rosedale hotel holdings limited 珀麗酒店控股有限公司 · 2014. 11. 9. · “independent...

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your

licensed securities dealer or registered institution in securities, bank manager, solicitor, professional accountant or

other professional adviser.

If you have sold or transferred all your shares in Rosedale Hotel Holdings Limited, you should at once hand this

circular together with the accompanying form of proxy to the purchaser or the transferee, or to the bank, the licensed

securities dealer or registered institution in securities or other agent through whom the sale or transfer was effected for

transmission to the purchaser or transferee.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility

for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any

liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of

this circular.

Rosedale Hotel Holdings Limited珀麗酒店控股有限公司

(Incorporated in Bermuda with limited liability)

(Stock Code: 1189)

VERY SUBSTANTIAL DISPOSALS ANDCONNECTED TRANSACTIONS

IN RELATION TO THE DISPOSALS OF THE SHARES IN AND SHAREHOLDER’S LOANS TO

MAKERSTON LIMITED AND EAGLE SPIRIT HOLDINGS LIMITED

Financial Adviser to Rosedale Hotel Holdings Limited

Independent Financial Adviser to the Independent Shareholders

Terms used in this cover page have the same meanings as defined in this circular.

A notice convening the SGM to be held at 3:30 p.m. on Thursday, 27 November 2014 at Gemini Room, 33rd Floor,

Rosedale on the Park, 8 Shelter Street, Causeway Bay, Hong Kong is set out on pages SGM-1 to SGM- 2 of this

circular. A form of proxy for use at the SGM or any adjournment thereof (as the case may be) is enclosed with this

circular. Whether or not you intend to attend such meeting, please complete the accompanying form of proxy in

accordance with the instructions printed thereon and return it to the branch share registrar of the Company in Hong

Kong, Tricor Secretaries Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, as soon

as possible and in any event not less than 48 hours before the time appointed for holding such meeting. Completion

and return of the form of proxy will not preclude you from attending and voting in person at the SGM or any

adjournment thereof (as the case may be) if you so wish.

10 November 2014

CONTENTS

– i –

Page

Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Letter from Centurion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Appendix I – Financial information of the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . I – 1

Appendix II – Financial information of the Eagle Spirit Group . . . . . . . . . . . . . . . . . II – 1

Appendix III – Financial information of the Maker ston Group . . . . . . . . . . . . . . . . . . III – 1

Appendix IV – Pro forma financial information of the Remaining Group . . . . . . . . . . IV – 1

Appendix V – Valuation reports on the propert ies . . . . . . . . . . . . . . . . . . . . . . . . . . . . V – 1

Appendix VI – General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VI – 1

Notice of SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SGM – 1

DEFINITION

– 1 –

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

following meanings:

“Agreements” collectively, the Eagle Spirit Agreement and the Ma kerston

Agreement

“Apex” Apex Quality Group Limited, a company incorporated in the

BVI with limited liability which was beneficially owned as

to approximately 89.40% by the Company as at the Latest

Practicable Date

“Beijing Hotel” the hotel situated at No. 8, Jiang Tai Road West, Chao Yang

District, Beijing, the PRC and is now known as Rosedale Hotel &

Suites, Beijing

“Board” the board of Directors

“Business Day” a day (other than Saturdays, Sundays, public holidays and any day

on which a tropical cyclone warning no. 8 or above or a “black”

rainstorm warning signal is hoisted at any time between 9:00 a.m.

and 5:00 p.m.) on which licensed banks in Hong Kong are generally

open for business

“BVI” the British Virgin Islands

“Capital Increase Agreement” the capital increase agreement dated 31 May 2013 entered

into among DS Eastin, the Investor, Rosedale Beijing and the

Company in relation to the capital contribution of US$68.8

million (equivalent to approximately HK$533.2 million) by a

subsidiary of the Investor for the increase in the registered capital

of Rosedale Beijing

“CEL” China Enterprises Limited, a company incorporated in Bermuda

with limited liability, the shares of which are traded in the over-

the-counter securities market in the United States of America and

is an associated company of Hanny

DEFINITION

– 2 –

“Centurion” Centurion Corporate Finance Limited, a licensed corporation

to carry out Type 1 (dealing in securities), Type 4 (advising on

securities), Type 6 (advising on corporate finance) and Type

9 (asset management) regulated activities under the SFO and

the independent financial adviser to advise the Independent

Shareholders in relation to the Transactions

“close associate(s)” has the same meaning ascribed to it under the Listing Rules

“Company” Rosedale Hotel Holdings Limited, a company incorporated in

Bermuda with limited liability, the issued shares of which are

listed on the Main Board of the Stock Exchange (Stock Code:

1189)

“Compensated Amount” the amount of compensation receivable by DS Eastin from the

Investor pursuant to the Capital Increase Agreement

“connected person(s)” has the same meaning ascribed to it under the Listing Rules

“Director(s)” director(s) of the Company

“Domain Name” the domain name “kowloon.rosedalehotels.com”, including email

addresses using such domain name, namely, “@rosedalehotels.com”,

created by Rosedale Kowloon as the licensee or by the Licensor at

the request of Rosedale Kowloon (as the case may be)

“DS Eastin” DS Eastin Limited, a company incorporated in Hong Kong with

limited liability and a wholly-owned subsidiary of Makerston

“DS Eastin Dividend” a dividend declared prior to MS Completion by DS Eastin to

Makerston in an amount equal to the lesser of all the distributable

profits of DS Eastin and the Compensated Amount, payable on

receipt of the Compensated Amount

“Eagle Spirit” Eagle Spirit Holdings Limited, a wholly-owned subsidiary of ES

Vendor prior to ES Completion, which was incorporated in the

BVI with limited liability

“Eagle Spirit Agreement” the agreement dated 11 April 2014 entered into between the ES

Vendor, the Purchaser, the Company and ITCP in relation to the

sale and purchase of the ES Sale Share and the ES Sale Loan

DEFINITION

– 3 –

“Eagle Spirit Group” collectively, Eagle Spirit and its subsidiaries

“ES Completion” completion of the sale and purchase of the ES Sale Share and the

assignment of the ES Sale Loan under the Eagle Spirit Agreement

“ES Completion Accounts” (i) the unaudited management accounts of Eagle Spirit (on a non-

consolidated basis); (ii) the unaudited consolidated management

accounts of the More Star Group; (iii) the unaudited management

accounts of Rosedale Kowloon; (iv) the unaudited consolidated

management accounts of the HK Macau Group; and (v) the

unaudited combined management accounts of the Rosy Universe

Group, each comprising an income statement for the period from

1 January 2014 to the ES Completion Date and a statement (or

consolidated statement as the case may be) of financial position as

at the ES Completion Date

“ES Completion Date” the date on which the ES Completion takes place

“ES Consideration” the aggregate consideration for the ES Sale Share and the ES Sale

Loan pursuant to the terms of the Eagle Spirit Agreement

“ES Long Stop Date” 29 December 2014 or such other date as the Purchaser , the ES

Vendor, the Company and ITCP may agree in writing

“ES Net Current Assets” the aggregate of all current assets (excluding deferred tax assets

and the TKT Hotel) less all liabilities (excluding deferred tax

liabilities and the ES Sale Loan), as at the ES Completion Date

“ES Note” the loan note in the principal amount of HK$250 million to

be issued by ITCP to the ES Vendor or its nominee in partial

settlement of the ES Consideration upon the ES Completion

“ES Sale Loan” the amounts due from Eagle Spirit to the ES Vendor as at the ES

Completion Date

“ES Sale Share” one (1) ordinary share of US$1 in the capital of Eagle Spirit

representing the entire issued share capital as at the date of the

Eagle Spirit Agreement and at ES Completion

DEFINITION

– 4 –

“ES Vendor” Easy Vision Holdings Limited, a direct wholly-owned subsidiary

of the Company, which was incorporated in the BVI with limited

liability

“GAAP” generally accepted accounting principles

“Group” the Company and its subsidiaries

“Hanny” Hanny Holdings Limited, a company incorporated in Bermuda

with limited liability and the issued shares of which are listed on

the Main Board of the Stock Exchange (Stock Code: 275)

“HK” or “Hong Kong” the Hong Kong Special Administrative Region of the PRC

“HK Macau” Hongkong Macau (Internat ional) BVI Limited, a direct

wholly-owned subsidiary of Eagle Spirit, which was incorporated

in the BVI with limited liability

“HK Macau Group” collectively, HK Macau and its subsidiary

“Independent Shareholder(s)” Shareholders other than those who are required to abstain from

voting on the resolution(s) relating to the Transactions under the

Listing Rules

“Investor” China Private Ventures Ltd., a company incorporated in the BVI

with limited liability

“ITCC” ITC Corporation Limited, a company incorporated in Bermuda

with limited liability, the issued shares of which are listed on the

Main Board of the Stock Exchange (Stock Code: 372)

“ITCP” ITC Properties Group Limited, a company incorporated in

Bermuda with limited liability, the issued shares of which are

listed on the Main Board of the Stock Exchange (Stock Code:

199)

“Latest Practicable Date” 6 November 2014, being the latest practicable date prior to the

printing of this circular for the purpose of ascertaining certain

information contained in the circular

DEFINITION

– 5 –

“Licence Agreement” the agreement to be entered into between the Licensor and

Rosedale Kowloon in relation to the grant of the non-exclusive use

of the Trademarks by Rosedale Kowloon

“Licensor” Rosedale Oriental Hotel Mgt. Inc., an indirect non wholly -owned

subsidiary of the Company

“Listing Rules” the Rules Governing the Listing of Securities on the Stock

Exchange

“Macau” the Macau Special Administrative Region of the PRC

“Makerston” Makerston Limited, a wholly-owned subsidiary of MS Vendor

prior to MS Completion, which was incorporated in the BVI with

limited liability

“Makerston Agreement” the agreement dated 11 April 2014 entered into among the MS

Vendor, the Purchaser, the Company and ITCP in relation to the

sale and purchase of the MS Sale Share and the MS Sale Loan

“Makerston Dividend” a dividend declared prior to MS Completion by Makerston to the

MS Vendor in an amount equal to the lesser of all distributable

profits of Makerston or the DS Eastin Dividend, subject to receipt

of the DS Eastin Dividend

“Makerston Group” collectively, Makerston and its subsidiar y

“Master Lease” the lease dated 14 March 2014 entered into between the Property

Company as lessor and Rosedale Kowloon as lessee

“More Star” More Star Limited, a company incorporated in the BVI with

limited liability, 40% equity interest of which is owned by Eagle

Spirit

“More Star Group” collectively, More Star and its subsidiary

DEFINITION

– 6 –

“MS Completion” completion of the sale and purchase of the MS Sale Share and the

assignment of the MS Sale Loan under the Makerston Agreement

“MS Completion Accounts” (i) the unaudited management accounts of Makerston (on a non-

consolidated basis); (ii) the unaudited management accounts of

DS Eastin (on a non-consolidated basis); and (iii) the unaudited

management accounts of Rosedale Beijing, each comprising an

income statement for the period from 1 January 2014 to the MS

Completion Date and a statement of financial position as at the

MS Completion Date

“MS Completion Date” the date on which the MS Completion takes place

“MS Consideration” the aggregate consideration for the MS Sale Share and the MS

Sale Loan pursuant to the terms of the Makerston Agreement

“MS Long Stop Date” 29 December 2014 or such other date as the Purchaser , the MS

Vendor, the Company and ITCP may agree in writing

“MS Net Current Assets” the aggregate of all current assets (excluding interest in an

associated company, deferred tax assets, the Compensated

Amount, net asset adjustment receivable under the Capital

Increase Agreement and the Beijing Hotel) less all liabilities

(excluding all unpaid land premium, professional fees and other

costs and expenses incurred in relation to the proposed expansion

and renovation of the Beijing Hotel up to an amount of available

cash of Rosedale Beijing, the PRC tax liabilities on disposal of

80% interest in Rosedale Beijing pursuant to the Capital Increase

Agreement, deferred tax liabilities and the MS Sale Loan), as at

the MS Completion Date

“MS Note” the loan note in the principal amount of HK$250 million to be

issued by ITCP to the MS Vendor or its nominee upon the MS

Completion

“MS Sale Loan” the amounts due from Makerston to the MS Vendor at the MS

Completion Date

DEFINITION

– 7 –

“MS Sale Share” one (1) ordinary share of US$1 in the capital of Makerston,

representing the entire issued share capital as at the date of the

Makerston Agreement and at MS Completion

“MS Vendor” Rosedale Hotel Group Limited, a wholly-owned subsidiary of

Apex, which was incorporated in the BVI with limited liability

“PRC” the People’s Republic of China, and for the purpose of this

circular, excluding Hong Kong, Macau and Taiwan

“Property Company” Fortress State International Limited, a wholly-owned subsidiary

of More Star, which was incorporated in Hong Kong with limited

liability

“Purchaser” Silver Infinite Limited, a direct wholly-owned subsidiary of ITCP,

which was incorporated in the BVI with limited liability

“Remaining Group” the Group upon ES Completion and MS Completion

“RD Group Management” Rosedale Group Management Limited, a wholly-owned subsidiary

of Rosy Universe, which was incorporated in Hong Kong with

limited liability

“RD Hotel Management” Roseda le Ho te l Managemen t In t e rna t iona l L imi t ed , a

wholly-owned subsidiary of Rosy Universe, which was

incorporated in the BVI with limited liability

“Rosedale Beijing” Rosedale Hotel Beijing Co., Ltd., a sino-foreign joint venture

company established in the PRC which is held as to 80% by a

subsidiary of the Investor and 20% by DS Eastin

“Rosedale Catering” Rosedale Restaurant and Cater ing Limited, an indirect

wholly-owned subsidiary of Eagle Spirit, which was incorporated

in Hong Kong with limited liability

“Rosedale Kowloon” Rosedale Hotel Kowloon Limited, a direct wholly-owned

subsidiary of Eagle Spirit, which was incorporated in Hong Kong

with limited liability

DEFINITION

– 8 –

“Rosedale Share Agreement” the agreement dated 11 April 2014 entered into among ITCC, ITC

Investment Holdings Limited as the vendor, Hanny and Hanny

Investment Group Limited as the purchaser in relation to the

sale and purchase of the entire issued share capital of Leaptop

Investments Limited which through its wholly-owned subsidiary

held approximately 29.76% of the issued share capital of the

Company

“Rosy Universe” Rosy Universe Limited, a wholly-owned subsidiary of Eagle

Spirit, which was incorporated in the BVI with limited liability

“Rosy Universe Group” collectively, Rosy Universe and its subsidiaries

“SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of

Hong Kong)

“SGM” the special general meeting of the Company to be convened and

held for the Independent Shareholders to consider and, if thought

fit, approve the disposals of shares in and shareholder’s loans

to Eagle Spirit and Makerston under the Agreements and the

transactions contemplated thereunder

“Share(s)” ordinary share(s) of HK$0.01 each in the share capital of the

Company

“Shareholders(s)” holder(s) of the Share(s)

“Shaw” Shaw Holdings Inc., a company incorporated in the Republic of

Nauru

“Shaw Agreement” the sale and purchase agreement dated 5 November 2013 entered

into between Eagle Spirit as vendor and Shaw as purchaser in

relation to the sale and purchase of 60% equity interest in More

Star at a cash consideration of approximately HK$789.2 million

“Stock Exchange” The Stock Exchange of Hong Kong Limited

DEFINITION

– 9 –

“substantial shareholder” has the same meaning ascribed to it under the Listing Rules

“TKT Hotel” the hotel building situated at No. 86 Tai Kok Tsui Road, Tai Kok

Tsui, Kowloon, Hong Kong, registered in the Land Registry as

Kowloon Inland Lot No. 11208

“Trademarks” (i) the trademark registrations in Hong Kong numbered

200212784AA, 300188811, 300188802 and 300188794 in relation

to the “Rosedale” brand; (ii) such other marks which are from

time to time used by, owned by, or registered in the name of the

Licensor or any of its wholly-owned subsidiaries; and (iii) the

Domain Name

“Transactions” collectively, the transactions contemplated under the Agreements

“HK$” Hong Kong dollars, the lawful currency of Hong Kong

“US$” United States dollars, the lawful currency of the United States of

America

“m2” square metres

“%” per cent.

In this circular, amounts in RMB are translated into HK$ on the basis of RMB1 = HK$1.26 and

US$ are converted into HK$ on the basis of US$1 = HK$7.75. The conversion rates are for illustration

purpose only and should not be taken as a representation that RMB and US$ could actually be converted

into HK$ at the respective rates or at all.

LETTER FROM THE BOARD

– 10 –



(Stock Code: 1189)

Executive Directors:

Mr. Cheung Hon Kit (Chairman)

Ms. Chan Ling, Eva (Managing Director)

Mr. Chan Pak Cheung, Natalis

Independent Non-executive Directors:

Mr. Kwok Ka Lap, Alva

Mr. Poon Kwok Hing, Albert

Mr. Sin Chi Fai

Registered office:

Clarendon House

2 Church Street

Hamilton HM 11

Bermuda

Head office and

principal place of business:

31st Floor

Paul Y. Centre

51 Hung To Road

Kwun Tong

Kowloon

Hong Kong

10 November 2014

To the Shareholders

Dear Sir or Madam,


IN RELATION TO THE DISPOSALS OF THE SHARES IN AND SHAREHOLDER’S LOANS TO


INTRODUCTION

The Company announced on 23 April 2014, among other things, that

(i) on 11 April 2014, the ES Vendor (a direct wholly-owned subsidiary of the Company), the

Purchaser (a direct wholly-owned subsidiary of ITCP), the Company and ITCP entered into

the Eagle Spirit Agreement, pursuant to which the ES Vendor has conditionally agreed to

sell, and the Purchaser has conditionally agreed to purchase, the ES Sale Share and the ES

Sale Loan for an aggregate consideration of not exceeding HK$566 million ; and


– 11 –

(ii) on 11 April 2014, the MS Vendor (a non wholly -owned subsidiary of the Company), the

Purchaser (a direct wholly-owned subsidiary of ITCP), the Company and ITCP entered into

the Makerston Agreement, pursuant to which the MS Vendor has conditionally agreed to sell,

and the Purchaser has conditionally agreed to purchase, the MS Sale Share and the MS Sale

Loan for an aggregate consideration of not exceeding HK$324 million.

The Company further announced on 23 September 2014, among other things, that (i) the Purchaser,

the ES Vendor, the Company and ITCP have agreed in writing on 23 September 2014 to extend the ES

Long Stop Date to 29 December 2014 or such other date as the parties thereto may agree in writing; and

(ii) the Purchaser, the MS Vendor, the Company and ITCP have agreed in writing on 23 September 2014 to

extend the MS Long Stop Date to 29 December 2014 or such other date as the parties thereto may agree in

writing.

As one or more of the applicable percentage ratios in respect of the Transactions under Rule 14.07

of the Listing Rules exceed(s) 75%, the Transactions constitute very substantial disposals for the Company

under the Listing Rules which are subject to reporting, announcement and shareholders’ approval

requirements. As ITCC, being the substantial shareholder of the Company, was indirectly interested in

approximately 30.65% of the issued share capital of ITCP as at the date of the Agreements, the Purchaser

(being a wholly-owned subsidiary of ITCP) is a connected person of the Company. Accordingly, the

Transactions also constitute connected transactions for the Company under Chapter 14A of the Listing

Rules, which are subject to approval of the Independent Shareholders at the SGM by way of poll.

The purpose of this circular is to provide you with, among other things, (i) details of the

Agreements; (ii) financial information on the Eagle Spirit Group and the Make rston Group ; ( iii) unaudited

pro forma financial information of the Remaining Group; (iv) the letter of advice from Centurion to the

Independent Shareholders; (v) the valuation report on the properties held by the Eagle Spirit Group and

the Make rston Group; and ( vi) the notice of SGM.

THE EAGLE SPIRIT AGREEMENT

Date

11 April 2014

Parties

(i) ES Vendor: Easy Vision Holdings Limited, a direct wholly-owned

subsidiary of the Company;

(ii) Purchaser: Silver Infinite Limited, a direct wholly-owned subsidiary of

ITCP;

(iii) ES Vendor’s guarantor: the Company; and

(iv) Purchaser’s guarantor: ITCP.


– 12 –

To the best of the Director’s knowledge, information and belief having made all reasonable

enquiries, ITCP was owned as to 30.65% by ITCC, which is a substantial shareholder holding 29.76%

of the issued share capital of the Company as at the date of the Eagle Spirit Agreement, and therefore

the Purchaser (being a direct wholly-owned subsidiary of ITCP) is a connected person of the Company

under Chapter 14A of the Listing Rules. The Purchaser is an investment holding company. ITCP and its

subsidiaries are principally engaged in property development and investment in Macau, the PRC and Hong

Kong.

Interests to be disposed of

The assets to be disposed of by the ES Vendor comprise the ES Sale Share and the ES Sale Loan.

The ES Sale Share represents the entire issued share capital of Eagle Spirit as at the date of the Eagle

Spirit Agreement and at the ES Completion. The ES Sale Loan represents the aggregate amount owing by

Eagle Spirit to the ES Vendor as at the ES Completion Date. As at the Latest Practicable Date, the ES Sale

Loan amounted to approximately HK$ 33 million.

Details of the Eagle Spirit Group are set out in the section headed “Information on Eagle Spirit and

Makerston” below.

ES Consideration

The ES Consideration is to be determined in accordance with the following formula:

ES Consideration = HK$530 million

+ 40% of the consolidated ES Net Current Assets of More Star

+ the ES Net Current Assets of Eagle Spirit

+ the ES Net Current Assets of Rosedale Kowloon

+ the consolidated ES Net Current Assets of HK Macau

+ the combined ES Net Current Assets of Rosy Universe,

subject to a maximum of HK$566 million.

Although the ES Net Current Assets of the respective entity (as disclosed in the above formula)

include intercompany balances that should be eliminated on consolidation, the effect of the intercompany

balances would be eliminated upon summation of the ES Net Current Assets of the abovementioned

entities. Accordingly, the ES Consideration calculation has taken into account the elimination of

intercompany balances. Based on the un audited financial information of the Eagle Spirit Group as at 30

June 2014, the ES Consideration is estimated to be approximately HK$ 504 million.

The ES Consideration attributable to the ES Sale Loan is the face value of the ES Sale Loan on a

dollar-for-dollar basis, with the balance of the ES Consideration being attributable to the ES Sale Share.


– 13 –

The ES Consideration is to be paid by the Purchaser to the ES Vendor on the ES Completion Date in

the following manner:

(i) as to HK$250 million payable by way of issue of the ES Note; and

(ii) as to the balance of the ES Consideration payable in cash.

At ES Completion, the ES Consideration will be determined based on the draft ES Completion

Accounts prepared by the ES Vendor. The ES Vendor shall finalise and agree the ES Completion Accounts

with the Purchaser within two (2) months after the ES Completion Date. The Purchaser will make up any

shortfall of the ES Consideration paid to the ES Vendor, or (as the case may be) the ES Vendor will return

any excess ES Consideration received based on the ES Completion Accounts, within ten (10) Business

Days after the finalisation of the agreed ES Completion Accounts.

The ES Consideration was determined after arm’s length negotiations between the ES Vendor and

the Purchaser with reference to (i) the preliminary valuation of the TKT Hotel as at 31 March 2014 by

an independent property valuer and the ES Net Current Assets of each member of the Eagle Spirit Group

and on the basis that the Eagle Spirit Group will have no material debts at ES Completion other than the

ES Sale Loan; and (ii) the indemnity given by the ES Vendor and the Company in favour of the Purchaser

against all tax liabilities that may arise from the disposal of 60% equity interest in More Star pursuant to

the Shaw Agreement and other liabilities arising under the Shaw Agreement, as no provision against such

liabilities have been made for the purposes of determining the ES Consideration. For the avoidance of

doubt, the ES Vendor and the Purchaser have not taken into account the entering into and/or completion of

the Rosedale Share Agreement when determining the ES Consideration.

Conditions precedent

Completion of the Eagle Spirit Agreement is conditional upon fulfillment or waiver (as the case

may be) of the following conditions:

(i) the approval by the Independent Shareholders of the Eagle Spirit Agreement and the

transactions contemplated thereunder at the SGM in compliance with the Listing Rules

having been obtained;

(ii) the written approval by the shareholders of ITCP or approval by the shareholders of ITCP

(other than those, if any, who are required to abstain from voting under the Listing Rules or

the applicable laws, rules and regulations) of the Eagle Spirit Agreement and the transactions

contemplated thereunder at the special general meeting of ITCP in compliance with the

Listing Rules having been obtained;


– 14 –

(iii) the Purchaser being satisfied with the results of the due diligence review on the Eagle Spirit

Group, each member of the More Star Group and the TKT Hotel;

(iv) each of the warranties given under the Eagle Spirit Agreement being true and accurate

in all material respects and not misleading as at the date of the Eagle Spirit Agreement

and remaining true and accurate in all material aspects and not misleading as at the ES

Completion Date;

(v) there being no material adverse change in the financial position of the Eagle Spirit Group and

each member of the More Star Group from 31 March 2014 up to and as at the ES Completion

Date; and

(vi) the Property Company having given its consent in writing to the indirect disposal of

Rosedale Kowloon under the Master Lease.

The Purchaser may at its discretion at any time waive in writing any conditions set out above,

except for conditions (i), (ii) and (vi).

If any of the conditions (i), (ii) and (vi) is not fulfilled on or before the ES Long Stop Date, and/

or the conditions (iii), (iv) and (v) do not remain fulfilled or waived (as the case may be), the Eagle Spirit

Agreement shall be of no further effect and the rights and obligations of the parties under the Eagle Spirit

Agreement shall lapse except for antecedent breach. As at the Latest Practicable Date, conditions ( iii) and

(vi) ha d been fulfilled.

ES Completion

ES Completion is, subject to all conditions precedent being fulfilled or waived (as the case may be),

to take place on the seventh (7th) Business Day after fulfillment of the conditions (i), (ii) and (vi) referred

to above, or such other date as the parties may agree in writing.

Upon ES Completion, the Company will not have any equity interest in Eagle Spirit, and Eagle

Spirit will cease to be a subsidiary of the Company. The financial results of the Eagle Spirit Group will no

longer be consolidated into the financial statements of the Group.


– 15 –

THE MAKERSTON AGREEMENT

Date

11 April 2014

Parties

(i) MS Vendor: Rosedale Hotel Group Limited, which is beneficially owned

as to approximately 89.40% by the Company;

(ii) Purchaser: Silver Infinite Limited, a direct wholly-owned subsidiary of

ITCP;

(iii) MS Vendor’s guarantor: the Company; and


Details of the Purchaser and its relationship with ITCC are set out in the paragraph headed “Parties”

in the section headed “The Eagle Spirit Agreement” above.

Interests to be disposed of

The assets to be disposed of under the Makerston Agreement comprise the MS Sale Share and the

MS Sale Loan. The MS Sale Share represents the entire issued share capital of Makerston as at the date of

the Makerston Agreement and at the MS Completion. The MS Sale Loan represents the aggregate amount

owing by Makerston to the MS Vendor as at the MS Completion Date. As at the Latest Practicable Date,

the MS Sale Loan amounted to approximately HK$ 207 million.

The principal asset of the Makerston Group is the holding of a 20% interest in Rosedale Beijing

which holds the Beijing Hotel. Following completion of the Capital Increase Agreement on 29 November

2013, Makerston’s interest in Rosedale Beijing was diluted from 100% to 20%. Further information

relating to the Makerston Group is set out in the section headed “Information on Eagle Spirit and

Makerston” below.


– 16 –

MS Consideration

The MS Consideration is to be determined in accordance with the following formula:

MS Consideration = HK$256 million

+ the MS Net Current Assets of Makerston

+ the MS Net Current Assets of DS Eastin

+ 20% of the MS Net Current Assets of Rosedale Beijing

+ 20% of the amount of land premium paid by Rosedale Beijing out of

its cash on hand during the period between the date of the Makerston

Agreement and the MS Completion Date,

subject to any upward adjustment in connection with the Compensated Amount as described under the

paragraph headed “Arrangement in respect of the Compensated Amount” below and a maximum of

HK$324 million. The upward adjustment for the land premium paid by Rosedale Beijing is to recognise

the value of the cash that is currently held by Rosedale Beijing (which would be counted towards the MS

Net Current Assets if not applied towards payment of land premium, as land premium once paid is not

considered as “current assets” of Rosedale Beijing).

Although the MS Net Current Assets of the respective entity (as disclosed in the above formula)

include intercompany balances that should be eliminated on consolidation, the effect of the intercompany

balances would be eliminated upon summation of the MS Net Current Assets of the abovementioned

entities. Accordingly, the MS Consideration calculation has taken into account the elimination of

intercompany balances. Based on the un audited financial information of the Makerston Group as at 30

June 2014, the MS Consideration is estimated to be approximately HK$ 302 million.

The MS Consideration attributable to the MS Sale Loan is the face value of the MS Sale Loan on a

dollar-for-dollar basis, with the balance of the MS Consideration being attributable to the MS Sale Share.

The MS Consideration is to be paid by the Purchaser to the MS Vendor on the MS Completion Date

in the following manner:

(i) as to HK$250 million payable by way of the issue of the MS Note; and

(ii) as to the balance of the MS Consideration payable in cash.

At MS Completion, the MS Consideration will be determined based on the draft MS Completion

Accounts prepared by the MS Vendor. The MS Vendor shall finalise and agree the MS Completion

Accounts with the Purchaser within two (2) months after the MS Completion Date. The Purchaser will

make up any shortfall of the MS Consideration paid to the MS Vendor, or (as the case may be) the MS

Vendor will return any excess MS Consideration received based on the MS Completion Accounts, within

ten (10) Business Days after the finalisation of the agreed MS Completion Accounts.


– 17 –

The MS Consideration was determined after arm’s length negotiations between the MS Vendor and

the Purchaser with reference to the preliminary valuation of the Beijing Hotel as at 31 March 2014 by an

independent property valuer and the MS Net Current Assets of the Makerston Group and on the basis that

the Makerston Group will have no material debts at MS Completion other than the MS Sale Loan. For the

avoidance of doubt, the MS Vendor and the Purchaser have not taken into account the entering into and/or

completion of the Rosedale Share Agreement when determining the MS Consideration.

Conditions precedent

MS Completion is conditional upon fulfillment or waiver (as the case may be) of the following

conditions:

(i) the approval by the Independent Shareholders of the Makerston Agreement and the

transactions contemplated thereunder at the SGM in compliance with the Listing Rules

having been obtained;

(ii) the written approval by the shareholders of ITCP or approval by the shareholders of ITCP

(other than those, if any, who are required to abstain from voting under the Listing Rules or

the applicable laws, rules and regulations) of the Makerston Agreement and the transactions

contemplated thereunder at the special general meeting of ITCP in compliance with the

Listing Rules having been obtained;

(iii) the Purchaser being satisfied with the results of the due diligence review on the Makerston

Group, Rosedale Beijing and the Beijing Hotel;

(iv) requisite consent having been obtained in respect of the transfer of the MS Sale Share under

the Makerston Agreement;

(v) each of the warranties given under the Makerston Agreement being true and accurate

in all material respects and not misleading as at the date of the Makerston Agreement

and remaining true and accurate in all material aspects and not misleading as at the MS

Completion; and

(vi) there being no material adverse change in the financial position of the Makerston Group from

31 March 2014 up to and as at the MS Completion Date.

The Purchaser may at its discretion at any time waive any of the conditions set out above, except for

conditions (i), (ii) and (iv). If any of the above conditions is not fulfilled or waived (as the case may be)

on or before the MS Long Stop Date and/or conditions (iii), (v) and (vi) above do not remain fulfilled or

waived (as the case may be) on the MS Completion Date, the Makerston Agreement shall be of no further

effect and the rights and obligations of the parties under the Makerston Agreement shall lapse except for

antecedent breach. As at the Latest Practicable Date, condition (iii) had been fulfilled.


– 18 –

Arrangement in respect of the Compensated Amount

Pursuant to the Capital Increase Agreement, the Investor has agreed to pay DS Eastin the

Compensated Amount on or before six (6) months after completion of the Capital Increase Agreement . As

disclosed in the announcements of the Company dated 5 June 2013, 27 September 2013 and 29 November

2013, completion of the deemed disposal of a 80% interest in Rosedale Beijing by DS Eastin to a

subsidiary of the Investor under the Capital Increase Agreement took place on 29 November 2013 and as a

result, a receivable of the Compensated Amount from the Investor of approximately HK$665 million under

the Capital Increase Agreement was recorded in the accounts of DS Eastin as at the date of the Makerston

Agreement.

In respect of the Compensated Amount, pursuant to the Makerston Agreement, the Purchaser

acknowledges and consents to the resolutions of Makerston to declare the DS Eastin Dividend and the

resolutions of the MS Vendor to declare the Makerston Dividend and the payment of the DS Eastin

Dividend and the Makerston Dividend upon receipt of the Compensated Amount (or any amount thereof),

the effect of which is to enable the upstream payment of the Compensated Amount to the MS Vendor by

way of dividend payment. As disclosed in the announcement of the Company dated 8 September 2014,

the principal amount of the Compensated Amount has been fully settled by the Investor. As at the Latest

Practicable Date, the DS Eastin Dividend and the Makerston Dividend had been declared and paid to

Makerston and the MS Vendor respectively.

The MS Completion

The MS Completion is, subject to all conditions precedent being fulfilled or waived (as the case

may be), to take place on the seventh (7th) Business Day after fulfillment of the conditions (i), (ii) and (iv)

referred to above, or such other date as the parties to the Maker ston Agreement may agree in writing.

Upon MS Completion, the Company will not have any equity interest in Makerston and therefore

Makerston will cease to be a subsidiary of the Company . The financial results of the Makerston Group will

no longer be consolidated into the financial statements of the Group.


– 19 –

THE ES NOTE AND THE MS NOTE

The principal terms of the ES Note and the MS Note (both unsecured) are set out as follows:

Issuer: ITCP

Noteholders: the ES Vendor for the ES Note and the MS Vendor for the MS Note or

their respective nominees

Principal amounts: HK$250 million for each of the ES Note and the MS Note

Interest: 5% per annum, payable semi-annually in arrears

Maturity: second anniversary of the respective dates of the issue of the ES Note

and the MS Note, but ITCP may prepay all or part of the outstanding

principal amount (at the minimum amount of HK$5,000,000) at any

time prior to the maturity date without any penalty, prepayment or other

fees by giving the noteholders not less than seven (7) days’ prior written

notice together with all interest accrued on the amount to be prepaid

Transferability: the noteholders are not entitled to assign the outstanding amount under

the ES Note or the MS Note or any of their rights, interests or benefits

thereunder without the prior written consent of ITCP


– 20 –

INFORMATION ON EAGLE SPIRIT AND MAKERSTON

Set out below was the existing structure of the Makerston Group and the Eagle Spirit Group as at

the Latest Practicable Date:

100%

100%

100%

100% 100% 100%

100%

100%

100%40%

100%

100%

100%

20%

89.4%

The Company

(Bermuda)

ES Vendor

(BVI)

Apex

(BVI)

(Note 1)

Eagle Spirit

(BVI)

MS Vendor

(BVI)

Rosy Universe

(BVI)

More Star

(BVI)

Rosedale Kowloon

(HK)

HK Macau

(BVI)

Makerston

(BVI)

RD Group

Management

(HK) (BVI)

RD Hotel

Management

DS Eastin

(HK) TKT

Hotel

Rosedale Beijing

(PRC)

Beijing Hotel

indirect holding

The Property

Company

(HK)

Rosedale

Catering

(HK)

Notes:

1. On 29 August 2014, the ES Vendor acquired 2,079,000 ordinary shares of US$0.02 each in the share capital of Apex,

representing approximately 0.75% of the issued share capital of Apex. Accordingly, the ES Vendor directly held

approximately 6.25% and indirectly held approximately 83.15% of Apex.

2. Places in parentheses represent places of incorporation.


– 21 –

The Eagle Spirit Group

Eagle Spirit

Eagle Spirit, which is an investment holding company incorporated in the BVI, is wholly -owned by

the ES Vendor. Its principal assets comprise (i) 100% equity interest in Rosy Universe, which holds the

entire equity interest in both RD Group Management and RD Hotel Management, which are principally

engaged in corporate management and secretarial services, and hotel management and consultancy

services respectively; (ii) 40% equity interest in More Star, the sole asset of which is its investment in

the Property Company which currently holds the ownership of the TKT Hotel, namely Rosedale Hotel

Kowloon; (iii) 100% equity interest in Rosedale Kowloon, which has entered into the Master Lease with

the Property Company for the lease of the TKT Hotel and is to be granted a non-exclusive use of the

Trademarks under the Licence Agreement; and (iv) 100% equity interest in HK Macau which holds 100%

equity interest in Rosedale Catering, which is a food and beverage operator. Details of each member of the

Eagle Spirit Group are set out as follows:

(i) Rosy Universe Group

Rosy Universe, which is an investment holding company incorporated in the BVI, is wholly -

owned by Eagle Spirit. The principal assets of Rosy Universe are its holding of the entire equity

interest in RD Group Management and RD Hotel Management.

RD Group Management is a company incorporated in Hong Kong and has recruited a team of

staff for the provision of corporate management and secretarial services. RD Hotel Management is a

company incorporated in the BVI and its principal activities are the provision of hotel management

and consultancy services. Currently, it has entered into consultancy contracts with two (2) hotels in

the PRC, one in Guangzhou and one in Beijing, for the provision of consultancy services which are

to be expired on 31 December 2014. The contracts will be terminated prior to ES Completion.

