000,000 Shares; and VI-1

332 APPENDIX VI GENERAL INFORMATION (iii) after the Diminution of Authorised Share Capital, our Company allotted and issued 3,286,860,360 Shares to COLI at an aggregate subscription price of HK$3,286,860.36, the payment of which was settled in cash paid by COLI to our Company (the Cash Capitalisation ). Immediately after the Cash Capitalisation, COLI held 3,286,860,460 Shares, representing the entire issued share capital of our Company. Save as disclosed above and in Resolutions in Writing of the Sole Shareholder Passed on [.] 2015 below, there has been no alteration in the share capital of our Company within the two years immediately preceding the date of this listing document. (b) Founder shares Our Company has no founder shares, management shares or deferred shares. 3. Resolutions in Writing of the Sole Shareholder Passed on [.] 2015 Written resolutions were passed by COLI, our then sole Shareholder on [.] 2015 pursuant to which, among other matters: (a) (b) (c) (d) our Company approved and adopted (i) the amended and restated Memorandum of Associationwitheffectfromthedateofsuchwrittenresolutionand(ii)theamended and restated Articles of Association with effect from the Listing Date; the Share Subdivision, the Diminution of Authorised Share Capital and the Cash Capitalisation were approved; the Listing was approved and the Directors were authorised to implement the Listing; subject to the lock-up undertaking given by our Company pursuant to Rule of thelistingrulesreferredtoin Undertakings to the Stock Exchange pursuant to the Listing Rules below, a general unconditional mandate was granted to our Directors allot, issue and deal with the Shares or securities convertible into Shares or options, warrants or similar rights to subscribe for the Shares or such convertible securities and to make or grant offers, agreements or options which would or might require the exercise of such powers, provided that the aggregate nominal value of the Shares allotted or agreed to be allotted by the Directors other than pursuant to a (i) rights issue, (ii) any scrip dividend scheme or similar arrangement providing for the allotment of the Shares in lieu of the whole or part of a dividend on the Shares or (iii) a specific authority granted by our Shareholders in general meeting, shall not exceed the aggregate of: (i) (ii) 20% of the aggregate nominal amount of the share capital of our Company in issue immediately following the completion of the Spin-off; and the aggregate nominal amount of the share capital of our Company repurchased by our Company pursuant to the Repurchase Mandate referred to in subparagraph (e) below, VI-2

333 APPENDIX VI GENERAL INFORMATION such mandate to remain in effect during the period from the passing of the resolution until the earliest of (I) the conclusion of the next annual general meeting of our Company, (II) the end of the period within which our Company is required by the Articles of Association, the Companies Law or any other applicable Cayman Islands laws to hold its next annual general meeting and (III) the date on which the resolution is varied or revoked by an ordinary resolution by our Shareholders in general meeting (the Relevant Period ); and (e) a general unconditional mandate (the Repurchase Mandate ) was granted to our Directors to exercise all powers of our Company to repurchase Shares on the Stock Exchange or on any other other stock exchange on which the securities of our Company may be listed (and which is recognised by the SFC and the Stock Exchange for this purpose) and made in accordance with all applicable laws and requirements of the Listing Rules, with an aggregate nominal amount not exceeding 10% of the aggregate nominal amount of the share capital of our Company in issue immediately following the completion of the Spin-off, such mandate to remain in effect during the Relevant Period. 4. Changes in Share Capital of Subsidiaries I. The subsidiaries of our Company are listed in the Accountant s Report set out in Appendix Save as disclosed in this Appendix and in History and Corporate Structure Reorganisation, the following alterations in the share capital of our Company s subsidiaries took place within the two years immediately preceding the date of this listing document: COPL Trademark Holding On 10 April 2015, one ordinary share of HK$1.00 was allotted and issued to Acota Services Limited as initial subscriber, credited as fully paid, in consideration of HK$1.00 paid by Acota Services Limited, which was subsequently transferred to our Company for a consideration of HK$1.00. CSPM Beijing On 19 April 2013, the registered share capital of CSPM Beijing was increased from RMB5.01 million to RMB25 million. COGOPM Hohhot On 19 April 2013, the registered share capital of COGOPM Hohhot was increased from RMB0.8 million to RMB3 million. VI-3

