Yincheng International : MAJOR TRANSACTIONS (1) THE ENTERING INTO OF THE FRAMEWORK AGREEMENTS FOR THE ACQUISITION OF THE ENTIRE EQUITY INTEREST IN AND DEBT OF HANGZHOU QINGCHENG AND (2) COOPERATION AGREEMENT IN RELATION TO DEVELOPMENT OF THE PROJECT LAND HELD BY WUXI XUELANG

February 26, 2021 at 03:41 am EST

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Yincheng International Holding Co., Ltd., you should at once hand this circular together with the accompanying form of proxy to the purchaser or transferee or to the bank, licensed securities dealer or registered institution in securities or other agent through whom the sale or transfer was effected for transmission to the purchaser 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.

MAJOR TRANSACTIONS

(1) THE ENTERING INTO OF THE FRAMEWORK AGREEMENTS FOR THE ACQUISITION OF THE ENTIRE EQUITY INTEREST IN

AND DEBT OF HANGZHOU QINGCHENG

AND

(2) COOPERATION AGREEMENT IN RELATION TO DEVELOPMENT OF THE PROJECT LAND HELD BY WUXI XUELANG

Unless the context otherwise requires, all capitalised terms used in this circular shall have the meanings set out in the section headed ''Definitions'' of this circular.

A letter from the Board containing details of the Target Company Acquisition and the Transactions are set out on pages 10 to 43 of this circular.

The Target Company Acquisition and the Transactions have been approved by the Written Approval from a closely allied group of Shareholders who together hold more than 50% of the issued share capital of the Company, pursuant to Rule 14.44 of the Listing Rules in lieu of a general meeting of the Company. This circular is being despatched to the Shareholders for information purpose only.

26 February 2021

CONTENTS

Page

DEFINITIONS ..................................................................

LETTER FROM THE BOARD ..................................................

1 10

APPENDIX I - FINANCIAL INFORMATION OF THE GROUP ...........

I-1

APPENDIX II - FINANCIAL INFORMATION OF

HANGZHOU QINGCHENG ............................. II-1

APPENDIX III -

FINANCIAL INFORMATION OF

WUXI XUELANG ....................................... III-1

APPENDIXIV -

MANAGEMENT DISCUSSION AND

ANALYSIS OF HANGZHOU QINGCHENG ............. IV-1

APPENDIXV -

MANAGEMENT DISCUSSION AND ANALYSIS OF

WUXI XUELANG ....................................... V-1

APPENDIX VI - UNAUDITED PRO FORMA FINANCIAL INFORMATION

OF THE ENLARGED GROUP ........................... VI-1

APPENDIXVII -

PROPERTY VALUATION REPORT IN RELATION

TO THE PROPERTY INTEREST HELD BY

HANGZHOU QINGCHENG ............................. VII-1

APPENDIX VIII - PROPERTY VALUATION REPORT IN RELATION

TO THE PROPERTY INTEREST HELD BY

WUXI XUELANG ....................................... VIII-1

APPENDIX IX

- GENERAL INFORMATION ............................... IX-1

- i -

In this circular, unless the context otherwise requires, the following expressions shall have the meanings set out below:

''Acquisition Framework

Agreement I''

the equity interest transfer framework agreement (股權轉讓框架協議書(一)) dated 15 September 2020 entered into among the Purchaser, Yihe Real Estate, the Target Company, the Guarantors and Hangzhou Hongyuyuan LLP in relation to the acquisition of Target Equity Interest A and Target Debt A

''Acquisition Framework

Agreement II''

the equity interest transfer framework agreement (股權轉讓框架協議書(二)) dated 15 September 2020 entered into among the Purchaser, the Huahong Parties and the Target Company in relation to the acquisition of Target Equity Interest B and Target Debt B

''Acquisition Framework

Agreements''

Acquisition Framework Agreement I and Acquisition Framework Agreement II

''Adjustments I''

the adjustments of Consideration I as set out in the section headed ''Letter from the Board - (1) The Entering into of the Framework Agreements for the Acquisition of the Entire Equity Interest in and Debt of Hangzhou Qingcheng - The Acquisition Framework Agreements - Major Terms of Acquisition Framework Agreement I - Adjustments of Consideration I'' of this circular

''Adjustments II''

the adjustments of Consideration II as set out in the section headed ''Letter from the Board - (1) The Entering into of the Framework Agreements for the Acquisition of the Entire Equity Interest in and Debt of Hangzhou Qingcheng - The Acquisition Framework Agreements - Major Terms of Acquisition Framework Agreement II - Adjustments of Consideration II'' of this circular

''Asset Management Parties''

Zheshang Asset Management, Zheyue Asset Management and Zhejiang Jinyu

''Board''

the board of Directors

''Company''

Yincheng International Holding Co., Ltd. (銀城國際控股有限公司), a company incorporated under the laws of the Cayman Islands with limited liability, and the shares of which are listed on the Main Board of the Stock Exchange (stock code: 1902)

''Completion Date''

the date on which the registration of Target Equity Interest A and Target Equity Interest B under the name of the Purchaser have been completed (whichever is latter)

''Consideration I''

the consideration of RMB1,090,637,588.09 (comprising (i) Equity Transfer Price A; (ii) the debt of RMB127,173,826.52 of the Target Company owed to Yihe Real Estate; and (iii) the provision of loans of RMB481,494,001.57 and US$50,000,000 to the relevant companies of the Yihe Real Estate Group (with the Target Company as a joint debtor), and subject to Adjustments I) payable by the Purchaser in relation to the acquisition of Target Equity Interest A and Target Debt A

''Consideration II''

''Cooperation Agreement''

the consideration of RMB106,360,903.78 (comprising (i) Equity Transfer Price B; and (ii) the debt of RMB41,360,903.78 of the Target Company owed to the Huahong Parties and their associates, and subject to Adjustments II) payable by the Purchaser in relation to the acquisition of Target Equity Interest B and Target Debt B the cooperation agreement dated 23 December 2020 entered into among Wuxi Huayu, Wuxi Yinzetao and Wuxi Yinzexuan

''Debt Transfer Price A''

the debt transfer price of RMB127,173,826.52 (subject to Adjustments I) for the acquisition of Target Debt A

''Debt Transfer Price B''

the debt transfer price of RMB41,360,903.78 for the acquisition of Target Debt B

''Deemed Disposal''

the contribution of registered capital in Wuxi Yinzexuan of RMB150,000,000 from Wuxi Huayu, subsequent to the completion of which Wuxi Yinzexuan shall be held as to 50% and 50% by Wuxi Yinzetao and Wuxi Huayu, respectively