(i i) More Star Group

More Star is an investment holding company incorporated in the BVI with limited liability.

Its sole asset is its investment in the Property Company. On 14 March 2014, the disposal of 60%

equity interest in More Star by Eagle Spirit to Shaw under the Shaw Agreement was completed and

thus as at the Latest Practicable Date, Eagle Spirit held 40% equity interest in More Star.

The Property Company is a company incorporated in Hong Kong with limited liability and

is principally engaged in the business of property holding. Its principal asset is the ownership of

the TKT Hotel, which is located at No. 86 Tai Kok Tsui Road, Tai Kok Tsui, Kowloon, Hong Kong.

It is a 4-star rated hotel currently known as “Rosedale Hotel Kowloon” with gross floor area of

approximately 10,300 m2 and 435 guest rooms. Based on the valuation report on the TKT Hotel


– 22 –

as set out in Appendix V to this circular prepared by Asset Appraisal Limited, an independent

property valuer, the market value of the TKT Hotel as at 30 September 2014 was estimated to be

approximately HK$ 1,285 million.

(iii) HK Macau Group

HK Macau is an investment holding company incorporated in the BVI which owns the entire

issued share capital of Rosedale Catering. Rosedale Catering is mainly engaged in the operation of

food and beverage outlets.

(i v) Rosedale Kowloon

Rosedale Kowloon is a company incorporated in Hong Kong with limited liability and is

the operator of the TKT Hotel. On 14 March 2014, Rosedale Kowloon and the Property Company

entered into the Master Lease pursuant to which Rosedale Kowloon leases the TKT Hotel for

its hotel operation for a term of six (6) years, the material terms of which are set out in the

announcement of the Company dated 10 November 2013 and the circular of the Company dated 18

February 2014. For the continuing use of the Trademarks after the ES Completion, the Licensor will

grant a non-exclusive and non-transferrable licence to use the Trademarks to Rosedale Kowloon

under the Licence Agreement for a period commencing from the ES Completion Date to 31 March

2020 (being the date on which the Master Lease expires).

Financial information of the Eagle Spirit Group

Set out below is the unaudited consolidated financial information of the Eagle Spirit Group

(with 100% interest in the More Star Group, given the disposal of 60% equity interest in the More Star

Group was completed after 31 December 2013) prepared in accordance with the HK GAAP as set out in

Appendix II to this circular:

For the year ended

31 December

For the

six months

ended 30 June

2012 2013 2014

HK$’000 HK$’000 HK$’000

Revenue 55,943 125,179 70,126

Profit before taxation 14,581 33,353 470,589

Profit after taxation 13,118 31,839 469,832


– 23 –

As the TKT Hotel commenced business in July 2012, the revenue of the Eagle Spirit Group for the

year ended 31 December 2012 only covered of results of the TKT Hotel from July to December in 2012.

The significant increase in revenue of the Eagle Spirit Group for the year ended 31 December 2013 was

mainly due to the contribution from the full year results of the TKT Hotel in 2013. On 5 November 2013,

Eagle Spirit and Shaw entered into the Shaw Agreement in relation to the disposal of 60% equity interest

in More Star by Eagle Spirit to Shaw. Accordingly, the property, plant and equipment of the Eagle Spirit

Group had been reclassified to assets held for sale as at 31 December 2013.

As at 30 June 2014, the unaudited consolidated net assets of the Eagle Spirit Group ( after

completion of the disposal of 60% equity interest in the More Star Group ) was approximately HK$ 44 6. 4

million.

The Makerston Group

Makerston, which is an investment holding company incorporated in the BVI, is wholly -owned by

the MS Vendor. Its principal asset is its holding of the entire issued share capital of DS Eastin, which is an

investment holding company incorporated in Hong Kong holding 20% of the paid-up capital of Rosedale

Beijing.

On 31 May 2013, DS Eastin, the Investor, Rosedale Beijing and the Company entered into the

Capital Increase Agreement, pursuant to which the Investor agreed to procure the capital contribution of

US$68.8 million ( equivalent to approximately HK$533.2 million) in cash for the increase in the registered

capital of Rosedale Beijing. Upon completion of the capital increase by a subsidiary of the Investor

under the Capital Increase Agreement which took place on 29 November 2013, Rosedale Beijing has

become a sino-foreign joint venture company with a registered capital of US$86 million ( equivalent to

approximately HK$666.5 million) held as to 80% by a subsidiary of the Investor and 20% by DS Eastin.

Pursuant to a joint venture agreement dated 18 October 2013 entered into between the subsidiary of the

Investor and DS Eastin, profits of Rosedale Beijing are to be shared by both parties to the joint venture

agreement in accordance with their respective ratio of capital contribution.

Rosedale Beijing is principally engaged in hotel ownership and operation and its principal asset

is the ownership of the Beijing Hotel. According to the legal opinion from the PRC legal adviser of the

Company, Rosedale Beijing has obtained the necessary business license . The Beijing Hotel has gross

floor area of approximately 37,173 m2 with 462 guest rooms and a shopping arcade. In January 2013, an

approval for an extension of the Beijing Hotel by the Beijing Municipal Commission of Urban Planning

was obtained. Pursuant to the Capital Increase Agreement, it was agreed that the maximum amount to

be contributed by DS Eastin to Rosedale Beijing in respect of such extension will not exceed RMB30

million. As part of the modification procedures for the said extension, Rosedale Beijing entered into a

supplemental agreement dated 9 June 2014 with the Beijing Municipal Bureau of Land and Resources,

whereby the additional premium payable by Rosedale Beijing was agreed to be RMB67,420,150 and such

additional premium has been paid by Rosedale Beijing in June 2014 in accordance with the terms thereof

from its cash on hand. Under the supplemental agreement, the total permissible floor area was increased to

54,780 m2 (superstructure) and the land use was amended to commercial and finance (which covered the

existing use for hotel) with a corresponding change of the term of the land use right from 50 years to 40

years. Based on the valuation report on the Beijing Hotel as set out in Appendix V to this circular prepared

by Asset Appraisal Limited, an independent property valuer, the market value of the Beijing Hotel was

estimated to be approximately HK$ 1, 300 million as at 30 September 2014 .


– 24 –

Financial information of the Makerston Group

Set out below is the unaudited consolidated financial information of the Makerston Group prepared

in accordance with the HK GAAP as set out in Appendix III to this circular:

For the year ended

31 December

For the

six months

ended 30 June

2012 2013 2014

HK$’000 HK$’000 HK$’000

Revenue 96,125 80,075 –

(Loss)/profit before taxation ( 16,161) 640,446 (3,149)

(Loss)/profit after taxation ( 10,771) 580,297 (3,149)

The significant profit before and after taxation of the Makerston Group for the year ended 31

December 2013 was mainly attributable to a one-off gain on the deemed disposal of Rosedale Beijing of

approximately HK$ 656.2 million . DS Eastin was entitled to the Compensated Amount of approximately

HK$665 million under the Capital Increase Agreement, resulting in a significant gain on deemed disposal

of Rosedale Beijing.

As at 30 June 2014, the unaudited consolidated net asset value of the Makerston Group was

approximately HK$ 645.0 million .

REASONS FOR AND BENEFITS OF THE TRANSACTIONS

The Group is principally engaged in hotel operations and trading of securities.

The existing hotel operations of the Group comprise the operation of three “Rosedale” branded

4-star rated hotels (of which two are leased-and-operated hotels in Hong Kong), Times Plaza Hotel ,

Shenyang and Luoyang Golden Gulf Hotel. As disclosed in the Company’s interim report for the six

months ended 30 June 2013, slower pace of economic growth of the PRC and signs of the retreat of hot

money from Asia give a hard time to the Group’s hotel operations, the performance of which depends

heavily on the ups and downs of the world economic atmosphere. Facing this situation, the Group intended

to continue to enhance its hotel chain and to explore further income streams so as to stay ahead of its

competitors and to maximise value for the Shareholders.

The Directors are of the view that the Transactions allow the Group to realise its minority stake

in the TKT Hotel and the Beijing Hotel. The proceeds arising from the Transactions would provide

necessary financial resources for the Group to repay its borrowings when they fall due so as to strengthen

its financial position, enhance the Group’s capability to capture any future investment opportunities, and

focus its resources on other hotels of the Remaining Group.


– 25 –

After the ES Completion and MS Completion, the Remaining Group and the hotel portfolio will

comprise Rosedale Hotel and Suites , Guangzhou, Times Plaza Hotel , Shenyang, Luoyang Golden Gulf

Hotel, and Rosedale on the Park which is a leased-and-operated hotel located in Hong Kong. Having taken

into account these four hotels being under the management of the Remaining Group and the financial

effect of each of the ES Completion and the MS Completion set out in the section headed “ Financial

effects of the Transactions” below, the Directors consider that the Remaining Group has a sufficient level

of operations and tangible assets of sufficient value to warrant the continued listing of the Shares on the

Stock Exchange as required under Rule 13.24 of the Listing Rules. In addition, given that the Remaining

Group has identified specific use of the net proceeds from the Transactions as described below, the

Directors consider that the Remaining Group would not become a cash company upon ES Completion and

MS Completion.

As at the Latest Practicable Date, the Company did not have any intention to dispose of any assets

and business of the Remaining Group. As disclosed in the Company’s annual report for the year ended 31

December 2013, the Group will explore further the leased-and-operated hotel and franchising business to

supplement its traditional owner-operated hotel business, and will from time to time revisit its business

strategy and composition of its hotel portfolio to cope with market changes and to explore further income

streams so as to maximise the wealth of the Shareholders.

Having considered the above, the Directors are of the view that the terms of the Eagle Spirit

Agreement and the Makerston Agreement are fair and reasonable and the Transactions are in the interests

of the Company and the Shareholders as a whole.

The net proceeds from the transactions contemplated under the Eagle Spirit Agreement and

the Makerston Agreement are estimated to be approximately HK$ 502 million and HK$30 0 million

respectively. The Group intends to apply the net proceeds from the Transactions as to approximately

(i) HK$250 million for repayment of other borrowings; (ii) HK$66 million for payment of the special

dividend , details of which were disclosed in the announcement of the Company dated 12 May 2014 ; and

(iii) the remaining balance for future investment opportunities of the Group as and when appropriate.

Completion of the disposals under the Eagle Spirit Agreement and the Makerston Agreement are not

inter-conditional on each other. If only MS Completion takes place, the net proceeds therefrom may be

insufficient for repayment of other borrowings and payment of the special dividend, the shortfall will be

funded by internal resources of the Group. The Company has been in discussions with an independent

third party in relation to the possible acquisition of equity interest in a company engaging in hotel related

business in the PRC. As at the Latest Practicable Date, the parties had not yet reached any agreement on

the specific terms of the possible acquisition, and the possible acquisition may or may not proceed. Save

for the above, as at the Latest Practicable Date, there were no agreement, understanding, intention or

negotiation regarding potential acquisition by the Group.


– 26 –

FINANCIAL EFFECTS OF THE TRANSACTIONS

In respect of disposal of the Eagle Spirit Group

Assuming the disposal of the Eagle Spirit Group had been completed on 30 June 2014, the

Group would recognise a loss of approximately HK$ 14.2 million which is calculated based on the fair

value of the ES Consideration of approximately HK$ 470.8 million (comprising cash consideration of

approximately HK$ 253.8 million and fair value of the ES Note of approximately HK$ 217.0 million) after

deducting (i) the carrying amount of the net assets of the Eagle Spirit Group of approximately HK$44 6. 4

million as at 30 June 2014; (ii) the carrying amount of the ES Sale Loan of approximately HK$ 36.6

million as at 30 June 2014; and (iii) the estimated costs of approximately HK$2.0 million directly

attributable to the disposal of the ES Sale Share and the ES Sale Loan.

Based on the unaudited pro forma financial information of the Remaining Group as set out in

Appendix IV to this circular, (i) assuming the disposal of the Eagle Spirit Group had been completed

on 30 June 2014, the total assets of the Group would have been decreased by approximately HK$ 33.4

million from approximately HK$ 3,084.2 million as at 30 June 2014 to approximately HK$ 3,050.8

million, and total liabilities of the Group would have been decreased by approximately HK$ 19.2 million

from approximately HK$ 479.4 million as at 30 June 2014 to approximately HK$ 460.2 million ; and (ii)

assuming the disposal of the Eagle Spirit Group had been completed on 1 January 2013 , the Group’s

results would have been decreased by approximately HK$ 17.9 million from net profit attributable to the

owners of the Company of approximately HK$ 382.0 million for the year ended 31 December 2013 to

approximately HK$ 364.1 million.

In respect of disposal of the Makerston Group

Assuming the disposal of the Makerston Group had been completed on 30 June 2014, the Group

would recognise a gain of approximately HK$ 3.2 million which is calculated based on the fair value of the

MS Consideration of approximately HK$ 268. 7 million (comprising cash consideration of approximately

HK$ 51.8 million and fair value of the MS Note of approximately HK$217.0 million), after deducting (i)

the carrying amount of the net assets of the Makerston Group of approximately HK$ 645.0 million as at

30 June 2014; (ii) the carrying amount of the MS Sale Loan of approximately HK$ 217.7 million as at 30

June 2014; (iii) tax indemnity payable of approximately HK$66.7 million undertaken by the Remaining

Group; and (i v) the estimated costs of approximately HK$2.0 million directly attributable to the disposal

of the MS Sale Share and the MS Sale Loan, and adjusted by the Compensated Amount recoverable from

the Investor of approximately HK$ 66 5.9 million .


– 27 –

Based on the unaudited pro forma financial information of the Remaining Group as set out in

Appendix IV to this circular, (i) assuming the disposal of the Makerston Group had been completed on 30

June 2014 , the total assets of the Group would have been increased by approximately HK$ 3.2 million from

approximately HK$ 3,084.2 million as at 30 June 2014 to approximately HK$ 3, 087.4 million, while total

liabilities of the Group would remain unchanged; and (ii) assuming the disposal of the Makerston Group

had been completed on 1 January 2013 , the Group’s results would have been decreased by approximately

HK$ 609.7 million from net profit attributable to the owners of the Company of approximately HK$ 382.0

million for the year ended 31 December 2013 to net loss attributable to the owners of the Company of

approximately HK$ 227.7 million.

Shareholders should note that the actual gain or loss from the Transactions to be recorded by the

Company will depend on the financial position of the Eagle Spirit Group and the Makerston Group as at

the ES Completion Date and the MS Completion Date respectively.

FINANCIAL AND TRADING PROSPECTS OF THE GROUP

As mentioned in the paragraph headed “Reasons for and benefits of the Transactions” above, the

Group intends to repay other borrowing of approximately HK$250 million out of the net proceeds from

the Transactions. By removing these liabilities from its statement of financial position, the gearing ratio

and the financial position of the Company shall be enhanced to a considerable extent. Furthermore, the

bottom line of the Group in the future shall be improved by reducing the finance costs incurred on the

said borrowings. After the ES Completion and MS Completion, the Group will continue to engage in hotel

operations and trading of securities.

LISTING RULES IMPLICATIONS

As one or more of the applicable percentage ratios in respect of the Transactions under Rule 14.07

of the Listing Rules exceed(s) 75%, the Transactions constitute very substantial disposals for the Company

under the Listing Rules which are subject to the reporting, announcement and shareholders’ approval

requirements.

As ITCC, being the substantial shareholder of the Company, was indirectly interested in

approximately 30.65% of the issued share capital of ITCP as at the date of the Agreements, the Purchaser

(being a direct wholly-owned subsidiary of ITCP) is a connected person of the Company. Accordingly, the

Transactions constitute connected transactions for the Company under Chapter 14A of the Listing Rules,

which are subject to approval from the Independent Shareholders at the SGM by way of poll.


– 28 –

As completion of the Rosedale Share Agreement (details of which were set out in the

announcements of ITCC and Hanny both dated 9 May 2014) is conditional on the ES Completion and the

MS Completion, CEL, an associated company of Hanny , is considered to have a material interest in the

Transactions. Accordingly, ITCC , its close associates and directors (who hold any Shares), CEL and its

close associates shall abstain from voting in respect of the resolutions relating to the Agreements and the

transactions contemplated thereunder at the SGM. Dr. Chan Kwok Keung, Charles (by virtue of his being

a director and controlling shareholder of ITCC) will also abstain from voting in respect of the resolutions

relating to the Agreements and the transactions contemplated thereunder at the SGM. As at the Latest

Practicable Date, ITCC held 195,706,000 Shares, representing approximately 29.76% of the issued share

capital of the Company ; CEL held 48,660,424 Shares, representing approximately 7.40% of the issued

share capital of the Company ; and Dr. Chan Kwok Keung, Charles held 1,132,450 Shares, representing

approximately 0.17% of the issued share capital of the Company.

Mr. Cheung Hon Kit (by virtue of his being director of both ITCP and the Company) did not

attend the meeting of the Board in relation to the approval of the Agreements. Mr. Kwok Ka Lap, Alva

(by virtue of his being director of Hanny, ITCP and the Company), Mr. Poon Kwok Hing, Albert and Mr.

Sin Chi Fai (by virtue of their being directors of both Hanny and the Company) abstained from voting on

the relevant resolution(s) approving the Agreements in the meeting of the Board. As all the independent

non-executive Directors have material interest in the Transactions, no independent board committee is

formed. Mr. Cheung Hon Kit, Mr. Poon Kwok Hing, Albert, Mr. Sin Chi Fai (who did not hold any Shares)

and Mr. Kwok Ka Lap, Alva, beneficially held 7,500 Shares in aggregate as at the Latest Practicable

Date (representing approximately 0.001% of the issued share capital of the Company) will also abstain

from voting in respect of the resolutions relating to the Agreements and the transactions contemplated

thereunder at the SGM.

THE SGM

The SGM will be held at 3:30 p.m. on Thursday, 27 November 2014 at Gemini Room, 33rd Floor,

Rosedale on the Park, 8 Shelter Street, Causeway Bay, Hong Kong to consider and, if thought fit, approve

the disposals of shares in and shareholder’s loans to Eagle Spirit and Makerston under the Agreements

and the transactions contemplated thereunder. A notice convening the SGM is set out on pages SGM-1

to SGM- 2 of this circular. Whether or not you are able to attend the SGM, you are requested to complete

the accompanying form of proxy in accordance with the instructions printed thereon and return the same

to the Company’s branch share registrar in Hong Kong, Tricor Secretaries Limited at Level 22, Hopewell

Centre, 183 Queen’s Road East, Wanchai, Hong Kong, as soon as possible and in any event not less than

48 hours before the time appointed for the holding of the SGM or any adjournment thereof (as the case

may be). Completion and return of the form of proxy shall not preclude you from attending and voting in

person at the SGM or any adjournment meeting thereof (as the case may be) if you so wish.


– 29 –

The resolutions to approve the disposals of shares in and shareholders’s loans to Eagle Spirit and

Makerston under the Agreements and the transactions contemplated thereunder at the SGM will be taken

by way of poll and an announcement will be made by the Company after the SGM on the results of the

SGM.

RECOMMENDATIONS

Your attention is drawn to the letter from Centurion set out on pages 30 to 73 of this circular which

contains its advice to the Independent Shareholders regarding the Transactions.

The Directors consider that the terms of the Agreements are fair and reasonable so far as the

Independent Shareholders are concerned and the Transactions are in the interests of the Company and the

Shareholders as a whole. Accordingly, the Directors recommend the Independent Shareholders to vote

in favour of the ordinary resolutions to be put forward to the Independent Shareholders at the SGM to

consider and, if thought fit, approve the disposals of shares in and shareholder’s loans to Eagle Spirit and

Makerston under the Agreements and transactions contemplated thereunder.

ADDITIONAL INFORMATION

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

Yours faithfully,

For and on behalf of

Rosedale Hotel Holdings Limited

Cheung Hon Kit

Chairman

LETTER FROM CENTURION

– 30 –

The following is the text of the letter of advice to the Independent Shareholders from Centurion

Corporate Finance Limited dated 10 November 2014 for incorporation in this circular:–

10 November 2014

To the Independent Shareholders of


Dear Sirs,


IN RELATION TO THE DISPOSALS OFTHE SHARES IN, AND SHAREHOLDER’S LOANS TO,


INTRODUCTION

We have been engaged as the independent financial adviser to advise the Independent Shareholders

with respect to the Transactions, the terms and conditions of Agreements and the transactions

contemplated thereunder. Details of the Transactions and the Agreements are outlined in the “Letter From

The Board” set out from pages 10 to 29 of the circular dated 10 November 2014 to the Shareholders

(“Circular”) of which this letter forms a part.

As set out in the “Letter From The Board”, the Transactions constitute very substantial disposals

and connected transactions for the Company under the Listing Rules, which are subject to approval from

the Independent Shareholders at the SGM by way of poll.

For the reason as set out in the “Letter From The Board”, all the independent non-executive

Directors have material interest in the Transactions and as such, no independent board committee is

formed. We have therefore been appointed to address this letter of independent advice to the Independent

Shareholders directly and (i) to give an opinion as to whether the Transactions, the terms and conditions

of the Agreements and the transactions contemplated thereunder are of normal commercial terms, are in

the ordinary and usual course of business of the Group and are fair and reasonable and in the interests of

the Company and its Shareholders as a whole; and (ii) to recommend to the Independent Shareholders how

to vote at the SGM. Capitalised terms used in this letter shall have the same meanings as defined in the

Circular unless the context otherwise requires.


– 31 –

As completion of the Rosedale Share Agreement (details of which were set out in the

announcements of ITCC and Hanny both dated 9 May 2014) is conditional on the ES Completion and the

MS Completion, CEL, as an associated company of Hanny, is considered to have a material interest in the

Transactions. Accordingly, ITCC, its close associates and directors (who hold any Shares), CEL and its

close associates shall abstain from voting in respect of the ordinary resolutions approving the Agreements

and the transactions contemplated thereunder at the SGM. Dr. Chan Kwok Keung, Charles (by virtue of

his being a director and controlling shareholder of ITCC) will also abstain from voting at the SGM. For

further details, please refer to the sections headed “Listing Rules Implications” and “The SGM” as set out

in the “Letter From The Board”.

The Company further announced on 23 September 2014 the extension of the ES Long Stop Date

and the MS Long Stop Date to 29 December 2014 or such other date as the parties thereto may agree in

writing.

Mr. Baldwin Lee, the author of this letter of independent advice, has over 25 years of experience in

investment banking and corporate finance. He has been the managing director of our firm since 1994. Prior

to his present posting, he was a director at Sun Hung Kai International Limited, the investment banking

arm of Sun Hung Kai & Co. Limited. Prior to his return to Hong Kong in early 1991 from Canada, he was

a corporate finance professional at the Toronto’s head office of Walwyn Stodgell Cochran Murray Limited,

an investment banking firm in Canada. He was educated in Canada and holds an M.B.A. degree and a B.

Comm. degree. He is also a Fellow member of the Institute of Canadian Bankers and a Fellow member of

the Hong Kong Securities Institute.

We are not associated with the Company or any other parties to the Agreements or their respective

substantial shareholders or connected persons, as defined under the Listing Rules. Apart from the normal

professional fees payable to us in relation to this appointment, no arrangement exists whereby we will

receive any fee or benefit from the Company or any of the parties to the Agreements or their respective

substantial shareholders or connected persons. We have never acted for the Company prior to this

appointment.


– 32 –

BASIS OF OUR OPINION

In formulating our opinion and recommendation, we have relied on the accuracy of the information,

opinions and representations contained in the Circular and other documents (including but not limited to

the bases and assumptions for the valuation reports on the hotel properties and promissory notes) which

have been provided to us by the Directors and for which they shall take full responsibility. The Directors

have declared in a responsibility statement set out in Appendix VI to the Circular that they collectively

and individually accept full responsibility for the accuracy of the information contained in the Circular.

We have also assumed that all statements, information, opinions and representations made or referred to in

the Circular and other circulars of the Company in relation to its previous disposals of the majority stakes

in TKT Hotel and Beijing Hotel were true at the time they were made and continued to be true at the date

of this Circular. We have also assumed that all statements of belief, opinion and intention made by the

Directors in the Circular are reasonably made after due and careful enquiry.

In respect of the financial information of each of the Group, the Remaining Group, the Eagle Spirit

Group and the Makerston Group, we have relied principally on their respective audited and/or unaudited

financial statements (including unaudited pro forma financial information of the Remaining Group), such

financial statements and information are prepared by the Company and for which the Directors take full

responsibility. We have also sought and obtained confirmation from the Directors that, having made all

reasonable enquiries and to the best of their knowledge and belief, no material facts have been omitted

from the information provided and/or referred to in the Circular.

We have no reason to doubt the truth, accuracy and completeness of the information and

representations provided to us by the Directors. We consider that we have reviewed sufficient financial

information and have taken reasonable steps as required under the Listing Rules, which enable us to

reach an informed view and to justify our reliance on the accuracy of the information as contained in the

Circular and to provide us with a reasonable basis for our opinion. We have not, however, conducted any

form of independent or in-depth investigation into the businesses and affairs or the prospects (including

the pro forma financial effects) of each of the Group, the Remaining Group, the Eagle Spirit Group and

the Makerston Group, or any of their respective subsidiaries, associates or parent companies, nor have we

independently verified any of the information supplied to us.


– 33 –

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our recommendation, we have taken into consideration the following principal

factors and reasons:

1. Background Information

1.1 Background of the Group

The principal business activities of the Group are in hotel operations and trading

of securities. The existing hotel operations of the Group comprise the operation of the

three “Rosedale” branded 4-star rated hotels (of which two hotels are leased-and-operated

hotels in Hong Kong), Times Plaza Hotel, Shenyang and the Luoyang Golden Gulf Hotel.

Upon Completion, the Remaining Group shall comprise the Rosedale Hotel and Suites in

Guangzhou, the Times Plaza Hotel in Shenyang, the Luoyang Golden Gulf Hotel and shall

continue to manage the leased-and-operated Rosedale On the Park hotel in Hong Kong.

The following is an overview of the breakdown in segment revenue of the Group

for the years ended 31 December 2011, 2012 and 2013 by activity as extracted from the

Company’s 2012 and 2013 annual reports respectively:–

Table A: Audited segment revenue and results of the Group for the three

years ended 31 December 2011, 2012 and 2013 respectively

For the year ended 31 December 2011 2012 2013(HK$’000) (in %) (HK$’000) (in %) (HK$’000) (in %)

Segment revenues and resultsTurnover from hotel operations 391,023 100.0% 429,466 100.0% 447,220 100.0%

Turnover from securities trading – 0.0% – 0.0% – 0.0%

Total 391,023 100.0% 429,466 100.0% 447,220 100.0%

Segment profit/(loss)From hotel operations (163,499) (94.5%) (137,884) (101.4%) 624,437

(Note)

99.9%

From securities trading (9,549) (5.5%) 1,845 1.4% 239 0.1%

Total (173,048) 100.0% (136,039) 100.0% 624,676 100.0%

Profit (loss) for the year

attributable to Shareholders (206,643) (143,188) 381,966

Note: Included gain on deemed disposal of Rosedale Beijing of HK$781,773,000 as a result of a capital

injection

Source: 2012 and 2013 Annual Reports of the Company dated 22 March 2013 and 27 March 2014

respectively


– 34 –

For the year ended 31 December 2013, hotel operations of the Group comprise the

operation of the four “Rosedale” branded 4-star rated hotels. Turnover increased by 4.1%

to HK$447.2 million (HK$429.5 million for the year ended 31 December 2012), with the

contribution from the full year results of Rosedale Hotel Kowloon opened in July 2012.

Segment profit for the year ended 31 December 2013 was HK$624.4 million (loss of

HK$137.9 million for the year ended 31 December 2012), after taking into account the

gain on deemed disposal of Rosedale Beijing of HK$781.8 million (section 1.6 and section

7.2.1 below under the heading “Possible effects on earnings” further explain this one-off

gain item). Profit from securities trading for the year ended 31 December 2013 was HK$0.2

million (HK$1.8 million for the year ended 31 December 2012).

As set out in Appendix I to the Circular, for the year ended 31 December 2013,

turnover of the Remaining Group attained HK$242.0 million, represented a decrease of

12.8% as compared to HK$277.4 million of 2012. The results of the Remaining Group

for the year ended 31 December 2013 was a loss of HK$294.6 million (2012: HK$151.4

million). On a segment results basis, the hotel operations of the Remaining Group comprise

the operation of the three “Rosedale” branded 4-star rated hotels, Times Plaza Hotel,

Shenyang and Luoyang Golden Gulf Hotel. Turnover decreased by 12.8% to HK$242.0

million for the year ended 31 December 2013 (2012: HK$277.4 million). Segment loss for

the reporting year was HK$140.0 million (2012: HK$124.3 million). For details, please refer

to page I-11 in Appendix I to the Circular.

The following is an overview of the consolidated net assets of the Group:–

Table B: Audited and unaudited consolidated net assets of the Group

Audited net assets of

the Group as at 31 December 2013

(Note A)

Unaudited consolidated net assets of

the Group as at 30 June 2014

(Note B)

(HK$’000) (HK$’000)

Total assets 3,567,266 3,084,207

Less: Total liabilities 1,348,673 479,393

Net assets 2,218,593 2,604,814

Equity attributable to the Shareholders 1,976,154 2,369,223

Sources:

Note A: as extracted from the 2013 annual report of the Company

Note B: as extracted from Appendix IV to the Circular


– 35 –

1.2 Group structure of the Eagle Spirit Group and the Makerston Group

Set out below was the existing structure of the Eagle Spirit Group and the Makerston

Group as at the Latest Practicable Date:

100%

100%

100%

100% 100% 100%

100%

100%

100%40%

100%

100%

100%

20%

89.4%

The Company

(Bermuda)

ES Vendor

(BVI)

Apex

(BVI)

(Note 1)

Eagle Spirit

(BVI)

MS Vendor

(BVI)

Rosy Universe

(BVI)

More Star

(BVI)

HK Macau

(BVI)

Rosedale Kowloon

(HK)

Makerston

(BVI)

RD Group

Management

(HK) (BVI)

RD Hotel

Management

DS Eastin

(HK) TKT

Hotel

Rosedale Beijing

(PRC)

Beijing Hotel

indirect holding

The Property

Company

(HK)

Rosedale

Catering

(HK)

Notes:

1. On 29 August 2014, the ES Vendor acquired 2,079,000 ordinary shares of US$0.02 each in the share

capital of Apex, representing approximately 0.75% of the issued share capital of Apex. Accordingly,

the ES Vendor directly held approximately 6.25% and indirectly held approximately 83.15% of

Apex.

2. Places in parentheses represent places of incorporation.


– 36 –

1.3 The Eagle Spirit Group proposed to be disposed

Eagle Spirit, which is an investment holding company incorporated in the BVI, is

wholly-owned by ES Vendor. Its principal assets comprise (i) 100% equity interest in Rosy

Universe; (ii) 40% equity interest in More Star, the sole asset of which is its investment

in the Property Company which holds the ownership of the TKT Hotel; (iii) 100% equity

interest in Rosedale Kowloon, which has entered into the Master Lease with the Property

Company for the lease of the TKT Hotel and is to be granted a non-exclusive use of the

Trademarks under the Licence Agreement; and (iv) 100% equity interest in HK Macau.

Details of each of these members of the Eagle Spirit Group are set out below:

(i) Rosy Universe Group

Rosy Universe, which is an investment holding company incorporated in the

BVI, is wholly-owned by Eagle Spirit. The principal assets of Rosy Universe are

its holding of the entire equity interest in RD Group Management and RD Hotel

Management.

RD Group Management is a company incorporated in Hong Kong and has

recruited a team of staff for the provision of corporate management and secretarial

services. RD Hotel Management is a company incorporated in the BVI and its

principal activities are the provision of hotel management and consultancy services.

Currently, it has entered into consultancy contracts with two hotels in the PRC, one

in Guangzhou and one in Beijing, for the provision of consultancy services which

will expire on 31 December 2014. The contracts will be terminated prior to ES

Completion.

( ii) More Star Group

More Star is an investment holding company incorporated in the BVI with

limited liability. Its sole asset is its investment in the Property Company. On 14 March

2014, the disposal of 60% equity interest in More Star by Eagle Spirit to Shaw under

the Shaw Agreement was completed and thus as at the Latest Practicable Date, Eagle

Spirit held 40% equity interest in More Star.


– 37 –

The Property Company is a company incorporated in Hong Kong with limited

liability and is principally engaged in the business of property holding. Its principal

asset is the ownership of the TKT Hotel. It is a 4-star rated hotel currently known

as “Rosedale Hotel Kowloon” with a gross floor area of approximately 10,300 sq.

m. and 435 guest rooms. Based on the valuation report on the TKT Hotel as set out

in Appendix V to the Circular by Asset Appraisal Limited, an independent property

valuer, the market value of the TKT Hotel as at 30 September 2014 was estimated to

be approximately HK$1,285 million.

(iii) HK Macau Group

HK Macau is an investment holding company incorporated in the BVI which

owns the entire issued share capital of Rosedale Catering. Rosedale Catering is mainly

engaged in the operation of food and beverage outlets.

( iv) Rosedale Kowloon

Rosedale Kowloon is a company incorporated in Hong Kong with limited

liability and is the operator of the TKT Hotel. On 14 March 2014, Rosedale Kowloon

and the Property Company entered into the Master Lease, pursuant to which,

Rosedale Kowloon leasees the TKT Hotel for its hotel operation for a term of six (6)

years, the material terms of which are set out in the announcement of the Company

dated 10 November 2013 and the circular of the Company dated 18 February 2014.

For the continuing use of the Trademarks after the ES Completion, the Licensor

will grant a non-exclusive and non-transferrable licence to use the Trademarks to

Rosedale Kowloon under the Licence Agreement for a period commencing from the

ES Completion Date to 31 March 2020 (being the date on which the Master Lease

expires).


– 38 –

1.4 Financial information of the Eagle Spirit Group

Set out below is a summary of the unaudited consolidated statements of profit or loss

and other comprehensive income of the Eagle Spirit Group for each of the three years ended

31 December 2013 and the six months ended 30 June 2013 and 2014 as set out in Appendix

II to the Circular:

Table C: Summarized unaudited consolidated statements of profit or loss and

other comprehensive income of the Eagle Spirit Group for each of

the three years ended 31 December 2013 and the six months ended 30

June 2013 and 2014

Unaudited consolidated statements of profit or loss and other comprehensive income highlights

For the year ended

31 December 2011

For the year ended

31 December 2012

For the year ended

31 December 2013

For the six months

ended 30 June

2013

For the six months

ended 30 June

2014(HK$’000) (HK$’000) (HK$’000) (HK$’000) (HK$’000)

Revenue – 55,943 125,179 56,861 70,126

Gross profit – 29,045 67,383 23,689 24,999

Other income 34,154 31,219 30,185 13,307 18,886

Administrative expenses (14,705) (39,182) (46,912) (18,801) (30,104)

Gain on disposal of

assets classified as held for sale – – – – 459,286

Share of result of a joint venture – – – – 954

Finance costs (569) (6,501) (17,303) (8,483) (3,432)

Profit before taxation 18,880 14,581 33,353 9,712 470,589

Profit after taxation and total

comprehensive income

for the year/period 17,502 13,118 31,839 8,949 469,832

Source: Appendix II to the Circular

As the TKT Hotel commenced business in July 2012, the revenue of the Eagle Spirit

Group for the year ended 31 December 2012 only covered the results of the TKT Hotel

from July to December 2012. The significant increase in revenue of the Eagle Spirit Group

for the year ended 31 December 2013 was mainly due to the contribution from the full year

results of the TKT Hotel in 2013. On 5 November 2013, Eagle Spirit and Shaw entered into

the Shaw Agreement in relation to the disposal of 60% equity interest in More Star by Eagle

Spirit to Shaw. Accordingly, the property, plant and equipment of the Eagle Spirit Group

had been reclassified to assets held for sale as at 31 December 2013 and resulted in the

approximately HK$459.3 million “Gain on disposal of assets classified as held for sale” for

the six months ended 30 June 2014 as set out above.


– 39 –

As at 30 June 2014, the unaudited consolidated net assets of the Eagle Spirit Group

(after completion of the disposal of 60% equity interest in the More Star Group) was

approximately HK$446.4 million. Please refer to page II-4 in Appendix II to the Circular

for details of the unaudited consolidated statements of financial position providing such net

assets of the Eagle Spirit Group.

Upon ES Completion, Eagle Spirit will cease to be a subsidiary of the Company and

its financial results will no longer be consolidated into the financial statements of the Group.

1.5 The Makerston Group proposed to be disposed

Makerston, which is an investment holding company incorporated in the BVI, is

wholly-owned by the MS Vendor. Its principal asset is its holding of the entire issued share

capital of DS Eastin, which is an investment holding company incorporated in Hong Kong

holding 20% of the paid-up capital of Rosedale Beijing.

Upon completion of the capital increase under the Capital Increase Agreement which

took place on 29 November 2013, Rosedale Beijing has since become a sino-foreign joint

venture company and been held as to 80% by a subsidiary of the Investor and 20% by DS

Eastin. For further details, please refer to section 4.3 below.