334 APPENDIX VI GENERAL INFORMATION 5. Securities Repurchase Mandate This paragraph includes information required by the Stock Exchange to be included in this listing document concerning the repurchase by our Company of its own securities. (a) Provisions of the Listing Rules The Listing Rules permit companies with a primary listing on the Stock Exchange to repurchase their own securities on the Stock Exchange subject to certain restrictions, the more important of which are summarised below: (i) Shareholders approval All proposed repurchases of securities (which must be fully paid up in the case of shares) by a company listed on the Stock Exchange must be approved in advance by an ordinary resolution of the shareholders, either by way of general mandate or by specific approval of a particular transaction. (ii) Source of funds Repurchases must be funded out of funds legally available for the purpose in accordance with the Memorandum and Articles of Association, the Listing Rules, the Companies Law and the applicable laws and regulations of the Cayman Islands. A listed company may not repurchase its own securities on the Stock Exchange for a consideration other than cash or for settlement otherwise than in accordance with the trading rules of the Stock Exchange. Under Cayman Islands laws, any repurchases by our Company may be made out of profits of our Company or out of an issue of new Shares made for the purpose of the repurchase or, if authorised by the Memorandum and Articles of Association and subject to the Companies Law, out of capital, and, in the case of any premium payable on the repurchase, out of profits or from sums standing to the credit of our share premium account or, if authorised by its Memorandum and Articles of Association and subject to the Companies Law, out of capital. (iii) Trading restrictions The total number of shares which a listed company may repurchase on the Stock Exchange is the number of shares representing up to a maximum of 10% of the aggregate number of shares in issue. A company may not issue or announce a proposed issue of new securities for a period of 30 days immediately following a repurchase (other than an issue of securities pursuant to an exercise of warrants, share options or similar instruments requiring the company to issue securities which were outstanding prior to such repurchase) without the prior approval of the Stock Exchange. In addition, a listed company is prohibited from repurchasing its shares on the Stock Exchange if the purchase price is 5% or more than the average closing market price for the five preceding trading days on which its shares were traded on the Stock Exchange. The Listing Rules also prohibit a listed company from repurchasing its securities if that repurchase would result in the number of listed securities which are in the hands of the public falling below the relevant prescribed minimum percentage as required by the Stock Exchange. A company is required to procure that the broker appointed by it to effect a repurchase of securities discloses to the Stock Exchange such information with respect to the repurchase as the Stock Exchange may require. VI-4

335 APPENDIX VI GENERAL INFORMATION (iv) Status of repurchased shares All repurchased securities (whether effected on the Stock Exchange or otherwise) will be automatically delisted and the certificates for those securities must be cancelled and destroyed. Under the Companies Law, a company s repurchased shares shall be treated as cancelled and the amount of the company s issued share capital shall be reduced by the aggregate nominal value of the purchased shares accordingly, although the authorised share capital of the company will not be reduced, or alternatively, may be kept by the company as treasury shares. (v) Suspension of repurchase A listed company may not make any repurchase of securities after a price sensitive development has occurred or has been the subject of a decision until such time as the price sensitive information has been made publicly available. In particular, during the period of one month immediately preceding the earlier of (1) the date of the board meeting (as such date is first notified to the Stock Exchange in accordance with the Listing Rules) for the approval of a listed company s results for any year, half-year, quarter or any other interim period (whether or not required under the Listing Rules) and (2) the deadline for publication of an announcement of a listed company s results for any year or half-year under the Listing Rules, or quarter or any other interim period (whether or not required under the Listing Rules), the listed company may not repurchase its shares on the Stock Exchange, other than in exceptional circumstances. In addition, the Stock Exchange may prohibit a repurchase of securities on the Stock Exchange if a listed company has breached the Listing Rules. (vi) Reporting requirements Certain information relating to repurchases of securities on the Stock Exchange or otherwise must be reported to the Stock Exchange not later than 30 minutes before the earlier of the commencement of the morning trading session or any pre-opening session on the following business day. In addition, a listed company s annual report is required to disclose details regarding repurchases of securities made during the year, including a monthly analysis of the number of securities repurchased, the purchase price per share or the highest and lowest price paid for all such purchase, where relevant, and the aggregate prices paid. (vii) Connected persons A listed company is prohibited from knowingly repurchasing securities on the Stock Exchange from a core connected person, that is, a director, chief executive or substantial shareholder of the company or any of its subsidiaries or their close associates and a core connected person is prohibited from knowingly selling his securities to the company. (b) Reasons for Repurchases Our Directors believe that the ability to repurchase our Shares is in the best interest of our Company and our Shareholders. Such repurchases may, depending on market conditions and funding arrangements at the time, result in an increase in the net assets and/or earnings per Share. The Directors have sought the Repurchase Mandate to give our Company the flexibility to do so if and when appropriate. The number of Shares to be repurchased on any occasion and the price and other terms upon which the same are repurchased will be decided by our Directors VI-5