''Director(s)''

the director(s) of the Company

''Enlarged Group''

the Group immediately upon completion of the Target Company Acquisition and the Transactions

''Equity Transaction

Agreement''

the equity transaction agreement* (產權交易合同) dated 10 November 2020 entered into between Wuxi Huayu and Wuxi Shanshui in relation to the Project Company Acquisition

''Equity Transfer Price A''

the equity transfer price of RMB131,969,760 (subject to Adjustments I) for the acquisition of Target Equity Interest A

''Equity Transfer Price B''

the equity transfer price of RMB65,000,000 (subject to Adjustments II) for the acquisition of Target Equity Interest B

''Group''

the Company and its subsidiaries

''Guarantors''

Mr. He Jianliang (何建梁先生) and Mr. He Jianxin (何建信先生), the legal representative of the Target Company and Yihe Real Estate, respectively

''Hangzhou Hongyuyuan LLP''

Hangzhou Hongyuyuan Enterprise Management Partnership (Limited Partnership)* (杭州鴻鈺源企業管理合夥企業(有限合夥), a limited partnership established in the PRC with Yinzehong, Zheshang Asset Management, Zheyue Asset Management and Zhejiang Jinyu being the partners whose capital contribution are RMB150,000,000, RMB975,000,000, RMB175,000,000 and RMB10,000, respectively, as at the Latest Practicable Date

''Huahong Parties''

Zhejiang Huahong, Mr. Zhao and Mr. Zhou

''Huahong Project''

phases I, II and III of the Target Project which were under the development of the Huahong Parties as at the date of the Acquisition Framework Agreements

''Independent Third Party(ies)''

a third party(ies) independent of the Company and its connected persons

''Kunlun Debt''

the debt of RMB358,774,862.94 owed by the Target Company to Kunlun Trust as at the date of the Acquisition Framework Agreements

''Kunlun Trust''

Kunlun Trust Co., Ltd. (昆侖信託有限責任公司), a creditor of (i) a related company of Yihe Real Estate; and (ii) the Target Company, and an Independent Third Party

''Latest Practicable Date''

22 February 2021, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained herein

''Listing Rules''

the Rules Governing the Listing of Securities on the Stock Exchange

''Mr. Zhao''

Mr. Zhao Chongqing (趙崇清先生), the holder of 8.712% equity interest in the Target Company as at the date of the Acquisition Framework Agreements

''Mr. Zhou''

Mr. Zhou Qingxing (周慶興先生), the holder of 1.98% equity interest in the Target Company as at the date of the Acquisition Framework Agreements

''Party or Parties''

''percentage ratio(s)''

the party or parties to the Cooperation Agreement has the meaning ascribed to it in the Listing Rules

''PRC''

the People's Republic of China, which for the sole purpose of this circular, shall exclude the Hong Kong Special Administrative Region, the Macau Special Administrative Region and Taiwan

''Project Company'' or ''Wuxi Xuelang''

Wuxi Xuelang Changguang Real Estate Co., Ltd.* (無錫雪浪長廣置業有限公司), a company established under the laws of the PRC with limited liability

''Project Company Accountants'

Report''

the accountants' report issued by Ernst & Young, certified public accountant and the reporting accountants of the Company dated 26 February 2021 in relation to the Project Company, the text of which is set out in Appendix III to this circular

''Project Company Acquisition''

the acquisition by Wuxi Huayu of (i) the entire equity interest in the Project Company from Wuxi Shanshui; and (ii) the debt in the amount of RMB700,000,000 owed by the Project Company to Wuxi Shanshui pursuant to the Equity Transaction Agreement

''Project Company Acquisition

Consideration''

the consideration of RMB752,087,000 in relation to the Project Company Acquisition

''Project Company's Reporting

Period''

the period from 17 February 2020 (date of establishment of the Project Company) to 31 December 2020

''Project Land''

the land parcel situated at the east to Wuhu Avenue, south to Gaoyuan Road, west to Planning Road and north to Hefeng Road* (東至五湖大道、南至高遠路、西至規劃道路、北至和風路)

''Property Valuation Report I''

the valuation report in relation to the valuation of the Target Land held by Hangzhou Qingcheng as at 31 December 2020 and issued by Jones Lang LaSalle Corporate Appraisal and Advisory Limited, an independent property valuer, dated 26 February 2021

''Property Valuation Report II''

the valuation report in relation to the valuation of the Project Land held by Wuxi Xuelang as at 31 December 2020 and issued by Jones Lang LaSalle Corporate Appraisal and Advisory Limited, an independent property valuer, dated 26 February 2021

''Prospectus''

the prospectus issued by the Company dated 22 February 2019

''Purchaser''

Hangzhou Zezhou Enterprise Management Co., Ltd.* (杭州澤洲企業管理有限公司), a company established under the laws of the PRC with limited liability and an indirect wholly-owned subsidiary of the Company as at the Latest Practicable Date

''Relevant Shareholders''

Silver Huang Holding Limited, Silver Vally Holding Limited, Silver Xie Holding Limited, Silver Ma Holding Limited, Silver Li Holding Limited, Silver Wang Holding Limited and Silver Shao Holding Limited, each being a company incorporated in the British Virgin Islands with limited liability and a Shareholder

''Reorganisation''

the reorganisation of the Group in preparation for the listing of the Shares on the Stock Exchange, details of which are set out in the section headed ''History, Reorganisation and Group Structure - Corporate Development - The reorganisation'' in the prospectus of the Company dated 22 February 2019

''RMB''

Renminbi, the lawful currency of the PRC

''Share(s)''

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

''Shareholder''

holder(s) of Share(s)

''sq. m.''

square metres

''Stock Exchange''

The Stock Exchange of Hong Kong Limited

''Supplemental Land Fee''

the aggregate amount of supplemental land fee* (補容土地款) and deed tax* (契稅) of RMB89,797,000 payable to the relevant government authority

''Target Company'' or ''Hangzhou Qingcheng''

Hangzhou Qingcheng Property Development Co., Ltd.* (杭州青城房地產開發有限公司), a company established under the laws of the PRC with limited liability

''Target Company Accountants'

Report''

the accountants' report issued by Ernst & Young, certified public accountant and the reporting accountants of the Company dated 26 February 2021 in relation to the Target Company, the text of which is set out in Appendix II to this circular

''Target Company Acquisition''

acquisition of the Target Equity Interest and the Target Debt by the Purchaser from Yihe Real Estate and the Huahong Parties pursuant to the terms and conditions of the Acquisition Framework Agreements