Rosedale Beijing is principally engaged in hotel ownership and operation and its

principal asset is the ownership of the Beijing Hotel. According to the legal opinion from

the PRC legal adviser of the Company, Rosedale Beijing has obtained the necessary business

license to operate. The Beijing Hotel has gross floor area of approximately 37,173 sq. m.

with 462 guest rooms and a shopping arcade. Please refer to the “Letter From The Board”

for details on the approval for an extension of the Beijing Hotel which would result in an

increase in its total permissible floor area and the additional premium paid by Rosedale

Beijing. Based on the valuation report on the Beijing Hotel as set out in Appendix V to the

Circular prepared by Asset Appraisal Limited, an independent property valuer, the market

value of the Beijing Hotel was estimated to be approximately HK$1,300 million as at 30

September 2014.


– 40 –

1.6 Financial information of the Makerston Group

Set out below is a summary of the unaudited consolidated statements of profit or loss

of the Makerston Group for each of the three years ended 31 December 2013 and the six

months ended 30 June 2013 and 2014 as set out in Appendix III to the Circular:

Table D: Summarized unaudited consolidated statements of profit or loss of

the Makerston Group for each of the three years ended 31 December

2013 and the six months ended 30 June 2013 and 2014

Unaudited consolidated statements of profit or loss highlights

For the year ended

31 December 2011

For the year ended

31 December 2012

For the year ended

31 December 2013

For the six months

ended 30 June

2013

For the six months

ended 30 June

2014(HK$’000) (HK$’000) (HK$’000) (HK$’000) (HK$’000)

Revenue 85,490 96,125 80,075 40,200 –

Gross profit 23,948 29,779 22,753 9,666 –

Other income 20,832 4,757 7,152 6,442 5,486


Gain on disposal of

assets classified as held for

sale (see below for details) – – 656,230 – –

Share of result of an associate – – (1,223) – (2,463)

Finance costs (8,682) (8,026) (7,114) (3,839) (29)

(Loss) profit before tax (9,458) (16,161) 640,446 (8,314) (3,149)

(Loss) profit after tax for

the year/period (5,737) (10,771) 580,297 (5,616) (3,149)

Source: Appendix III to the Circular

The significant profit before and after taxation of the Makerston Group for the

year ended 31 December 2013 was mainly attributable to an one-off gain on the deemed

disposal of Rosedale Beijing of approximately HK$656.2 million. DS Eastin was entitled

to the Compensated Amount of approximately HK$665 million under the Capital Increase

Agreement, resulting in a significant gain on deemed disposal of Rosedale Beijing.

As at 30 June 2014, the unaudited consolidated net asset value of the Makerston

Group was approximately HK$645.0 million.

Upon MS Completion, Makerston will cease to be a subsidiary of the Company and its

financial results will no longer be consolidated into the financial statements of the Group.


– 41 –

2. The Transactions

Details of the Transactions as extracted from the “Letter From The Board” and to be opined

by us are set out below:–

2.1 The Eagle Spirit Agreement

Parties

The following are the parties to the Eagle Spirit Agreement:–

(i) ES Vendor: Easy Vision Holdings Limited, a direct

wholly-owned subsidiary of the Company;

(ii) Purchaser: Silver Infinite Limited, a direct wholly-owned

subsidiary of ITCP;

(iii) ES Vendor’s guarantor: the Company; and


As set out in the “Letter From The Board”, as at the date of the Eagle Spirit

Agreement, ITCP was owned indirectly as to 30.65% by ITCC, which is a substantial

shareholder holding 29.76% of the issued share capital of the Company. The Purchaser

(being a direct wholly-owned subsidiary of ITCP) is thus a connected person of the

Company under Chapter 14A of the Listing Rules.

2.1.1 Interests to be disposed of

The assets to be disposed of by the ES Vendor comprise the ES Sale Share

and the ES Sale Loan. The ES Sale Share represents the entire issued share capital of

Eagle Spirit as at the date of the Eagle Spirit Agreement and at the ES Completion.

The ES Sale Loan represents the aggregate amount owing by Eagle Spirit to the ES

Vendor as at the ES Completion Date. As at the Latest Practicable Date, the ES Sale

Loan amounted to approximately HK$33 million.


– 42 –

2.1.2 ES Consideration

The ES Consideration is to be determined in accordance with the following

formula:

ES Consideration = HK$530 million

+ 40% of the consolidated ES Net Current Assets of

More Star

+ the ES Net Current Assets of Eagle Spirit

+ the ES Net Current Assets of Rosedale Kowloon

+ the consolidated ES Net Current Assets of HK

Macau

+ the combined ES Net Current Assets of Rosy

Universe,

subject to a maximum of HK$566 million.

As set out in the “Letter From The Board”, although the ES Net Current

Assets of respective entity (as disclosed in the above formula) include intercompany

balances that should be eliminated on consolidation, the effect of the intercompany

balances would be eliminated upon summation of the ES Net Current Assets of the

abovementioned entities. Accordingly, the ES Consideration calculation has taken into

account the elimination of intercompany balances.

Based on the unaudited financial information of the Eagle Spirit Group as at 30

June 2014, the ES Consideration is estimated to be approximately HK$504 million.

Table E below contains a breakdown of how this HK$504 million is arrived at.

The ES Consideration attributable to the ES Sale Loan is the face value of the

ES Sale Loan on a dollar-for-dollar basis, with the balance of the ES Consideration

being attributable to the ES Sale Share.

The ES Consideration is to be paid by the Purchaser to the ES Vendor on the ES

Completion Date in the following manner:

(i) as to HK$250 million payable by way of issue of the ES Note; and

(ii) as to the balance of the ES Consideration payable in cash.


– 43 –

At ES Completion, the ES Consideration will be determined based on the draft

ES Completion Accounts prepared by the ES Vendor. The ES Vendor shall finalise

and agree the ES Completion Accounts with the Purchaser within two (2) months

after the ES Completion Date. The Purchaser will make up any shortfall of the ES

Consideration paid to the ES Vendor, or (as the case may be) the ES Vendor will return

any excess ES Consideration received based on the ES Completion Accounts, within

ten (10) Business Days after the finalisation of the agreed ES Completion Accounts.

The ES Consideration was determined after arm’s length negotiations between

the ES Vendor and the Purchaser with reference to (i) the preliminary valuation of the

TKT Hotel as at 31 March 2014 by Asset Appraisal Limited, an independent property

valuer and the ES Net Current Assets of each member of the Eagle Spirit Group and

on the basis that the Eagle Spirit Group will have no material debts at ES Completion

other than the ES Sale Loan; and (ii) the indemnity given by the ES Vendor and the

Company in favour of the Purchaser against all tax liabilities that may arise from

the disposal of 60% equity interest in More Star pursuant to the Shaw Agreement

and other liabilities arising under the Shaw Agreement, as no provision against such

liabilities have been made for the purposes of determining the ES Consideration.

Our views

Section 4.2 below contains details of the past transaction in respect of the

sale of 60% interest in the TKT Hotel. The following summarizes the pricing

comparisons for the ES Consideration and this past transaction insofar as

implied value of the TKT Hotel vs. its market value are concerned:

TKT Hotel on a 100% basis

Implied valuation

under the

consideration vs.

Market value

determined by the

valuation report

Under the ES Consideration HK$1,281.5 million

(Note)

HK$1,285.0 million

Consideration as set out

in the Company’s circular dated

18 February 2014

HK$1,280.0 million HK$1,285.0 million

Note: Implied valuation is calculated based on “valuation of the TKT Hotel based on ES

Consideration” and the face value of the ES Note as set out in Table E below of

HK$512.60 million divided by 40% = HK$1,281.5 million


– 44 –

The implied valuation of the TKT Hotel under the ES Consideration

(assuming its face value) is thus very close to its market value as determined

by the valuation, which is also consistent with the aforesaid past transaction

involving the sale of 60% interest in the TKT Hotel. That said, the HK$250

million ES Note is valued at a discount and as such, the fair value of the ES

Consideration is thus less than its face value, details of which are set out in

Table E below.

Under the ES Consideration, Rosedale Kowloon, HK Macau and

Rosy Universe are also to be disposed of based on their net assets. We have

reviewed the unaudited management-prepared financial statements of each of

these subsidiaries of the Eagle Spirit Group and on the basis that their recent

historical profit and loss records were either insignificant, lack of a consistent

earnings record, or principal contracts that generated management fee income

are to be terminated, all of which would render a price-earnings multiple or

a cash flow multiple approach inappropriate, we concur with the Directors

of their basis to use the net asset values of such subsidiaries as consideration

under the ES Consideration.

2.1.3 Conditions precedent

Completion of the Eagle Spirit Agreement is conditional upon fulfillment or

waiver (as the case may be) of certain conditions precedent, details of which are set

out in the “Letter From The Board”. If any of these conditions is not fulfilled, remains

fulfilled or waived (as the case may be), the rights and obligations of the parties under

the Eagle Spirit Agreement shall lapse and be of no further effect.

Our views

The conditions precedent of the Eagle Spirit Agreement include, among

others, approval by the Independent Shareholders at the SGM; results of the

due diligence review and no material adverse change in the financial position of

the Eagle Spirit Group and each member of the More Star Group, we consider

such conditions precedent being fairly standard and they are therefore, fair and

reasonable.


– 45 –

2.2 The Makerston Agreement

The parties to the Makerston Agreement are as follows:–

(i) MS Vendor: Rosedale Hotel Group Limited, which is

beneficially owned as to approximately 89.4%

by the Company;

(ii) Purchaser: Silver Infinite Limited, a direct wholly-owned

subsidiary of ITCP;

(iii) MS Vendor’s guarantor: the Company; and


Background of the Purchaser and its relationship with ITCC are set out in the

paragraph headed “The Eagle Spirit Agreement” above.

2.2.1 Interests to be disposed of

The assets to be disposed of under the Makerston Agreement comprise the MS

Sale Share and the MS Sale Loan. The MS Sale Share represents the entire issued

share capital of Makerston as at the date of the Makerston Agreement and at the MS

Completion. The MS Sale Loan represents the aggregate amount owing by Makerston

to the MS Vendor as at the MS Completion Date. As at the Latest Practicable Date, the

MS Sale Loan amounted to approximately HK$207 million.

The principal asset of the Makerston Group is the holding of a 20% interest in

Rosedale Beijing which holds the Beijing Hotel. Following completion of the Capital

Increase Agreement on 29 November 2013, Makerston’s interest in Rosedale Beijing

was diluted from 100% to 20%.


– 46 –

2.2.2 MS Consideration

The MS Consideration is to be determined in accordance with the following

formula:

MS Consideration = HK$256 million

+ the MS Net Current Assets of Makerston

+ the MS Net Current Assets of DS Eastin

+ 20% of the MS Net Current Assets of Rosedale

Beijing

+ 20% of the amount of land premium paid by

Rosedale Beijing out of its cash on hand during

the period between the date of the Makerston

Agreement and the MS Completion Date,

subject to a maximum of HK$324 million, subject to any upward adjustment in

connection with the Compensated Amount as described under the paragraph headed

“Arrangement in respect of the Compensated Amount” below. The upward adjustment

for the land premium paid by Rosedale Beijing is to recognise the value of the cash

that is currently held by Rosedale Beijing (which would be counted towards the MS

Net Current Assets if not applied towards payment of land premium, as land premium

once paid is not considered as “current assets” of Rosedale Beijing).

As set out in the “Letter From The Board”, although the MS Net Current Assets

of the respective entity (as disclosed in the above formula) include intercompany

balances that should be eliminated on consolidation, the effect of the intercompany

balances would be eliminated upon summation of the MS Net Current Assets

of the abovementioned entities. Accordingly, the MS Consideration calculation

has taken into account the elimination of intercompany balances. Based on the

unaudited financial information of the Makerston Group as at 30 June 2014, the

MS Consideration is estimated to be approximately HK$302 million. Table E below

contains a breakdown of how this HK$302 million is arrived at.

The MS Consideration attributable to the MS Sale Loan is the face value of the

MS Sale Loan on a dollar-for-dollar basis, with the balance of the MS Consideration

being attributable to the MS Sale Share.


– 47 –

The MS Consideration is to be paid by the Purchaser to the MS Vendor upon the

MS Completion Date in the following manner:

(i) as to HK$250 million payable by way of the issue of the MS Note; and

(ii) as to the balance of the MS Consideration payable in cash.

At MS Completion, the MS Consideration will be determined based on draft

MS Completion Accounts prepared by the MS Vendor. The MS Vendor shall finalise

and agree the MS Completion Accounts with the Purchaser within two (2) months

after MS Completion Date. The Purchaser will make up any shortfall of the MS

Consideration paid to the MS Vendor, or (as the case may be) the MS Vendor will

return any excess MS Consideration paid based on the MS Completion Accounts,

within ten (10) Business Days after the finalisation of the agreed MS Completion

Accounts.

The MS Consideration was determined after arm’s length negotiations between

the MS Vendor and the Purchaser with reference to the preliminary valuation of

the Beijing Hotel as at 31 March 2014 by Asset Appraisal Limited, an independent

property valuer and the MS Net Current Assets of the Makerston Group and on the

basis that the Makerston Group will have no material debts at MS Completion other

than the MS Sale Loan.

Our views

Section 4.3 below contains details of the past transaction in respect of

the sale of 80% interest in the Beijing Hotel. The following summarizes the

pricing comparisons for the MS Consideration and the past transaction insofar

as implied value of the Beijing Hotel vs. its market value are concerned:

Beijing Hotel on a 100% basis

Implied valuation

under the

consideration vs.

Market value

determined by the

valuation report

Under the MS Consideration HK$1,280.0 million

(Note)

HK$1,300.0 million

Consideration as set out in the

Company’s circular dated

26 July 2013

RMB1,000.0 million

(approximately

HK$1,260.0 million)

HK$1,190.7 million

(approximately

RMB945.0 million)

Note: Implied valuation is calculated based on “valuation of the Beijing Hotel based on

MS Consideration” and the face value of the MS Note as set out in Table E below

of HK$256.00 million divided by 20% = HK$1,280.0 million


– 48 –

The implied valuation of the Beijing Hotel under the MS Consideration

(assuming its face value) is thus very close to its market value as determined by the

valuation, which is also consistent with the aforesaid past transaction involving the

sale of 80% interest in the Beijing Hotel. That said, the HK$250 million MS Note is

valued at a discount and as such, the fair value of the MS Consideration is thus less

than its face value, details of which are set out in Table E below.

2.2.3 Conditions precedent

MS Completion is conditional upon fulfillment or waiver (as the case may

be) of certain conditions precedent, details of which are set out in the “Letter From

The Board”. If any of these conditions is not fulfilled, remains fulfilled or waived

(as the case may be), the rights and obligations of the parties under the Eagle Spirit

Agreement shall lapse and be of no further effect.

Our views

The conditions precedent of the Makerston Agreement include, among

others, approval by the Independent Shareholders at the SGM; results of the due

diligence review and no material adverse change in the financial position of the

Makerston Group, we consider such conditions precedent being fairly standard

and they are therefore, fair and reasonable.

2.3 The ES Note and the MS Note

Both of the ES Note and the MS Note shall be unsecured, the principal terms of which

are set out in the “Letter From The Board”, a brief summary of which is as follows:

Issuer: ITCP

Noteholders: the ES Vendor for the ES Note and the MS Vendor for the

MS Note or their respective nominees

Principal amounts: HK$250 million for each of the ES Note and the MS Note

Interest: 5% per annum, payable semi-annually in arrears

Maturity: Second anniversary of the respective dates of the issue of

the ES Note and the MS Note, but ITCP may prepay all or

part of the outstanding principal amount (at the minimum

amount of HK$5,000,000) without any penalty.


– 49 –

Our views

Valuation of the TKT Hotel and the Beijing Hotel

The Company engaged Asset Appraisal Limited to assess the market values of

the properties of the TKT Hotel and the Beijing Hotel and to prepare the valuation

reports as set out in Appendix V to the Circular. In order to assess the property

valuations, we have performed work pursuant to Note 1(d) to Rule 13.80 of the Listing

Rules, including reviewing the terms of engagement of Asset Appraisal Limited, its

scope of work under the engagement, the valuation reports and discussing with Asset

Appraisal Limited on the methodologies adopted and bases and assumptions made in

arriving at such property valuations. For the findings and reasons set out below, we are

satisfied with the result of our review.

In our discussion with Asset Appraisal Limited about its experience in similar

property valuations, we have also assessed the experience and qualification of

Asset Appraisal Limited and are satisfied with such assessment. As set out in the

valuation reports, both the TKT Hotel and the Beijing Hotel have been valued by the

“comparison method” where comparison based on prices realized or market prices

of comparable properties is made. In the case of TKT Hotel, the valuation results

obtained from the comparison method have been cross-checked against the Income

Capitalization Approach. We have also reviewed the analysis involving investment

yield and the present value factors in so far as valuation of the TKT Hotel is

concerned.

We understand from Asset Appraisal Limited that the rationale for the

comparison method adopted for its valuation methodology is because such approach is

the most appropriate, when market prices of comparable properties are available. We

have discussed details of the TKT Hotel and the Beijing Hotel set out in the valuation

reports with Asset Appraisal Limited and the major assumptions thereof. We are

satisfied with such discussions with Asset Appraisal Limited.

In light of the above and based on our discussions with Asset Appraisal

Limited, we are of the view that the valuation methodology adopted and the major

assumptions thereof are consistent with market practice and are fair and reasonable.

We have also noted that in the valuation reports, Asset Appraisal Limited specifically

stated that it has complied with the requirements set out in Chapter 5 (and in the case

of the Beijing Hotel, Practice Note 12) of the Listing Rules and the HKIS Valuation

Standards (2012 Edition) by the Hong Kong Institute of Surveyors. Having considered

the aforesaid, we are of the view that the valuation reports provide a valid basis for the

Directors to assess the fairness and reasonableness of the market values of the TKT

Hotel and the Beijing Hotel.


– 50 –

Fair value of the ES Notes and the MS Notes

The Company has also engaged Asset Appraisal Limited to value the ES Notes

and the MS Notes and to assess their respective fair values for the purpose of the

Company’s preparation of the pro forma financial information set out in the Circular.

In order to assess such valuations and notwithstanding the report of such valuations

is not required to be set out in the Circular, we have performed work, to the extent

applicable, works similar to those mentioned above for the hotel property valuations

pursuant to Note 1(d) to Rule 13.80 of the Listing Rules, including reviewing the

terms of engagement of Asset Appraisal Limited, its scope of work under a separate

engagement letter, the valuation reports and discussing with Asset Appraisal Limited

on the methodologies adopted and bases and assumptions made in arriving at such

valuations. For the findings set out below, we are satisfied with the result of our

review.

We have discussed with Asset Appraisal Limited on the methodology adopted

and its bases and assumptions made in arriving at the fair values of the ES Notes

and the MS Notes. The methodology adopted involves a model which has taken into

account the credit profile of ITCP, the issuer of the ES Notes and the MS Notes,

the market yields of promissory notes issued by other issuers of similar credit

profile to that of ITCP and the resulting credit spread thereof. Having considered

the said methodology adopted and its bases and assumptions, we are of the view

that the valuations provide a valid basis for the Directors to assess the fairness and

reasonableness of the fair values of the ES Notes and the MS Notes.

Fair value is defined under Hong Kong Financial Reporting Standard 13 as the

price that would be received to sell an asset or paid to transfer a liability in an orderly

transaction between market participants at the valuation date. Both the ES Notes and

the MS Notes are unsecured promissory notes carrying an annual interest rate of 5%,

which when measured against market yields of promissory notes of similar credit

profile, is viewed by Asset Appraisal Limited as inadequate. The present value of

such difference in yields over the 2-year life span of each of the ES Notes and the MS

Notes produce the following fair values under the valuation:–

Face value: Fair value as determined by valuation

HK$250 million ES Notes HK$217.0 million

HK$250 million MS Notes HK$217.0 million

Given the fair values of the ES Notes and the MS Notes are valued at a

discount to their face values, the following is a discount analysis of each of the ES

Consideration and the MS Consideration.


– 51 –

Table E: Discounts as represented by the ES Consideration and the MS

Consideration based on fair values of the ES Notes and the MS

Notes

ES ConsiderationAs at

30 June 2014

ES Consideration based on

face value of the ES Note

ES Consideration based on

fair value of the ES Note

% of discount to the face

value of the ES Note

(HK$’ million) (HK$’ million) (HK$’ million)

Valuation of the TKT Hotel

(on a 40% basis) based on

the ES Consideration

512.60 Cash

ES Note

262.60

250.00

262.60

217.00

Sub-total 512.60 479.60 6.4%

Other non current assets of

the Eagle Spirit Group

(unaudited consolidated)

17.40 Assumed paid by

cash on a dollar-

for-dollar basis

17.40 17.40 Nil

Other “ES Net Current

Assets/(Liabilities)”*

(26.19) –Ditto– (26.19) (26.19) Nil

Total 503.81 503.81 470.81

MS ConsiderationAs at

30 June 2014

MS Consideration based on

face value of the MS Note

MS Consideration based on

fair value of the MS Note

% of discount to the face

value of the MS Note

(HK$’ million) (HK$’ million) (HK$’ million)

Valuation of the Beijing Hotel

(on a 20% basis) based on

the MS Consideration

256.00 Cash

MS Note

6.00

250.00

6.00

217.00

Sub-total 256.00 223.00 12.9%

Other “MS Net

Current Assets”**

45.76 Assumed paid by

cash on a dollar-

for-dollar basis

45.76 45.76 Nil

Total 301.76 301.76 268.76

* Note: Note (3)(a) to Pro Forma Financial Information under Scenario I on page IV-8 in

Appendix IV to the Circular

** Note: Note ( 4)(a) to Pro Forma Financial Information under Scenario II on page IV-16 in

Appendix IV to the Circular

Sources: Appendix IV to the Circular, note 3(a) to Scenario I and note 4(a) to Scenario II.


– 52 –

Discounts as represented by the ES Consideration and the MS Consideration

Our findings on the discounts to the face value of the ES Consideration and MS

Consideration as represented by the fair value of ES Notes and the MS Notes are:–

(i) The Directors did not envisage there would be a discount as represented

by the non cash component of the ES Consideration and MS

Consideration i.e. the payment-in-kind as represented by each of the ES

Notes and the MS Notes.

(ii) As set out in sections 4.2 and 4.3 below, the recent disposal of 60%

of the TKT Hotel and 80% of the Beijing Hotel involved majority and

control stakes, whose values were in line with market values determined

by independent valuation reports. It is therefore reasonable to expect

the proposed disposal of the Group’s remaining minority interests in the

TKT Hotel and the Beijing Hotel under the Transactions to command

a price at a discount to their respective control stake values achieved

earlier. The question is now much “discount” would be reasonable and

in this regard, we referred to findings set out in the book “Valuing A

Business, The Analysis and Appraisal of Closely Held Companies,

5th Edition, by Shannon P. Pratt and Alina V. Niculita”. Chapter 15 of

this book concludes that a discount of up to 20% for minority interest

discount is considered reasonable. It should be noted that both the 6.4%

and 12.9% discounts as set out in Table E above are within this 20%

range. It can also be rationalized that, although unintentional, the smaller

discount of 6.4% represents a larger minority stake of 40%, when viewed

against the larger discount of 12.9% for a smaller minority stake of 20%.

Based on the above analysis, we are of the view that the discounts to the face

value of the ES Consideration and MS Consideration as represented by the fair value

of ES Notes and the MS Notes are fair and reasonable.


– 53 –

3. Reasons for and Benefits of the Transactions

The following is a summary of the section headed “Reasons For And Benefits Of The

Transactions” as set out in the “Letter From The Board”:–

• As disclosed in the Company’s interim report for the six months ended 30 June 2013,

the slower pace of economic growth of the PRC and signs of the retreat of hot money

from Asia give a hard time to the Group’s hotel operations, the performance of which

depends heavily on the ups and downs of the world economic atmosphere. Facing this

situation, the Group intended to continue to enhance its hotel chain and to explore

further income streams so as to stay ahead of its competitors and to maximise value

for the Shareholders; and

• The Directors are of the view that the Transactions allow the Group to realise its

minority stakes in the TKT Hotel and the Beijing Hotel. The proceeds arising from the

Transactions would provide the necessary financial resources for the Group to repay

its borrowings when they fall due so as to strengthen its financial position, enhance

the Group’s capability to capture any future investment opportunities, and focus its

resources on other hotels of the Remaining Group.

Apart from the aforesaid reasons and benefits, the Directors has also taken into account the

hotels being under management of the Remaining Group and the financial effect of each of the

ES Completion and the MS Completion as set out in the “Letter From The Board”, the Directors

consider that the Remaining Group has a sufficient level of operations and tangible assets of

sufficient value to warrant its continued listing of the Shares on the Stock Exchange as required

under Rule 13.24 of the Listing Rules. In addition, given that the Remaining Group has identified

specific use of the net proceeds from the Transactions, the Directors consider that the Remaining

Group would not become a cash company upon ES Completion and MS Completion.

Having considered the above, the Directors are of the view that the terms of the Eagle Spirit

Agreement and the Makerston Agreement are fair and reasonable and the Transactions are in the

interests of the Company and the Shareholders as a whole.

Our views

Having considered the findings of the hotel industry in Hong Kong and Beijing in the

section headed “Hotel Industry Overview” below, we concur with the Directors of their view

on the slower pace of economic growth of the PRC and signs of possible retreat of hot money

from Asia are supported by recent press reports and statistical data for both Hong Kong and

Beijing, details of which are set out in section 6 below.


– 54 –

We have also noted the disposal of the 60% of the TKT Hotel and the deemed disposal

of the 80% interest in the Beijing Hotel set out in section 4 below, the Transactions would

allow the Group to realise its residual minority interests in each of the TKT Hotel and the

Beijing Hotel, and based on the fair value of the ES Note and MS Note, at a price slightly at

a discount to each of the considerations for the majority stakes disposed earlier.

As the net proceeds from the transactions contemplated under the Eagle Spirit

Agreement and the Makerston Agreement are estimated to be approximately HK$502 million

and HK$300 million respectively, the Group intends to apply the net proceeds from the

Transactions as to approximately (i) HK$250 million for repayment of other borrowings;

(ii) HK$66 million for payment of the special dividend, details of which were disclosed in

the announcement of the Company dated 12 May 2014 (please note section 4.4 below); and

(iii) the remaining balance for future investment opportunities of the Group as and when

appropriate, we also concur with the Directors about their reasons and benefits in so far

as additional financial resources for the Group to repay its borrowings so as to strengthen

its financial position and to enhance the Group’s capability to capture future investment

opportunities are concerned. In this regard, your attention is also drawn to the “Letter From

The Board” which discloses that the Company has been in discussions with an independent

third party in relation to the possible acquisition of equity interest in a company engaging in

hotel-related business in the PRC.

Finally, Independent Shareholders should also note that as set out in the

announcements of ITCC and Hanny both dated 9 May 2014, completion of the Rosedale

Share Agreement (details were set out in the said announcements) is conditional on the ES

Completion and the MS Completion. In the said announcement released by Hanny, it was

disclosed that (i) the completion of the Rosedale Share Agreement will enable Hanny, its

subsidiaries and associated companies to hold approximately 29.98% of the issued share

capital of the Company; and (ii) citing proceeds from the Transactions would strengthen the

Remaining Group’s financial position, completion of the Rosedale Share Agreement is thus

made conditional on, among other things, the ES Completion and the MS Completion (or the

wavier of such condition by Hanny).

For the avoidance of doubt, completion of the Transactions is not conditional on

completion of the Rosedale Share Agreement and as set out in the “Letter From The Board”.

For further details, please refer to the announcement issued by Hanny dated 9 May 2014.


– 55 –

4. Relevant past transactions announced by the Company

We have also reviewed the following past transactions announced by the Company for the

purpose of our independent advice as set out herein.

4.1 Proposed disposal of the TKT Hotel which was lapsed

On 13 February 2012, the Company announced a proposed sale of the TKT Hotel in

the form of a disposal of all the then equity interest in and shareholders’ loan from More Star

for a total consideration of approximately HK$1,317.7 million, which was arrived at based

on an agreed value of HK$1,314.6 million for the 100% of the TKT Hotel and an estimated

value of HK$3.1 for the net asset value of the disposal group less the consideration for

the sale loan. This consideration was arrived at, among other things, with reference to the

preliminary valuation of the TKT Hotel in its existing state of HK$1,100 million.

The purchaser, which was an independent third party, was a company incorporated

in Singapore. The completion of this proposed disposal was subject to, among other things,

the successful completion of the initial public offering of units in a real estate investment

trust (“REIT”), the listing of which would have been on the Singapore Exchange Securities

Trading Limited. 5% of the consideration would have been paid in the form of these REIT

units and the remaining 95% payment would have been in cash. This condition on listing

could not become unconditional and the lapsed disposal was announced by the Company on

29 June 2012.

Our views

Whilst the abovementioned lapsed disposal of 100% of the TKT Hotel might

have been priced at a 19.5% premium to valuation, we note that such disposal was

intended to be part of a listing of a REIT in Singapore and had it proceeded, 5% of

the consideration would have been paid in the relevant REIT units. At the end, the

listing did not proceed and as a result, the proposed disposal lapsed. We therefore

take the view that the intended pricing of this lapsed disposal is not relevant to our

consideration of the pricing under the ES Consideration.


– 56 –

4.2 Disposal of 60% the TKT Hotel

The disposal of the 60% of the TKT Hotel was in the form of the disposal of 60%

equity interest in, and corresponding shareholders’ loan due by, More Star to Shaw, an

independent third party purchaser, details of which were disclosed in the circular of the

Company dated 18 February 2014. Consideration for this disposal was based on HK$768

million plus 60% of the net asset value of the disposal Group (consisted of More Star and

the Property Company), subject to adjustment to such net asset value. This consideration

suggested approximately HK$1,280.0 million was the agreed value attributable to 100%

of the TKT Hotel, viewed against the valuation report on the TKT Hotel which indicated a

market value of HK$1,285.0 million then. This disposal was completed on 14 March 2014.

Our views

The consideration for the disposal of the 60% of the TKT Hotel was in line with

the value determined by a valuation report. The consideration for the disposal group

consisted of More Star and the Property Company was on a net current assets value

basis. These are therefore, comparable to the underlying pricing rationale of the ES

Consideration.

4.3 Deemed disposal of interest in the Beijing Hotel

On 31 May 2013, DS Eastin, the Investor, Rosedale Beijing and the Company entered

into the Capital Increase Agreement, pursuant to which the Investor agreed to procure the

capital contribution of US$68.8 million (representing approximately HK$533.2 million) in

cash for the increase in the registered capital of Rosedale Beijing. Upon completion of the

capital increase under the Capital Increase Agreement which took place on 29 November

2013, Rosedale Beijing has become a sino-foreign joint venture company with a registered

capital of US$86 million (representing approximately HK$666.5 million) held as to 80% by

a subsidiary of the Investor and 20% by DS Eastin (or 17.7%, in so far as the Company’s

indirect effect equity interest is concerned). The Investor is an independent third party.

Details of this deemed disposal were disclosed in the circular of the Company dated 26 July

2013 (“Beijing Hotel Circular”).

We have sought confirmation from the management of the Company and we are given

to understand that under the Compensated Amount set out in the Beijing Hotel Circular, the

agreed value attributable to the Beijing Hotel was then RMB1,000 million (hence RMB800

million less the adjustments set out on page 9 of the Beijing Hotel Circular). The valuation

report on the Beijing Hotel as disclosed in the Beijing Hotel Circular indicated a market

value of HK$1,190.7 million (approximately RMB945.0 million) then.


– 57 –

Our views

The consideration for the deemed disposal of 80% of the Beijing Hotel was in

line with the value determined by a valuation report. This is therefore, comparable to

the underlying pricing rationale of the MS Consideration.

4.4 Declaration of Special Dividend

The Company announced on 12 May 2014 that the Board has resolved to declare a

special dividend of HK$0.10 per Share subject to either ES Completion or MS Completion

(“Special Dividend”). Based on 657,675,872 Shares in issue as at the date of the said

announcement, the Special Dividend in aggregate would amount to approximately HK$66

million. The record date of the Special Dividend will be determined and announced by the

Company at a later date.

Our views

The Company changed its name to its current name in April 2010 and

announced that such name change was to more accurately reflect the principal

activities and to highlight the business focus of the Group. Following such name

change, the Company had declared an interim special dividend of HK$0.10 per Share

in its 2010 interim results announcement dated 27 August 2010. Subsequently, the

Company did not declare any dividend until on 12 May 2014, when the directors of

the Company declared the Special Dividend.

The Special Dividend will give all Shareholders an equal opportunity to

participate in such distribution and will allow those Shareholders the flexibility to

either reinvest their cash dividends in other investments or treat such dividends as

partial return for their investments in the Company. Therefore, we are of the view that

the Special Dividend is in the interests of the Independent Shareholders.

5. Share price performance of the shares vs. comparables

As the ES Consideration and the MS Consideration are determined based on net asset

value and adjustment to such net assets as a result of both the property and promissory notes

valuations, we take the view that a price-to-book discount as represented by the net assets of the

hotel properties and the fair value of each of the ES Note and MS Note is the underlying pricing

rationale for the Transactions. The 6.4% discount and 12.9% discount based on the fair value of the

ES Note and MS Note respectively as set out in Table E above would therefore represent a price-


– 58 –

to-book discount of respectively, 0.936 time (i.e. 1–0.064) and 0.871 time (i.e. 1–0.129). On this

basis, we have reviewed the share price performance of the Shares so as to analyse how the market

values the Shares and ultimately, the underlying net assets of the Group. We noted that the market

price as commanded by the Shares was consistently at a discount to the Group’s net book value.

On this issue, set out below is a chart which summarizes the historical price-to-book discount as

commanded by the Shares.

Chart I A general overview of the historical price/book discount as commanded by

the Shares since August 2010 (closing price per Share to reported net asset

value of the Group) vs. the price/book discounts of the Transactions

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00

1.10

1.20

1.30

31

-Mar

-14

28

-Feb

-14

30

-Jan

-14

31

-Dec

-13

29

-Nov

-13

31

-Oct

-13

30

-Sep

-13

30

-Au

g-1

33

1-J

ul-

13

28

-Ju

n-1

33

1-M

ay-1

33

0-A

pr-

13

28

-Mar

-13

28

-Feb

-13

31

-Jan

-13

31

-Dec

-12

30

-Nov

-12

31

-Oct

-12

28

-Sep

-12

31

-Au

g-1

2

31

-Ju

l-1

22

9-J

un

-12

31

-May

-12

30

-Ap

r-1

23

0-M

ar-1

2

29

-Feb

-12

31

-Jan

-12

30

-Dec

-11

31

-Oct

-11

30

-Sep

-11

31

-Au

g-1

1

29

-Ju

l-1

13

0-J

un

-11

31

-May

-11

29

-Ap

r-1

13

1-M

ar-1

1

28

-Feb

-11

31

-Jan

-11

31

-Dec

-10

30

-Nov

-10

31

-Oct

-10

30

-Sep

-10

30

-Au

g-1

0

30

-Nov

-11

P/B 0.936 as represented by the ES Consideration based on the fair value of the ES Note

Tim

es

P/B 0.871 as represented by the MS Consideration based on the fair value of the MS Note

30 August 2010, the next trading date

following the first interim results

were published and after

the change of Company’s name

11 April 2014 the last trading date

preceding the announced of the Transactions

Source: Annual and interim reports of the Company

The above chart tracks the performance of the Shares since 30 August 2010, the next trading

date following the publication of the interim results of the Group for the six-month ended 30 June

2010 on 27 August 2010, being the first results announcement under the Company’s current name.

The Company changed its name to its current name in April 2010 and announced that such name

change was to more accurately reflect the principal activities and to highlight the business focus of

the Group. Based on the above chart, the Share price has been trading at a discount to the Group’s

book value since August 2010. When viewed against such Share price performance, the implied

price-to-book discounts of 0.936 and 0.871 time as represented by the ES Consideration and the MS

Consideration respectively are in our view, fair and reasonable, as such discounts are substantially

less than that commanded by the Share price as set out in the above chart.


– 59 –

Following the above comparison, we are of the opinion that it is also important to extent such

comparison to other market comparables of the Company to provide a general overview of a sector-

based share price performance. Set out below are price-to-book multiples of issuers whose shares

are listed on the Stock Exchange and whose hotel business is reasonably comparable to that of the

Company. Our selection criteria is that these comparables (i) have over 75% of its turnover in hotel-

related operations in one of the two most recent annual results announced prior to 11 April 2014,

the date the Agreements were entered into; and (ii) given the size of the market capitalization of the

Company, have market capitalisation of less than HK$1 billion. We are of the view that any issuer

whose market capitalization is HK$1 billion or larger may be less comparable to the Company.

Based on such criteria, we consider the list of the comparables as set out in the table below

exhaustive. Due to the nature of this kind of comparison, which varies from issuers’ sizes, lines of

business, markets, levels of leverage, unlisted vs. listed assets etc., the comparison result should

only be considered in conjunction with other findings as set out herein.