336 APPENDIX VI GENERAL INFORMATION at the relevant time, having regard to the circumstances then prevailing and such repurchases will only be made if our Directors believe that such repurchases will benefit our Company and our Shareholders. (c) Funding of Repurchases In repurchasing securities, our Company may only apply funds legally available for such purpose in accordance with the Memorandum and Articles of Association, the Listing Rules, the Companies Law and the applicable laws and regulations of the Cayman Islands. There could be a material adverse impact on the working capital and/or the gearing position of our Group as compared with the position disclosed in this listing document in the event that the Repurchase Mandate were to be carried out in full at any time during the Relevant Period. However, our Directors do not propose to exercise the Repurchase Mandate to such an extent as would, in the circumstances, have a material adverse effect on the working capital requirements of our Group or the gearing levels which in the opinion of our Directors are from time to time appropriate for our Group. (d) General The exercise in full of the Repurchase Mandate, on the basis of 3,286,860,460 Shares in issue immediately following the completion of the Spin-off, could accordingly result in up to 328,686,046 Shares being repurchased by our Company during the Relevant Period. None of our Directors nor, to the best of their knowledge having made all reasonable enquiries, any of their close associates currently intends to sell any Shares to our Company or our subsidiaries. Our Directors have undertaken to the Stock Exchange that, so far as the same may be applicable, they will exercise the Repurchase Mandate in accordance with the Listing Rules, the Memorandum and Articles of Association, the Companies Law and the applicable laws and regulations of the Cayman Islands. If, as a result of a securities repurchase, a Shareholder s proportionate interest in the voting rights of our Company is increased, such increase will be treated as an acquisition for the purpose of the Code on Takeovers and Mergers (the Takeovers Code ). Accordingly, a Shareholder or a group of Shareholders acting in concert could obtain or consolidate control of our Company and become obliged to make a mandatory offer in accordance with Rule 26 of the Takeovers Code. Save for the foregoing, our Directors are not aware of any consequences which would arise under the Takeovers Code as a consequence of any repurchases pursuant to the Repurchase Mandate. Any repurchase of Shares that results in the number of Shares held by the public being reduced to less than 25% of our Shares then in issue (or such other percentage as may be prescribed as the minimum public shareholding under the Listing Rules) could only be implemented if the Stock Exchange agreed to waive the Listing Rules requirements regarding the public shareholding referred to above. It is believed that a waiver of this provision would not normally be given other than in exceptional circumstances. VI-6

337 APPENDIX VI GENERAL INFORMATION No core connected person of our Company has notified our Company that he/she/it has any present intention to sell Shares to our Company, or has undertaken not to do so if the Repurchase Mandate is exercised. B. FURTHER INFORMATION ABOUT THE BUSINESS OF OUR COMPANY 1. Summary of Material Contracts The following contracts (not being contracts in the ordinary course of business) have been entered into by members of our Group within the two years preceding the date of this listing document and are or may be material: (a) (b) (c) (d) (e) (f) the agreement dated 1 June 2014 entered into between China State Property Limited ( 中國中建地產有限公司 ) (as vendor) and COLI Beijing PM Holding (as purchaser) whereby China State Property Limited ( 中國中建地產有限公司 ) agreed to transfer the entire equity interests of CSPM Beijing to COLI Beijing PM Holding for a consideration of RMB16,457,400; the assignment dated 9 June 2015 entered into between COLI Property (as assignor and licensor) and COPL Trademark Holding (as assignee and licensee) whereby COLI Property agreed to transfer for a consideration of HK$10 and license for nil consideration to COPL Trademark Holding the trademarks owned by it as set out in B. Further Information About the Business of our Company 2. Intellectual Property Rights of our Group (i.e. the COLI Property Trademark Assignment); the assignment dated 9 June 2015 entered into between COLI TM (as assignor and licensor) and COPL Trademark Holding (as assignee and licensee) whereby COLI TM agreed to transfer for a consideration of HK$10 and license for nil consideration to COPL Trademark Holding the trademarks owned by it as set out in B. Further Information About the Business of our Company 2. Intellectual Property Rights of our Group (i.e. the COLI TM Trademark Assignment); the agreement dated 15 May 2015 entered into between COLI Beijing PM Holding (as vendor) and COPL PRC Holding (as purchaser) whereby COLI Beijing PM Holding agreed to transfer the entire equity interests of CSPM Beijing to COPL PRC Holding for a consideration of RMB11,748,000 (i.e. the Beijing Equity Transfer Agreement); the agreement dated 15 May 2015 entered into between COLI Chongqing PM Holding (as vendor) and CSPM Beijing (as purchaser) whereby COLI Chongqing PM Holding agreed to transfer the entire equity interests of CSPM Chongqing to CSPM Beijing for a consideration of RMB1 (i.e. the Chongqing Equity Transfer Agreement); the agreement dated 15 May 2015 entered into between COHL Zibo PM Holding (as vendor) and CSPM Beijing (as purchaser) whereby COHL Zibo PM Holding agreed to transfer the entire equity interests of CSPM Zibo to CSPM Beijing for a consideration of RMB1 (i.e. the Zibo Equity Transfer Agreement); VI-7