''Target Company Acquisition

Consideration''

the aggregate consideration of RMB1,196,998,491.87 comprising Consideration I and Consideration II (subject to Adjustments I and Adjustments II) payable by the Purchaser in relation to the Target Company Acquisition

''Target Company's Reporting

Period''

the three years ended 31 December 2017, 2018 and 2019 and the nine months ended 30 September 2020

''Target Debt''

Target Debt A and Target Debt B

''Target Debt A''

the debt of the Target Company owed to Yihe Real Estate which was amounted to RMB127,173,826.52 as at the date of the Acquisition Framework Agreements

''Target Debt B''

the debt of the Target Company owed to the Huahong Parties and their associates which was amounted to RMB41,360,903.78 as at the date of the Acquisition Framework Agreements

''Target Equity Interest''

the entire equity interest in the Target Company as at the date of the Acquisition Framework Agreements

''Target Equity Interest A''

67% equity interest in the Target Company which was held by Yihe Real Estate as at the date of the Acquisition Framework Agreements

''Target Equity Interest B''

33% equity interest in the Target Company which was collectively held by Zhejiang Huahong, Mr. Zhao and Mr. Zhou as at the date of the Acquisition Framework Agreements

''Target Land''

the land parcel which is situated at Qingshan Minzhu Village, Lin'an District, Hangzhou City, Zhejiang* (浙江省杭州市臨安區青山民主村) with a total area of approximately 805,871.7 sq. m.

''Target Project''

the property development project which is located on the Target Land

''Tender Subject''

(i) the entire equity interest in the Project Company from Wuxi Shanshui; and (ii) the debt in the amount of RMB700,000,000 owed by the Project Company to Wuxi Shanshui

''Total Commitment''

the amount of RMB616,257,900 to be borne by Wuxi Yinzetao and Wuxi Yinzexuan to Wuxi Huayu and/or the Project Company to facilitate the payment of the remaining of the Project Company Acquisition Consideration and the Supplemental Land Fee

''Transactions''

''Transaction Service Fee''

the transactions contemplated under the Cooperation Agreement including the Deemed Disposal and the Transfer the transaction service fee of RMB4,708,600 paid by Wuxi Huayu to Wuxi Shanshui in relation to the Project Company Acquisition

''Transfer''

the transfer of the entire equity interest in the Project Company from Wuxi Huayu to Wuxi Yinzexuan

''Trustee''

the trustee of a trust over the rights and benefits attached to the loan provided by Hangzhou Hongyuyuan LLP to the Purchaser

''US$''

United States dollars, the lawful currency of the United States of America

''Written Approval''

the written shareholders' approval obtained by the Company in relation to the Target Company Acquisition and the Transactions pursuant to Rule 14.44 of the Listing Rules

''Wuxi Huayu''

Wuxi Huayu Real Estate Co., Ltd.* (無錫華宇置業有限公司), a company established under the laws of the PRC with limited liability, the ultimate beneficial owners of which were Mr. Zhang Linzhong (張林忠先生) and Ms. Zhang Lihua (張麗華女士) as at the Latest Practicable Date

''Wuxi Shanshui''

Wuxi Shanshui Huigu Town Construction Development Co., Ltd.* ( 無錫山水慧谷城鎮建設發展有限公司 ), a company established under the laws of the PRC with limited liability, the ultimate beneficial owner of which was the People's Government of Wuxi* (無錫市人民政府 ) as at the Latest Practicable Date

''Wuxi Yinzetao''

Wuxi Yinzetao Enterprise Management Co., Ltd.* (無錫銀澤濤企業管理有限公司), a company established under the laws of the PRC with limited liability and an indirect wholly-owned subsidiary of the Company

''Wuxi Yinzexuan''

Wuxi Yinzexuan Enterprise Management Co., Ltd.* (無錫銀澤渲企業管理有限公司), a company established under the laws of the PRC with limited liability, and a wholly-owned subsidiary of the Company as at the date of the Cooperation Agreement

''Yihe Creditors''

seven creditors of the Yihe Real Estate Group, all of which are Independent Third Parties

''Yihe Land''

a total of approximately 396,364.52 sq. m. of the Target Land which was under the development of Yihe Real Estate as at the Latest Practicable Date

''Yihe Project''

phases IV and V of the Target Project which were under the development of Yihe Real Estate as at the Latest Practicable Date

''Yihe Real Estate''

Yihe Real Estate Group Co., Ltd.* (頤和地產集團有限公司), a company established under the laws of the PRC with limited liability which was wholly-owned by Long Sen Investments (Hong Kong) Limited and in turn ultimately wholly-owned by Mr. He Jianliang (何建梁先生), and the holder of 67% equity interest in the Target Company as at the date of the Acquisition Framework Agreements

''Yihe Real Estate Group''

Yihe Real Estate and its related companies

''Yincheng Real Estate''

Yincheng Real Estate Group Co., Ltd.* (銀城地產集團股份有限公司), a company established under the laws of the PRC with limited liability, the former holding company of the operating subsidiaries of the Group prior to completion of the Reorganisation

''Yincheng Real Estate Group''

Yincheng Real Estate and its subsidiaries from time to time

''Yinzehong''

Wuxi Yinzehong Enterprise Management Co., Ltd.* (無錫銀澤鴻企業管理有限公司), a company established under the laws of the PRC with limited liability and an indirect wholly-owned subsidiary of the Company

''Zhejiang Huahong''

Zhejiang Huahong Holding Group Co., Ltd.* (浙江華虹控股集團有限公司), a company established under the laws of the PRC with limited liability which was owned as to 70% and 30% by Mr. Zhao and Mr. Zhao Zhihao (趙志昊先生), respectively, and the holder of 22.308% equity interest in the Target Company as at the date of the Acquisition Framework Agreements

''Zhejiang Jinyu''

Zhejiang Jinyu Asset Management Co., Ltd.* (浙江金珏資產管理有限公司), a state-owned enterprise (國有企業) incorporated under the laws of the PRC with limited liability

''Zheshang Asset Management''

Zhejiangsheng Zheshang Asset Management Co., Ltd.* (浙江省浙商資產管理有限公司), a state-owned enterprise (國有企業) incorporated under the laws of the PRC with limited liability

''Zheyue Asset Management''

Zheyue Asset Management Co., Ltd.* (浙越資產管理有限公司), a state-owned enterprise (國有企業) incorporated under the laws of the PRC with limited liability

''%''

per cent.

In this circular, the English names of the PRC entities or enterprises are translations oftheir Chinese names. In the event of any inconsistency, the Chinese names shall prevail.