Table F: Price-to-book comparable analysis of other issuers whose principal

business is in hotel operations

Company Name Stock Code

Market cap. based on

closing share price on

11 April 2014

Price-to-book based on

closing share price on,

and published annual or

interim results/ reports prior to,

11 April 2014(HK$’ million)

Capital Estate Limited 193 602 0.79

City e-Solutions Limited 557 417 0.73

Far East Hotels and

Entertainment Limited 37 114 0.34

Mexan Limited 22 334 0.97

Shun Cheong Holdings Limited 650 215 1.09

Shun Ho Resources Holdings Limited 253 487 0.21

Shun Ho Technology Holdings Limited 219 849 0.21

Minimum 0.21Maximum 1.09

Average 0.62

The Company 1189 388 0.20

Source: Stock Exchange’s website


– 60 –

Based on the above table, the average price-to-book multiples of the comparable companies

is at a discount of 0.62 time and their minimum and maximum price-to-book multiples range from

0.21 time to 1.09 times, the implied price-to-book discounts of 0.936 and 0.871 time as represented

by the ES Consideration and the MS Consideration respectively are in our view, fair and reasonable,

as such discounts are substantially less than that commanded by most of these market comparables.

6. Hotel Industry Overview

Hong Kong

In a report in the Property section of the South China Morning Post titled “Hotels

Hit By Fall In Visitors From Mainland” published on 14 May 2014, it was reported that

(i) according to Immigration Department figures, the number of mainland tourists coming

to Hong Kong dropped 1.5% year-on-year during the Labour Day holiday; and (ii) it was

the first time those visitors decreased during the holiday since the introduction in 2003 of

the individual traveler scheme, which allows mainland tourists to visit Hong Kong without

joining tour groups. While overnight visitor arrivals grew by 8% to 25.66 million last year,

according to Hong Kong Tourism Board, the arrivals from other short-haul and long-haul

markets reportedly dipped 0.5% and 3.4% respectively. The fall in mainland tourists was

reported to be attributable to a combination of reasons including credit squeeze in the PRC,

the RMB depreciation against HK$, the anti-corruption campaign in the PRC and the recent

protests in Hong Kong against mainland tourists. The decrease in mainland tourists is said to

pose a challenge to the hotel industry in Hong Kong.

In another report on the front page of the South China Morning Post titled “Drop

In Retail Sales Biggest In Five Years” on 4 June 2014. Citing source from the Census and

Statistics Department, it was reported that the volume of Hong Kong’s retail sales in April

2014 dropped by 9.5% over a year earlier. This drop was reportedly to be the sharpest in five

years since February 2009, according to the Financial Secretary Mr. John Tsang Shun-wah.

Such poor performance was also reportedly, attributable to the slow down in growth rate in

mainland visitors to Hong Kong from 26.7% in March 2014 to 14.7% in April 2014.

The TKT Hotel is classified by the Hong Kong Tourism Board as a “Medium Tariff

Hotel” out of a total of four ratings. Against such classification, the following charts are

produced and these charts are with respect to all hotels in Hong Kong in general and hotels

classified under “Medium Tariff Hotel” category in particular.


– 61 –

Chart II Number of hotel rooms supply since 2009 based on all the hotels and

those classified under “Medium Tariff Hotels” in Hong Kong

59,627

17,342 17,591 17,07219,566 20,048 20,812 20,854 21,429 21,234 21,234 21,234 21,396 21,482

60,42862,830

67,39470,017 70,083 70,630 70,630 70,786 70,814 71,066 71,304 71,887

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

2009

2010

2011

2012

2013

All Hotels

No.

of

Roo

ms

Jan

2014

Feb 2

014

Mar

201

4

Apr

201

4

May

201

4

Jun

2014

Jul 2

014

Aug

201

4

Medium Tariff Hotels

Source: Insight & Research, Hong Kong Tourism Board

Based on the above chart, total number of hotel rooms of all the hotels in Hong Kong

has been growing since 2009 over the last 5 years period, at 70,017 hotel rooms by the end

of 2013. In comparison, total number of hotel rooms of the “Medium Tariff Hotels” category

saw a small decline in 2011 but has since resumed steady growth to 20,048 hotel rooms by

the end of 2013. For the first eight months in 2014, the number of hotel rooms appears to

be relatively stable for either all hotels or those classified under “Medium Tariff Hotels”

category.


– 62 –

Chart III Hotel room occupancy rate and average room rate of the hotels

under the “Medium Tariff Hotels” category in Hong Kong

2009

2010

2011

2012

2013

Hotel Room Occupancy Rate (%)

Jan

2014

Feb 2

014

Mar

201

4

Apr

201

4

May

201

4

Jun

2014

Jul 2

014

Aug

201

4

Average Achieved Hotel Rate (HK$)

70%

75%

80%

85%

90%

95%

100%

HK$0

HK$100

HK$200

HK$300

HK$400

HK$500

HK$600

HK$700

HK$800

HK$900

80%

HK$481

HK$585

HK$710

HK$781 HK$758HK$745 HK$750

HK$757HK$786

HK$724

HK$676

HK$751

HK$790

90%

93%

92%91%

89%

92%95%

92%

88%91%

95% 96%(%

)O

ccup

ancy

Rat

e

Source: Insight & Research, Hong Kong Tourism Board

Based on the above chart, hotel room occupancy rate of hotels under the “Medium

Tariff Hotels” category had been steadily increasing between 2009 and 2011 to 93% in 2011

but such growth had since been replaced with a small decline trend for the years 2012 and

2013 to 92% and 91% respectively. Average room rate also had also been steadily increasing

until 2013, which saw a small decline on a year-on-year basis in 2013. Trends for the first

eight months in 2014 are for reference only, as fluctuations in occupancy rate and average

achieved room rate on a month-to-month basis are too short to be conclusive as a trend.


– 63 –

Beijing

Beijing in general is considered one of the more sought after attractions in the PRC for

both domestic and international tourists and business visitors, given its political, economic

and cultural centre status. Beijing is also viewed as a strong conference market and ranks

as one of the more sought after destinations for “Meetings, Incentives, Conventions and

Exhibitions”. That said, the average room rate and average room occupancy trends for 4-star

hotels in Beijing have been, respectively, flat and declined slightly over the last two years of

2012 to 2013. This was reportedly, attributable to the scaling back of international visitors,

due to a range of reasons, including RMB appreciation, Beijing’s smog issue and European

debt crisis. Although domestic tourists appear to offset some of the decline in international

tourist numbers. Charts IV and V below are to summarise the 4-star hotel industry in which

the Beijing Hotel operates.

Chart IV Average room rate and average room occupancy rate in respect of

4-star hotels in Beijing

400

420

440

460

480

500

520

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

439.9 440.8

472.6

500.3 500.3502.5

496.3

468

506.4

482.7484.6

467.8 467.9

51.20%

59.10%

63.10% 62.60% 61.00%

47.80%

40.80%

57.50%60.20%

58.70% 57.70%

65.80% 66.70%

2009

2010

2011

2012

2013

Average Room Rate

(RMB/Room) (4-Star Hotels)

Jan

2014

Feb 2

014

Mar

201

4

Apr

201

4

May

201

4

Jun

2014

Jul 2

014

Aug

201

4

Average Room Occupancy (%)

(4-Star Hotels)

RM

B

Source: Beijing Municipal Bureau of Statistics

The above chart shows average room rate of 4-star hotels in Beijing had a sharp

increase from 2010 to 2012 but remained flat at RMB500.3 for 2012 and 2013. Average room

occupancy rate also peaked in 2011 and then leveled off with a small decline after 2011

to 61% in 2013. The monthly statistics on average room rate and room occupancy rate for

January to August 2014 are for reference only as the month-to-month trends fluctuated up

and down but are too short to be conclusive as a trend.


– 64 –

Chart V Hotels’ revenue in aggregate in respect of 4-star hotels in Beijing

100,000

200,000

300,000

400,000

500,000

600,000

700,000

1,000,000

700,986

780,070

849,921

933,198891,167

800,000

900,000

63,665 45,60966,413 68,763 68,613 65,839 69,611 72,123

0

2009

2010

2011

2012

2013

RM

B (

in m

illio

n)

Jan

2014

Feb 2

014

Mar

201

4

Apr

201

4

May

201

4

Jun

2014

Jul 2

014

Aug

201

4

Source: Beijing Municipal Bureau of Statistics

From the above chart, revenue for 4-star hotels in Beijing peaked in 2012 and declined

in 2013. For the first eight months ended 31 August 2014, apart from a small drop in revenue

for the month of February 2014, revenues appear to have been stable with relatively flat

growth rate.

Our views

The above Charts on Hong Kong’s and Beijing’s hotel industries in which the

TKT Hotel and Beijing Hotel respectively operates in do support the Board’s view on the

slower pace of economic growth in the PRC which has had an impact on the Group’s hotel

operations in general. Such impact would appear to be more visible in (i) Chart III, in so far

as the room occupancy rate of the “Medium Tariff Hotels” is concerned, which has a steady

but mild decline since 2011; and (ii) Chart V, as 4-star hotels’ revenue has declined from the

peak of 2012, on a year-on-year basis. Taken as a whole, we are of the opinion that these

trends generally support the economic reasons cited by the Board for the Transactions.


– 65 –

7. Financial effects of the Transactions

7.1 Disposal of the Eagle Spirit Group

Assuming the disposal of the Eagle Spirit Group had been completed on 30 June 2014,

the Group would recognise a loss of approximately HK$14.2 million which is calculated as

follows:–

HK$’ million

Pro forma total fair value of the ES Consideration 470.8

Less: Estimated costs directly attributable to the disposal of

the ES Sale Share and the ES Sale Loan (2.0)

468.8

Less: Carrying amount of the net assets of the Eagle Spirit Group (446.4)

Less: Carrying amount of the ES Sale Loan (36.6)

Pro forma loss on

the disposal (14.2)

Source: Note (3) to the Pro Forma Financial Information under Scenario I in Appendix IV to the Circular

The loss of approximately HK$14.2 million as set out above is due to the fair value

of the ES Note being valued at HK$217 million, which is less than its face value of HK$250

million.


– 66 –

7.1.1 Pro forma financial effects of the disposal of the Eagle Spirit Group

Based on the unaudited pro forma financial information of the Remaining

Group as set out in Appendix IV to the Circular, and assuming the disposal of the

Eagle Spirit Group had been completed on 30 June 2014 or on 1 January 2013, as

the case may be, the pro forma financial effects on the Group would have been as

follows:–

Table G: A summary of pro forma financial effects of the disposal of the

Eagle Spirit Group (HK$’ million)

Pro forma effects on Before the disposal

After the disposal

Pro forma financial effects

Total assets HK$3,084.2 HK$3,050.8 Decreased by

HK$33.4

or 1.1%

Total liabilities HK$479.4 HK$460.2 Decreased by

HK$19.2

or 4.0%

Net assets (attributable

to Shareholders)

HK$2,369.2 HK$2,355.0 Decreased by

HK$14.2

or 0.6%

Earnings (attributable

to Shareholders)

HK$382.0 HK$ 364. 1 Decreased by

HK$ 17. 9

or 4. 7%

Cash flow (Cash and

cash equivalents

at year end)

HK$427.3 HK$568.0 Increased by

HK$140.7

or 32.9%

Source: Appendix IV to the Circular under Scenario I


– 67 –

Our views

Possible effects on assets

Based on the unaudited condensed consolidated statement of financial

position of the Group as at 30 June 2014 and assuming the disposal of the Eagle

Spirit Group had been completed on 30 June 2014, the total assets and net

assets of the Group would have been decreased by HK$33.4 million (or 1.1%)

and HK$14.2 million (or 0.6%) from approximately HK$3,084.2 million and

HK$2,369.2 million to approximately HK$3,050.8 million and HK$2,355.0

million respectively as set out in Table G above. Given the size of the Group’s

total assets and net assets as at 30 June 2014, such decreases are relatively

immaterial and are mainly due to the pro forma loss arising from the disposal of

the Eagle Spirit Group as set out above.

Possible effects on earnings

Based on the audited consolidated statement of profit or loss and other

comprehensive income of the Group for the year ended 31 December 2013

and assuming the disposal of the Eagle Spirit Group had been completed

on 1 January 2013, the Group’s results would have been decreased by

approximately HK$ 17. 9 million from the net profit attributable to Shareholders

of approximately HK$382.0 million for the year ended 31 December 2013 to

approximately HK$ 364. 1 million. This improvement is the result of a number

of pro forma adjustments, details of which are set out in Notes 4-7 on page

IV-9 in Appendix IV to the Circular. In particular, under the said Note 7, the

relevant pro forma adjustment represents the recognition of the pro forma loss

arising from the disposal of the Eagle Spirit Group as if such disposal were

completed and the Group’s control over the Eagle Spirit Group were lost on 1

January 2013. In considering the Eagle Spirit Group only holding 40% interest

in More Star in the transaction of the disposal of the Eagle Spirit Group, it is

not meaningful to calculate a pro forma gain or loss based on the assets and

liabilities of the Eagle Spirit Group as at 1 January 2013 since the Eagle Spirit

Group held 100% interest in More Star as at 1 January 2013. Therefore, for the

purposes of the pro forma consolidated statement of profit or loss and other

comprehensive income (and pro forma consolidated statement of cash flows),

it is more representative to assume that the pro forma loss on such disposal is

equal to HK$14,2 million as calculated on the same basis as set out in section

7.1 above. Such decrease is in our view, immaterial.


– 68 –

Possible effects on cash flows

Based on the audited consolidated statement of cash flows of the Group

for the year ended 31 December 2013 and assuming the disposal of the Eagle

Spirit Group had been completed on 1 January 2013, the Group’s cash flow

would have been improved by approximately $140.7 million or 32.9% from

HK$427.3 million cash and cash equivalents for the year ended 31 December

2013 to approximately HK$568.0 million. This improvement is mainly

because of the net cash inflow of the cash proceeds from the disposal. Such

improvement is a positive effect.

7.2 Proposed disposal of the Makerston Group

Assuming the disposal of the Makerston Group had been completed on 30 June 2014,

the Group would recognise a gain attributable to Shareholders of approximately HK$2.9

million which is calculated as follows:–

HK$’ million

Pro forma total fair value of the MS Consideration 268.7

Estimated costs directly attributable to the disposal of

the MS Sale Share and the MS Sale Loan (2.0)

266.7

Less: Carrying amount of the net assets of the Makerston Group (645.0)

Add: Compensated Amount recoverable from the Purchaser 666.0

Less: Carrying amount of the MS Sale Loan (217.7)

Less: Tax indemnity payable undertaken by the Remaining Group (66.8)

Pro forma gain on the disposal (3.2)

Pro forma gain on the disposal attributable to Shareholders (2.9)

Source: Note (4) to the Pro Forma Financial Information under Scenario II in Appendix IV to the Circular

The gain of approximately HK$3.2 million only as set out above is due to the fair

value of the MS Note being valued at HK$217 million, which is less than its face value of

HK$250 million.


– 69 –

7.2.1 Pro forma financial effects of the disposal of the Makerston Group

Based on the unaudited pro forma financial information of the Remaining

Group as set out in Appendix IV to the Circular, and assuming the disposal of the

Makerston Group had been completed on 30 June 2014 or on 1 January 2013, as

the case may be, the pro forma financial effects on the Group would have been as

follows:–

Table H: A summary of pro forma financial effects of the disposal of the

Makerston Group (HK$’ million)

Pro forma effects on Before the disposal

After the disposal

Pro forma financial effects

Total assets HK$3,084.2 HK$3,087.4 Increased by

HK$3.2

or 0.1%

Total liabilities HK$479.4 HK$479.4 Unchanged due

to rounding

(small change

if no rounding)

Net assets (attributable

to Shareholders)

HK$2,369.2 HK$2,372.1 Increased by

HK$2.9

or 0.1%

Earnings/(Loss) (attributable

to Shareholders)

HK$382.0 (HK$ 227. 7) Decreased by

HK$ 609. 7

or 159. 6%

Cash flow (Cash and cash

equivalents at year end)

HK$427.3 HK$456.0 Increased by

HK$28.7

or 6.7%

Source: Appendix IV to the Circular under Scenario II


– 70 –

Our views

Possible effects on assets

Based on the unaudited condensed consolidated statement of financial

position of the Group as at 30 June 2014 and assuming the disposal of the

Makerston Group had been completed on 30 June 2014, the total assets and

net assets of the Group would have been increased by HK$3.2 million or 0.1%

and HK$2.9 million or 0.1% from approximately HK$3,084.2 million and

HK$2,369.2 million to approximately HK$3,087.4 million and HK$2,372.1

million respectively as set out in Table H above. Given the size of the Group’s

total assets and net assets as at 30 June 2014, such increases are relatively

immaterial.

Possible effects on earnings

Based on the audited consolidated statement of profit or loss and other

comprehensive income of the Group for the year ended 31 December 2013

and assuming the disposal of the Makerston Group had been completed on 1

January 2013, the Group’s results would have been decreased by approximately

HK$ 609. 7 million or 159. 6% from the net profit attributable to Shareholders

of approximately HK$382.0 million for the year ended 31 December 2013 to a

loss of approximately HK$ 227. 7 million. This “loss” is due to the adjustments

to the one-off “gain on deemed disposal of Rosedale Beijing” of HK$781.8

million (HK$656.2 million + HK$125.6 million as set out below), which turn

such account to nil, as follows:–

(i) adjustment represents the deconsolidation of the results

attributable to the Makerston Group and in particular, the

aforesaid one-off “gain on deemed disposal of Rosedale Beijing”

(amounted to HK$656.2 million), from the audited consolidated

statement profit or loss and other comprehensive income of the

Group for the year ended 31 December 2013 as if the proposed

disposal had taken place on 1 January 2013; and

(ii) adjustment represents the HK$:RMB exchange difference

arising from the accumulated translation difference (amounted to

HK$125.6 million) arising from Rosedale Beijing .


– 71 –

For further details of the above adjustments, please refer to notes (5) ,

(7) and (10) on page IV-18 in Appendix IV to the Circular. In particular, under

the said note 10, the relevant pro forma adjustment represents the recognition

of the pro forma gain arising from the disposal as if the Makerston Group

were completed and the Group’s control over the Makerston Group were lost

on 1 January 2013. In considering the Makerston Group only holding 20%

interest in Rosedale Beijing in the transaction of the disposal of the Makerston

Group, it is not meaningful to calculate a pro forma gain or loss based on the

assets and liabilities of the Makerston Group as at 1 January 2013 since the

Makerston Group held 100% interest in Rosedale Beijing as at 1 January 2013.

Therefore, for the purposes of the pro forma consolidated statement of profit

or loss (and other comprehensive income and pro forma consolidated statement

of cash flows), it is more representative to assume that the pro forma gain on

such disposal is equal to the HK$3.2 million as calculated on the same basis as

set out in section 7.2 above. Given the “gain on deemed disposal of Rosedale

Beijing” was only an one-off accounting gain attributable to the results of the

Makerston Group, the pro forma adjustments thereof are one-off in nature

and are not expected to have a continuing effect on the Remaining Group. We

therefore do not consider this effect relevant to our analysis.

Possible effects on cash flows

Based on the audited consolidated statement of cash flows of the

Group for the year ended 31 December 2013 and assuming the disposal of

the Makerston Group had been completed on 1 January 2013, the Group’s

cash flow would have been improved by approximately HK$28.7 million or

6.7% from HK$427.3 million cash and cash equivalents for the year ended

31 December 2013 to approximately HK$456.0 million. This improvement is

mainly because of the net cash inflow of the cash proceeds from the disposal.

Such improvement is a positive effect.

Shareholders should note that (i) the actual gain or loss from the

Transactions to be recorded by the Company will depend on the financial

position of the Eagle Spirit Group and the Makerston Group as at the ES

Completion Date and the MS Completion Date respectively; and (ii) the

purpose of the abovementioned pro forma financial information is solely to

illustrate the impact of a significant event or transaction on unadjusted financial

information of the Group as if the event had occurred or the transaction had

been undertaken and accordingly, there is no assurance that the actual outcome

of the event or transaction would have been as presented.


– 72 –

The disposal of the Eagle Spirit Group and the Makerston Group will

result in the Group recognising a loss and an insignificant gain respectively.

Had the fair value of each of the ES Notes and the MS Notes been valued at

par to their face value, the proposed disposal of the Eagle Spirit Group and the

Makerston Group would have been resulted in a gain and a more significant

gain from disposal respectively.

We are therefore of the opinion that the pro forma financial effects on

the Group as set out in the sections above are either for illustrative purpose,

inconclusive or are relatively immaterial.

8. Financial and Trading Prospects of the Group

Your attention is also drawn to the section headed “Financial And Trading Prospects Of The

Group” in the “Letter From The Board”, in particular, Group intends to repay other borrowing

out of the net proceeds from the Transactions and in so doing, lower the gearing ratio and better

enhance the financial position of the Company. The Remaining Group will also continue to engage

in hotel operations and trading of securities.

SUMMARY

The Group’s segment profit from its hotel operations for each of the past three years ended 31

December 2013 was consistently at a loss (the Group’s profit from hotel operation in 2013 was due to

the one-off gain of the deemed disposal of Rosedale Beijing only). The Group had tried unsuccessfully to

dispose of its 100% interest in the TKT Hotel in 2012 and was finally able to sell a majority stake in each

of the TKT Hotel and Beijing Hotel recently to independent third parties.

We concur with the Directors’ views that the Transactions would allow the Group to realise its

minority investments in the TKT Hotel and the Beijing Hotel, at terms which we find to be fair and

reasonable and the proceeds receivable from the Transactions would provide the necessary financial

resources for the Group to repay its borrowings when they fall due so as to strengthen its financial position

and to enhance the Group’s capability to capture any future investment opportunities.

The Board has resolved to declare the Special Dividend amounting to approximately HK$66 million

which Shareholders could redeploy for their other investments thus the Special Dividend would give them

more flexibility in their investment needs.


– 73 –

The Directors’ intention was to price the Transactions based on net asset value and in the case of

hotel properties, supported by independent valuation report. However, the non-cash component of the

consideration, namely the ES Notes and the MS Notes which carry an annual interest rate of 5%, when

measured against market yields of promissory notes of similar credit profile, was viewed as inadequate

by the valuer. This resulted in the fair values of the ES Notes and the MS Notes being valued at less than

their face values and the fair values of the consideration represent a discount for the Transactions. We

have opined above that such discounts are fair and reasonable, given the minority stake nature of each of

the Transactions. That said, because of such discounts, the proposed disposal of the Eagle Spirit Group

and the Makerston Group will result in the Group having to recognise a loss of approximately HK$14.2

million and an insignificant gain of HK$2.9 million (attributable to Shareholders) respectively.

The pro forma financial effects on the Group as set out in above are either for illustrative purpose,

inconclusive or relatively immaterial. As we have also concurred with the Board’s views on its reasons for

and benefits of the Transactions, we take the view that the short term cost for undertaking the Transactions

is, of course, the adverse pro forma financial effects as set out above and the loss from disposals (or an

insignificant gain, in so far as the disposal of the Makerston Group is concerned) that the Group has to

recognise, as a result of the fair values of the ES Notes and the MS Notes being valued at less than their

face values.

Independent Shareholders who cannot accept these cost implications or do not share our view that

taken as a whole, the benefits of the Transactions outweigh these cost implications can vote against the

ordinary resolutions at the SGM. This is however not our recommendation, which is set out below.

RECOMMENDATION

Having considered the principal factors and reasons set out above, we consider that insofar

as the Transactions are concerned, the terms and conditions of the Agreements and the transactions

contemplated thereunder are of normal commercial terms, and whilst they may not be in the ordinary and

usual course of business of the Group, they are fair and reasonable and in the interests of the Company

and its Shareholders as a whole. We therefore advise the Independent Shareholders to vote in favour of

the ordinary resolutions to be put forward to the Independent Shareholders at the SGM and to approve

the disposal of shares in, and shareholders’ loans to, Eagle Spirit and Makerston respectively under the

Agreements and the transactions contemplated thereunder.

Yours faithfully,

for and on behalf of

Centurion Corporate Finance Limited

Baldwin LEE

Managing Director

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

I – 1

1. FINANCIAL INFORMATION OF THE GROUP

Details of the financial information of the Group for each of the three financial years ended 31

December 201 1, 201 2 and 201 3, and the six months ended 30 June 2014 are disclosed in the following

documents which have been published on the website of the Stock Exchange (www.hkex.com.hk) and the

website of the Company (www.rhh.com.hk):

• annual report of the Company for the year ended 31 December 2011 published on 19 March

2012 (pages 33-161) ;

• annual report of the Company for the year ended 31 December 2012 published on 25 April

2013 (pages 40-157);

• annual report of the Company for the year ended 31 December 2013 published on 22 April

2014 (pages 43-173); and

• interim report of the Company for the six months ended 30 June 2014 published on

22 September 2014 (pages 1- 32) .

2. STATEMENT OF INDEBTEDNESS

At the close of business on 30 September 2014, being the latest practicable date for the purpose of

ascertaining the indebtedness of the Group prior to the printing of this circular, the Group had outstanding

unsecured borrowings of approximately HK$260,000,000. No guarantee was given by any parties

regarding the borrowings.

Save as aforesaid and apart from intra-group liabilities, as at the close of business on 30 September

2014, the Group did not have any debt securities issued and outstanding or agreed to be issued, bank

overdrafts, loans or other similar indebtedness, liabilities under acceptance or acceptance credits,

debentures, mortgages, charges, hire purchase or finance lease commitments, guarantees or contingent

liabilities.


I – 2

3. WORKING CAPITAL

The Directors, after due and careful consideration, are of the opinion that after taking into account

the present internal resources available to the Group, the presently available facilities and the estimated

net proceeds from the Transactions, the Group has sufficient working capital for its present requirements,

that is for at least the next 12 months from the date of this circular, in the absence of any unforeseeable

circumstances.

4. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in

the financial or trading position of the Group since 31 December 201 3, the date to which the latest audited

consolidated financial statements of the Company were made up.

5. MANAGEMENT DISCUSSION AND ANALYSIS

Set out below are the management discussion and analysis of the Remaining Group for each of the

years ended 31 December 201 1, 201 2 and 201 3, and the six months ended 30 June 2014.

For the year ended 31 December 2011

Review of operations

The Remaining Group attained a turnover of HK$ 305.5 million from its continuing

operations for the year ended 31 December 2011 . Gross profit for the year was HK$ 36.4

million for the year ended 31 December 2011 while the results of the Remaining Group for

the year ended 31 December 2011 was a loss of HK$ 231.1 million and was arrived at after

charging administrative expenses of HK$ 122.8 million ; finance costs of HK$ 14.6 million ;

impairment loss recognised in respect of other intangible assets arising from certain under-

performed hotel lease contracts of HK$ 10.1 million ; and impairment loss recognised in

respect of property, plant and equipment of HK$ 31.2 million ; and after crediting increase in

fair value of investment properties of HK$ 13.5 million .


I – 3

Segment results

Hotel and Leisure Services

The hotel and leisure business of the Remaining Group comprises the two “Rosedale”

branded 4-star rated hotels, Times Plaza Hotel Shenyang, Luoyang Golden Gulf Hotel and

the Square Inn budget hotel chain. Turnover was HK$ 305.5 million for the year ended 31

December 2011 . The strong Renminbi and the expanding Square Inn budget hotel chain also

played an important role in this improving performance. Segment loss for the reporting year

was HK$ 157.4 million which was mainly attributable to the high depreciation charge on the

Remaining Group’s hotel properties and ancillary fixed assets.

Securities Trading

Loss from securities trading for the year ended 31 December 2011 was HK$ 9.5

million .

Material acquisitions and disposals

On 26 September 2011, the Remaining Group entered into a share sale agreement

with an independent third party in relation to the disposal of the entire issued share capital

of Gold Richly Limited at a consideration of RMB45,000,000. Gold Richly Limited was the

then subsidiary of the Company and its major activity was the holding of, through a wholly

foreign owned entity in the PRC, a resort hotel development with three blocks of one to two-

storey buildings erected on two parcels of land located at Hailing Island, Yangjiang City,

Guangdong Province, the PRC. The said share sale agreement was completed in October

2011.

Significant investment

There was no significant investment during the year ended 31 December 2011.


I – 4

Liquidity and financial resources

At the end of the reporting year, the Remaining Group’s total borrowings were as

follows:

At 31 December

2011

HK$ million

Loan from a related company 14.6

Borrowings – amount due within one year 68.1

82.7

The convertible notes issued in June 2006, which bore a fixed coupon at the rate of

2% per annum, matured on 7 June 2011 . Other borrowings of approximately HK$ 8.1 million

bore interest at a fixed rate of 10% per annum. All other borrowings bore floating interest

rates. The loan from a related company were repayable on demand within one year.

The gearing ratio as at 31 December 2011, expressed as a percentage of total

borrowings to equity attributable to owners of the Company, was 4.7% . The cash and cash

equivalents held by the Remaining Group were principally denominated in Hong Kong

dollars and Renminbi.

Pledge of assets

At 31 December 2011, the Remaining Group did not have any assets pledged to banks

for credit facilities.


I – 5

At 31 December 2011, the Remaining Group’s 10% interest in HKWOT (BVI)

Limited (“HKWOT”) was pledged to C-Travel International Limited (“C-Travel”) for the

purposes of accounting for the payment, discharge and performance of all present and future

obligations and liabilities (whether actual or contingent) of the Company to C-Travel arising

under or in respect of (i) any breach of warranties; (ii) any breach of protective covenants

or post completion adjustment under a conditional agreement dated 3 February 2010

between the Company and C-Travel in relation to the disposal of 90% interest in HKWOT

by the Company to C-Travel at a cash consideration of US$88.0 million; (iii) the deed of

indemnity dated 27 May 2010; (iv) the share charge dated 27 May 2010; and (v) any claims

or other losses arising under or in connection with any of items (i) to (iv) above (inclusive)

including, without limitation, damages in respect of any such claims as determined by a

court or arbitration of competent jurisdiction or amounts being the subject of a settlement or

otherwise agreed in writing between the Company and C-Travel for a year ending on the date

falling three years from 27 May 2010. The carrying amount of the Remaining Group’s 10%

interest in HKWOT as at 31 December 2011 was approximately HK56.2 million .

Contingent liabilities

The Remaining Group did not have any significant contingent liabilities as at 31

December 2011 .

Foreign currency exposure

The majority of the Remaining Group’s assets and liabilities and business transactions

were denominated in Hong Kong dollars and Renminbi. During the year ended 31 December

2011, the Remaining Group had not entered into any hedging arrangements. However,

the management would continue to monitor closely its foreign currency exposure and

requirements and to arrange for hedging facilities when necessary.

Employees

At 31 December 2011, the Remaining Group had 1,408 employees, of which 1,199

employees were stationing in the PRC. Competitive remuneration packages were structured

to commensurate with the responsibilities, qualifications, experience and performance of

individual employee. The Remaining Group also provided training programs, provident fund

scheme and medical insurance for its employees.


I – 6

Prospects

The world economy is on the brink of another major downturn. Global economic

growth started to decelerate in mid-2011 and is estimated to have averaged 2.8 % over the

previous year. This economic slowdown is expected to continue into 2012 and 2013. The

United Nations baseline forecast for the growth of world gross product (WGP) is 2.6 % for

2012 and 3.2 % for 2013, which is below the pre-crisis pace of global growth.

Persistent high unemployment in the United States and low wage growth are holding

back aggregate demand and, together with the prospect of prolonged depressed housing

prices, has heightened risks of a new wave of home foreclosures. Growth in the Euro zone

has slowed considerably since the beginning of 2011 and the ever-simmering sovereign

debt crisis heavily weighs on consumer and business confidence across Europe. The failure

of policymakers in developed countries to address unemployment and prevent sovereign

debt distress and financial sector fragility from escalating has posed the most acute risk for

the global economy in the outlook for 2012-2013. Meanwhile, developing countries and

economies in transition are expected to continue to stoke the engine of the world economy,

growing on average by 5.4 % in 2012 and 5.8 % in 2013 in the baseline outlook. Among the

major developing countries, growth in China and India is expected to remain robust.

The Remaining Group, with years of successful experience in the PRC hospitality

industry, has already got its place in this flourishing market. The Remaining Group’s four-

star rated Rosedale hotel chain comprises three self-owned hotels located in the PRC and

the leased-and-operated Rosedale on the Park located in Hong Kong currently running in

total of over 1, 100 guest rooms. Following the rapid expansion of the “Square Inn” budget

hotel chain during 2010 and 2011, the Remaining Group shall concentrate on procuring and

operating quality leased-and-operated hotels in the PRC. The Remaining Group has during

the year had approximately 50 “Square Inn” branded hotels in operation, located in the

Mainland mainly in decent cities such as Guangzhou and Beijing and popular tourists spots

like Wuyishan.

The Remaining Group would continue to put resources to strengthen its branding and

position in the market and to explore further quality investment opportunities to enhance

shareholders’ wealth.


I – 7



The Remaining Group attained a turnover of HK$ 277.4 million from its continuing

operations for the year ended 31 December 2012, represented a decrease of 9.2% as

compared to that of HK$ 305.5 million in 2011. Gross profit for the year increased by 42.9%

to HK$ 52.0 million for the year ended 31 December 2012 (2011: HK$ 36.4 million). Loss for

the Remaining Group for the year ended 31 December 2012 was HK$ 151.4 million (2011:

HK$ 231.1 million). Loss for the year was arrived at after charging administrative expenses

of HK$ 69.6 million (2011: HK$ 122.8 million); finance costs of HK$ 4.1 million (2011:

HK$ 14.6 million); impairment loss recognised in respect of other intangible assets arising

from certain under-performed hotel lease contracts of HK$ 34.1 million (2011: HK$ 10.1

million); impairment loss recognised in respect of property, plant and equipment of HK$ 44.2

million (2011: HK$ 31.2 million) and loss on disposal of property, plant and equipment of

HK$ 26.3 million (2011: HK$ 24.6 million); and after crediting an increase in fair value of

investment properties of HK$ 10.0 million (2011: HK$ 13.5 million) and gain on disposal of

available-for-sale investment of HK$ 17.0 million (2011: Nil).

Segment results

Hotel operations

As at 31 December 2012, the hotel operations of the Remaining Group comprised

the three “Rosedale” branded 4-star rated hotels, Times Plaza Hotel Shenyang, Luoyang

Golden Gulf Hotel and the Square Inn budget hotel chain. Turnover decreased by 9.2% to

HK$ 277.4 million for the year ended 31 December 2012 (2011: HK$ 305.5 million), resulting

from the increasing average room rates and average occupancy rates. The strong Renminbi

also played an important role to this improving performance. The operating margin of the

Remaining Group was further improved subsequent to the surrender and disposal of certain

under-performed budget hotel leases during the year. Segment loss for the reporting year was

HK$ 124.3 million (2011: HK$ 157.4 million). Loss for the year was mainly attributable to

the high depreciation charge on the Remaining Group’s hotel properties and ancillary fixed

assets; impairment loss recognised on and loss on disposal of leasehold improvement in

respect of those under-performed budget hotel leases.

Securities Trading

Profits from trading of securities for the year ended 31 December 2012 was HK$ 1.8

million (2011: loss of HK$ 9.5 million).


I – 8


On 13 January 2012, the Remaining Group entered into a conditional sale and

purchase agreement with an independent third party as vendor. Pursuant to the agreement,

the vendor agreed to sell and the Remaining Group agreed to purchase 14,000,000 ordinary

shares of US$0.02 each in the capital of Apex , representing approximately 5.05% of the

issued share capital of Apex , at a total cash consideration of HK$62,000,000. The said

agreement was completed in January 2012. Following completion of the transaction, the

Company’s equity interest in Apex increased to approximately 88.2% and Apex remains as an

indirect non wholly -owned subsidiary of the Company.

On 2 February 2012, the Company entered into a conditional agreement with C-Travel

and pursuant to which the Company conditionally agreed to sell and C-Travel conditionally

agreed to purchase the remaining 10% equity interest in the issued share capital of HKWOT

at a consideration of US$9.44 million. The consideration was paid by C-Travel as to US$9.18

million by way of cash at completion and as to the balance of US$0.26 million by way of

cash on the first anniversary of the completion date. The said agreement was completed in

February 2012.

On 24 October 2012, Enjoy Media Holdings Limited (“Enjoy Media”), a wholly-

owned subsidiary of the Company, entered into a memorandum of understanding (the

“MOU”) with an independent third party (the “Intended Purchaser”) in relation to the

possible disposal of the entire issued share capital of Square Inn Hotel Management Limited

(“Square Inn”) at a consideration of HK$52,000,000. If the parties fail to sign a formal

agreement on or before 31 January 2013 (the “Signing Date”) for whatever reason, the

MOU shall lapse automatically. Square Inn is principally engaged in the holding of a lease

contract for the operation of a three-star hotel in Macau (the “Hotel”). The Hotel has not yet

been in operation pending the grant of a hotel licence by the relevant government authority.

On 25 January 2013, Enjoy Media and the Intended Purchaser entered into a supplemental

memorandum of understanding, pursuant to which the parties agreed that, amongst other

things, the Signing Date be extended to a date falling on or before 30 April 2013 or such later

date as may be agreed by the parties in writing.


There was no significant investments during the year ended 31 December 2012.


I – 9


At the end of the reporting year, the Remaining Group’s total borrowings were as

follows:

At

31 December

2012

HK$ million

Borrowings – amount due within one year 18.1

Borrowings – amount due after one year 250.0

268.1

Borrowings of approximately HK$ 8.1 million bore interest at a fixed rate of 10% per

annum. All other borrowings bore floating interest rates.


borrowings to equity attributable to owners of the Company, was 16.6% (2011: 4.7%). The

cash and cash equivalents held by the Remaining Group were principally denominated in

Hong Kong dollars and Renminbi.

Pledge of assets


and financial institutions for credit facilities.