338 APPENDIX VI GENERAL INFORMATION (g) (h) (i) (j) the agreement dated 18 May 2015 entered into between COGO Property (as vendor) and COPL PRC Holding (as purchaser) whereby COGO Property agreed to transfer the entire equity interests of COGOPM Holding to COPL PRC Holding for a consideration of approximately RMB50.0 million (i.e. the COGO Equity Transfer Agreement); the deed of indemnity dated [.] 2015 entered into by COHL and our Company containing the indemnities referred to in E. Other Information 2. Tax and other indemnity (i.e. the Deed of Indemnity); the deed of non-competition dated [.] 2015 entered into by CSCEC with our Company in respect of the undertakings given by CSCEC referred to in Relationship with our Controlling Shareholders Non-compete Undertakings (i.e. CSCEC Deed of Noncompetition); and the deed of non-competition dated [.] 2015 entered into by CSCECL with our Company in respect of the undertakings given by CSCECL referred to in Relationship with our Controlling Shareholders Non-compete Undertakings (i.e. CSCECL Deed of Non-competition). VI-8

339 APPENDIX VI GENERAL INFORMATION 2. Intellectual Property Rights of our Group (a) Trademarks owned As at the Latest Practicable Date, our Group had obtained intellectual property rights for its operations and is the registered owner of the following trademarks which are material to our business: No. Trademark Place of Registration Class 1. Hong Kong 36, 37, 41, 43, 44, 45 Registration number Date of Registration Date of Expiry Registered Owner COPL Trademark Holding (1) 2. PRC COPL PRC Holding 3. PRC COPL PRC Holding 4. PRC COPL Building Engineering 5. PRC COPL Building Engineering 6. PRC COGOPM Holding Note: (1) Trademarks assigned to our Group under the COLI TM Trademark Assignment. VI-9

340 APPENDIX VI GENERAL INFORMATION (b) Trademarks licensed As at the Latest Practicable Date, our Group was the licensee of the following trademarks which are material to our business: No. Trademark Place of Application/ Registration Class Registration number Date of Registration/ Renewal Date of Expiry Registered Owner 1. PRC COLI Property (2) 2. PRC COLI TM (1) 3. PRC COLI TM (1) 4. PRC COLI TM (1) 5. PRC COLI TM (1) 6. PRC COLI TM (1) 7. PRC COLI TM (1) 8. PRC COLI Property (2) 9. PRC COLI TM (1) 10. PRC COLI TM (1) 11. PRC COLI TM (1) 12. PRC COLI TM (1) 13. PRC COLI TM (1) 14. PRC COLI TM (1) VI-10

341 APPENDIX VI GENERAL INFORMATION No. Trademark Place of Application/ Registration Class Registration number Date of Registration/ Renewal Date of Expiry Registered Owner 15. PRC COLI Property (2) 16. PRC COLI Property (2) 17. PRC COLI Property (2) 18. PRC (3) (3) n.a. (3) COLI Property (2) 19. PRC COLI Property (2) 20. PRC COLI Property (2) 21. PRC COLI Property (2) 22. PRC COLI Property (2) 23. PRC COLI Property (2) Notes: (1) Trademarks licensed to our Group under the COLI TM Trademark Assignment. (2) Trademarks licensed to our Group under the COLI Property Trademark Assignment. (3) This trademark is in the process of application as at the Latest Practicable Date. The number and date disclosed herein refer to its application number and application date. VI-11