For identification purposes only

Non-executive Directors: Huang Qingping (Chairman) Xie Chenguang

Registered office: Sertus Chambers

Governors Square, Suite #5-204 23 Lime Tree Bay Avenue

Executive Directors: Ma Baohua

P.O. Box 2547

Zhu Li Wang Zheng Shao Lei

Grand Cayman KY1-1104 Cayman Islands

Principal place of business in Hong Kong: Room 4502, 45/F

Independent Non-Executive Directors: Chen Shimin

Chan Peng Kuan Lam Ming Fai

Far East Finance Centre 16 Harcourt Road Admiralty

Hong Kong

26 February 2021

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTIONS

(1) THE ENTERING INTO OF THE FRAMEWORK AGREEMENTS FOR THE ACQUISITION OF THE ENTIRE EQUITY INTEREST IN

AND DEBT OF HANGZHOU QINGCHENG

AND

(2) COOPERATION AGREEMENT IN RELATION TO DEVELOPMENT OF THE PROJECT LAND HELD BY WUXI XUELANG

INTRODUCTION

Reference is made to the announcements of the Company dated 15 September 2020, 7

October 2020, 18 December 2020, 23 December 2020, 31 December 2020, 15 January 2021 and 18 January 2021 in relation to, among other things, the Target Company Acquisition and the Transactions.

The purpose of this circular is to provide you with (i) details of the Target Company Acquisition and the Transactions; (ii) financial information of the Group; (iii) financial information of Hangzhou Qingcheng; (iv) financial information of Wuxi Xuelang; (v) management discussion and analysis of Hangzhou Qingcheng; (vi) management discussion and analysis of Wuxi Xuelang; (vii) the unaudited pro forma financial information of the Enlarged Group; (viii) Property Valuation Report I; (ix) Property Valuation Report II and other information as required under the Listing Rules.

(1) THE ENTERING INTO OF THE FRAMEWORK AGREEMENTS FOR THE

ACQUISITION OF THE ENTIRE EQUITY INTEREST IN AND DEBT OF

HANGZHOU QINGCHENG

On 15 September 2020 (after trading hours), the Purchaser (an indirect wholly-owned subsidiary of the Company) entered into Acquisition Framework Agreement I with Yihe Real Estate, the Target Company, the Guarantors and Hangzhou Hongyuyuan LLP for the acquisition of Target Equity Interest A (representing 67% equity interest in the Target Company) and Target Debt A (which is amounted to RMB127,173,826.52) at Consideration I of RMB1,090,637,588.09 (subject to adjustments).

On 15 September 2020 (after trading hours), the Purchaser entered into Acquisition Framework Agreement II with the Huahong Parties and the Target Company for the acquisition of Target Equity Interest B (representing 33% equity interest in the Target Company) and Target Debt B (which is amounted to RMB41,360,903.78) at Consideration II of RMB106,360,903.78 (subject to adjustments).

Background of the Target Company

The Target Company is a limited liability company in the PRC and principally engages in property development and property management. The background information of the Target Company as at the date of the Acquisition Framework Agreements and the circumstances leading to the entering into of the Acquisition Framework Agreements are detailed below.

Shareholding structure of the Target Company

The Target Company was owned by Yihe Real Estate, Zhejiang Huahong, Mr. Zhao and Mr. Zhou, all of which are Independent Third Parties. The shareholding structure of the Target Company was as follows:

Target Company

Loans due to a creditor and the shareholders of the Target Company by the Target Company

The Target Company was indebted to Kunlun Trust the Kunlun Debt in the amount of RMB358,774,862.94 and was indebted to Yihe Real Estate and the Huahong Parties in the amount of RMB127,173,826.52 and RMB41,360,903.78, respectively.

Loans due to the Yihe Creditors and Zhejiang Huahong by the Yihe Real Estate Group

The Yihe Real Estate Group was indebted to the Yihe Creditors in the total amount of approximately RMB1.05 billion. The Yihe Creditors had commenced legal proceedings against the Yihe Real Estate Group for debt recovery and applied for the freezing of Target Equity Interest A. The Court had imposed such freezing measures on Target Equity Interest A where the dealing of such equity interest had been restricted.

Yihe Real Estate was also indebted to Zhejiang Huahong in the amount of RMB42,143,800. Zhejiang Huahong had commenced legal proceedings against Yihe Real Estate for debt recovery and applied for the freezing of 27.81% equity interest in the Target Company held by Yihe Real Estate. The Court had imposed such freezing measures on 27.81% equity interest in the Target Company held by Yihe Real Estate where the dealing of such equity interest had been restricted.

Assets of the Target Company

The Target Company owned the Target Land, on which Yihe Real Estate and the Huahong Parties had been developing the Yihe Project and the Huahong Project respectively. Details of the approximate site area covered under each of the projects are set out below:

Yihe Project	Huahong Project
sq.m.	sq.m.
Undeveloped site area	276,226.17	3,311
Developed site area	120,138.35	406,196.18
Total area	396,364.52	409,507.18

The Yihe Project had been developing solely by Yihe Real Estate which bore all the costs for the development and enjoyed all revenue generated therefrom. The Huahong Project had been developing solely by the Huahong Parties which bore all the costs for the development and enjoyed all the revenue generated therefrom.

As at the date of the Acquisition Framework Agreements, an area of approximately 21,019 sq. m. of the Yihe Land was subject to seizure measures due to the non-performance of the operational payables in the amount of RMB46,583,095.70 by the Target Company, while an area of approximately 284,956.90 sq. m. of the Yihe Land had been mortgaged by the Target Company to Kunlun Trust as a security for the Kunlun Debt.

Operational payables, receivables and inventories of the Target Company

As at 30 September 2020, the operational payables, receivables and inventories of the Target Company were approximately RMB887,159,455, RMB21,347,971 and RMB312,095,497, respectively.

Financial information of the Target Company

Set out below is the financial information of the Target Company for the years ended 31 December 2018 and 2019:

For the year ended 31 December

2019	2018
RMB'000	RMB'000
(Audited)	(Audited)
Net loss before taxation	61,185	161,904
Net loss after taxation	62,022	200,393

The audited net liabilities of the Target Company as at 30 September 2020 was approximately RMB553,413,000.

Restructuring and Acquisition of the Target Company

In view of the development potential of the Target Land and the Group's business strategy in expanding its existing business in property development in the Yangtze River Delta Megalopolis, the Group intended to acquire the Target Equity Interest in the Target Company for the development of the undeveloped area of the Target Land into a residential and commercial complex and the carrying on with the sales of unsold residential properties on the developed area of the Target Land. Nonetheless, given the financial position of the Target Company and its shareholders, debt restructuring in relation to the Target Company and its shareholders has to be carried out in preparation for the Target Company Acquisition.