December 2012 (2011: Nil).


I – 10




2012, the Remaining Group ha d not entered into any hedging arrangements. However,



Employees

At 31 December 2012, the Remaining Group had 994 employees, of which 653

employees were stationing in the PRC. Competitive remuneration packages were structured


individual employee. The Remaining Group also provided training programs, provident fund


Prospects

The World Economic Outlook projections imply that global growth would strengthen

gradually through 2013, averaging 3.5 % on an annual basis, a moderate uptick from 3.2 %

in 2012. A further strengthening to 4.1 % is projected for 2014, assuming recovery takes a

firm hold in the euro area economy. However, downside risks remain significant, including

renewed setbacks in the euro area and risks of excessive near-term fiscal consolidation

in the United States. In the PRC, it is generally expected that the political and economic

environment will move into a new era following the successful handover of the sovereignty

to the new national leaders after the twelfth National People’s Congress held in March 2013.

The Remaining Group, with years of successful experience in the PRC and domestic

hospitality business, has already got its place in this flourishing market. Facing severe

competition from both local and international budget hotel brands, the Remaining Group

has surrendered and/or disposed of certain non-performed hotel leases during 2012. The

Remaining Group shall further review its business strategy on its budget hotel business and

to focus on retaining those hotels located in Guangdong Province and with good business

potentials that would provide positive contribution to the Remaining Group in the coming

years.

In the future, the Remaining Group would continue to put resources to strengthen its

branding and position in the hospitality industry and to explore further quality investment

opportunities to enhance shareholders’ wealth.


I – 11



During the current reporting year, turnover of the Remaining Group attained

HK$ 242.0 million, represented a decrease of 12.8% as compared to HK$ 277.4 million of

2012. The results of the Remaining Group for the year ended 31 December 2013 was a loss

of HK$ 294.6 million (2012: HK$ 151.4 million) which was mainly attributable to gross

profit of HK$ 25.2 million (2012: HK$ 52.0 million); administrative expenses of HK$ 139.2

million (2012: HK$ 69.6 million); finance costs of HK$ 7.9 million (2012: HK$ 4.1 million);

impairment losses recognised in respect of available-for-sale investment of HK$ 32.2 million

(2012: Nil); impairment losses recognised in respect of property, plant and equipment of

HK$ 50.4 million (2012: HK$ 44.2 million) in respect of its hotel properties in the PRC based

on valuation reports conducted by independent professional valuers; loss on disposals of

subsidiaries of HK$ 20.1 million (2012: gain of HK$ 2.2 million); decrease in fair value of

investment properties of HK$ 30.1 million (2012: increase of HK$ 10.0 million); and income

tax credit of HK$ 2.6 million (2012: tax expenses of HK$4.9 million) .

Segment results

Hotel Operations

The hotel operations of the Remaining Group comprise the operation of the three

“Rosedale” branded 4-star rated hotels, Times Plaza Hotel Shenyang and Luoyang Golden

Gulf Hotel. Turnover decreased by 12.8% to HK$ 242.0 million for the year ended 31

December 2013 (2012: HK$ 277.4 million) . Segment loss for the reporting year was

HK$ 140.0 million (2012: HK$ 124.3 million) . Based on the valuation conducted by an

independent professional valuer and the unsatisfied results of the hotel operation and the

budget hotels in the PRC, the Directors determined that impairment of HK$ 50.4 million

(2012: HK$ 44.2 million) had to be recognised in respect of certain hotel properties and

leasehold improvement in the PRC.

Securities Trading

Profit from securities trading for the year ended 31 December 2013 was HK$ 0.2

million (2012: HK$ 1.8 million).


I – 12


On 29 April 2013, Enjoy Media , entered into an agreement with three independent

third parties for the disposal of the entire issued share capital in Square Inn by Enjoy Media

at a consideration of HK$52,000,000. Completion took place immediately upon signing of

the agreement.


There was no significant investments during the year ended 31 December 2013.


At the end of the reporting period, the Remaining Group’s total borrowings were as

follows:

At

31 December

2013

HK$ million

Borrowings – amount due within one year 10

Borrowings – amount due after one year 250

260

All borrowings bore floating interest rates.


borrowings to equity attributable to owners of the Company, was 20. 7% (2012: 16.6%).

Pledge of assets


and financial institutions for credit facilities.


I – 13



December 2013 (2012: Nil).




2013, the Remaining Group ha d not entered into any hedging arrangements. However, the

Company would continue to monitor closely its foreign currency exposure and requirements

and to arrange for hedging facilities when necessary.

Employees

At 31 December 2013, the Remaining Group had 870 employees, of which 531

employees were stationed in the PRC. Competitive remuneration packages were structured


individual employee. The Remaining Group also provides training programs, provident fund


Prospects

Global activity strengthened during the second half of 2013. International Monetary

Fund expected that activity shall improve further in 2014-15, largely on account of recovery

in the advanced economies. Global growth is now projected to be slightly higher in 2014, at

around 3.7%, rising to 3.9% in 2015. But following the US Federal Reserve Board’s tapering

its quantitative easing measures beginning from January 2014, downward revisions to growth

forecasts in some economies highlight continued fragilities, and downside risks remain. On

the other hand, growth in China rebounded strongly in the second half of 2013, due largely

to an acceleration in investment and is expected to moderate slightly to around 7.5% in 2014-

15.

There are five hotels under the management of the Remaining Group, of which

two located in Hong Kong are leased-and-operated hotel s. The Remaining Group shall

explore further this leased-and-operated hotel and franchising business to supplement its

traditional owner-operated hotel business. Nevertheless, the Remaining Group shall from

time to time revisit its business strategy and composition of its hotel portfolio to cope with

market changes and to explore further income streams so as to maximise the wealth of its

shareholders.


I – 14

For the six months ended 30 June 2014


During the six months ended 30 June 2014, turnover of the Remaining Group

attained HK$ 114.5 million . The results of the Remaining Group for the six months ended

30 June 2014 was a loss of HK$ 57.6 million which was mainly attributable to gross profit

of HK$ 28.4 million ; administrative expenses of HK$ 52.2 million ; finance costs of HK$ 4.0

million ; and decrease in fair value of investment properties of HK$ 15.7 million .

Segment results

Hotel Operations

The hotel operations of the Remaining Group comprise the operation of Rosedale

Hotel & Suites Guangzhou, Times Plaza Hotel Shenyang, Luoyang Golden Gulf Hotel and

two leased-and-operated hotels located in Hong Kong, being Rosedale on the Park and

Rosedale Hotel Kowloon. Turnover was HK$ 1 1 4.5 million for the six months ended 30 June

2014 . Segment loss for the reporting period was HK$ 1 7.2 million .

Securities Trading

Loss from securities trading for the six months ended 30 June 2014 was HK$ 0.2

million .


There were no material acquisitions and disposals during the six months ended 30

June 2014.


I – 15


At the end of the reporting period, the Remaining Group’s total borrowings were as

follows:

At

30 June 2014

HK$ million

Borrowings – amount due within one year 10

Borrowings – amount due after one year 250

260

All borrowings bore floating interest rates.

The gearing ratio as at 30 June 2014, expressed as a percentage of total borrowings to

equity attributable to owners of the Company, was 20. 3% (as at 31 December 2013: 20.7%).

Pledge of assets

At 30 June 2014, the Remaining Group did not have any assets pledged to banks and

financial institutions for credit facilities.


The Remaining Group did not have any significant contingent liabilities as at each of

30 June 2014 and 31 December 2013.



were denominated in Hong Kong dollars and Renminbi. During the six months ended 30

June 2014, the Remaining Group ha d not entered into any hedging arrangements. However




I – 16

Employees

At 30 June 2014, the Remaining Group had 935 employees, of which 610 employees

were stationed in the PRC. Competitive remuneration packages were structured to

commensurate with the responsibilities, qualifications, experience and performance of

individual employee. The Remaining Group also provide d training programs, provident fund


Prospects

The International Monetary Fund (“IMF”) has lowered its growth forecast for the

Chinese economy in 2015 from 7.3% to 7% or lower. The IMF sees a steady build-up of debt,

particularly by local governments and in the shadow banking sector, as the biggest risk to the

economy. Despite concerns about a slowdown in the property market, it said this may only

be cyclical and that growth can resume once corrections take place to adjust for overheating.

Nevertheless, the IMF still believes that China can achieve the growth target of 7.5% for this

year as set by the PRC government .

Notwithstanding the expected slower economic growth of the PRC in the coming year

and the voice from the community to reduce the number of PRC individual visitors to Hong

Kong, the Remaining Group is still cautiously optimistic on the business of the Remaining

Group in the coming months since the market demand for four-star level hotels, the core

business focus of the Remaining Group, is still considerably strong.

The Company will revisit continuously its business strategy and composition of its

hotel chain to cope with market changes and to explore further income streams so as to stay

ahead of its competitors and to maximise the wealth of its shareholders.

APPENDIX II FINANCIAL INFORMATION OF THE EAGLE SPIRIT GROUP

II – 1

REVIEW REPORT ON THE EAGLE SPIRIT GROUP

REPORT ON REVIEW OF UNAUDITED CONSOLIDATED FINANCIAL INFORMATION

TO THE BOARD OF DIRECTORS OF ROSEDALE HOTEL HOLDINGS LIMITED

(incorporated in Bermuda with limited liability)

Introduction

We have reviewed the unaudited consolidated financial information of Eagle Spirit Holdings

Limited (“Eagle Spirit”) and its subsidiaries (hereinafter collectively referred to as the “Eagle Spirit

Group”) set out on pages II-3 to II-10 which comprises the unaudited consolidated statements of financial

position as of 31 December 2011, 2012 and 2013 and 30 June 2014 and the related unaudited consolidated

statements of profit or loss and other comprehensive income, consolidated statements of changes in equity

and consolidated statements of cash flows for each of the years/period then ended (the “Relevant Period ”)

and explanatory notes (the “Unaudited Consolidated Financial Information”). The Unaudited Consolidated

Financial Information has been prepared solely for the purpose of inclusion in the circular to be issued by

Rosedale Hotel Holdings Limited (the “Company”) in connection with the proposed disposal of the entire

equity interest in and corresponding shareholder’s loan due from Eagle Spirit in accordance with Rule

14.68(2)(a)(i)(A) of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong

Limited.

The directors of the Company are responsible for the preparation and presentation of the Unaudited

Consolidated Financial Information of the Eagle Spirit Group in accordance with the basis of preparation

set out in note 2 to the Unaudited Consolidated Financial Information and Rule 14.68(2)(a)(i) of the

Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited. The directors

of the Company are also responsible for such internal control as management determines is necessary

to enable the preparation of Unaudited Consolidated Financial Information that is free from material

misstatement, whether due to fraud or error. The Unaudited Consolidated Financial Information does not

contain sufficient information to constitute a complete set of financial statements as defined in Hong Kong

Accounting Standard 1 “Presentation of Financial Statements” or an interim financial report as defined

in Hong Kong Accounting Standard 34 “Interim Financial Reporting” issued by the Hong Kong Institute

of Certified Public Accountants (the “HKICPA”). Our responsibility is to express a conclusion on this

Unaudited Consolidated Financial Information based on our review, and to report our conclusion solely to

you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not

assume responsibility towards or accept liability to any other person for the contents of this report.


II – 2

Scope of review

We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410

(“HKSRE 2410”) “Review of Interim Financial Information Performed by the Independent Auditor of

the Entity” and with reference to Practice Note 750 “Review of Financial Information under the Hong

Kong Listing Rules for a Very Substantial Disposal” issued by the HKICPA. A review of the Unaudited

Consolidated 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 Hong Kong Standards on Auditing

and consequently does not enable us to obtain assurance that we would become aware of all significant

matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the Unaudited

Consolidated Financial Information of the Eagle Spirit Group for the Relevant Period is not prepared,

in all material respects, in accordance with the basis of preparation set out in note 2 to the Unaudited

Consolidated Financial Information.

Deloitte Touche Tohmatsu

Certified Public Accountants

Hong Kong

10 November 2014


II – 3

UNAUDITED CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER

COMPREHENSIVE INCOME

FOR EACH OF THE THREE YEARS ENDED 31 DECEMBER 2013 AND

THE SIX MONTHS ENDED 30 JUNE 2013 AND 2014

Year ended 31 December

Six months ended

30 June

2011 2012 2013 2013 2014

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Revenue – 55,943 125,179 56,861 70,126

Cost of sales and services – (26,898) (57,796) (33,172) (45,127)

Gross profit – 29,045 67,383 23,689 24,999

Other income 34,154 31,219 30,185 13,307 18,886


Gain on disposal of assets classified

as held for sale – – – – 459,286

Share of result of a joint venture – – – – 954

Finance costs (569) (6,501) (17,303) (8,483) (3,432)


Income tax expense (1,378) (1,463) (1,514) (763) (757)

Profit and total comprehensive income

for the year/period 17,502 13,118 31,839 8,949 469,832


II – 4

UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL POSITIONAT 31 DECEMBER 2011, 31 DECEMBER 2012, 31 DECEMBER 2013 AND 30 JUNE 2014

As at 31 DecemberAs at

30 June2011 2012 2013 2014

HK$’000 HK$’000 HK$’000 HK$’000

Non-current assetsProperty, plant and equipment 630,989 823,085 958 839

Club debentures – – 520 520

Rental deposit – – – 16,000

Interest in a joint venture – – – 193,725

Amount due from a joint venture – – – 299,078

630,989 823,085 1,478 510,162

Current assetsInventories – 414 577 550

Trade and other receivables 900 4,956 7,832 10,844

Amounts due from fellow subsidiaries 6,076 1,891 2,260 88

Pledged bank deposits 3,066 3,263 – –

Bank balances and cash 1,434 20,306 139,092 11,502

11,476 30,830 149,761 22,984

Assets classified as held for sale – – 837,306 –

11,476 30,830 987,067 22,984

Current liabilitiesTrade and other payables 28,745 47,772 16,493 19,262

Amount due to immediate

holding company – – – 36,619

Amounts due to fellow subsidiaries 178,681 335,986 269,112 30,880

Loan from a related company 14,000 – – –

Loan from a fellow subsidiary – 6,000 6,000 –

Bank borrowing – due within one year 405,000 435,000 – –

626,426 824,758 291,605 86,761

Liabilities associated with assets classified as held for sale – – 635,944 –

626,426 824,758 927,549 86,761

Net current (liabilities) assets (614,950) (793,928) 59,518 (63,777)

16,039 29,157 60,996 446,385

Capital and reservesShare capital – – – –

Reserves 16,039 29,157 60,996 446,385

Equity attributable to owner

of Eagle Spirit 16,039 29,157 60,996 446,385


II – 5

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR EACH OF THE THREE YEARS ENDED 31 DECEMBER 2013

AND THE SIX MONTHS ENDED 30 JUNE 2013 AND 2014

Attributable to owner of Eagle Spirit

Share capital

(Accumulated

losses) profits Total

HK$’000 HK$’000 HK$’000

At 1 January 2011 – (1,463) (1,463)


for the year – 17,502 17,502

At 31 December 2011 – 16,039 16,039


for the year – 13,118 13,118

At 31 December 2012 – 29,157 29,157


for the year – 31,839 31,839

At 31 December 2013 – 60,996 60,996


for the period – 469,832 469,832

Dividend paid (Note) – (84,443) (84,443)

At 30 June 2014 – 446,385 446,385

At 1 January 2013 – 29,157 29,157


for the period – 8,949 8,949

At 30 June 2013 – 38,106 38,106

Note: The dividend was declared by Rosedale Hotel Management International Limited (“RHMIL”) to its then

sole shareholder, Rosedale Hotel Group Limited (“RHGL”) before the completion of the Eagle Spirt Group

Reorganisation (see note 1). After the payment of dividend, RHMIL was transferred from RHGL to Rosy Universe

Limited (“Rosy Universe”) as part of the Eagle Spirit Group Reorganisation.


II – 6

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS




Six months ended

30 June

2011 2012 2013 2013 2014

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

OPERATING ACTIVITIES


Adjustments for:

Interest income (4) (3) (102) (46) (6,241)

Depreciation of property,

plant and equipment 128 5,211 12,396 8,712 144

Finance costs 569 6,501 17,303 8,483 3,432

Share of result of a joint venture – – – – (954)

Loss on disposal of property,

plant and equipment 7 – – – –

Gain on disposal of assets classified

as held for sale – – – – (459,286)

Operating cash flows before

movements in working capital 19,580 26,290 62,950 26,861 7,68 4

(Increase) decrease in inventories – (414) (163) (144) 27

Decrease (increase) in trade and

other receivables 202 (4,056) (2,833) 197 (19,012)

(Increase) decrease in amounts

due from fellow subsidiaries (5,884) 2,722 (1,399) (2,834) 1,415

Increase (decrease) in trade and

other payables 3,299 (14,674) 2,792 (2,659) 5,484

NET CASH FROM (USED IN)

OPERATING ACTIVITIES 17,197 9,868 61,347 21,421 (4,402)

INVESTING ACTIVITIES

Additions to property,

plant and equipment (394,922) (157,266) (29,535) (29, 179) (25)

Placement of pledged bank deposits (3,054) (197) (1,737) (1,737) –

Interest received 4 3 102 46 173

Proceeds from disposal of subsidiaries – – – – 762,843

Withdrawal of pledged bank deposits – – – – 5,000

Repayment from a joint venture – – – – 12,240

NET CASH (USED IN) FROM

INVESTING ACTIVITIES (397,972) (157,460) (31,170) (30,8 70) 780,231


II – 7

FINANCING ACTIVITIES

New borrowing raised 405,000 435,000 630,000 630,000 –

Advance from (repayment to)

fellow subsidiaries 8,296 157,304 (66,874) (49,701) ( 237, 704)

Loan advanced from (repayment to)

a related company 14,000 (14,000) – – –

Advance from an immediate

holding company – – – – 45, 519

Repayment of bank borrowing (42,500) (405,000) (435,000) (435,000) (630,000)

Dividend paid to RHGL – – – – (84,443)

Repayment to an immediate

holding company – – – – (8,900)

Interest paid (3,043) (12,840) (17,403) (8,301) (4,005)

Loan advance from (repayment to)

a fellow subsidiary – 6,000 – – (6,000)


FINANCING ACTIVITIES 381,753 166,464 110,723 136,998 (925,533)

NET INCREASE (DECREASE) IN

CASH AND CASH EQUIVALENTS 978 18,872 140,900 127,549 (149,704)

CASH AND CASH

EQUIVALENTS AT BEGINNING

OF THE YEAR/PERIOD 456 1,434 20,306 20,306 161,206

CASH AND CASH EQUIVALENTS

AT END OF THE YEAR/PERIOD,

represented by

Bank balances and cash 1,434 20,306 161,206 147,855 11,502

Bank balances included in assets

classified as held for sale – – (22,114) – –

1,434 20,306 139,092 147,855 11,502


Six months ended

30 June

2011 2012 2013 2013 2014

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000


II – 8

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



1. General

Eagle Spirit Holdings Limited (“Eagle Spirit”) was incorporated on 6 May 2005 with limited

liability in the British Virgin Islands (the “BVI”). Its ultimate holding company is Rosedale Hotel

Holdings Limited (the “Company”), a company incorporated in Bermuda with its shares listed

on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”). Its immediate holding

company is Easy Vision Holdings Limited (“Easy Vision”), a limited company also incorporated in

the BVI. The address of the registered office of Eagle Spirit is at Palm Grove House, P.O. Box 438,

Road Town, Tortola, BVI.

Eagle Spirit acts as an investment holding company. During the Relevant Period (as defined

below in note 2), Eagle Spirit and its subsidiaries (collectively referred to as the “Eagle Spirit

Group”) are engaged in (i) the business of operating a hotel known as “Rosedale Hotel Kowloon”,

which is located at No.86 Tai Kok Tsui Road, Tai Kok Tsui, Kowloon, Hong Kong (the “Property”);

(ii) hotel corporate management and consultancy services; and (iii) restaurant operation and hotel

operation.

On 11 April 2014, Easy Vision, Silver Infinite Limited (the “Purchaser”), a direct wholly-

owned subsidiary of ITC Properties Group Limited (“ITCP”), a company incorporated in Bermuda

with limited liability with its shares listed on the Stock Exchange , the Company and ITCP entered

into a sales and purchase agreement, pursuant to which Easy Vision has conditionally agreed

to sell and the Purchaser has conditionally agreed to purchase (1) the entire equity interest in

Eagle Spirit, which holds 40% of the equity interest in More Star Limited (“More Star”) and

(2) the shareholder’s loan due from Eagle Spirit for an aggregate consideration of not exceeding

HK$566,000,000 (the “ES Disposal”).

During the Relevant Period , the Eagle Spirit Group was formed through a series of

transactions (the “Eagle Spirit Group Reorganisation”) which were undertaken by Eagle Spirit as

follows:

( i) acquired the entire issued share capital of Hongkong Macau (International) BVI

Limited (“HK Macau”) from Apex Quality Group Limited (“Apex”), a fellow

subsidiary of Eagle Spirit ; and

(i i) acquired from a wholly -owned subsidiary of Apex the entire issued share capital

of Rosy Universe Limited (“Rosy Universe”) which holds 100% of the interest

in RHMIL and Rosedale Group Management Limited, which are engaged in the

provision of hotel corporate management consultancy services to hotels in Hong Kong

and People’s Republic of China (the “PRC”).


II – 9

For the purpose of preparation of the proposed very substantial disposal of the Company’s

interest in Eagle Spirit, the Eagle Spirit Group Reorganisation, which commenced in November

2013, was completed during the period ended 30 June 2014, pursuant to which Eagle Spirit, as

holding company of the existing subsidiaries, has also bec ome the holding company of Rosy

Universe and its subsidiaries. These companies were under the common control of the Company

prior to and after the Eagle Spirit Group Reorganisation and therefore they are regarded as

continuing entity.

The Unaudited Consolidated Financial Information of the Eagle Spirit Group has been

prepared as if Eagle Spirit has been the holding company of the companies now comprising the

Eagle Spirit Group throughout the Relevant Period .

The unaudited consolidated statements of profit or loss and other comprehensive income and

the unaudited consolidated statements of cash flows which include the results and cash flows of the

companies now comprising the Eagle Spirit Group have been prepared by applying the principles

of merger accounting in accordance with Accounting Guideline 5 “Merger Accounting for Common

Control Combinations’’ as if the current group structure had been in existence throughout the

Relevant Period or since their respective dates of incorporation/establishment, where this is a

shorter period. The unaudited consolidated statements of financial position of the Eagle Spirit

Group as at 31 December 2011, 31 December 2012 and 31 December 2013 have been prepared to

present the assets and liabilities of the companies now comprising the Eagle Spirit Group as if the

current group structure had been in existence as at those dates.

The Unaudited Consolidated Financial Information is presented in Hong Kong dollars, which

is also the functional currency of Eagle Spirit.

2. Basis of preparation of the unaudited consolidated financial information

The Unaudited Consolidated Financial Information of the Eagle Spirit Group for the three

years ended 31 December 2013 and the six months ended 30 June 2014 (the “Relevant Period ”) has

been prepared in accordance with paragraph 68(2)(a)(i) of Chapter 14 of The Rules Governing the

Listing of Securities on The Stock Exchange , and solely for the purposes of inclusion in the circular

to be issued by the Company in connection with the proposed ES Disposal.


II – 10

The amounts included in the Unaudited Consolidated Financial Information of the Eagle

Spirit Group have been recognised and measured in accordance with the relevant accounting

policies of the Company adopted in the preparation of the consolidated financial statements of the

Company and its subsidiaries for the relevant years or period, which conform with Hong Kong

Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants

(the “HKICPA”). The Unaudited Consolidated Financial Information does not contain sufficient

information to constitute a complete set of financial statements as defined in Hong Kong

Accounting Standard ( “HKAS”) 1 “Presentation of Financial Statements” nor an interim report as

defined in HKAS 34 “Interim Financial Reporting” issued by the HKICPA.

In preparing the Unaudited Consolidated Financial Information of the Eagle Spirit Group,

the directors of Eagle Spirit have given careful consideration to the future liquidity and going

concern of the Eagle Spirit Group in light of the fact that the Eagle Spirit Group’s current liabilities

exceeded its current asset by HK$614,950,000, HK$793,928,000 and HK$ 63,777,000 as at 31

December 2011, 31 December 2012 and 30 June 2014, respectively. The directors of Eagle Spirit

are satisfied that the Eagle Spirit Group will have sufficient funds to meet its financial obligations

as they fall due for the foreseeable future, after taking into consideration that the Company has

agreed to provide adequate funds for the Eagle Spirit Group to meet in full its financial obligations

up to the date of the completion of the ES Disposal. Moreover, upon completion of the ES

Disposal, ITCP will provide financial support to the Eagle Spirit Group to meet in full its financial

obligations as they fall due in the foreseeable future.

APPENDIX III FINANCIAL INFORMATION OF THE MAKE RSTON GROUP

III – 1

REVIEW REPORT ON THE MAKE RSTON GROUP

REPORT ON REVIEW OF UNAUDITED CONSOLIDATED FINANCIAL INFORMATION

TO THE BOARD OF DIRECTORS OF ROSEDALE HOTEL HOLDINGS LIMITED

(incorporated in Bermuda with limited liability)

Introduction

We have reviewed the unaudited consolidated financial information of Makerston Limited

(“Makerston”) and its subsidiaries (hereinafter collectively referred to as the “Makerston Group”) set out

on pages III-3 to III-10 which comprises the unaudited consolidated statements of financial position as of

31 December 2011, 2012 and 2013 and 30 June 2014 and the related unaudited consolidated statements

of profit or loss and other comprehensive income, consolidated statements of changes in equity and

consolidated statements of cash flows for each of the years/period then ended (the “Relevant Period ”) and

explanatory notes (the “Unaudited Consolidated Financial Information”). The Unaudited Consolidated

Financial Information has been prepared solely for the purpose of inclusion in the circular to be issued by

Rosedale Hotel Holdings Limited (the “Company”) in connection with the proposed disposal of the entire

equity interest in and corresponding shareholder’s loan due from Makerston in accordance with Rule

14.68(2)(a)(i)(A) of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong

Limited.

The directors of the Company are responsible for the preparation and presentation of the Unaudited

Consolidated Financial Information of the Makerston Group in accordance with the basis of preparation

set out in note 2 to the Unaudited Consolidated Financial Information and Rule 14.68(2)(a)(i) of the

Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited. The directors

of the Company are also responsible for such internal control as management determines is necessary

to enable the preparation of Unaudited Consolidated Financial Information that is free from material

misstatement, whether due to fraud or error. The Unaudited Consolidated Financial Information does not

contain sufficient information to constitute a complete set of financial statements as defined in Hong Kong

Accounting Standard 1 “Presentation of Financial Statements” or an interim financial report as defined

in Hong Kong Accounting Standard 34 “Interim Financial Reporting” issued by the Hong Kong Institute

of Certified Public Accountants (the “HKICPA”). Our responsibility is to express a conclusion on this

Unaudited Consolidated Financial Information based on our review, and to report our conclusion solely to

you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not

assume responsibility towards or accept liability to any other person for the contents of this report.


III – 2

Scope of review

We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410

(“HKSRE 2410”) “Review of Interim Financial Information Performed by the Independent Auditor of

the Entity” and with reference to Practice Note 750 “Review of Financial Information under the Hong

Kong Listing Rules for a Very Substantial Disposal” issued by the HKICPA. A review of the Unaudited

Consolidated 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 Hong Kong Standards on Auditing

and consequently does not enable us to obtain assurance that we would become aware of all significant

matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the Unaudited

Consolidated Financial Information of the Makerston Group for the Relevant Period is not prepared,

in all material respects, in accordance with the basis of preparation set out in note 2 to the Unaudited

Consolidated Financial Information.



Hong Kong

10 November 2014


III – 3

UNAUDITED CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER





Six months ended

30 June

2011 2012 2013 2013 2014

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Revenue 85,490 96,125 80,075 40,200 –

Cost of sales and services (61,542) (66,346) (57,322) (30,534) –

Gross profit 23,948 29,779 22,753 9,666 –

Other income 20,832 4,757 7,152 6,442 5,486


Gain on deemed disposal of

a subsidiary – – 656,230 – –

Share of result of an associate – – (1,223) – (2,463)

Finance costs (8,682) (8,026) (7,114) (3,839) (29)


Income tax credit (expense) 3,721 5,390 (60,149) 2,698 –

(Loss) profit for the year/period (5,737) (10,771) 580,297 (5,616) (3,149)

Other comprehensive income

(expense) for the year/period

Items that will not be reclassified to

profit or loss:

Exchange difference arising on

translation of functional currency

to presentation currency 5,729 523 16,732 726 (5,191)

Share of exchange difference of an

associate – – – – (3,652)

Other comprehensive income

(expense) for the year/period 5,729 523 16,732 726 (8,843)

Total comprehensive (expense)

income for the year/period (8) (10,248) 597,029 (4,890) (11,992)


III – 4

UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL POSITIONAT 31 DECEMBER 2011, 31 DECEMBER 2012, 31 DECEMBER 2013 AND 30 JUNE 2014

As at 31 DecemberAs at

30 June2011 2012 2013 2014

HK$’000 HK$’000 HK$’000 HK$’000

Non-current assetsProperty, plant and equipment 686,979 669,705 – –

Interest in an associate – – 269,627 263,512

Pledged bank deposits 11,867 11,780 – –

698,846 681,485 269,627 263,512

Current assetsInventories 2,594 2,535 – –

Trade and other receivables 10,241 13,883 665, 405 665,952

Amount due from a fellow subsidiary 272 367 – –

Pledged bank deposits – – 306,079 –

Bank balances and cash 8,004 8,991 443 61

21,111 25,776 971, 927 666,013

Current liabilitiesTrade and other payables 16,639 17,056 238 10

Tax payable 1,804 1,999 66,744 66,744

Derivative financial instrument 2,858 2,730 – –

Amount due to immediate

holding company 278,308 294,247 311, 588 217,725

Amounts due to fellow subsidiaries 4,593 830 – 54

Bank borrowings – due within one year 10,741 14,741 206,000 –

314,943 331,603 584, 570 284,5 33

Net current (liabilities) assets (293,832) (305,827) 387,357 381,480

Total assets less current liabilities 405,014 375,658 656,984 644,992

Non-current liabilitiesBank borrowings – due after one year 222,963 208,222 – –

Deferred tax liabilities 111,848 107,481 – –

334,811 315,703 – –

70,203 59,955 656,984 644,992

Capital and reservesShare capital – – – –

Reserves 70,203 59,955 656,984 644,992

Equity attributable to owner

of Makerston 70,203 59,955 656,984 644,992


III – 5

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY


AND THE THREE MONTHS ENDED 30 JUNE 2013 AND 2014

Attributable to owner of Makerston

Share

capital

Other

reserve

Translation

reserve

(Accumulated

losses)

profits Total

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

(Note)

At 1 January 2011 – (13,093) 108,251 (24,947) 70,211



to presentation currency – – 5,729 – 5,729

Loss for the year – – – (5,737) (5,737)

Total comprehensive expense

for the year – – 5,729 (5,737) (8)

At 31 December 2011 – (13,093) 113,980 (30,684) 70,203



to presentation currency – – 523 – 523

Loss for the year – – – (10,771) (10,771)


for the year – – 523 (10,771) (10,248)

At 31 December 2012 – (13,093) 114,503 (41,455) 59,955



to presentation currency – – 16,732 – 16,732

Profit for the year – – – 580,297 580,297

Total comprehensive income

for the year – – 16,732 580,297 597,029

Release upon deemed disposal

of a subsidiary – 13,093 – (13,093) –

Release of translation reserve upon

deemed disposal of a subsidiary – – (141,536) 141,536 –


III – 6

At 31 December 2013 – – (10,301) 667,285 656,984



to presentation currency – – (5,191) – (5,191)

Share of exchange difference of

an associate – – (3,652) – (3,652)

Loss for the period – – – (3,149) (3,149)


for the period – – (8,843) (3,149) (11,992)

At 30 June 2014 – – (19,144) 664,136 644,992

At 1 January 2013 – (13,093) 114,503 (41,455) 59,955



to presentation currency – – 726 – 726

Loss for the period – – – (5,616) (5,616)


for the period – – 726 (5,616) (4,890)

At 30 June 2013 – (13,093) 115,229 (47,071) 55,065

Note: The other reserve of the Group arose from acquisition of additional interest in a subsidiary from non-controlling

interest in prior years.

Attributable to owner of Makerston

Share

capital

Other

reserve

Translation

reserve

(Accumulated

losses)

profits Total

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

(Note)


III – 7

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS



Year ended 31 December Six months ended

30 June2011 2012 2013 2013 2014

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

OPERATING ACTIVITIES


Adjustments for:

Interest income (74) (101) (80) (42) (3,205)

Finance costs 8,682 8,026 7,114 3,839 29

Depreciation of property,

plant and equipment 28,781 30,376 25,385 10,512 –

Fair value loss (gain) on derivative

financial instrument 2,858 (128) (650) (929) –

Share of loss of an associate – – 1,223 – 2,463


plant and equipment 366 381 23 23 –

Gain on deemed disposal of

a subsidiary – – (656,230) – –

Operating cash flows before

movements in working capital 31,155 22,393 17,231 5,089 (3,862)

(Increase) decrease in inventories (230) 59 (158) ( 4) –

(Increase) decrease in trade and

other receivables (49 9) (3,643) ( 3, 509) (368) –

Increase ( decrease) in trade and

other payables 2,330 401 (4,468) (1,005) (53)

( Decrease) increase in amounts due

from/to fellow subsidiaries (29,383) (3,726) (463) 324 54


OPERATING ACTIVITIES 3,373 15,484 8, 633 4,036 (3,861)

INVESTING ACTIVITIES


plant and equipment (17,412) (8,619) (24,171) (2,051) –

Placement of pledged

bank deposits (11,581) – (297,331) – –

Withdrawal of pledged bank deposits – – – 249 306,079

Interest received 74 101 80 42 152

Proceeds from disposal of property,

plant and equipment 80 73 5 5 –

Proceeds from deemed disposal of

a subsidiary – – 291,073 – –

Settlement of derivative

financial instrument – – (2,080) – –

NET CASH (USED IN) FROM

INVESTING ACTIVITIES (28,839) (8,445) ( 32,424) ( 1,755) 306,231


III – 8

FINANCING ACTIVITIES

New bank borrowings raised 226,072 – – – –

Repayment of loan from

a fellow subsidiary (118,576) – – – –

Advance from immediate

holding company 127,729 148,659 85,991 8,277 1,285

Repayment to immediate

holding company (202,305) (135,572) (56,027) – (97,833)

Interest paid (8,588) (8,011) (7,048) (3,823) (204)

Repayment of bank borrowings – (11,450) (8,505) (8,346) (206,000)


FINANCING ACTIVITIES 24,332 (6,374) 14,411 (3,892) (302,752)

NET (DECREASE) INCREASE IN

CASH AND CASH EQUIVALENTS (1,134) 665 (9,380) (1,611) (382)


AT BEGINNING OF

THE YEAR/PERIOD 8,513 8,004 8,991 8,991 443

EFFECT OF FOREIGN EXCHANGE

RATE CHANGES 625 322 832 69 –


AT END OF THE YEAR/PERIOD,

represented by bank balances

and cash 8,004 8,991 443 7,4 49 61


Six months ended

30 June

2011 2012 2013 2013 2014

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000


III – 9

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL INFORMATION



1. General

Makerston Limited (“Makerston”) was incorporated with limited liability in the British

Virgin Islands (the “BVI”). Its ultimate holding company is Rosedale Hotel Holdings Limited (the

“Company”), a company incorporated in Bermuda with its shares listed on The Stock Exchange of

Hong Kong Limited (the “Stock Exchange”). The address of the registered office of the Company

is Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda. Its immediate holding company

is Rosedale Hotel Group Limited (“RHGL”), a company incorporated in the BVI. The address of

the registered office of Makerston is located at P.O. Box 957, Offshore Incorporations Centre, Road

Town, Tortola, the BVI.

Makerston acts as an investment holding company. During the years ended 31 December

2011 and 2012, its principal subsidiary, Rosedale Hotel Beijing Co., Ltd. (“Rosedale Beijing”) was

engaged in the business of hotel operation.

During the year ended 31 December 2013, following the completion of a capital increase

agreement entered into with an independent third party, Makerston’s interest in Rosedale Beijing

was diluted from 100% to 20%. Accordingly, Rosedale Beijing ceased to be a subsidiary of

Makerston and became an associate after the completion of the capital increase transaction.

On 11 April 2014, RHGL, Silver Infinite Limited (the “Purchaser”), a direct wholly-owned

subsidiary of ITC Properties Group Limited (“ITCP”), a company incorporated in Bermuda with

limited liability with its shares listed on the Stock Exchange, the Company and ITCP further

entered into a sales and purchase agreement, pursuant to which RHGL has conditionally agreed

to sell and the Purchaser has conditionally agreed to purchase (1) the entire equity interest in

Makerston, which holds 20% of the equity interest in Rosedale Beijing and (2) the shareholder’s

loan due from Makerston with an aggregate consideration of not exceeding HK$324,000,000 (the

“MS Disposal”).

The functional currency of the Makerston is Renminbi. The Unaudited Consolidated

Financial Information is presented in Hong Kong dollars for management review purpose.