Hangzhou Hongyuyuan LLP was first set up with its sole purpose to facilitate the acquisition of the Kunlun Debt and provide financial assistance to the Purchaser for settlement of the Target Company Acquisition. Yinzehong (an indirect wholly-owned subsidiary of the Company) and the Asset Management Parties shall contribute to Hangzhou Hongyuyuan LLP in the amount of RMB150,000,000 and RMB1,150,010,000, respectively.

The Acquisition Framework Agreements were entered into to set out the terms and conditions of the Target Company Acquisition, in particular the steps and procedures in relation to (i) the repayment of debts owed by the Yihe Real Estate Group to the Yihe Creditors and Zhejiang Huahong for uplifting the freezing measures on Target Equity Interest A; and (ii) the release of mortgages over the land use rights of certain portion of the Yihe Land prior to completion of the Target Company Acquisition.

In order to release the land use rights of the Yihe Land for an area of approximately 284,956.90 sq. m. that had been mortgaged in favour of Kunlun Trust prior to completion of the Target Company Acquisition, the Purchaser shall entrust Zheshang Asset Management to enter into a debt transfer agreement with Kunlun Trust for the acquisition of the Kunlun Debt at the consideration of RMB304,657,271.23.

The Acquisition Framework Agreements

Major Terms of Acquisition Framework Agreement I

The major terms of Acquisition Framework Agreement I are detailed below.

Subject assets to be acquired

The Purchaser has agreed to acquire, and Yihe Real Estate has agreed to sell, Target Equity Interest A (representing 67% of the entire equity interest in the Target Company) and Target Debt A (being the debt of RMB127,173,826.52 owed by the Target Company to Yihe Real Estate).

Consideration I

Consideration I of RMB1,090,637,588.09 (subject to adjustments) comprises the following:

(a) Equity Transfer Price A of RMB131,969,760 (which is derived from based on the paid-in capital contribution of the Target Company by Yihe Real Estate) for the acquisition of Target Equity Interest A;
(b) Debt Transfer Price A of RMB127,173,826.52 (which is equivalent to the amount owed by the Target Company to Yihe Real Estate) for the acquisition of Target Debt A; and
(c) the provision of loans of RMB481,494,001.57 and US$50,000,000 (equivalent to RMB350,000,000) to the relevant companies of the Yihe Real Estate Group (with the Target Company as a joint debtor) for the settlement of debts owed by such relevant companies of the Yihe Real Estate Group to the Yihe Creditors. The repayment obligation of the Yihe Real Estate Group has been waived as all the required conditions have been fulfilled.

Steps and conditions of the transaction and settlement of Consideration I

The transaction contemplated hereunder shall proceed according to the following steps in sequential order. No party shall proceed to the next step before completion of the previous step(s) without the unanimous written consent of Yihe Real Estate and the Purchaser:

(a) within 20 days upon execution of Acquisition Framework Agreement I:
(i) all seizure measures of the land use rights under the name of the Target
Company shall have been lifted, and there is no potential disputes and situation that may hinder the transaction hereunder;
- (ii) Zheshang Asset Management and Kunlun Trust shall enter into a debt transfer agreement for the acquisition of the Kunlun Debt;
- (iii) the Target Company shall mortgage the land use rights of the Yihe Land for an area of approximately 48,751.60 sq. m., which is currently mortgaged to Kunlun Trust as the first mortgagee, to Zheshang Asset Management as the second mortgagee; and
- (iv) upon completion of the abovementioned mortgage registration, the Purchaser shall procure Zheshang Asset Management to settle the consideration of RMB304,657,271.23 regarding the Kunlun Debt. The first mortgage of the land use rights for an area of approximately 48,751.60 sq. m. of the Yihe Land in favour of Kunlun Trust shall then be released with Zheshang Asset Management becoming the first mortgagee of such land use rights;
(b) within 30 days upon execution of Acquisition Framework Agreement I:
(i) the Target Company shall mortgage the land use rights of the Yihe Land for (i) an area of approximately 4,169.53 sq. m.; and (ii) an area of approximately 48,751.60 sq. m. to the Trustee as the first mortgagee and the second mortgagee, respectively, and complete such mortgage registrations;
(ii) upon the transfer of the Kunlun Debt to Zheshang Asset Management,

Zheshang Asset Management shall request Kunlun Trust to cancel all mortgage registrations on the land use rights of the Yihe Land for an area of approximately 236,205.30 sq. m., and the Target Company shall complete the procedures for merging a number of state-owned land use rights certificates to three state-owned land use rights certificates in relation to the Yihe Land for an area of approximately 223,305.04 sq. m. for unifying the usage and building restrictions on the Target Land; and

(iii) upon completion of the abovementioned merger procedures, the Target

Company shall mortgage such land use rights of the Yihe Land for an area of approximately 223,305.04 sq. m. to Zheshang Asset Management as the first mortgagee and to the Trustee as the second mortgagee, respectively, and complete such mortgage registrations;

(c) within 55 days upon execution of Acquisition Framework Agreement I:
(i) the Purchaser shall pay RMB586,965,110.42 (i.e. the sum of
RMB105,400,000, RMB67,867,821.17 and RMB413,697,289.25 which is derived from Equity Transfer Price A, Debt Transfer Price A and the provision of loans by the Purchaser, respectively) in total to the escrow accounts jointly controlled by the Purchaser and the relevant five Yihe Creditors, respectively, and all such creditors shall agree to uplift the freezing measures on Target Equity Interest A;
- (ii) the Purchaser shall instruct its affiliate to pay US$50,000,000 (equivalent to RMB350,000,000) and place the proceeds of such loan to an escrow account jointly controlled by the affiliate of the Purchaser and one of the Yihe Creditors;
- (iii) the Purchaser shall pay RMB67,796,712.33 to an escrow account jointly controlled by the Purchaser and one of the Yihe Creditors;
- (iv) the Purchaser shall settle Debt Transfer Price B and RMB782,896.22 (i.e. RMB42,143,800 in total) in accordance with Acquisition Framework Agreement II to the escrow account jointly controlled by the Purchaser and the Huahong Parties; and
(v) all freezing measures on Target Equity Interest A shall have been uplifted, and there is no potential obstacle on the transfer of Target Equity Interest A and Target Equity Interest B;
(d) within 60 days upon execution of Acquisition Framework Agreement I:
(i) Yihe Real Estate shall complete the registration of Target Equity Interest A under the name of the Purchaser; and
(ii) the Huahong Parties shall complete the registration of Target Equity Interest B under the name of the Purchaser;
(e) within 30 days upon completion of all the steps in paragraphs (a) to (d) above provided that no dispute arises from the parties to Acquisition Framework Agreement I:
(i) the Purchaser shall provide a loan of RMB15,861,067.70 to the Target