III – 10

2. Basis of preparation of the unaudited consolidated financial information

The Unaudited Consolidated Financial Information of the Makerston Group for the three

years ended 31 December 2013 and the six months ended 30 June 2014 has been prepared in

accordance with paragraph 68(2)(a)(i) of Chapter 14 of The Rules Governing the Listing of

Securities on the Stock Exchange , and solely for the purposes of inclusion in the circular to be

issued by the Company in connection with the MS Disposal.

The amounts included in the Unaudited Consolidated Financial Information of the Makerston

Group have been recognised and measured in accordance with the relevant accounting policies of

the Company adopted in the preparation of the consolidated financial statements of the Company

and its subsidiaries for the relevant years or period, which conform with Hong Kong Financial

Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants (the

“HKICPA”). The Unaudited Consolidated Financial Information does not contain sufficient

information to constitute a complete set of financial statements as defined in Hong Kong

Accounting Standard (“HKAS”) 1 “Presentation of Financial Statements” nor an interim report as

defined in HKAS 34 “Interim Financial Reporting” issued by the HKICPA.

APPENDIX IV PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

IV – 1

1. BASIS OF PREPARATION OF THE PRO FORMA FINANCIAL INFORMATION OF THE

REMAINING GROUP

The following is a summary of the illustrative pro forma consolidated statements of financial

position, pro forma consolidated statements of profit or loss and other comprehensive income and

pro forma consolidated statements of cash flows (collectively referred to as the “Pro Forma Financial

Information”), which have been prepared to illustrate the effects of (i) the disposal of the entire equity

interest in and corresponding shareholder’s loan due from Eagle Spirit Holdings Limited (the “ES

Disposal”) ; (ii) the disposal of the entire equity interest in and corresponding shareholder’s loan due from

Makerston Limited (the “MS Disposal”); and (iii) both of the ES Disposal and MS Disposal.

The Pro Forma Financial Information of the Group has been prepared by the Directors in

accordance with Paragraph 4.29 of the Listing Rules for illustrative purposes only, based on their

judgments, estimations and assumptions, and because of its hypothetical nature, it may not give a true

picture of the financial position of the Group as at 30 June 2014 or at any future date or the results and

cash flows of the Group for the year ended 31 December 2013 or for any future period.

Pro forma consolidated statement of financial position of the Remaining Group

The pro forma consolidated statement of financial position of the Remaining Group has

been prepared based on the unaudited condensed consolidated statement of financial position of

the Group as at 30 June 2014, which has been extracted from the published interim report of the

Company for the six months ended 30 June 2014, with the pro forma adjustments relating to the ES

Disposal and/or MS Disposal, which include, amongst others, the deconsolidation of the assets and

liabilities attributable to the ES Disposal and/or MS Disposal as explained in the notes below and

other adjustments directly attributable to the transactions and factually supportable.

Pro forma consolidated statement of profit or loss and other comprehensive income and pro

forma consolidated statement of cash flows of the Remaining Group

The pro forma consolidated statement of profit or loss and other comprehensive income and

pro forma consolidated statement of cash flows of the Remaining Group have been prepared based

on the audited consolidated statement of profit or loss and other comprehensive income and audited

consolidated statement of cash flows of the Group for the year ended 31 December 2013, which has

been extracted from the annual report of the Company for the year then ended, with the pro forma

adjustments relating to the ES Disposal and/or MS Disposal, which include, amongst others, the

deconsolidation of the results and the exclusion of the cash flows attributable to the ES Disposal

and/or MS Disposal respectively, as explained in the notes below and other adjustments directly

attributable to the transactions and factually supportable.


IV – 2

The Pro Forma Financial Information should be read in conjunction with the historical

financial information of the Group as set out in the published interim report of the Company for the

six months ended 30 June 2014 and the published annual report of the Company for the year ended

31 December 2013 and other financial information included elsewhere in this circular.

The Pro Forma Financial Information of the Group is presented in three scenarios as follows:

Scenario I: Assuming the ES Disposal ha d been completed on 30 June 2014 or 1

January 2013 for the purposes of the pro forma consolidated statement of

financial position, pro forma consolidated statement of profit or loss and

other comprehensive income and pro forma consolidated statement of cash

flows respectively and the Makerston Agreement lapsed;

Scenario II: Assuming the MS Disposal ha d been completed on 30 June 2014 or 1

January 2013 for the purposes of the pro forma consolidated statement of

financial position, pro forma consolidated statement of profit or loss and

other comprehensive income and pro forma consolidated statement of cash

flows respectively and the Eagle Spirit Agreement lapsed; and

Scenario III: Assuming both the ES Disposal and MS Disposal ha d been completed on 30

June 2014 or 1 January 2013 for the purposes of the pro forma consolidated

statement of financial position, pro forma consolidated statement of profit or

loss and other comprehensive income and pro forma consolidated statement

of cash flows respectively.


IV – 3

PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAS AT 30 JUNE 2014

Scenario I – Assuming the ES Disposal ha d been completed on 30 June 2014 or 1 January 2013 for the purposes of the pro forma consolidated statement of financial position, pro forma consolidated statement of profit or loss and other comprehensive income and pro forma consolidated statement of cash flows respectively and the Makerston Agreement lapsed

The Groupas at

30 June 2014 Pro forma adjustments

Subtotal ofpro forma

adjustments of ES Disposal

The RemainingGroup as at

30 June 2014after the

ES DisposalHK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

(Unaudited) Note 1 Note 2 Note 3

Non-current assetsProperty, plant and equipment 536,480 (839) – – (839) 53 5,641

Investment properties 279,000 – – – – 279,000

Interest in a joint venture 193,725 (193,725) – – (193,725) –

Interest in an associate 263,512 – – – – 263,512

Amount due from a joint venture 299,078 (299,078) – – (299,078) –

Promissory notes receivable – – – 217,000 217,000 217,000

Available-for-sale investments 31,638 – – – – 31,638

Club debentures, at cost less impairment 520 (520) – – (520) –

Other assets 16,000 (16,000) – – (16,000) –

1,619,953 (510,162) – 217,000 (293,162) 1,326,791

Current assetsInventories 3,315 (550) – – (550) 2,765

Trade and other receivables 794,688 (10,844) 30,880 – 20,036 814,724

Investments held for trading 368 – – – – 368

Amount due from fellow subsidiaries – (88) 88 – – –

Bank balances and cash 665,883 (11,502) – 251,807 240,305 906,188

1,464,254 (22,984) 30,968 251,807 259,791 1,724,045

Current liabilitiesTrade and other payables 74,518 (19,262) 88 – (19,174) 55,344

Tax liabilities 77,452 – – – – 77,452

Borrowings – amount due within one year 10,000 – – – – 10,000

Amount due to immediate holding company – (36,619) – 36,619 – –

Amounts due to fellow subsidiaries – (30,880) 30,880 – – –

Amount due to a non-controlling shareholder of a subsidiary 9,271 – – – – 9,271

171,241 (86,761) 30,968 36,619 (19,174) 152,067

Net current assets 1,293,013 63,777 – 215,188 278,965 1,571,978

Total assets less current liabilities 2,912,966 (446,385) – 432,188 (14,197) 2,898,769

Non-current liabilitiesBorrowings – amount due after one year 250,000 – – – – 250,000

Deferred taxation 58,152 – – – – 58,152

308,152 – – – – 308,152

2,604,814 (446,385) – 432,188 (14,197) 2,590,617

Capital & reservesShare Capital 6,577 – – – – 6,577

Reserves 2,362,646 – – (14,197) (14,197) 2,348,449

Equity attributable to owners of the parent 2,369,223 – – (14,197) (14,197) 2,355,026

Non-controlling interests 235,591 – – – – 235,591

Total equity 2,604,814 – – (14,197) (14,197) 2,590,617


IV – 4

PRO FORMA CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOMEFOR THE YEAR ENDED 31 DECEMBER 2013

Scenario I – Assuming the ES Disposal ha d been completed on 30 June 2014 or 1 January 2013 for the purposes of the pro forma consolidated statement of financial position, pro forma consolidated statement of profit or loss and other comprehensive income and pro forma consolidated statement of cash flows respectively and the Makerston Agreement lapsed

The Groupfor the

year ended31 December

2013 Pro forma adjustments



The RemainingGroup for the


2013immediately

after theES Disposal

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000(Audited) Note 4 Note 5 Note 6 Note 7

Turnover 447,220 (125,17 9) – – – (125,17 9) 322,04 1

Direct operating costs (331,933) 57,796 – – – 57,796 (274,137)

Gross profit 115,287 (67,38 3) – – – (67,38 3) 47,90 4

Interest income 1,829 420 28,210 – 28,630 30,459

Other income, gains and losses 5,433 (30,185) 27,386 – – (2,799) 2,634

Distribution and selling expenses (4,613) – – – – – (4,613)

Administrative expenses (223,485) 46,912 (27,386) – – 19,526 (203,959)

Finance costs (32,283) 17,303 (420) – – 16,883 (15,400)

Gain on deemed disposal of a subsidiary 781,773 – – – – – 781,773

Impairment loss recognised in respect of

available-for-sale investment (32,239) – – – – – (32,239)


property, plant and equipment (50,407) – – – – – (50,407)

Impairment loss recognised in respect of other assets (11,160) – – – – – (11,160)

(Loss) gain on disopsal of subsidiaries (20,059) – – – (14,197) (14,197) (34,256)

Loss on disposal of property, plant and equipment (5,742) – – – – – (5,742)

Gain on disposal of a joint venture 5,166 – – – – – 5,166

Reversal of impairment losses on amount

due from a joint venture 7,089 – – – – – 7,089

Decrease in fair value of investment properties (30,108) – – – – – (30,108)

Share of result of an associate (1,223) – – – – – (1,223)

Share of result of a joint venture (3,074) – – – – – (3,074)

Profit before taxation 502,184 (33,35 3) – 28,210 (14,197) (19,340) 482,844

Income tax expenses (59,086) 1,51 4 – – – 1,51 4 (57,57 2)

Profit (loss) for the year 443,098 (31,839) – 28,210 (14,197) (17,826) 425,272

Other comprehensive (expense) incomeItems that may be reclassified subsequently to profit or loss

Exchange difference arising on translation of

financial statements of foreign operations 29,182 – – – – – 29,182

Reclassification of translation reserve to profit or

loss upon deemed disposal of a subsidiary (125,543) – – – – – (125,543)

Reclassification of translation reserve to profit or

loss upon disposal of a subsidiary (3,526) – – – – – (3,526)

(99,887) – – – – – (99,887)

Total comprehensive income (expense) for the year 343,211 (31,839) – 28,210 (14,197) (17,826) 325,385

Profit (loss) for the year attributable to:Owners of the Company 381,966 (3 1, 839) – 28,210 (14,197) (17,826) 364,140

Non-controlling interests 61,132 – – – – – 61, 132

443,098 (31,839) – 28,210 (14,197) (17,826) 425,272

Total comprehensive income (expense) attributable to:Owners of the Company 280,569 ( 31, 839) – 28,210 (14,197) (17,826) 262,743

Non-controlling interests 62,642 – – – – – 62,642

343,211 (31,839) – 28,210 (14,197) (17,826) 325,385


IV – 5

PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOW

FOR THE YEAR ENDED 31 DECEMBER 2013

Scenario I – Assuming the ES Disposal ha d been completed on 30 June 2014 or 1 January

2013 for the purposes of the pro forma consolidated statement of financial position, pro forma

consolidated statement of profit or loss and other comprehensive income and pro forma

consolidated statement of cash flows respectively and the Makerston Agreement lapsed

The Groupfor the







2013immediately


HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

(Audited) Note 6 Note 7 Note 8 Note 9 Note 10

Cash flows from operating activities

Profit for the year 443,098 28,210 (14,197) (31,839) – – (17,826) 425,272

Adjustments for:

Share of result of an associate 1,223 – – – – – – 1,223

Share of result of a joint venture 3,074 – – – – – – 3,074

Income taxes – – – (1,51 4) – – (1,51 4) (1,514)

Depreciation of property, plant and equipment 95,859 – – (12,396) – – (12,396) 83,463

Interest income (1,829) (28,210) – 102 – – (28,108) (29,937)

Other interest expenses 32,283 – – (17,303) – – (17,303) 14,980

Loss on disposal of property, plant and equipment 5,742 – – – – – – 5,742

Fair value gain on derivative financial instrument (650) – – – – – – (650)


property, plant and equipment 50,407 – – – – – – 50,407

Impairment loss recognised in respect of other assets 11,160 – – – – – – 11,160


other receivables 7,871 – – – – – – 7,871

Gain on disposal of a joint venture (5,166) – – – – – – (5,166)


due from a joint venture (7,089) – – – – – – (7,089)


available-for-sale investment 32,239 – – – – – – 32,239

Increase in fair value of investments held for trading (245) – – – – – – (245)

Gain on deemed disposal of a subsidiary (715,029) – – – – – – (715,029)

Loss on disposal of subsidiaries 20,059 – 14,197 – – – 14,197 34,256

Loss on disposal of investments held for trading 162 – – – – – – 162

Decrease in fair value of investment properties 30,108 – – – – – – 30,108

Operating cash flows before movements in working capital 3,277 – – (62,9 50) – – (62,9 50) (59,67 3)

Movements in working capital

Increase in trade and other receivables (91,345) – – 2, 833 – – 2, 833 (88, 512)

Decrease in inventories 2,695 – – 163 – – 163 2,858

Increase in trade and other payables 18,391 – – ( 2, 792) 1,399 – ( 1, 393) 16, 998

Increase in amounts due from fellow subsidiaries – – – 1,399 (1,399) – – –

(70,259) – – 1, 603 – – 1, 603 ( 68, 656)

Cash used in operations (66,982) – – (61, 347) – – (61, 347) ( 128, 329)

Taxation paid in the People’s Republic of China (4,668) – – – – – – (4,668)

Net cash used in operating activities (71,650) – – (61, 347) – – (61, 347) ( 132, 997)


IV – 6

The Groupfor the







2013immediately


HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

(Audited) Note 6 Note 7 Note 8 Note 9 Note 10

Cash flows from investing activities

Additions to property, plant and equipment and

investment properties (62,473) – – 29,535 – – 29,535 (32,938)

Placement of pledged bank deposits (307,816) – – 1,737 – – 1,737 (306,079)

Disposal of derivative financial instrument (2,080) – – – – – – (2,080)

Disposal of interest in a joint venture 4 – – – – – – 4

Withdrawal of pledged bank deposits 11,780 – – – – – – 11,780

Proceeds from disposal of property, plant and equipment 264 – – – – – – 264

Repayment from an investee 41,077 – – – – – – 41,077

Interest received 1,829 12,500 – (102) – – 12,398 14,227

Repayment of amounts due from former fellow subsidiaries – – – – 66,874 – 66,874 66,874

Proceeds from disposals of subsidiaries 46,999 – – – – 231,501 231,501 278,500

Proceeds from deemed disposal of a subsidiary 297,311 – – – – – – 297,311

Net cash from investing activities 26,895 12,500 – 31, 170 66,874 231,501 342,045 368,940

Cash from financing activities

New borrowings raised 195,000 – – (195,000) – – (195,000) –

Repayment of bank and other borrowings (22,456) – – – – – – (22,456)

Purchase of shares of a subsidiary from

non-control shareholders (13,500) – – – – – – (13,500)

Decrease in amount due to fellow subsidiaries – – – 66,874 (66,874) – – –

Interest paid (32,283) – – 17,403 – – 17,403 (14,880)

Net cash from financing activities 126,761 – – (110,723) (66,874) – (177,597) (50,836)

Net increase (decrease) in cash and cash equivalents 82,006 12,500 – (140,900) – 231,501 103,101 185,107

Cash and cash equivalents at beginning of the year 364,066 – – (20,306) – – (20,306) 343,760

Effect of foreign exchange rate changes 3,315 – – – – – – 3,315

Cash and cash equivalents at end of the year, represented by

Bank balances and cash 449,387 12,500 – (161,206) – 231,501 82,795 532,182

Bank balances included in assets classified as held for sale (22,114) – – 22,114 – – 22,114 –

427,273 12,500 – (139,092) – 231,501 104,909 532,182


IV – 7

Notes to the Pro Forma Financial Information

Scenario I – Assuming the ES Disposal ha d been completed on 30 June 2014 or 1 January 2013 for the purposes of the

pro forma consolidated statement of financial position, pro forma consolidated statement of profit or loss and other

comprehensive income and pro forma consolidated statement of cash flows respectively and the Makerston Agreement

lapsed

(1) The adjustment represents the deconsolidation of the assets and liabilities of the Eagle Spirit Group as of 30 June

2014 , as extracted from the review report of the Eagle Spirit Group set out in Appendix II to this circular, from the

Group’s unaudited condensed consolidated statement of financial position as at 30 June 2014 as if the ES Disposal

were completed and the Group’s control over the Eagle Spirit Group were lost on 30 June 2014.

(2) The adjustment represents the reclassification of amounts due from (to) fellow subsidiaries to other payables and

other receivables respectively, as the Eagle Spirit Group is no longer fellow subsidiaries of the Group, as if the ES

Disposal were completed and control over the Eagle Spirit Group by the Group were lost on 30 June 2014.

(3) The adjustment represents the pro forma loss arising from the ES Disposal as if the ES Disposal were completed and

the Group’s control over the Eagle Spirit Group were lost on 30 June 2014 calculated as follows:

HK$’000

Pro Forma total fair value of ES Consideration (note a) 470,807

Estimated costs directly attributable to the ES Disposal (note b) (2,000)

468,807

Carrying amount of net assets of the Eagle Spirit Group (note c ) (446,385)

Carrying amount of the ES Sale Loan (note c) (36,619)

Pro forma loss on the ES Disposal (14,197)


IV – 8

(a) Pursuant to the Eagle Spirit Agreement, the ES Consideration is determined based on the financial

information of the Eagle Spirit Group as of ES Completion Date in accordance with the following formula:

Pro forma amounts

as at 30 June 2014

HK$’000

Cash consideration 530,000

Plus:

40% of the consolidated ES Net Current Assets (Liabilities) of More Star (2,035)

the ES Net Current Assets of Eagle Spirit 312,413

the ES Net Current Assets (Liabilities) of Rosedale Kowloon (21,765)

the consolidated ES Net Current Assets (Liabilities) of HK Macau (296,662)

the combined ES Net Current Assets (Liabilities) of Rosy Universe (18,144)

503,807

Pursuant to the Eagle Spirit Agreement, the ES Consideration shall not exceed HK$566,000,000. Given the

pro forma ES Consideration calculated by the above formula using the financial information as at 30 June

2014 as if it were the ES Completion Date does not exceed HK$566,000,000, for the purpose of preparation

of the pro forma consolidated statement of financial position, the pro forma ES Consideration is assumed to

be HK$ 503,807,000 which will be satisfied as follows:

(i) HK$250,000,000 by the issue of the ES Note ; and

(ii) the balance (i.e. HK$ 253,807,000) in cash.

An analysis of the pro forma fair value of the ES Consideration assuming the ES Disposal had taken

place on 30 June 2014 is set out as follows:

Face value

Pro forma

total fair value of

ES Consideration

HK$’000 HK$’000

ES Note 250,000 217,000

Cash consideration 253,807 253,807

Total consideration 503,807 470,807

The ES Note is to be issued by ITCP, bearing coupon interest at 5% per annum, payable semi-

annually in arrears, and with maturity period of 2 years. At initial recognition, the pro forma fair

value of the ES Note is estimated based on the valuation report issued by an independent firm of

valuers, which is measured at the present value of contractual future cash flows discounted at the

effective interest rate of 13% per annum, taking into account the credit standing of ITCP and the

remaining time to maturity. Pursuant to the terms of the ES Note, ITCP has an option to early

redeem the ES Note at par plus accrued outstanding interest. In the opinion of the Directors, the

fair value of the early redemption option is insignificant. The fair values of the ES Note and the

early redemption option embedded derivative are subject to change at ES Completion Date, so are

the costs of ES Disposal and carrying amounts of net assets of the Eagle Spirit Group and ES Sale

Loan, and therefore the actual gain or loss is subject to change at ES Completion Date.


IV – 9

(b) The estimated direct transaction costs to be incurred in connection with the ES Disposal is assumed to be

approximately HK$2,000,000, and the actual costs of the ES Disposal is subject to change at ES Completion

Date.

(c) The amounts are extracted from the review report for the Eagle Spirit Group set out in Appendix II to this

circular .

(4) The adjustment represents the deconsolidation of the results attributable to the Eagle Spirit Group for the year ended

31 December 2013, as extracted from the review report for the Eagle Spirit Group set out in Appendix II to this

circular, from the audited consolidated statement of profit or loss and other comprehensive income of the Group for

the year ended 31 December 2013 as if the ES Disposal had taken place on 1 January 2013. This adjustment is not

expected to have a continuing effect on the Remaining Group.

(5) The adjustment represents the reinstatement of intra-group management fee and secondment fee income amounting

to HK$27,386,000 received from and interest expenses of HK$420,000 paid to former fellow subsidiaries of the

Eagle Spirit Group for the year ended 31 December 2013, and the related administrative expenses of HK$27,386,000

incurred and other income of HK$420,000 received by the Remaining Group, as the Eagle Spirit Group are no

longer fellow subsidiaries of the Remaining Group after completion of the ES Disposal. This adjustment is not


(6) The adjustment represents effective interest income of HK$28,210,000 in respect of the ES Note with principal

value of HK$250 million, discounted at the effective interest rate of 13% per annum. The interest received is

calculated based on its coupon interest at 5% per annum, which is reflected in the pro forma consolidated statement

of cash flows for the year ended 31 December 2013. This adjustment is expected to have a continuing effect on the

Remaining Group.

(7) The adjustment represents the recognition of the pro forma loss arising from the ES Disposal as if the ES Disposal

were completed and the Group’s control over the Eagle Spirit Group were lost on 1 January 2013. In considering the

Eagle Spirit Group only holding 40% interest in More Star in the transaction of the ES Disposal, it is not meaning to

calculate a pro forma gain or loss based on the assets and liabilities of the Eagle Spirit Group as at 1 January 2013

since the Eagle Spirit Group held 100% interest in More Star as at 1 January 2013. Therefore, for the purposes of

the pro forma consolidated statement of profit or loss and other comprehensive income and pro forma consolidated

statement of cash flows, it is more representative to assume that the pro forma loss on the ES Disposal is equal to

HK$14,197,000 as calculated on the same basis as set out in note 3 above.

(8) The adjustment represents the exclusion of the cash flows of the Eagle Spirit Group as extracted from the review

report for the Eagle Spirit Group set out in Appendix II to this circular, from the audited consolidated statement of

cash flows of the Group for the year ended 31 December 2013, as if the ES Disposal had taken place on 1 January

2013. This adjustment is not expected to have a continuing effect on the Remaining Group.

(9) The adjustment represents the reclassification of the intra-group cash flows for the amounts due from fellow

subsidiaries of HK$1,399,000 and decrease in amount due to fellow subsidiaries of HK$ 66,874,000, as the Eagle

Spirit Group is no longer related to the Remaining Group after completion of the ES Disposal. This adjustment is

not expected to have a continuing effect on the Remaining Group.

(10) The net cash inflow of the proceeds from the ES Disposal of HK$ 231,501,000 represents the pro forma estimated

cash consideration of HK$ 253,807,000 (note 3(a)) less (i) estimated pro forma direct costs of HK$2,000,000 such

as legal and professional fees; and (ii) cash and cash equivalents of the Eagle Spirit Group as at 1 January 2013 of

HK$20,306,000, as if the ES Disposal had taken place on 1 January 2013. This adjustment is not expected to have a

continuing effect on the Remaining Group.


IV – 10

PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2014

Scenario II – Assuming the MS Disposal ha d been completed on 30 June 2014 or 1 January



consolidated statement of cash flows respectively and the Eagle Spirit Agreement lapsed

The Groupas at

30 June 2014 Pro forma adjustments


adjustments of MS Disposal



MS DisposalHK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

(Unaudited) Note 1 Note 2 Note 3 Note 4

Non-current assetsProperty, plant and equipment 536,480 – – – – – 536,480

Investment properties 279,000 – – – – – 279,000

Interest in a joint venture 193,725 – – – – – 193,725

Interest in an associate 263,512 (263,512) – – – (263,512) –

Amount due from a joint venture 299,078 – – – – – 299,078

Promissory notes receivable – – – – 217,000 217,000 217,000

Available-for-sale investments 31,638 – – – – – 31,638

Club debentures, at cost less impairment 520 – – – – – 520

Other assets 16,000 – – – – – 16,000

1,619,953 (263,512) – – 217,000 (46,512) 1,573,441

Current assetsInventories 3,315 – – – – – 3,315

Trade and other receivables 794,688 (665,952) 665,952 54 54 794,742

Investments held for trading 368 – – – – – 368

Bank balances and cash 665,883 (61) – – 49,758 49,697 715,580

1,464,254 (666,013) 66 5,952 54 49,758 49,751 1,514,005

Current liabilitiesTrade and other payables 74,518 (10) – – – (10) 74,508

Tax liabilities 77,452 (66,744) – – – (66,744) 10,708

Tax indemnity payable – – – – 66,744 66,744 66,744

Borrowings – amount due within one year 10,000 – – – – – 10,000

Amount due to immediate holding company – (217,725) – – 217,725 – –

Amounts due to fellow subsidiaries – (54) – 54 – – –

Amount due to a non-controlling shareholder

of a subsidiary 9,271 – – – – – 9,271

171,241 (284,533) – 54 284,469 (10) 171,231

Net current assets 1,293,013 (381,480) 665,952 – (234,711) 49,761 1,342,774

Total assets less current liabilities 2,912,966 (644,992) 665,952 – (17,711) 3,249 2,916,215

Non-current liabilitiesBorrowings – amount due after one year 250,000 – – – – – 250,000

Deferred taxation 58,152 – – – – – 58,152

308,152 – – – – – 308,152

2,604,814 (644,992) 665,952 – (17,711) 3,249 2,608,063

Capital & reservesShare Capital 6,577 – – – – – 6,577

Reserves 2,362,646 – – – 2,882 2,882 2,365,528

Equity attributable to owners of the parent 2,369,223 – – – 2,882 2,882 2,372,105

Non-controlling interests 235,591 – – – 367 367 235,958

Total equity 2,604,814 – – – 3,249 3,249 2,608,063


IV – 11

PRO FORMA CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER







The Groupfor the






year ended31 December 2013

immediatelyafter the

MS DisposalHK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

(Audited) Note 5 Note 6 Note 7 Note 8 Note 9 Note 10

Turnover 447,220 (80,075) – – – – – (80,075) 367,145

Direct operating costs (331,933) 57,322 – – – – – 57,322 (274,611)

Gross profit 115,287 (22,753) – – – – – (22,753) 92,534

Interest income 1,829 – – – – 28,210 – 28, 210 30, 039

Other income, gains and losses 5,433 (7,15 2) – – 8,417 – – 1,26 5 6,69 8

Distribution and selling expenses (4,613) – – – – – – – (4,613)

Administrative expenses (223,485) 37,35 2 – – (8,417) – – 28,93 5 (194,55 0)

Finance costs (32,283) 7,114 – – – – – 7,114 (25,169)

Gain on deemed disposal of a subsidiary 781,773 (656,230) – (125,543) – – – (781,773) –


available-for-sale investments (32,239) – – – – – – – (32,239)


property, plant and equipment (50,407) – – – – – – – (50,407)

Impairment loss recognised in respect of other assets (11,160) – – – – – – – (11,160)

(Loss) gain on disposal of subsidiaries (20,059) – – – – – 3,249 3,249 (16,810)

Loss on disposal of property, plant and equipment (5,742) – – – – – – – (5,742)

Gain on disposal of a joint venture 5,166 – – – – – – – 5,166


due from a joint venture 7,089 – – – – – – – 7,089

Decrease in fair value of investment properties (30,108) – – – – – – – (30,108)

Share of result of an associate (1,223) 1,223 – – – – – 1,223 –

Share of result of a joint venture (3,074) – – – – – – – (3,074)

Profit (loss) before taxation 502,184 (640,446) – (125,543) – 28,210 3,249 (734,530) (232,346)

Income tax expenses (59,086) 60, 149 – – – – – 60,149 1,063

Profit (loss) for the year 443,098 ( 580, 297) – (125,543) – 28,210 3,249 (674,381) (231,283)

Other comprehensive (expense) incomeItems that may be reclassified subsequently to

profit or loss:


financial statements of foreign operations 29,182 – – (16,732) – – – (16,732) 12,450

Reclassification adjustment of translation reserve

upon deemed disposal of a subsidiary (125,543) – – 125,543 – – – 125,543 –

Reclassification adjustment of

translation reserve upon disposal of a subsidiary (3,526) – – – – – – – (3,526)

(99,887) – – 108,811 – – – 108,811 8,924


IV – 12

The Groupfor the






year ended31 December 2013

immediatelyafter the

MS DisposalHK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

(Audited) Note 5 Note 6 Note 7 Note 8 Note 9 Note 10

Item that will not be reclassified subsequently to

profit or loss:


functional currency to presentation currency – (16,732) – 16,732 – – – – –

Total comprehensive income (expense) for the year 343,211 ( 597, 029) – – – 28,210 3,249 (565,570) (222,359)

Profit (loss) for the year attributable to:Owners of the Company 381,966 (580,297) 68,475 (125,543) – 24,881 2,866 (609,618) (227,652)

Non-controlling interests 61,132 – (68,475) – – 3,329 383 (64,763) (3,631)

443,098 ( 580, 297) – (125,543) – 28,210 3,249 (674,381) (231,283)

Total comprehensive income (expense) attributable to:Owners of the Company 280,569 (597,029) 70,449 – – 24,881 2,866 (498,833) (218,264)

Non-controlling interests 62,642 – (70,449) – – 3,329 383 (66,737) (4,095)

343,211 ( 597,029) – – – 28,210 3,249 (565,570) (222,359)


IV – 13

PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOW






The Groupfor the

year ended31 December 2013 Pro forma adjustments




year ended31 December 2013immediately after

the MS DisposalHK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000(Audited) Note 7 Note 9 Note 10 Note 11 Note 12 Note 13

Cash flows from operating activities

Profit (loss) for the year 443,098 (125,543) 28,210 3,249 ( 580, 297) – – (674,381) (231,283)

Adjustments for:

Share of result of an associate 1,223 – – – (1,223) – – (1,223) –

Share of result of a joint venture 3,074 – – – – – – 3,074

Income tax – – – – 6,595 – – 6,595 6, 595

Depreciation of property, plant and equipment 95,859 – – – (25,385) – – (25,385) 70,474

Interest income (1,829) – (28,210) – 80 – – (28,130) (29,959)

Other interest expenses 32,283 – – – (7,114) – – (7,114) 25,169

Loss on disposal of property, plant and equipment 5,742 – – – (23) – – (23) 5,719

Fair value gain on derivative financial instrument (650) – – – 650 – – 650 –


property, plant and equipment 50,407 – – – – – – – 50,407

Impairment loss recognised in respect of other assets 11,160 – – – – – – – 11,160


other receivables 7,871 – – – – – – – 7,871

Gain on disposal of a joint venture (5,166) – – – – – – – (5,166)

Reversal of impairment losses on amount due

from a joint venture (7,089) – – – – – – – (7,089)


available-for-sale investment 32,239 – – – – – – – 32,239

Increase in fair value of investments held for trading (245) – – – – – – – (245)

Gain on deemed disposal of a subsidiary (715,029) 125,543 – – 589, 486 – – 715,029 –

Loss (gain) on disposal of subsidiaries 20,059 – – (3,249) – – – (3,249) 16,810

Loss on disposal of investments held for trading 162 – – – – – – – 162

Decrease in fair value of investment properties 30,108 – – – – – – – 30,108

Operating cash flows before movements

in working capital 3,277 – – – (17,231) – – (17,231) (13,954)


(Increase) decrease in trade and other receivables (91,345) – – – 3, 509 – – 3, 509 ( 87, 836)

Decrease in inventories 2,695 – – – 158 – – 158 2,853

Increase in trade and other payables 18,391 – – – 4,468 – 463 4,931 23,322

Decrease in amounts due to fellow subsidiaries – – – – 463 – ( 463) – –

(70,259) – – – 8, 598 – – 8, 598 ( 61, 661)

Cash used in operations (66,982) – – – ( 8, 633) – – ( 8, 633) ( 75, 615)

Taxation paid in the People’s Republic of China (4,668) – – (4,668)

Net cash used in operating activities (71,650) – – – ( 8, 633) – – ( 8, 633) ( 80, 283)


Additions to property, plant and equipment and

investment properties (62,473) – – – 24,171 – – 24,171 (38,302)

Placement of pledged bank deposits (307,816) – – – 297,331 – – 297,331 (10,485)

Acquisition of subsidiaries – – – – – – – – –

Disposal of derivative financial instrument (2,080) – – – 2,080 – – 2,080 –

Disposal of interest in a joint venture 4 – – – – – – – 4

Withdrawal of pledged bank deposits 11,780 – – – – – – – 11,780


plant and equipment 264 – – – (5) – – (5) 259

Repayment from an investee 41,077 – – – – – – – 41,077

Interest received 1,829 – 12,500 – (80) – – 12,420 14,249

Advance to Makerston – – – – – – (85,991) (85,991) (85,991)

Repayment from Makerston – – – – – – 62,265 62,265 62,265

Proceeds from disposal of subsidiaries 46,999 – – – – 40,767 – 40,767 87,766

Proceeds from deemed disposal of a subsidiary 297,311 – – – (297,311) – – (297,311) –

Net cash from investing activities 26,895 – 12,500 – 26,186 40,767 ( 23, 726) 55,727 82,622


IV – 14


New borrowings raised 195,000 – – – – – – – 195,000

Repayment of bank and other borrowings (22,456) – – – 8,505 – – 8,505 (13,951)

Purchase of shares of a subsidiary

from non-control shareholders (13,500) – – – – – – – (13,500)

Advance from immediate holding company – – – – (85,991) – 85,991 – –

Repayment to immediate holding company – – – – 62,265 – (62,265) – –

Interest paid (32,283) – – – 7,048 – – 7,048 (25,235)

Net cash from financing activities 126,761 – – – ( 8, 173) – 23, 726 15,553 142,314

Net increase in cash and cash equivalents 82,006 – 12,500 – 9,380 40,767 – 62,647 144,653

Cash and cash equivalents at beginning of the year 364,066 – – – (8,991) – – (8,991) 355,075

Effect of foreign exchange rate changes 3,315 – – – (832) – – (832) 2,483

Cash and cash equivalents at end of the year,

represented by

Bank balances and cash 449,387 – 12,500 – (443) 40,767 – 52,824 502,211

Bank balances included in assets classified

as held for sale (22,114) – – – – – – – (22,114)

427,273 – 12,500 – (443) 40,767 – 52,824 480,097

The Groupfor the

year ended31 December 2013 Pro forma adjustments




year ended31 December 2013immediately after

the MS DisposalHK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000(Audited) Note 7 Note 9 Note 10 Note 11 Note 12 Note 13


IV – 15


Scenario II – Assuming the MS Disposal had been completed on 30 June 2014 or 1 January 2013 for the purposes

of the pro forma consolidated statement of financial position, pro forma consolidated statement of profit or loss and

other comprehensive income and pro forma consolidated statement of cash flows respectively and the Eagle Spirit

Agreement lapsed

(1) The adjustment represents the deconsolidation of the assets and liabilities of the Makerston Group as at 30 June

2014 , as extracted from the review report of the Makerston Group set out in Appendix III to this circular, from the

Group’s unaudited condensed consolidated statement of financial position as at 30 June 2014 as if the MS Disposal

were completed and the Group’s control over the Makerston Group were lost on 30 June 2014.

( 2) The adjustment represents, the arrangement pursuant to the Makerston Agreement in respect of which the

Compensated Amount from the Investor of approximately HK$ 665,952,000 under the Capital Increase Agreement

is recoverable by the MS Vendor from the Purchaser upon receipt of the Compensated Amount by the Makerston

Group.

( 3) The adjustment represents the reclassification of amounts due to fellow subsidiaries to other receivables, as the

Makerston Group will no longer be fellow subsidiaries of the Group after the completion of the MS Disposal, as if

the MS Disposal were completed and the Group’s control over the Makerston Group were lost on 30 June 2014.

( 4) The adjustment represents the pro forma gain on the disposal as if the MS Disposal were completed and the Group’s

control over the Makerston Group were lost on 30 June 2014 calculated as follows:

HK$’000

Pro forma total fair value of MS Consideration (note a) 268,758

Estimated costs directly attributable to the MS Disposal (note b) (2,000)

266,758

Carrying amount of net assets of the Makerston Group (note c) (644,992)

Compensated Amount recoverable from the Purchaser (note 2) 665,952

Carrying amount of MS Sale Loan (note c) ( 217,725)

Less: Tax indemnity payables undert aken by the Remaining Group (note d) (66,744)

Pro forma gain on the MS Disposal 3,249

Attributable to:

Owners of the Company 2,882

Non-controlling interests (approximately 11.3%) (note e) 367

3,249


IV – 16

Notes:

(a) Pursuant to the Makerston Agreement, the MS Consideration is determined based on the financial

information of the Makerston Group as of MS Completion Date in accordance with the following formula:

Pro forma amounts

as at 30 June 2014

HK$’000

Cash consideration 256,000

Plus:

the MS Net Current Assets of Makerston 152,764

the MS Net Current Assets (Liabilities) of DS Eastin (152,767)

20% of the MS Net Current Assets of Rosedale Beijing 28,933

20% of the amount of land premium paid by Rosedale Beijing out of

its cash on hand during the period between the date of

the Makerston Agreement and the MS Completion Date 16,828

Pro forma MS Consideration to be received by the Group 301,758

Pursuant to the Makerston Agreement, the MS Consideration is capped at HK$324,000,000. Given the pro

forma MS Consideration calculated by the above formula using the financial information as at 30 June 2014

as if it were the MS Completion Date does not exceed HK$324,000,000 , for the purpose of preparation of

this pro forma consolidated statement of financial position, the pro forma MS Consideration is assumed to

be HK$ 301,758,000 which will be satisfied as follows:

(i) HK$250,000,000 by issue of the MS Note ; and

(ii) the balance (i.e. HK$ 51,758,000) in cash.