Company and place the proceeds of such loan into the designated account of a creditor of the Target Company;

(ii) the Purchaser shall provide a loan of RMB30,722,028 to the Target

Company and place the proceeds of such loan into the designated account of a creditor of the Target Company; and

(iii) the Purchaser shall release the funds in the escrow accounts as detailed in paragraphs (c)(i) to (c)(iv) above to the designated accounts of the relevant Yihe Creditors and the Huahong Parties, and pay RMB50,000,000 to the designated account of one of the Yihe Creditors;

(f) within five business days upon completion of all the steps in paragraphs (a) to (e) above provided that (i) no dispute arises from the parties to Acquisition Framework Agreement I; (ii) no new encumbrance has been created over the Target Equity Interest and the land use rights of the Target Land; and (iii) no foreseeable risk of the Target Company having to bear material liabilities has been determined preliminarily by the Purchaser, the Purchaser shall pay RMB2,439,790 to Yihe Real Estate; and
(g) upon completion of all the steps in paragraphs (a) to (f) above, the Purchaser shall settle Equity Transfer Price A (to the extent remains unpaid and subject to adjustments) and Debt Transfer Price A (to the extent remains unpaid and subject to adjustments) within 30 days after the determination of Adjustments I.

The table below sets out a summary of the settlement of Consideration I:

Amount derived from

Equity

Transfer	Debt Transfer	the provision of loans
Price A	Price A	by the Purchaser
RMB	RMB

RMB US$

Settlement under paragraphs (c) to (f) above

Payee

Yihe Creditors Yihe Real Estate

105,400,000.00(1) 117,867,821.17(2) 481,494,001.57(3) 50,000,000(4)

Sub-total

2,439,790.00(5) - - - 107,839,790.00 117,867,821.17 481,494,001.57 50,000,000

Settlement under paragraph (g) above (6)

Yihe Real Estate

Total

24,129,970.00	9,306,005.35	-	-
131,969,760.00	127,173,826.52	481,494,001.57	50,000,000
- 17 -

Notes:

(1) Settlement of this amount is detailed in paragraph (c)(i) above
(2) Settlement of this amount is the sum of RMB67,867,821.17 and RMB50,000,000 as detailed in paragraphs (c)(i) and (e)(iii) above
(3) Settlement of this amount is the sum of RMB413,697,289.25 and RMB67,796,712.33 as detailed in paragraphs (c)(i) and (c)(iii) above
(4) Settlement of this amount is detailed in paragraph (c)(ii) above
(5) Settlement of this amount is detailed in paragraph (f) above
(6) On the assumption that the amount calculated and the estimated amount as specified in Acquisition Framework Agreement I is the same

Adjustments of Consideration I

The Purchaser shall conduct a final calculation of the payables, receivables and value of inventories of the Target Company arising from the operations and development of the Yihe Project on the date on which all such payables have become due or on the date on which the amount of payables of the Target Company which have been settled is more than RMB767,780,032, and Equity Transfer Price A and Debt Transfer Price A shall be adjusted as follows:

(a) if the amount calculated is higher than the estimated amount as specified in Acquisition Framework Agreement I, the difference between the amount calculated and the estimated amount shall first be deducted from Equity Transfer Price A (to the extent remains unpaid). If Equity Transfer Price A (to the extent remains unpaid) is not enough to off-set such difference, the remainder of such difference shall then be deducted from Debt Transfer Price A (to the extent remains unpaid). Should there still be a difference after deduction of Equity Transfer Price A and Debt Transfer Price A, the remainder of such difference shall be reimbursed by Yihe Real Estate to the Purchaser in cash; and
(b) if the amount calculated is lower than the estimated amount as specified in Acquisition Framework Agreement I, the Purchaser shall first pay Equity Transfer Price A (to the extent remain unpaid) and Debt Transfer Price A (to the extent remain unpaid) to Yihe Real Estate, then pay the difference between the amount calculated and the estimated amount to Yihe Real Estate in cash and such amount shall form part of Equity Transfer Price A.

Guarantee

Mr. He Jianliang (何建梁先生) and Mr. He Jianxin (何建信先生), as guarantors to Acquisition Framework Agreement I, shall provide joint and several guarantee for the obligations of Yihe Real Estate to settle all payables of the Target Company (including the payables as specified in Acquisition Framework Agreement I and the payables thatYihe Real Estate may not be aware of hence not disclosed in Acquisition Framework Agreement I) for a period of two years from the date on which any of such payables become due.

Liabilities of Yihe Real Estate for non-disclosure of payables and receivables of the Target Company

Should there be any liabilities of the Target Company arising from the operations by Yihe Real Estate which has not been disclosed to the Purchaser as at the date of Acquisition Framework Agreement I, the Target Company or the Purchaser shall, upon the occurrence of such event of default or prospective event of default, have the right to request Yihe Real Estate to take full responsibility without taking into account the consequences arising from the determination of Adjustments I.

Should Yihe Real Estate not be able to take up such responsibility, the relevant amount payable as a result of such non-disclosure shall be deducted directly from Consideration I. The Purchaser and the Target Company may also pay the relevant amount on behalf of Yihe Real Estate, where Yihe Real Estate shall (i) reimburse such amount to the Purchaser and the Target Company and pay an interest that is calculated based on the amount payable at a rate of 0.05% per day from the date on which such amount has been paid; and (ii) compensate all losses and damages suffered by the Purchaser and the Target Company.

Liabilities for breach of Acquisition Framework Agreement I

(a) Should the steps as detailed in the sub-paragraphs (a) to (d) of the paragraph headed ''Steps and conditions of the transaction and settlement of Consideration I'' in this section failed to be completed within the relevant time limit, the Purchaser or Hangzhou Hongyuyuan LLP shall have the right to terminate Acquisition Framework Agreement I by written notice:

(i) should the termination be caused by the failure to complete the steps as detailed in the sub-paragraph (c) or (d) of the paragraph headed ''Steps and conditions of the transaction and settlement of Consideration I'' in this section:

(1) the Purchaser shall have the right to request the release of the escrow measures on all the escrow accounts jointly controlled by the Purchaser and the relevant Yihe Creditors and retrieve all funds therein, and Yihe Real Estate and the Target Company shall pay to the Purchaser an interest which is calculated based on the funds paid at a rate of 15% per annum from the date on which such funds have been deposited to the escrow accounts to the date all such funds have been retrieved;
(2) the Purchaser no longer has to fulfill the remaining obligations under Acquisition Framework Agreement I; and

(3) should the escrow measures on all the escrow accounts have still not been released within ten days upon termination of Acquisition Framework Agreement I:

(i) the Purchaser shall have the right to request the repayment of loans of

US$50,000,000 (equivalent to RMB350,000,000) and RMB4,900,000 by the relevant related companies of Yihe Real Estate; and

(ii) the Target Company and Yihe Real Estate shall pay to the Purchaser all funds as deposited by the Purchaser into the escrow accounts jointly controlled by the Purchaser and the relevant Yihe Creditors, and have the right to request the Purchaser to release the funds as deposited to such escrow accounts to the designated accounts of the Yihe Creditors.

(b) Should the termination of Acquisition Framework Agreement I be caused by Yihe Real Estate or the Target Company, the Purchaser shall have the right to request Yihe Real Estate to pay a penalty of RMB50,000,000 in addition to its rights as set out in the sub-paragraph (a) above, and request Yihe Real Estate to compensate its losses and damages should such penalty not be enough to cover its losses and damages.
(c) Should Acquisition Framework Agreement I be terminated due to the default or malicious breach of agreement by the Purchaser, Yihe Real Estate shall have the right to request the Purchaser to pay a penalty of RMB50,000,000, and continue to request the Purchaser to compensate its losses and damages should such penalty fee not be enough to cover its losses and damages.
(d) Should Acquisition Framework Agreement II be unexecuted, cancelled, terminated, unenforceable and/or revoked, the Purchaser and Hangzhou Hongyuyuan LLP shall have the right to terminate Acquisition Framework Agreement I by giving written notice pursuant to the terms as detailed in the sub-paragraph (a) above.
(e) Should Acquisition Framework Agreement I be invalid or unenforceable, Yihe Real Estate and the Target Company shall compensate all losses and damages of the Purchaser and Hangzhou Hongyuyuan LLP caused thereby, including but not limited to all the unrecoverable amounts paid in relation to Consideration I, plus interest which is calculated based on such paid amounts at a rate of 15% per annum. Yihe Real Estate shall also compensate Debt Transfer Price B to the Purchaser. Should Target Equity Interest A has then been registered under the name of the Purchaser, the Purchaser shall transfer Target Equity Interest A to Yihe Real Estate upon Yihe Real Estate having compensated all losses and damages of the Purchaser.
(f) Should the situation as detailed in the sub-paragraphs (a) to (c) above occur or Acquisition Framework Agreement I be invalid or unenforceable as detailed in the sub-paragraph (e) above, upon Yihe Real Estate or the Target Company having fulfilled all of its obligations under the Acquisition Framework Agreement I, the Purchaser shall (i) release the joint management of the Target Company by Yihe

Real Estate, the Huahong Parties and the Purchaser or transfer the equity interest in the Target Company back to Yihe Real Estate and the Huahong Parties; and (ii) release all mortgage/pledge registrations of the land use rights of the Yihe Land and, if any, the asset of Yihe Real Estate which is worth not less than RMB43,000,000.

Major Terms of Acquisition Framework Agreement II

The major terms of Acquisition Framework Agreement II are detailed below.

Subject assets to be acquired

The Purchaser has agreed to acquire, and the Huahong Parties has agreed to sell, Target Equity Interest B (representing 33% of the entire equity interest in Target Company) and Target Debt B (being debt of RMB41,360,903.78 owed by the Target Company to the Huahong Parties and their associates).

Consideration II

Consideration II of RMB106,360,903.78 (subject to adjustments) comprises the following:

(a) Equity Transfer Price B of RMB65,000,000 (which is derived from based on the paid-in capital contribution of the Target Company by the Huahong Parties) for the acquisition of Target Equity Interest B; and
(b) Debt Transfer Price B of RMB41,360,903.78 (which is equivalent to the amount owed by the Target Company to the Huahong Parties) for the acquisition of Target Debt B.

Steps and conditions of the transaction and settlement of Consideration II

The transaction contemplated hereunder shall proceed according to the following steps in sequential order. No party shall proceed to the next step before completion of the previous step(s):

(a) within 55 days upon execution of Acquisition Framework Agreement II:

(i) upon (1) completion of the procedures for merging a number of state-owned land use rights certificates to three state-owned land use rights certificates in relation to the Yihe Land for an area of approximately 223,305.04 sq. m. for the purpose of unifying the usage and building restrictions on the Target Land and that the land use rights of the Yihe Land for an area of approximately 223,305.04 sq. m. having been mortgaged to Zheshang Asset Management and the Trustee as the first mortgagee and the second mortgagee, respectively, with such mortgages being registered; (2) the land use rights of the Yihe Land for an area of approximately 4,169.53 sq. m. having been mortgaged to the Trustee as the first mortgagee with such mortgage being registered; and (3) the land userights of the Yihe Land for an area of approximately 48,751.60 sq. m. having been mortgaged to the Trustee as the second mortgagee with such mortgage being registered, the Purchaser shall pay Debt Transfer Price B and RMB782,896.22 (i.e. RMB42,143,800 in total) to an escrow account jointly controlled by the Purchaser and the Huahong Parties;

(ii) the Huahong Parties shall ensure that the court has uplifted the freezing measures on 27.81% equity interest in the Target Company held by Yihe Real Estate (1) upon the Purchaser having paid RMB42,143,800 to the escrow account as set out in the sub-paragraph (a)(i) above; and (2) within seven business days upon the freezing measures on Target Equity Interest A having been lifted; and
(iii) there is no situation or potential situation that may hinder the transfer of Target Equity Interest A and Target Equity Interest B;

(b) within 60 days upon execution of Acquisition Framework Agreement II:
(i) the Huahong Parties shall complete the registration of Target Equity Interest B under the name of the Purchaser; and
(ii) the registration of Target Equity Interest A shall be completed under the name of the Purchaser;
(c) within three business days upon completion of all the steps in paragraphs (a) and (b) above provided that no dispute arises from the parties to Acquisition Framework Agreement II:
(i) the Purchaser and the Huahong Parties shall release the funds of
RMB42,143,800 in the escrow account jointly controlled by the Purchaser and the Huahong Parties to the designated account of the Huahong Parties, and if there is any remainder in such escrow account, such amount shall belong to the Purchaser; and
(ii) the Huahong Parties shall cooperate with the Purchaser as per its request to change or cancel the name chop of Mr. Zhao, and release the joint management of the escrow account by the Purchaser and the Huahong Parties; and
(d) upon completion of all the steps in paragraphs (a) to (c) above, the Huahong Parties and the Purchaser shall settle the remaining RMB64,217,103.78 of Consideration II within 30 days after the determination of Adjustments II.