An analysis of the pro forma fair value of the pro forma MS Consideration assuming the MS

Disposal had taken place on 30 June 2014 is set out as follows:

Face value

Pro forma

total fair value of

MS Consideration

HK$’000 HK$’000

MS Note 250,000 217,000

Cash consideration 51,758 51,758

Total consideration 301,758 268,758


IV – 17

The MS Note is to be issued by ITCP, bearing coupon interest at 5% per annum, payable semi-

annually in arrears, and with maturity period of 2 years. At initial recognition, the pro forma fair

value of the MS Note is estimated based on the valuation report issued by an independent firm of

valuers, which is measured at the present value of contractual future cash flows discounted at the

effective interest rate of 13% per annum, taking into account the credit standing of ITCP and the

remaining time to maturity. Pursuant to the terms of the MS Note, ITCP has an option to early

redeem the MS Note at par plus accrued outstanding interest. In the opinion of the Directors, the

fair value of the early redemption option is insignificant. The fair values of the MS Note and the

early redemption option embedded derivative are subject to change at MS Completion Date, so are

the costs of MS Disposal and carrying amounts of net assets of the Makerston Group and MS Sale

Loan, and therefore the actual gain is subject to change at MS Completion Date.

(b) The estimated direct transaction costs to be incurred in connection with the MS Disposal is assumed to

be approximately HK$2,000,000, and the actual costs of the MS Disposal is subject to change at MS

Completion Date.

(c) The amounts are extracted from the review report of the Makerston Group set out in Appendix III to this

circular .

( d) Pursuant to the terms of the Makerston Agreement, the MS Vendor undertakes, among other things, to

the Purchaser that it will fully indemnify the Purchaser, the Makerston Group and the PRC Company

against any taxation and related expenses arising from the Capital Increase Agreement and the transactions

contemplated thereunder.

The amount represents the estimated tax indemnity payables of HK$66,744,000 undertaken by the MS

Vendor in respect of the capital gain on the deemed disposal of Rosedale Beijing which was completed on

29 November 2013 .

(e) As at 1 January 2013, the Group held an effective interest of 88.2% of Makerston. On 21 June 2013, the

Group acquired an additional equity interests of approximately 0.5% of the issued share capital of Apex,

which is an intermediate holding company of Makerston. Following the completion of this transaction, the

Group’s equity interest in Makerston has been increased from approximately 88.2% to 88.7%. As at 30 June

2014, the non-controlling interests held 11.3% interest in Makerston Group.

( 5) The adjustment represents the deconsolidation of the results attributable to the Makerston Group for the year ended

31 December 2013, as extracted from the review report of the Makerston Group as set out in Appendix III to this

circular, from the audited consolidated statement profit or loss and other comprehensive income of the Group for

the year ended 31 December 2013 as if the MS Disposal had taken place on 1 January 2013. This adjustment is not


( 6) The amount represents the results attributable to the non-controlling interests of Apex of approximately of 11.8%

as at 1 January 2013 for deconsolidation of the results of the Makerston Group for the year ended 31 December

2013 as disclosed in note 5 above, as if the MS Disposal had taken place on 1 January 2013. This adjustment is not



IV – 18

( 7) Since the functional currency of the Company is in HK$ whereas that of each of the Makerston Group companies

is RMB, the exchange difference arising from translation of the Makerston Group to HK$ presentation currency is

not subsequently reclassified to profit or loss as presented in the review report of the Makerston Group set out in

Appendix III to this circular; whereas at the Group level such translation difference may be subsequently reclassified

to profit or loss. Accordingly, the accumulated translation difference of HK$125,543,000 arising from Rosedale

Beijing is included as part of the gain on deemed disposal of subsidiaries in the Group’s consolidated statement of

profit or loss and other comprehensive income; whereas such translation difference is excluded from the calculation

of the gain on deemed disposal of subsidiary at the Makerston Group level. This adjustment takes the above into

account. This adjustment is not expected to have a continuing effect on the Remaining Group.

( 8) The adjustment represents the reinstatement of intra-group transactions eliminated for the year ended 31 December

2013 as the Makerston Group will no longer be fellow subsidiar ies of the Remaining Group after the completion of

the MS Disposal. This adjustment is not expected to have a continuing effect on the Remaining Group.

( 9) The adjustment represents the effective interest income of HK$28,210,000 in respect of the MS Note with principal

value of HK$250 million, discounted at the effective interest rate of 13% per annum. The interest received is

calculated based on its coupon interest at 5% per annum, which is reflected in the pro forma consolidated statement

of cash flows for the year ended 31 December 2013. This adjustment is expected to have a continuing effect on the

Remaining Group.

(10) The adjustment represents the recognition of the pro forma gain arising from the MS Disposal as if the MS Disposal

were completed and the Group’s control over the Makerston Group were lost on 1 January 2013. In considering

the Makerston Group only holding 20% interest in Rosedale Beijing in the transaction of the MS Disposal, it is

not meaning to calculate a pro forma gain or loss based on the assets and liabilities of the Makerston Group as at 1

January 2013 since the Makerston Group held 100% interest in Rosedale Beijing as at 1 January 2013. Therefore,

for the purposes of the pro forma consolidated statement of profit or loss and other comprehensive income and pro

forma consolidated statement of cash flows, it is more representative to assume that the pro forma gain on the MS

Disposal is equal to HK$3,249,000 as calculated on the same basis as set out in note 4 above.

As at 1 January 2013, the Group held an effective interest of 88.2% of Makerston, and the non-controlling interests

held 11.8% interest in Makerston Group, and therefore the pro forma gain on the MS Disposal is attributable to:

HK$’000

Owners of the Company 2,866

Non-controlling interests (approximately 11.8%) 383

3,249

( 11) The adjustment represents the exclusion of the cash flows of the Makerston Group, as extracted from the review

report of the Makerston Group set out in Appendix III to this circular, from the audited consolidated statement of

cash flows of the Group for the year ended 31 December 2013, as if the MS Disposal had taken place on 1 January

2013. This adjustment is not expected to have a continuing effect on the Remaining Group.

( 12) The net cash inflow of the proceeds from the MS Disposal of HK$ 40,767,000 represents the pro forma estimated

cash consideration of HK$ 51,758,000 (note 4 (a)) less (i) estimated pro forma direct costs of HK$2,000,000 such

as legal and professional fees; and (ii) cash and cash equivalents of the Makerston Group as at 1 January 2013 of

HK$8,991,000, as if the MS Disposal had taken place on 1 January 2013. This adjustment is not expected to have a

continuing effect on the Remaining Group.

( 13) The adjustment represents the reinstatement of intra-group transactions eliminated for the year ended 31 December

2013 as the Makerston Group is no longer fellow subsidiaries of the Remaining Group after completion of the MS

Disposal. This adjustment is not expected to have a continuing effect on the Remaining Group.


IV – 19

PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAS AT 30 JUNE 2014

Scenario III – Assuming both the ES Disposal and MS Disposal ha d been completed on 30 June 2014 or 1 January 2013 for the purposes of the pro forma consolidated statement of financial position, pro forma consolidated statement of profit or loss and other comprehensive income and pro forma consolidated statement of cash flows respectively

The Groupas at

30 June 2014







ES Disposaland

MS DisposalHK$’000 HK$’000 HK$’000 HK$’000

(Unaudited) Note 1 Note 2

Non-current assetsProperty, plant and equipment 536,480 (8 39) – 535, 641

Investment properties 279,000 – – 279,000

Interest in a joint venture 193,725 (193,725) – –

Interest in an associate 263,512 – (263, 512) –

Amount due from a joint venture 299,078 (299,078) – –

Promissory notes receivable – 217,000 217,000 434,000

Available-for-sale investments 31,638 – – 31,638

Club debentures, at cost less impairment 520 (520) – –

Other assets 16,000 (16,000) – –

1,619,953 (293,162) (46,512) 1,280,279

Current assetsInventories 3,315 ( 550) – 2,7 65

Trade and other receivables 794,688 20, 036 54 814,778

Investments held for trading 368 – – 368


1,464,254 259,791 49,751 1,773,796

Current liabilitiesTrade and other payables 74,518 (19,174) (10) 55,334

Tax liabilities 77,452 – (66,744) 10,708

Tax indemnity payables – – 66,744 66,744

Borrowings – amount

due within one year 10,000 – – 10,000

Amount due to a non-controlling

shareholder of a subsidiary 9,271 – – 9,271

171,241 (19,174) (10) 152,057

Net current assets 1,293,013 278,965 49,761 1,621,739

Total assets less current liabilities 2,912,966 (14,197) 3,249 2,902,018


IV – 20

Non-current liabilitiesBorrowings – amount due after one year 250,000 – – 250,000

Deferred taxation 58,152 – – 58,152

308,152 – – 308,152

2,604,814 (14,197) 3,249 2,593,866

Capital & reservesShare Capital 6,577 – – 6,577

Reserves 2,362,646 (14,197) 2,882 2,351,331

Equity attributable to owners of the parent 2,369,223 (14,197) 2,882 2,357,908

Non-controlling interests 235,591 – 367 235,958

Total equity 2,604,814 (14,197) 3,249 2,593,866

The Groupas at

30 June 2014







ES Disposaland

MS DisposalHK$’000 HK$’000 HK$’000 HK$’000

(Unaudited) Note 1 Note 2


IV – 21

PRO FORMA CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER



Scenario III – Assuming both the ES Disposal and MS Disposal ha d been completed on 30

June 2014 or 1 January 2013 for the purposes of the pro forma consolidated statement of

financial position, pro forma consolidated statement of profit or loss and other comprehensive

income and pro forma consolidated statement of cash flows respectively

The Groupfor the


2013





Pro forma adjustment



2013immediately

after the ES Disposal

and MS Disposal

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

(Audited) Note 1 Note 2 Note 3

Turnover 447,220 (125,17 9) (80,075) – 241,96 6

Direct operating costs (331,933) 57,796 57,322 – (216,815)

Gross profit 115,287 (67,38 3) (22,753) – 25,15 1

Interest income 1,829 28,630 28,210 – 58,669

Other income, gains and losses 5,433 (2,799) 1,26 5 (6,200) (2,301)

Distribution and selling expenses (4,613) – – – (4,613)

Administrative expenses (223,485) 19,526 28,93 5 6,200 (168,824)

Finance costs (32,283) 16,883 7,114 – (8,286)

Gain on deemed disposal of a subsidiary 781,773 – (781,773) – –

Impairment loss recognised in respect of available-

for-sale investments (32,239) – – – (32,239)

Impairment loss recognised in respect of property,

plant and equipment (50,407) – – – (50,407)

Impairment loss recognised in respect of other

assets (11,160) – – – (11,160)

(Loss) gain on disposal of subsidiaries (20,059) (14,197) 3,249 – (31,007)


plant and equipment (5,742) – – – (5,742)

Gain on disposal of a joint venture 5,166 – – – 5,166

Reversal of impairment losses on amount due from

a joint venture 7,089 – – – 7,089

Decrease in fair value of

investment properties (30,108) – – – (30,108)

Share of result of an associate (1,223) – 1,223 – –

Share of result of a joint venture (3,074) – – – (3,074)

Profit (loss) before taxation 502,184 (19,340) (734,530) – (251,686)

Income tax expenses (59,086) 1,51 4 60,149 – 2,577

Profit (loss) for the year 443,098 (17,826) (674,381) – (249,109)


IV – 22

Other comprehensive (expense) incomeItems that may be reclassified

subsequently to profit or loss:


translation of financial statements of

foreign operations 29,182 – (16,732) – 12,450

Reclassification adjustment of

translation reserve upon deemed

disposal of a subsidiary (125,543) – 125,543 – –

Reclassification adjustment of translation

reserve upon

disposal of a subsidiary (3,526) – – – (3,526)

(99,887) – 108,811 – 8,924

Total comprehensive income (expense) for the year 343,211 (17,826) (565,570) – (240,185)

Profit (loss) for the year attributable to:Owners of the Company 381,966 (17,826) (609,618) – (245,478)

Non-controlling interests 61,132 – (64,763) – (3,631)

443,098 (17,826) (674,381) – (249,109)

Total comprehensive income (expense) attributable to:Owners of the Company 280,569 (17,826) (498,833) – (236,090)

Non-controlling interests 62,642 – (66,737) – (4,095)

343,211 (17,826) (565,570) – (240,185)

The Groupfor the


2013





Pro forma adjustment



2013immediately


and MS Disposal

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

(Audited) Note 1 Note 2 Note 3


IV – 23

PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWFOR THE YEAR ENDED 31 DECEMBER 2013

Scenario III – Assuming both the ES Disposal and MS Disposal ha d been completed on 30 June 2014 or 1 January 2013 for the purposes of the pro forma consolidated statement of financial position, pro forma consolidated statement of profit or loss and other comprehensive income and pro forma consolidated statements of cash flow respectively

The Groupfor the


2013







2013immediately


and MS Disposal

HK$’000 HK$’000 HK$’000 HK$’000(Audited) Note 1 Note 2

Cash flows from operating activitiesProfit (loss) for the year 443,098 (17,826) (674,381) (249,109)Adjustments for:

Share of result of an associate 1,223 – (1,223) –Share of result of a joint venture 3,074 – – 3,074Income tax – (1,51 4) 6,595 5, 081Depreciation of property,

plant and equipment 95,859 (12,396) (25,385) 58,078Interest income (1,829) (28,108) (28,130) (58,067)Other interest expenses 32,283 (17,303) (7,114) 7,866Loss on disposal of property,

plant and equipment 5,742 – (23) 5,719Fair value gain on derivative

financial instrument (650) – 650 –Impairment loss recognised

in respect of property, plant and equipment 50,407 – – 50,407

Impairment loss recognised in respect of other assets 11,160 – – 11,160

Impairment loss recognised in respect of other receivables 7,871 – – 7,871

Gain on disposal of a joint venture (5,166) – – (5,166)Reversal of impairment losses on

amount due from a joint venture (7,089) – – (7,089)Impairment loss recogn ised

in respect of available-for-sale investment 32,239 – – 32,239

Increase in fair value of investments held for trading (245) – – (245)

Gain on deemed disposal of a subsidiary (715,029) – 715,029 –

Loss on disposal of subsidiaries 20,059 14,197 (3,249) 31,007Loss on disposal of investments held

for trading 162 – – 162Decrease in fair value of

investment properties 30,108 – – 30,108

Operating cash flows before movements

in working capital 3,277 (62,9 50) (17,231) (76,90 4)


IV – 24


Increase in trade and other receivables (91,345) 2, 833 3, 509 ( 85, 003)

Decrease in inventories 2,695 163 158 3,016

Increase in trade and other payables 18,391 (1,393) 4,931 21,929

Increase (decrease) in amounts

due to fellow subsidiaries – – – –

(70,259) 1,603 8, 598 (60,058)

Cash used in operations (66,982) (61,347) ( 8, 633) (136,962)

Taxation paid in the

People’s Republic of China (4,668) – – (4,668)

Net cash used in operating activities (71,650) (61,347) ( 8, 633) (141,630)



plant and equipment and

investment properties (62,473) 29,535 24,171 (8,767)

Placement of pledged bank deposits (307,816) 1,737 297,331 (8,748)

Disposal of derivative

financial instrument (2,080) – 2,080 –

Disposal of interest in a joint venture 4 – – 4

Withdrawal of pledged bank deposits 11,780 – – 11,780


plant and equipment 264 – (5) 259

Repayment from an investee 41,077 – – 41,077

Interest received 1,829 12,398 12,420 26,647

Advance to Makerston – – (85,991) (85,991)

Repayment from Makerston – – 62,265 62,265

Repayment of amounts due

from former fellow subsidiaries – 66,874 – 66,874

Proceeds from disposal of subsidiaries 46,999 231,501 40,767 319,267

Proceeds from deemed disposal of

a subsidiary 297,311 – (297,311) –

Net cash from investing activities 26,895 342,045 55,727 424,667

The Groupfor the


2013







2013immediately


and MS Disposal

HK$’000 HK$’000 HK$’000 HK$’000

(Audited) Note 1 Note 2


IV – 25


New borrowings raised 195,000 (195,000) – –

Repayment of bank and

other borrowings (22,456) – 8,505 (13,951)

Purchase of shares of a subsidiary

from non-control shareholders (13,500) – – (13,500)

Interest paid (32,283) 17,403 7,048 (7,832)

Net cash from financing activities 126,761 (177,597) 15,553 (35,283)

Net increase in cash and cash equivalents 82,006 103,101 62,647 247,754

Cash and cash equivalents

at beginning of the year 364,066 (20,306) (8,991) 334,769

Effect of foreign exchange rate changes 3,315 – (832) 2,483

Cash and cash equivalents at end of the

year, represented by


Bank balances included

in assets classified as held for sale (22,114) 22,114 – –

427,273 104,909 52,824 585,006

The Groupfor the


2013







2013immediately


and MS Disposal

HK$’000 HK$’000 HK$’000 HK$’000

(Audited) Note 1 Note 2


IV – 26


Scenario III – Assuming both the ES Disposal and MS Disposal ha d been completed on 30 June 2014 or 1 January

2013 for the purposes of the pro forma consolidated statement of financial position, pro forma consolidated statement

of profit or loss and other comprehensive income and pro forma consolidated statement of cash flows respectively

(1) The details of pro forma adjustments on the ES Disposal are set out in Scenario I on pages IV-7 to IV-9.

(2) The details of pro forma adjustments on the MS Disposal are set out in Scenario II on pages IV-15 to IV-18.

(3) The amount represents the elimination of the intra-group transactions between Eagle Spirit Group and Makerston

Group for management fee income and secondment fee income amounting to HK$6,200,000 which have been

restated in terms of the pro forma adjustment on the ES Disposal and the MS Disposal in Scenario I and Scenario

II respectively, as neither the Eagle Spirit Group nor Makerston Group is part of the Remaining Group after

completion of the ES Disposal and MS Disposal. This adjustment is not expected to have a continuing effect on the

Remaining Group.


IV – 27

2. INDEPENDENT REPORTING ACCOUNTANT’S ASSURANCE REPORT ON THE

COMPILATION OF PRO FORMA FINANCIAL INFORMATION

To the Directors of Rosedale Hotel Holdings Limited

We have completed our assurance engagement to report on the compilation of pro forma

financial information of Rosedale Hotel Holdings Limited (the “Company”) and its subsidiaries

(hereinafter collectively referred to as the “Group”) by the directors of the Company (the

“Directors”) for illustrative purposes only. The pro forma financial information consists of the pro

forma consolidated statement of financial position as at 30 June 2014, the pro forma consolidated

statement of profit or loss and other comprehensive income for the year ended 31 December 2013,

the pro forma statement of cash flows for the year ended 31 December 2013 and related notes as

set out on pages IV-3 to IV-26 of the circular issued by the Company dated 10 November 2014 (the

“Circular”). The applicable criteria on the basis of which the Directors have compiled the pro forma

financial information are described on pages IV-1 and IV-2 of the Circular.

The pro forma financial information has been compiled by the Directors to illustrate

the impact of (i) the proposed very substantial disposal of the entire equity interest in and

corresponding shareholder’s loan due from Eagle Spirit Holdings Limited; and (ii) the proposed

very substantial disposal of the entire equity interest in and corresponding shareholder’s loan

due from Makerston Limited (collectively referred to as the “Transactions”) on the Group’s

financial position as at 30 June 2014 and the Group’s financial performance and cash flows for

the year ended 31 December 2013 as if the Transactions had taken place as at 30 June 2014 and

1 January 2013 respectively. As part of this process, information about the Group’s financial

position, financial performance and cash flows have been extracted by the Directors from the

Group’s condensed consolidated financial statements for the six months ended 30 June 2014 and

consolidated financial statements for the year ended 31 December 2013, on which a review report

and an audit report have been published respectively.


IV – 28

Directors’ Responsibilities for the Pro Forma Financial Information

The Directors are responsible for compiling the pro forma financial information in

accordance with paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock

Exchange of Hong Kong Limited (the “Listing Rules”) and with reference to Accounting Guideline

7 Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars (“AG 7”)

issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

Reporting Accountant’s Responsibilities

Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the Listing

Rules, on the pro forma financial information and to report our opinion to you. We do not accept

any responsibility for any reports previously given by us on any financial information used in

the compilation of the pro forma financial information beyond that owed to those to whom those

reports were addressed by us at the dates of their issue.

We conducted our engagement in accordance with Hong Kong Standard on Assurance

Engagements (“HKSAE”) 3420 Assurance Engagements to Report on the Compilation of Pro Forma

Financial Information Included in a Prospectus issued by the HKICPA. This standard requires that

the reporting accountant comply with ethical requirements and plan and perform procedures to

obtain reasonable assurance about whether the Directors have compiled the pro forma financial

information in accordance with paragraph 4.29 of the Listing Rules and with reference to AG 7

issued by the HKICPA.

For purposes of this engagement, we are not responsible for updating or reissuing any reports

or opinions on any historical financial information used in compiling the pro forma financial

information, nor have we, in the course of this engagement, performed an audit or review of the

financial information used in compiling the pro forma financial information.

The purpose of pro forma financial information included in an investment circular is solely

to illustrate the impact of a significant event or transaction on unadjusted financial information of

the Group as if the event had occurred or the transaction had been undertaken as at an earlier date

selected for purposes of the illustration. Accordingly, we do not provide any assurance that the

actual outcome of the event or transaction as at 31 December 2013 or 30 June 2014 would have

been as presented.


IV – 29

A reasonable assurance engagement to report on whether the pro forma financial information

has been properly compiled on the basis of the applicable criteria involves performing procedures

to assess whether the applicable criteria used by the Directors in the compilation of the pro forma

financial information provide a reasonable basis for presenting the significant effects directly

attributable to the event or transaction, and to obtain sufficient appropriate evidence about whether:

• The related pro forma adjustments give appropriate effect to those criteria; and

• The pro forma financial information reflects the proper application of those

adjustments to the unadjusted financial information.

The procedures selected depend on the reporting accountant’s judgment, having regard to the

reporting accountant’s understanding of the nature of the Group, the event or transaction in respect

of which the pro forma financial information has been compiled, and other relevant engagement

circumstances.

The engagement also involves evaluating the overall presentation of the pro forma financial

information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis

for our opinion.

Opinion

In our opinion:

(a) the pro forma financial information has been properly compiled on the basis stated;

(b) such basis is consistent with the accounting policies of the Group; and

(c) the adjustments are appropriate for the purposes of the pro forma financial information

as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.



Hong Kong

10 November 2014

APPENDIX V VALUATION REPORTS ON THE PROPERT IES

V – 1

A. VALUATION REPORT ON THE TKT HOTEL

The following is the text of a letter and valuation certificate, prepared for the purpose of

incorporation in this circular, received from Asset Appraisal Limited, an independent valuer, in connection

with its valuation as at 30th September, 2014 of the TKT Hotel.

Rm 901, 9/F., On Hong Commercial Building 145 Hennessy Road, Wanchai, Hong Kong

145 9 901

Tel : (852) 2529 9448 Fax : (852) 3521 9591

10th November, 2014

The Board of Directors


31/F Paul Y. Centre

51 Hung To Road

Kwun Tong

Kowloon

Hong Kong

Dear Sirs,

Rosedale Hotel Kowloon

No. 86 Tai Kok Tsui Road

Tai Kok Tsui

Kowloon Hong Kong

In accordance with the instructions from Rosedale Hotel Holdings Limited (referred to as the

“Company”) to value the captioned vested property interests (referred to as the “TKT Hotel”) situated in

Hong Kong, we confirm that we have carried out inspections of the TKT Hotel, made relevant enquiries

and obtained such further information as we consider necessary for the purpose of providing you with our

opinion of the market value of the TKT Hotel as at 30th September, 2014 (the “Valuation Date”).

BASIS OF VALUATION

Our valuation of the TKT Hotel represents the market value which we would define as intended to

mean “the estimated amount for which an asset or liability should exchange on the valuation date between

a willing buyer and a willing seller in an arm’s length transaction after proper marketing and where the

parties had each acted knowledgeably, prudently and without compulsion”.


V – 2

VALUATION METHODOLOGY

The TKT Hotel has been valued by the comparison method where comparison based on prices

realised or market prices of comparable properties is made. Comparable properties of similar size,

character and location are analysed and carefully weighed against all the respective advantages and

disadvantages of each property in order to arrive at a fair comparison of capital values.

As the TKT Hotel is held by the owner as long term investment for rental incomes, we have cross-

checked the valuation results obtained from the Market Approach by the Income Capitalization Approach.

The Income Capitalization Approach is based on the net rental income that can be generated from the

property under the Master Lease to be executed for the TKT Hotel with due allowance on the reversionary

interest upon expiry of the Master Lease.

As the TKT Hotel is currently being operated as hotels, we have valued it as an operational entity

on going concern basis assuming that the existing business operations therein shall be continued. Our

valuation also reflects the value of all chattels and fitting out within the TKT Hotel in association with the

hotel business operations.

ASSUMPTIONS

Our valuation has been made on the assumption that owners sell the property on the market in its

existing state without the benefit of deferred terms contracts, joint ventures, management agreements or

any similar arrangement which would serve to affect the value of the TKT Hotel.

As the TKT Hotel is held by the owner by means of long term Government lease granted by the

Government, we have assumed that the owner has free and uninterrupted rights to use the TKT Hotel for

the whole of the unexpired term of its leasehold interest.

Other special assumptions for our valuation (if any) would be stated out in the footnotes of the

valuation certificate attached herewith.

TITLESHIP

We have carried out title and encumbrance search for the TKT Hotel at the Hong Kong Land

Registry. However, we have not verified ownership of the TKT Hotel and the existence of any

encumbrances that would affect its ownership. According to the Land Registration Records obtained

from the Land Registry, the registered owner of the TKT Hotel is Fortress State International Limited

(registered via Conditions of Exchange No. 20129 of Kowloon Inland Lot No. 11208 and Certificate of

Compliance dated 12 December 2012).


V – 3

All information in relation to property title is disclosed herein for reference only and we do not

accept the liability for any interpretation which we have placed on such information which is more

properly the sphere of the legal advisers of the instructing party. Neither have we verified the correctness

of any information supplied to us concerning the TKT Hotel. No responsibility of legal in nature is

assumed in this report.

LIMITING CONDITIONS

No allowance has been made in our report for any charges, mortgages or amounts owing on the

TKT Hotel nor for any expenses or taxation which may be incurred in effecting a sale. It is assumed that

the property is free from encumbrances, restrictions and outgoings of an onerous nature, which could

affect its value. Our valuation have been made on the assumption that the seller sells the TKT Hotel on the

market without the benefit of a deferred term contract, leaseback, joint venture, management agreement or

any similar arrangement, which could serve to affect the value of the TKT Hotel.

We have relied to a very considerable extent on the information given by the Company and have

accepted advice given to us on such matters as tenure, planning approvals, statutory notices, easements,

particulars of occupancy, lettings, and all other relevant matters of the TKT Hotel.

We have not carried out detailed site measurements to verify the correctness of the site area and

floor areas in respect of the TKT Hotel but have assumed that the floor areas shown on the Government

documents handed to us are correct. All documents and contracts have been used as reference only and all

dimensions, measurements and areas are approximations.

The TKT Hotel was inspected on 4 June 2014 by TSE Wai Leung, who is a member of the Royal

Institution of Chartered Surveyors, a member of The Hong Kong Institute of Surveyors and a Registered

Professional Surveyor. However, no structural survey has been made for the TKT Hotel. In the course of

our inspection, we did not note any serious defects. We are unable to report whether the buildings and

structures of the TKT Hotel are free of rot, infestation or any other structural defects. No test was carried

out on any of the services of the buildings and structures of the TKT Hotel.

We have had no reason to doubt the truth and accuracy of the information provided to us by the

Company. We have also sought confirmation from the Company that no material factors have been omitted

from the information supplied. We consider that we have been provided with sufficient information

to reach an informed view, and we have no reason to suspect that any material information has been

withheld.

In valuing the TKT Hotel, we have complied with all the requirements contained in Chapter 5 to the

Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and The HKIS

Valuation Standards (2012 Edition) published by The Hong Kong Institute of Surveyors.


V – 4

The TKT Hotel has been valued in Hong Kong Dollars (HK$).

Our valuation certificate is attached herewith.

Yours faithfully,


Asset Appraisal Limited

Tse Wai Leung

MFin BSc MRICS MHKIS RPS(GP)

Director

Tse Wai Leung is a member of the Royal Institution of Chartered Surveyors, a member of The Hong Kong Institute of Surveyors, a

Registered Professional Surveyor in General Practice and a qualified real estate appraiser in the PRC. He is on the list of Property

Valuers for Undertaking Valuations for Incorporation or Reference in Listing Particulars and Circulars and Valuations in Connection

with Takeovers and Mergers of the Hong Kong Institute of Surveyors, Registered Business Valuer under the Hong Kong Business

Valuation Forum and has over ten (10) years’ of experience in valuation of properties in Hong Kong, Macau and the PRC.


V – 5

VALUATION CERTIFICATE

Property held by the Group for investment purpose

Property Description and tenureParticulars of occupancy

Market Value in existing state as at

30 September, 2014 HK$

Rosedale Hotel Kowloon

No. 86 Tai Kok Tsui Road

Tai Kok Tsui

Kowloon

Hong Kong

Section A and

the Remaining Portion

of Kowloon Inland

Lot No. 11208

The TKT Hotel comprises a site with an area of

approximately 845.4 square metres on which a

27-storey (plus one basement level) hotel building

was completed in December 2011.

The TKT Hotel has a total gross floor area of

approximately 10,300.455 square metres including

basement floor area of 476.562 square metres. It

is accommodating a total of 435 guest rooms (or

a total of 441 standard room modules). Functional

uses of each of the floor levels are set out as

follows:

Floor Level Functional Uses

Basement P lan t rooms , l oad ing a rea ,

fireman lift/disable lift, service

lift, car lift and carpark

G/F E n t r a n c e f oy e r, c o n c i e rg e ,

electrical rooms, staff entrance,

delivery entrance, taxi lay-by,

tour bus lay -by, vehicle turn

table, fireman lift/disable lift,

escalator, service lift, car lift and

carpark

1/F Reception & cashier counter,

seating area, gymnasium room,

electrical room, TBE room , dry

goods store room and escalator,

fireman/disable lift

2/F Restaurant, main kitchen, food

& beverage storage , dishwashing

area, plant room, LV switch

room, electrical room, fireman/

disable lift

3/F Back of house, staff canteen,

s t a f f c h a n g i n g r o o m s a n d

lavatories, plant rooms, electrical

room, fireman/disable lift

5/F Plant rooms, store room and

workshops

6/F to 29/F Guest rooms (accommodating

a total of 441 standard room

modules or 435 guest rooms),

electrical room

30/F Executive lounge, plant rooms

and store room

Roof Lift machine room

As at the Valuation Date, the

TKT Hotel is being operated

as a fully operational hotel.

(see Note 7 below)

1,285,000,000


V – 6

4/F, 13/F, 14/F and 24/F are omitted in the hotel

The TKT Hotel is held under Conditions of

Exchange No. 20129 for a term of 50 years

commencing from 18th April, 2011 at an annual

Government rent based on 3% of the rateable value

from time to time.

Notes:

1. The registered owner of the TKT Hotel is Fortress State International Limited, a wholly-owned subsidiary of More Star Limited

of which 40% equity interest is held by the Company, via Condition of Exchange No. 20129. Certificate of Compliance

certifying that all the positive obligations imposed on the registered owner in respect of the subject land lot under the aforesaid

Conditions of Exchange was issued by the District Lands Office, Kowloon West, Lands Department on 12th December, 2012

and was registered via memorial no. 12121900700027.

2. Consent letter dated 9th May, 2012 to increase the maximum gross floor area of the TKT Hotel from 10,144.8 square metres to

10,300.455 square metres was registered via memorial no. 12051803140028.

3. Lease modification letter for rectification of lot boundary of the TKT Hotel dated 4th October, 2012 was registered via

memorial no. 12101002840019.

4. Occupation Permit No. KN39/2011(OP) in respect of the TKT Hotel was issued by the Building Authority on 12th December,

2011 and registered via memorial no. 12121900700014.

5. We have valued the TKT Hotel as an operational hotel on the assumption that the owner has obtained all necessary approvals

and permits for hotel operations in the TKT Hotel.

6. The subject site falls within an area currently zoned “Other Specified Uses (Business)” under the Mong Kok Outline Zoning

Plan No. S/K3/30 dated 31st May, 2013.

7. Rosedale Hotel Kowloon Limited (“Rosedale Kowloon”), a wholly-owned subsidiary of the Company, has entered into the

Master Lease with the owner of the TKT Hotel with effect on 1st April, 2014. The rent payable by Rosedale Kowloon shall

comprise monthly base rent and turnover rent as follows:

(a) Monthly base rent represents the amount for each Year as set out below divided by twelve (12):

(i) First Year – HK$64,000,000

(ii) Second Year – HK$67,200,000

(iii) Third Year – HK$70,400,000

(iv) Fourth Year – HK$73,600,000

(v) Fifth Year – HK$76,800,000

(vi) Sixth Year – HK$80,000,000

Property Description and tenure


V – 7

(b) For any year during the term of the Master Lease, in the event the gross revenue (all revenue and income of any kind

derived from operations at the TKT Hotel) exceeds the threshold amount for such year, Rosedale Kowloon shall also

pay a turnover rent in an amount equal to 60% of the difference between the gross revenue and the following threshold

amounts for such year:

(i) First Year – HK$140,000,000

(ii) Second Year – HK$145,000,000

(iii) Third Year – HK$150,000,000

(iv) Fourth Year – HK$155,000,000

(v) Fifth Year – HK$160,000,000

(vi) Sixth Year – HK$165,000,000

No turnover rent shall be payable for that year if the gross revenue of a year is equal to or less than the threshold amount

for such year.

The above rental is exclusive of, and Rosedale Kowloon shall be responsible for and shall pay, all assessments, duties,

charges, impositions and outgoings of an annual or recurring nature assessed, incurred, imposed or charged on or in

respect of the TKT Hotel or upon the owner or occupier thereof by the government authority. The landlord shall be

responsible for all property tax, government rents and rates of the TKT Hotel during the term of the Master Lease.

8. Overview of the hotel property market of Hong Kong are set out as follows:

8.1 Market Demand

Benefiting from the strong growth in visitors from Mainland China, total visitor arrivals to Hong Kong grew by 11.7% in 2013

(approximately 54.3 million visitor arrivals) over the same of 2012. Total visitor arrivals to Hong Kong for the first 3 months

of 2014 grew by 18.1% (approximately 14.7 million visitor arrivals) over the same period of 2013. Out of the total visitor

arrivals for 2013, overnight visitors amounted to approximately 25.7 million (with an increase of 8% over the same of 2012).

Visitors from Mainland China accounted for 75% of the total visitor arrivals (approximately 40.75 million visitor arrivals) with

an increase of 16.7% over the same of 2012. Overnight visitors from Mainland China amounted to approximately 17.09 million

(with an increase of 13.15% over the same of 2012). Based on the information published by the Hong Kong Tourism Board, the

average hotel room occupancy for all the surveyed hotels under different categories in Hong Kong for 2013 was maintained at

the same level of last year of 89%.

8.2 Market Supply

By end of July 2013, Hong Kong has a total of 217 hotels, with 68,753 guest rooms. Total room supply increased by 3,808

rooms or 5.9% than in July 2012. To cater for the increasing demand for hotel rooms from visitors, the Government has

undertaken a number of initiatives to promote hotel developments to meet diversified needs from visitors. For instance, a

number of development sites in different parts of Hong Kong have been designated for “Hotel only” use. There are also

initiatives to allow conversion of old industrial buildings and re-vitalisation of heritage buildings into hotels. By end of 2014,

the total number of hotels of Hong Kong is expected to increase to 263 with a total of about 71,959 guest rooms.


V – 8

8.3 Asset Performance

Based on the information published by the Hong Kong Tourism Board, the average achieved hotel room rate for 2013 is

HK$1,447, dropped by about 2.8% year on year.

9. Given the assessed market value of HK$1,285,000,000 of the TKT Hotel, the agreed base rent of the Master Lease shall

generate a gross investment yield of 5. 69% which is in line with the prevailing market investment yield of commercial

properties in Hong Kong:

Year

Annual Rent/

Reversion Value Yield PV Factor Present Value

1 21,333,333 ( 3 months ended

31st December, 2014) 5.69% 0.9861 21,037,607

2 66,400,000 5.69% 0.9330 61,951,804

3 69,600,000 5.69% 0.8826 61,429,569

4 72,800,000 5.69% 0.8351 60,792,198

5 76,000,000 5.69% 0.7901 60,045,201

6 79,200,000 5.69% 0.7475 59,202,239

7 1,285,000,000 5.69% 0.7475 960,541,381

Total 1,285,000,000

Therefore, we are of the opinion that the market value of the TKT Hotel as measured by Income Capitalization Approach (on

the basis that it is subject to the Master Lease as at the Valuation Date) shall have no material difference from the amount

measured by the Market Approach.


V – 9

B. VALUATION REPORT ON THE BEIJING HOTEL

The following is the text of a letter and valuation certificate, prepared for the purpose of

incorporation in this circular, received from Asset Appraisal Limited, an independent valuer, in connection

with its valuation as at 30th September, 2014 of the Beijing Hotel.

Rm 901, 9/F., On Hong Commercial Building 145 Hennessy Road, Wanchai, Hong Kong

145 9 901

Tel : (852) 2529 9448 Fax : (852) 3521 9591

10 November, 2014

The Board of Directors


31/F Paul Y. Centre

51 Hung To Road

Kwun Tong

Kowloon

Hong Kong

Dear Sirs,

Rosedale Hotel & Suites, Beijing

No. 8 Jiang Tai Road West, Chao Yang District, Beijing, the PRC

In accordance with the instructions from Rosedale Hotel Holdings Limited (referred to as the

“Company”) to value the captioned property interests (referred to as the “Beijing Hotel”) situated in the

People’s Republic of China (the “PRC”), we confirm that we have carried out inspections of the Beijing

Hotel, made relevant enquiries and obtained such further information as we consider necessary for the

purpose of providing you with our opinion of the market value of the Beijing Hotel as at 30th September,

2014 (the “Valuation Date”).

BASIS OF VALUATION

Our valuation of the Beijing Hotel represents the market value which we would define as intended

to mean “the estimated amount for which an asset or liability should exchange on the valuation date

between a willing buyer and a willing seller in an arm’s length transaction after proper marketing and

where the parties had each acted knowledgeably, prudently and without compulsion”.


V – 10

VALUATION METHODOLOGY

The Beijing Hotel has been valued by the comparison method where comparison based on prices

realised or market prices of comparable properties is made. Comparable properties of similar size,

character and location are analysed and carefully weighed against all the respective advantages and

disadvantages of each property in order to arrive at a fair comparison of capital values.

As the Beijing Hotel is currently being operated as a hotel, we have valued it as an operational

entity on going concern basis assuming that the existing business operations therein shall be continued.

Our valuation also reflects the value of all chattels and fitting out within the Beijing Hotel in association

with the hotel business operations.

ASSUMPTIONS

Our valuation has been made on the assumption that owners sell the Beijing Hotel on the market

in its existing state without the benefit of deferred terms contracts, leaseback, joint ventures, management

agreements or any similar arrangement which would serve to affect the value of the Beijing Hotel.

As the Beijing Hotel is held by the owner by means of long term land use rights granted by the PRC

Government, we have assumed that the owner has free and uninterrupted rights to use the property for

the whole of the unexpired term of its land use rights. Unless stated as otherwise, we have also assumed

that the Beijing Hotel can be freely transferred on the market free from any land premium or expenses of

substantial amount payable to the PRC Government.

Other special assumptions for our valuation (if any) would be stated out in the footnotes of the

valuation certificate attached herewith.

TITLESHIP

We have been provided with copies of legal documents regarding the Beijing Hotel. However, we

have not verified ownership of the Beijing Hotel and the existence of any encumbrances that would affect

ownership of the Beijing Hotel.

We have also relied upon the legal opinion provided by the PRC legal adviser, namely Zhong Lun

Law Firm（中倫律師事務所）, to DS Eastin Limited on the relevant laws and regulations in the PRC, on

the nature of land use rights and the owner’s interests in the Beijing Hotel.


V – 11

LIMITING CONDITIONS

No allowance has been made in our report for any charges, mortgages or amounts owing on the

property nor for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise

stated, it is assumed that the Beijing Hotel is free from encumbrances, restrictions and outgoings of an

onerous nature, which could affect its value. Our valuation have been made on the assumption that the

seller sells the Beijing Hotel on the market without the benefit of a deferred term contract, leaseback, joint

venture, management agreement or any similar arrangement, which could serve to affect the value of the

Beijing Hotel.

We have relied to a very considerable extent on the information given by the Company and have

accepted advice given to us on such matters as tenure, planning approvals, statutory notices, easements,

particulars of occupancy, lettings, and all other relevant matters of the Beijing Hotel.

We have not carried out detailed site measurements to verify the correctness of the site area and

floor areas in respect of the Beijing Hotel but have assumed that the floor areas shown on the Government

documents handed to us are correct. All documents and contracts have been used as reference only and all

dimensions, measurements and areas are approximations.

The Beijing Hotel was inspected on 29 May 2014 by Zhou Tong, who is a PRC Registered

Land Appraiser. However, no structural survey has been made for the Beijing Hotel. In the course of

our inspection, we did not note any serious defects. We are unable to report whether the buildings and

structures of the Beijing Hotel are free of rot, infestation or any other structural defects. No test was

carried out on any of the services of the buildings and structures of the Beijing Hotel.

We have had no reason to doubt the truth and accuracy of the information provided to us by the

Company. We have also sought confirmation from the Company that no material factors have been omitted

from the information supplied. We consider that we have been provided with sufficient information

to reach an informed view, and we have no reason to suspect that any material information has been

withheld.

In valuing the Beijing Hotel, we have complied with all the requirements contained in Chapter 5

and Practice Note 12 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong

Kong Limited and The HKIS Valuation Standards (2012 Edition) published by The Hong Kong Institute of

Surveyors.


V – 12

The Beijing Hotel has been valued in Hong Kong Dollars (HK$). Whenever applicable, an exchange

rate of Renminbi (RMB) 1 to HK$ 1.2619 has been adopted for currency conversion.

Our valuation certificate is attached herewith.

Yours faithfully,


Asset Appraisal Limited

Tse Wai Leung

MFin BSc MRICS MHKIS RPS(GP)

Director

Tse Wai Leung is a member of the Royal Institution of Chartered Surveyors, a member of The Hong Kong Institute of Surveyors, a

Registered Professional Surveyor in General Practice and a qualified real estate appraiser in the PRC. He is on the list of Property

Valuers for Undertaking Valuations for Incorporation or Reference in Listing Particulars and Circulars and Valuations in Connection

with Takeovers and Mergers of the Hong Kong Institute of Surveyors, Registered Business Valuer under the Hong Kong Business

Valuation Forum and has over ten (10) years’ experience in valuation of Property in Hong Kong, Macau and the PRC.


V – 13

VALUATION CERTIFICATE

Property held and operated by the owner

Property Description and tenure

Particulars of

occupancy

Market Value in

existing state as at

30th September, 2014

HK$

Rosedale Hotel &

Suites, Beijing

No. 8 Jiang Tai

Road West

Chao Yang District

Beijing

the PRC

The Beijing Hotel comprises a site with an

area of 18,711.62 square metres on which

a 20-storey hotel building is erected. In

addition, 2 basement levels are provided

underneath. The Beijing Hotel was completed

in 1990. The Beijing Hotel also includes 3

blocks of single to 2-storey ancillary building.

As at the Valuation Date, the Beijing Hotel

was not in the process of being developed.

The Beijing Hotel has a total gross floor

area of 37,173.20 square metres (including

superstructure gross floor area of 29,810.80

square metres and substructure gross floor

area of 7,362.40 square metres).

The Beijing Hotel comprises a total of 462

guest rooms, a shopping arcade, restaurant,

lobby lounge, bar, executive lounge, coffee

shop, fitness centre, ballroom, multi-purpose

function rooms, business centre and car

parking spaces.

The Beijing Hotel is situated at the east part

of Beijing and is less than 30 minutes’ drive

from the Beijing Capital International Airport.

It is falling within a well developed area and

is in close proximity with the East embassy

area, the China International Exhibition

Centre and the central business area of

Chaoyang District, two sprawling public parks

namely the Si De Park（四得公園）and the Li

Do Park（麗都公園）are found opposite to the

Beijing Hotel and offering open view to the

subject development.

The Beijing Hotel is held for a land use right

term of 40 years (see notes 4 and 8 below).

As at the date of our

inspection, the Beijing

Hotel was being operated

as a fully operational

hotel.

1,300,000,000

See notes 4, 5 and 8

below


V – 14

Notes:

1. According to a State-owned Land Use Right Certificate ( Serial No. 京朝國用(2011出)第00112號) dated 23rd March, 2011

and a Building Ownership Certificate ( Serial No. 京房權証市朝港澳台字第10156號) dated 22nd November, 2005, the Beijing

Hotel is held by Rosedale Hotel Beijing Co., Ltd.（北京珀麗酒店有限責任公司） .

2. According to the Joint Venture Agreement (the “PRC JV Agreement”) dated 18 October 2013, Rosedale Hotel Beijing Co., Ltd.

is a Sino-foreign jointly owned entity owned as to 80% by Beijing Baijun Investment Limited（北京百駿投資有限公司）and as

to 20% by DS Eastin Limited (a wholly-owned subsidiary of Makerston Limited). Pursuant to the PRC JV Agreement :

2.1 both the paid up and registered capital of Rosedale Hotel Beijing Co., Ltd. is US$86,000,000, of which US$68,800,000

and US$17,200,000 are contributed by Beijing Baijun Investment Limited and DS Eastin Limited respectively ; and

2. 2 profits of Rosedale Hotel Beijing Co., Ltd. are to be shared by both parties to the PRC JV Agreement in accordance with

their respective ratio of capital contribution.

3. We have valued the Beijing Hotel as an operational entity on going concern basis on the assumption that the existing business

operations in the Beijing Hotel will be continued. Our valuation reflects the value of all chattels and fitting out within the

Beijing Hotel in association with the hotel business operations.

4. According to a Supplemental Agreement entered into between the Beijing Land Administration Bureau (as Grantor) and

Rosedale Hotel Beijing Co., Ltd. (as Grantee) on 9 June 2014 at a top up land premium of RMB67,420,150 payable by the

Grantee to the Grantor with the following terms:

Planned land use : Commercial and Finance

Land area : 14,692.85 square metres

Permissible Gross Floor Area : 54,780 square metres (Superstructure)

Permissible Building Height : 100 metres

Land Use Right Term : 40 years

5. According to the aforesaid Supplemental Agreement and given the total gross floor area of the existing buildings of the Beijing

Hotel, the development potential of the subject land parcel has not yet been fully utilized. In this regard , the Company has

planned to develop a luxurious hotel tower accommodating a total of 250 guest rooms and additional conferencing facilities

(the “Extension Project”) within the subject land parcel. As at the Valuation Date, no formal architectural plan for the

Extension Project was prepared and submitted and hence no planning approval on the development scheme was obtained. In

our valuation, we have taken into account the market value of the unutilized development potential of the Beijing Hotel on

the assumption that Rosedale Hotel Beijing Co., Ltd shall have no legal impediment in obtaining all necessary approvals and

consents from the Government for the construction of the Extension Project.

6. In accordance with the information provided by the Company, the status of title and grant of major approvals and licences are

as follows:

State-owned Land Use Rights Certificate : Yes

Building Ownership Certificate : Yes

Business Licence : Yes


V – 15

7. According to the opinion from the PRC legal adviser of the Company on the Beijing Hotel :

i. In accordance with the State-owned Land Use Right Certificate (Serial No.京朝國用(2011出)第00112號) issued by the

Beijing People’s Government of Chao Yang District on 23rd March, 2011 and the Building Ownership Certificate ( Serial

No.京房權証市朝港澳台字第10156號) issued by the Beijing Municipal Construction Commission on 22nd November,

2005, Rosedale Hotel Beijing Co., Ltd.（北京珀麗酒店有限責任公司） has the sole legal title to the land use right and is

the sole legal owner of the buildings of the Beijing Hotel for a land use right term expiring on 21st November, 2044.

ii. On 26th February, 1994, the Beijing Municipal Administration of Building and Land entered into a State-owned

Land Use Right Grant Contract with Rosedale Hotel Beijing Co., Ltd. (formerly known as 新萬壽實館有限責任

公司), pursuant to which the former agreed to grant to the latter the land use right of the Beijing Hotel with a land

area of 18,699.6 square metres for a term of 50 years for hotel use (with a plot ratio of 1.9) at a land premium of

RMB11,287,400.

iii. Rosedale Hotel Beijing Co., Ltd. proposed to conduct an the Extension Project , after completion of which the total gross

floor area of the Beijing Hotel would be increased to approximately 54,780 square metres. Pursuant to the reply letter

(北京市國土資源局關於北京珀麗酒店改擴建項目征求意見的覆函, （京國土利函[2012]37號）) issued by the Beijing

Municipal Bureau of Land and Resources on 16th January 2012, the Extension Project was approved by the Bureau in

principle on the condition that the existing land use right area, the range and the use of the Beijing Hotel will remain

unchanged subject to the urban planning conditions for the Extension Project. Rosedale Hotel Beijing Co., Ltd was also

required to complete relevant modification procedures for the State-owned Land Use Right Grant Contract and to pay

additional land premium as reviewed and decided by the Bureau in accordance with the applicable policies.

iv. Rosedale Hotel Beijing Co., Ltd. has submitted an application in connection with the Extension Project to the Beijing

Municipal Commission of Urban Planning for approval of the relevant urban planning conditions thereof on 14

September 2012.

v. Pursuant to the construction Project Urban Planning Conditions issued on 24th January, 2013 by the Beijing Municipal

Commission of Urban Planning has approved the relevant planning conditions in connection with the Extension Project .

A summary of the material conditions is as follow:

• Developable Land Area : 14,700 square metres

• Land Use : Commerce and Finance

• Use of Building : Hotel

• Total Floor Area : not more than 54,780 square metres

• Total Building Height : not more than 100 metres

vi. On 20 June 2013, Chaoyang District Commission of Development and Reform of Beijing Municipality issued the Notice

of Preliminary Examination of the Land Used for Construction Projects（建設項目土地預審告知單）, pursuant to which

Rosedale Beijing is urged to launch application to the Beijing Municipal Bureau of Land and Resources for performing

land use evaluation in accordance with the prescribed procedures.

vii. On 26 February 2014, the Beijing Municipal Commission of Development and Reform issued the approval letter ( 北京市

發展和改革委員會關於北京珀麗酒店項目改擴建核准的批覆，京發改[2014]425號), pursuant to which the Extension

Project is approved in principle on the condition that the total land use right area, the range and the location shall be

consistent with the approval letter.


V – 16

viii. Disclosed in (iii) abov e, Rosedale Hotel Beijing Co., Ltd. has handled the relevant modification procedures in respect of

the Extension Project and entered into a supplemental agreement to the State-owned Land Use Right Grant Contract (the

“Supplemental Agreement”) with the Beijing Municipal Bureau of Land and Resources and paid up the add itional land

premium on 20th June 2014. Rosedale Hotel Beijing Co., Ltd. can legally carry out the Extension Project provided that

Rosedale Hotel Beijing Co., Ltd. will have duly obtained the relevant environmental approval, the Construction Land

Planning Permit, the Construction Project Planning Permit and the Construction Permit in connection with the Extension

Project before commencing the construction.

ix. In accordance with the relevant laws, the use of the land for commercial and finance as stated in the Supplemental

Agreement shall cover the existing use for hotel, and the maximum term of grant of land use right shall not exceed

40 years in the case of land for commercial, tourism or recreational purposes, subject to grant contract of the land use

rights. In addition, though the term of the land use right is stated at 40 years in the Supplemental Agreement, it does not

specify its commencement date or the expiry date. As advised by DS Eastin Limited, Rosedale Hotel Beijing Co., Ltd. is

in discussion with the relevant government authority for the revised term of the land use rights such that the expiry date

shall not be earlier than 21 November, 2044, i.e. the date specified in the State-owned Land Use Right Grant Contract as

mentioned in note (ii) above. The expiry date of the term of the land use right remains to be clarified with the relevant

government authorities upon the issue of the revised State-owned Land Use Right Certificate.

x. Rosedale Hotel Beijing Co., Ltd. has completed all necessary approvals, filings and business registration formalities with

respect to its incorporation and changes of shareholding, save as the change of shareholding occurred in 1987 which

is not evidenced by business registration records as sighted by the PRC Lawyer. Rosedale Beijing has obtained the

Business License with the registration number of 110000450003044, pursuant to which the registered capital of Rosedale

Hotel Beijing Co., Ltd. is USD86,000,000 and the legal representative is Ma Chi Kong, Karl (馬志剛). The business

scope of Rosedale Hotel Beijing Co., Ltd. is “operating cafeterias, bars, restaurants and sauna; retailing cigarettes;

operating fitness facilities, entertainment facilities and commercial service facilities including guest rooms, banquet

halls, auditoria, multifunction halls, gymnasia, massage rooms, shopping malls, business centers, laundry rooms, and

etc. According to the Certificate of Approval and the Business License dated 18 November 2013 and 31 March 2014

respectively, Rosedale Hotel Beijing Co., Ltd. as the owner of Beijing Hotel is validly existing and in good standing as a

Sino-Foreign Joint Venture under the PRC laws; the Business License of Rosedale Hotel Beijing Co., Ltd. is in full force

and effect. According to the Capital Verification Reports issued respectively by Beijing Certified Public Accountants

((88)京會字第801號、(89)京會字第167號、(90)京會字第0362號、(91)京會字第849號), Price Waterhouse Zhang Chen

CPAs (張陳驗字(98)第38號、張陳驗字(99)第19號) and Beijing Yuxing Certified Public Accountants Co., Ltd. (譽興驗

字[2013]第13A268305號), the registered capital of Rosedale Rosedale Hotel Beijing Co., Ltd. had been fully contributed

and paid up by its shareholders.

xi. Rosedale Hotel Beijing Co., Ltd., being the legal owner of the Beijing Hotel, is entitled to transfer, lease, mortgage or

otherwise dispose of the Beijing Hotel in accordance with the PRC laws and regulations throughout the unexpired land

use rights term of the Beijing Hotel.

xii. To the best knowledge of the PRC legal adviser, the Beijing Hotel is free from mortgage, charge, litigation, seizure order

and other third parties’ rights.


V – 17

8. The Beijing Hotel has been equity accounted for in the financial statement of the Company as an interest in associate based

initially on the fair value of the 20% equity interest retained in Rosedale Beijing at completion of the Capital Increase

Agreement and subject to impairment test on the recoverable amount on the date of subsequent statements of financial position.

9. As stated in the Supplemental Agreement mentioned in note 4 above, the land use right term of the Beijing Hotel is 40

years but the commencement date and the expiry date had not been specified. As referred in Building Ownership Certificate

mentioned in Note 7(i) above, the land use right term of Beijing Hotel should be 50 years expiring on 21st November, 2044.

After the best enquiry by the management of the Company with China Private Ventures Limited, the beneficial controlling

shareholder of the PRC Company which is primarily responsible for the negotiation with the Beijing Municipal Bureau of Land

and Resources regarding the renewal of the Building Ownership Certificate, the expiry date of the land use right of the Beijing

Hotel shall probably expire at a date on or after 21st November, 2044. For the preparation of this valuation report, it is assumed

that the land use right term of the Beijing Hotel will expire on 21st November, 2044.

APPENDIX VI GENERAL INFORMATION

VI – 1

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility,

includes particulars given in compliance with the Listing Rules for the purpose of giving information with

regard to the Group. The Directors, having made all reasonable enquiries, confirm that to the best of their

knowledge and belief, the information contained in this circular is accurate and complete in all material

respects and not misleading or deceptive, and there are no other matters the omission of which would

make any statement herein or this circular misleading.

2. DISCLOSURE OF INTERESTS

(a) Interests of Directors or chief executive of the Company

As at the Latest Practicable Date, the interests and short positions of the Directors or chief

executive of the Company in the shares, underlying shares or debentures of the Company or any of

its associated corporations (within the meaning of Part XV of the SFO), which were required (i) to

be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of

the SFO (including interests and short positions which they were taken or deemed to have under

such provisions of the SFO); or (ii) pursuant to section 352 of the SFO, to be entered in the register

referred to therein; or (iii) pursuant to the Model Code for Securities Transactions by Directors

of Listed Issuers set out in Appendix 10 to the Listing Rules (the “Model Code”) adopted by the

Company to be notified to the Company and the Stock Exchange, were as follows:–

Interests in the Shares

Name of Director

Long position/

Short position

Capacity/Nature

of interest

Number of

Shares held

Approximate

percentage

of the

issued share

capital of

the Company

Mr. Kwok Ka Lap, Alva Long position Beneficial owner 7,500 0.00%

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or chief

executive of the Company had any interests or short positions in the shares, underlying shares and

debentures of the Company or its associated corporation (within the meaning of Part XV of the

SFO), which were required (i) to be notified to the Company and the Stock Exchange pursuant to

Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were

taken or deemed to have under such provisions of the SFO); or (ii) pursuant to section 352 of the

SFO, to be entered in the register referred to therein; or (iii) pursuant to the Model Code adopted by

the Company to be notified to the Company and the Stock Exchange.


VI – 2

(b) Interests of substantial Shareholders

Save as disclosed below, so far as is known to the Directors or chief executive of the

Company, as at the Latest Practicable Date, the following persons (other than a Director or chief

executive of the Company) had an interest or a short position in the Shares and underlying Shares

which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part

XV of the SFO:

(i) Interests in the Shares

Name of ShareholderLong position/Short position

Capacity/Natureof interest

Number ofShares held

Approximate percentage

of the issued share

capital of the Company

(a) Dr. Chan Kwok Keung,

Charles (“Dr. Chan”)

(Note 1)

Long position Beneficial owner 1,132,450 0.17%

Long position Interest of controlled

corporation

195,706,000 29.76%

Ms. Ng Yuen Lan, Macy

(Note 1)

Long position Interest of spouse 196,838,450 29.93%

ITCC (Note 1) Long position Interest of controlled

corporation

195,706,000 29.76%

ITC Investment Holdings

Limited (“ITC Investment”) (Note 1)


corporation

195,706,000 29.76%

Leaptop Investments Limited

(“Leaptop”) (Note 1)


corporation

195,706,000 29.76%

Asia Will Limited (“AWL”)

(Note 1)


(b) Hanny (Note 2) Long position Interest of controlled

corporation

148,506,000 22.58%

Hanny Investment Group

Limited (“HIG”) (Note 2)


corporation

148,506,000 22.58%

( c) CEL (Note 3) Long position Interest of controlled

corporation

48,660,424 7.40%

Cosmos Regent Ltd.

(Note 3)



VI – 3

Notes:

(1) AWL was interested in 195,706,000 Shares and was a wholly-owned subsidiary of Leaptop which

in turn was a wholly-owned subsidiary of ITC Investment. ITC Investment was a wholly-owned

subsidiary of ITCC. Dr. Chan directly and indirectly held a total of more than one third of the

issued share capital of ITC C. Accordingly, Leaptop, ITC Investment, ITCC and Dr. Chan were

deemed to be interested in the Shares held by AWL. Dr. Chan also personally held 1,132,450

Shares. Ms. Ng Yuen Lan, Macy, the spouse of Dr. Chan, was deemed to be interested in the Shares

held by AWL and Dr. Chan.

As part and parcel of the transactions contemplated in the Rosedale Share Agreement, ITC

Investment would procure AWL to place and/or donate 47,200,000 (or such other number as the

parties may agree) Shares to independent third party(ies) and/or such charitable body(ies) exempt

under the Inland Revenue Ordinance (Chapter 112 of the Laws of Hong Kong) and/or a combination

of both on such terms and conditions as ITC Investment might decide before completion, such that

immediately after completion, HIG and parties acting in concert with it will not hold in aggregate

30% or more of the voting rights of the Company. Subject to fulfillment of the conditions precedent

contained in the Rosedale Share Agreement (including without limitation, implementation and

completion of the aforesaid placement and/or donation), ITC Investment will cease to hold any

Shares after completion of the Rosedale Share Agreement.

(2) Pursuant to the Rosedale Share Agreement as mentioned in Note (1) above, 148,506,000 Shares

held by AWL would be acquired by HIG through the acquisition of the entire issued share capital

of Leaptop. HIG was a wholly-owned subsidiary of Hanny Magnetics (B.V.I.) Limited which in

turn was a wholly-owned subsidiary of Hanny. Accordingly, HIG and Hanny were deemed to be

interested in the 148,506,000 Shares held by AWL.

( 3) Million Good Limited and Cosmos Regent Ltd. were interested in 5,334,870 Shares and 43,325,554

Shares respectively and were wholly-owned subsidiaries of CEL. CEL was therefore deemed to be

interested in the Shares held by Million Good Limited and Cosmos Regent Ltd..

(4) As at the Latest Practicable Date, (i) Ms. Chan Ling, Eva, an executive Director, was also a director

of CEL and Cosmos Regent Ltd. ; (ii) Mr. Sin Chi Fai, an independent non-executive Director, was

also an independent non-executive director of Hanny and CEL ; and (iii) Mr. Kwok Ka Lap, Alva

and Mr. Poon Kwok Hing, Albert, independent non-executive Directors, were also independent

non-executive directors of Hanny.

(ii) Substantial shareholders of members of the Group

So far as is known to the Directors or chief executive of the Company, the following

persons (other than a Director or chief executive of the Company) were, directly or

indirectly, interested in 10% or more of the nominal value of any class of share capital

carrying rights to vote in all circumstances at general meetings of the other members of the

Group as at the Latest Practicable Date:

Name of subsidiary Name of shareholder

Percentage of

shareholding

Tangula Group Limited TIL Capital Corporation 18.1%

Luoyang Golden Gulf Hotel

Company Limited

洛陽市電業局 40%

洛陽電力旅行社有限公司洛陽市電力廣告有限公司 33.33%


VI – 4

Save as disclosed above, the Directors or chief executive of the Company were not aware

that there are any other persons (not being a Director or chief executive of the Company) who, as at

the Latest Practicable Date, had an interest or a short position in the Shares and underlying Shares

which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part

XV of the SFO, or who was, 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 meeting of any

other members of the Group, or had any options in respect of such capital.

3. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service

contracts with any member of the Group which is not determinable by such member of the Group within

one year without payment of compensation (other than statutory compensation).

4. DIRECTORS’ INTERESTS IN CONTRACTS

Save for the Eagle Spirit Agreement and the Makerston Agreement, as at the Latest Practicable

Date, none of the Directors was materially interested in any contract or arrangement subsisting and which

was significant in relation to the business of the Group.

5. DIRECTORS’ INTEREST IN COMPETING BUSINESS

As at the Latest Practicable Date, save as disclosed below, none of the Directors and their respective

close associates had any business which competes or is likely to compete, either directly or indirectly, with

the business of the Group.

Name of Director

Name of entity whose

businesses are considered

to compete or to be likely to

compete with the

businesses of the Group

Description of businesses of

the entity which are

considered to compete or

to be likely to compete with

the businesses of the Group

Nature of interest of

the Director in the entity

Mr. Cheung Hon Kit ITCP and its subsidiaries Property development and

investment and hotel operation

in the PRC

Chairman and executive

director of ITCP

As the Board is independent of the boards of the above entities, the Group is capable of carrying on

its business independently of, and at arm’s length, from the business of those entities.


VI – 5

6. DIRECTORS’ INTEREST IN ASSETS

Save for the ES Sale Share and the ES Sale Loan to be sold by the Group under the Eagle Spirit

Agreement and the MS Sale Share and the MS Sale Loan to be sold by the Group under the Makerston

Agreement, as at the Latest Practicable Date, none of the Directors had any interest, direct or indirect,

in any assets which had been acquired or disposed of by, or leased to, any member of the Group or were

proposed to be acquired or disposed of by, or leased to, any member of the Group since 31 December

201 3, being the date to which the latest published audited consolidated financial statements of the

Company were made up.

7. LITIGATION

As at the Latest Practicable Date, no member of the Group was engaged in any litigation or claims

of material importance and, so far as the Directors were aware, there was no litigation or claims of

material importance pending or threatened by or against any member of the Group.

8. MATERIAL CONTRACTS

The following contracts (not being contracts entered into in the ordinary course of business) have

been entered into by members of the Group within the two years immediately preceding the date of this

circular and ending on the Latest Practicable Date, which are or may be material:

(a) the memorandum of understanding dated 24 October 2012 and the supplemental

memorandum of understanding dated 25 January 2013 entered into between Enjoy Media

Holdings Limited (“Enjoy Media”), a subsidiary of the Company, and Mr. Kong Wa in

relation to the possible disposal of the entire issued share capital of Square Inn Hotel

Management Limited (“Square Inn”) by Enjoy Media at a consideration of HK$52,000,000;

(b) the agreement dated 29 April 2013 entered into between Enjoy Media, Mr. Kong Wa,

Mr. Tong Hon Va and Ms. Cheong Soi Un in relation to the disposal of the entire issued share

capital of Square Inn by Enjoy Media at a consideration of HK$52,000,000;

(c) the Capital Increase Agreement ;

(d) the Shaw Agreement; and

( e) the Agreements.


VI – 6

9. EXPERTS AND CONSENTS

The following are the qualifications of the experts who have given opinions or advice contained in

this circular:

Name Qualification

Deloitte Touche Tohmatsu (“Deloitte”) Certified Public Accountants

Centurion Independent financial advisor

Asset Appraisal Limited (“Asset Appraisal”) Independent professional valuer

Zhong Lun Law Firm (“Zhong Lun”) Legal advisers to the Company as to PRC laws

in relation to the Beijing Hotel

Deloitte , Centurion, Asset Appraisal and Zhong Lun have given and have not withdrawn their

written consent to the issue of this circular with the inclusion of their letters and references to their name

in the form and context in which they appear. As at the Latest Practicable Date, Deloitte , Centurion, Asset

Appraisal and Zhong Lun:

(a) did not have any shareholding in or any right (whether legally enforceable or not) to

subscribe for or to nominate persons to subscribe for securities in any member of the Group;

and

(b) did not have any direct or indirect interest in any assets which had been acquired or disposed

of by, or leased to, any member of the Group or were proposed to be acquired or disposed of

by or leased to any member of the Group since 31 December 201 3, being the date to which

the latest published consolidated financial statements of the Company were made up.

10. GENERAL

(a) The secretary of the Company is Ms. Law Sau Lai. She is an associate of The Hong

Kong Institute of Chartered Secretaries and The Institute of Chartered Secretaries and

Administrators.

(b) The registered office of the Company is situated at Clarendon House, 2 Church Street,

Hamilton HM 11, Bermuda.

(c) The branch share registrar and transfer office of the Company in Hong Kong is Tricor

Secretaries Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong

Kong.

(d) The English text of this circular and the accompanying form of proxy shall prevail over the

Chinese text.


VI – 7

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours

at 31st Floor, Paul Y. Centre, 51 Hung To Road, Kwun Tong, Kowloon, Hong Kong from the date of this

circular up to and including the date of the SGM:

(a) the memorandum of association and bye-laws of the Company;

(b) the material contracts referred to in the paragraph headed “Material Contracts” in this

Appendix;

(c) the review report on the Eagle Spirit Group and the Makerston Group, the texts of which are

set out in Appendix II and III to this circular;

(d) the review report on the unaudited pro forma financial information of the Remaining Group,

the texts of which are set out in Appendix IV to this circular;

(e) the annual reports of the Company for each of the two financial years ended 31 December

2012 and 2013, and the interim report of the Company for the six months ended 30 June

2014;

(f) the valuation reports on the properties prepared by Asset Appraisal as set out in Appendix V

to this circular;

(g) the PRC legal opinion issued by Zhong Lun as referred to in the valuation report on the

Beijing Hotel set out in Appendix V to this circular ;

(h) the written consents referred to in the paragraphs headed “Experts and Consents” above in

this Appendix;

( i) the circular of the Company dated 18 February 2014 which has been issued pursuant to the

requirements set out in Chapter 14 of the Listing Rules since 31 December 2013 (being the

date to which the latest published audited accounts of the Group were made up); and

( j) this circular .

NOTICE OF SGM

SGM – 1



(Stock Code: 1189)

NOTICE IS HEREBY GIVEN that a special general meeting (the “ Meeting”) of Rosedale Hotel

Holdings Limited (the “Company”) will be held at 3:30 p.m. on Thursday, 27 November 2014 at Gemini

Room, 33rd Floor, Rosedale on the Park, 8 Shelter Street, Causeway Bay, Hong Kong for the purpose

of considering and, if thought fit, passing, with or without modifications, the following resolutions as

ordinary resolutions of the Company:–

ORDINARY RESOLUTIONS

1. “THAT:

(a) the sale by Easy Vision Holdings Limited (“Easy Vision”), a direct wholly-owned

subsidiary of the Company, of 1 ordinary share with a par value of US$1 in the share

capital of Eagle Spirit Holdings Limited (“Eagle Spirit”) and the amounts due from

Eagle Spirit to Easy Vision as at the completion date for an aggregate consideration

of not exceeding HK$566 million, pursuant to the agreement dated 11 April 2014 (the

“Eagle Spirit Agreement”) entered into between Easy Vision as the vendor and Silver

Infinite Limited as the purchaser, the Company as the vendor’s guarantor and ITC

Properties Group Limited (“ITCP”) as the purchaser’s guarantor (a copy of which has

been produced to the Meeting and marked “A” and has been signed by the chairman

of the Meeting for the purpose of identification) and all the transactions contemplated

thereby, be and are hereby approved ; and

(b) any one director of the Company be authorised to do all such acts and things,

including agreeing to such amendments or extensions and execute all such documents

on behalf of the Company as he/she may consider necessary or expedient or desirable

to give effect to or in connection with the Eagle Spirit Agreement, or any of the

transactions contemplated thereby.”

2. “THAT:

(a) the sale by Rosedale Hotel Group Limited (“Rosedale Hotel”), a non wholly -owned

subsidiary of the Company, of 1 ordinary share with a par value of US$1 in the share

capital of Makerston Limited (“Makerston”) and the amounts due from Makerston

to Rosedale Hotel as at the completion date for an aggregate consideration of not

exceeding HK$324 million, pursuant to the agreement dated 11 April 2014 (the

“Makerston Agreement”) entered into between Rosedale Hotel as the vendor, Silver

Infinite Limited as the purchaser, the Company as the vendor’s guarantor and ITCP

as the purchaser’s guarantor (a copy of which has been produced to the Meeting and

marked “B” and has been signed by the chairman of the Meeting for the purpose

of identification) and all the transactions contemplated thereby, be and are hereby

approved ;

NOTICE OF SGM

SGM – 2

(b) any one director of the Company be authorised to do all such acts and things,

including agreeing to such amendments or extensions and execute all such documents

on behalf of the Company as he/she may consider necessary or expedient or desirable

to give effect to or in connection with the Makerston Agreement, or any of the

transactions contemplated thereby.”

By Order of the Board


Law Sau Lai

Company Secretary

Hong Kong, 10 November 2014

Notes:

1. Any shareholder of the Company entitled to attend and vote at the Meeting shall be entitled to appoint another person as his/

her/its proxy to attend and vote instead of him/her/it. A shareholder who is the holder of two or more shares may appoint

more than one proxy to represent him/her/it and vote on his/her/its behalf at the Meeting . A proxy need not be a shareholder

of the Company. In addition, a proxy or proxies representing either an individual shareholder or a shareholder which is a

corporation, shall be entitled to exercise the same powers on behalf of the shareholder which he/she or they represent as such

shareholder could exercise.

2. The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in

writing, or if the appointor is a corporation, either under seal or under the hand of an officer or attorney duly authorised.

The instrument appointing a proxy and the power of attorney, or other authority, if any, under which it is signed or notarially

certified copy of the power or authority shall be deposited at the branch share registrar of the Company in Hong Kong, Tricor

Secretaries Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not less than forty-eight

(48) hours before the time for holding the Meeting or adjournment thereof (as the case may be) at which the person named in

the instrument proposes to vote, and in default the instrument of proxy shall not be treated as valid.

3. Delivery of an instrument appointing a proxy shall not preclude a shareholder of the Company from attending and voting in

person at the Meeting and, in such event, the instrument appointing a proxy shall be deemed to be revoked.

4. Where there are joint holders of any share of the Company, any one of such holders may vote at the Meeting, either

personally or by proxy, in respect of such share as if he/she/it were solely entitled thereto, but if more than one of such

joint holders be present at the Meeting personally or by proxy, then the one of such holders whose name stands first on

the register of members of the Company in respect of such share shall alone be entitled to vote in respect thereof. Several

executors or administrators of a deceased shareholder in whose name any share stands shall for this purpose be deemed joint

holders thereof.

5. A form of proxy for use at the Meeting is enclosed herewith.

6. If a typhoon signal No. 8 or above, or a “black” rainstorm warn ing sign al is in effect any time after 12:30 p.m. on the date of

the Meeting, the Meeting will be postponed. The Company will post an announcement on the websites of the Company and

the Stock Exchange to notify shareholders of the Company of the date, time and place of the rescheduled Meeting.

7. As at the date of this notice, the Board comprises three executive Directors, namely Mr. Cheung Hon Kit (Chairman), Ms.

Chan Ling, Eva (Managing Director) and Mr. Chan Pak Cheung, Natalis; and three independent non-executive Directors,

namely Mr. Kwok Ka Lap, Alva, Mr. Poon Kwok Hing, Albert and Mr. Sin Chi Fai.

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