Adjustments to Consideration II

Consideration II shall be adjusted as follows:

Preliminary adjustment

(a) upon reaching the sixth month after the date on which the Target Equity Interest has been registered under the name of the Purchaser or the date on which specific payables of the Target Company arising from the operations and development of the Huahong Project as specified in Acquisition Framework Agreement II have been settled in full, whichever is earlier, the Huahong Parties and the Purchaser shall conduct a calculation of the payables, receivables and value of inventories of the Target Company arising from the operations and development of the Huahong Project. Upon completion of the preliminary adjustment:

(i) if the Huahong Parties are required to pay the Purchaser, such amount shall be deducted from Equity Transfer Price B (to the extent remains unpaid), and the remaining Equity Transfer Price B (if any) shall then be paid to the Purchaser within 30 days upon completion of the preliminary adjustment. If Equity Transfer Price B (to the extent remains unpaid) is not enough to settle the amount, the Purchaser shall have the right to continue to claim the outstanding amount from the Huahong Parties; and

(ii) if the Purchaser is required to pay to the Huahong Parties, the Purchaser shall, within 30 days upon completion of the preliminary adjustment, pay to the Huahong Parties Equity Transfer Price B (to the extent remains unpaid) and the amount payable as determined during the preliminary adjustment (where such amount shall form part of Equity Transfer Price B); and

Final adjustment

(b) upon all payables of the Target Company arising from the operations and development of the Huahong Project as specified in Acquisition Framework Agreement II have become due, the Huahong Parties and the Purchaser shall conduct a final calculation of the payables, receivables which have been realised and value of inventories which have been realised:

(i) if the final amount calculated is higher than the amount as determined during the preliminary adjustment, the difference between the final amount calculated and the amount determined during the preliminary adjustment shall be paid by the Huahong Parties to the Purchaser in cash; and

(ii) if the final amount calculated is lower than the amount as determined during the preliminary adjustment, the difference between the amount determined during the preliminary adjustment and the final amount calculated shall be paid by the Purchaser to the Huahong Parties in cash.

Liabilities of the Huahong Parties for non-disclosure of payables of the Target Company

Should the operational payables, receivables and value of inventories of the Target Company arising from the operations and development of the Huahong Project as specified in Acquisition Framework Agreement II become untrue, inaccurate and incomplete due to the non-disclosure of such by the Huahong Parties, the Target Company or the Purchaser shall have the right to request the Huahong Parties to take full responsibility without taking into account the consequences arising from the determination of Adjustments II.

Should the Huahong Parties not be able to take up such responsibility, the relevant amount payable as a result of such non-disclosure shall be deducted directly from Consideration II. The Purchaser and the Target Company may also pay the relevant amount on behalf of the Huahong Parties, where the Huahong Parties shall (i) reimburse such amount to the Purchaser and the Target Company and pay an interest that is calculated based on the amount payable at a rate of 0.05% per day from the date on which such amount was paid; and (ii) compensate all losses and damages suffered by the Purchaser and the Target Company.

Liabilities for breach of Acquisition Framework Agreement II

(a) Should the steps as detailed in the sub-paragraphs (a) to (b) of the paragraph headed ''Steps and conditions of the transaction and settlement of Consideration II'' in this section fail to be completed within the relevant time limit, the Purchaser shall have the right to terminate Acquisition Framework Agreement II without any reason by written notice:
(i) should the termination be caused by the failure to complete the steps as detailed in the sub-paragraphs (a) and (b) of the paragraph headed ''Steps and conditions of the transaction and settlement of Consideration II'' in this section, all funds in the escrow account jointly controlled by the Purchaser and the Huahong Parties shall belong to the Purchaser, and the Huahong Parties shall cooperate with the Purchaser as per its request to change or cancel the name chop of Mr. Zhao and release the joint management of such escrow account; and
(ii) should the escrow measures on the escrow account jointly controlled by the
Purchaser and the Huahong Parties have still not been released within two days upon termination of Acquisition Framework Agreement II, the Huahong Parties shall pay to the Purchaser a penalty calculated at the rate of 0.05% per day based on the funds in the escrow account, and the Purchaser shall have the right to request for compensation should such penalty not be enough to cover its losses and damages.
(b) Should the termination of Acquisition Framework Agreement II be caused by the Huahong Parties or the Target Company (including but not limited to the failure to (i) have the freezing measures on Target Equity Interest A uplifted within the time limit; and (ii) complete the registration of Target Equity Interest B under the name of the Purchaser), the Purchaser shall have the right to request the Huahong Parties to

pay a penalty of RMB10,000,000 in addition to its rights as set out in the sub-paragraph (a) above, and continue to request the Huahong Parties to compensate its losses and damages should such penalty not be enough to cover its losses and damages.

(c) Should the Purchaser fail to release the funds in the escrow account jointly controlled by the Huahong Parties and the Purchaser or pay Equity Transfer Price B (to the extent remains unpaid) and any additional amount as determined during Adjustments II in accordance with the paragraph headed ''Adjustments of Consideration II'' in this section, the Purchaser shall pay to the Huahong Parties a penalty calculated based on the amount unpaid at the rate of 0.05% per day for each day on which such amount has been overdue.
(d) Should Acquisition Framework Agreement II be terminated due to the default or malicious breach of agreement by the Purchaser, the Huahong Parties shall have the right to request the Purchaser to pay a penalty of RMB10,000,000, and continue to request the Purchaser to compensate its losses and damages should such penalty not be enough to cover its losses and damages.
(e) Should Acquisition Framework Agreement I be unexecuted, cancelled, terminated, invalid and/or unenforceable, the Purchaser shall have the right to terminate Acquisition Framework Agreement II by giving unilateral written notice. Should RMB42,143,800 been paid to the escrow account jointly controlled by the Purchaser and the Huahong Parties by then, the Purchaser shall have the right to request the Huahong Parties to return such funds to the Purchaser in accordance with paragraph (a) above. Should RMB42,143,800 been released to the Huahong Parties, other than such RMB42,143,800, the Purchaser shall have the right to request the Huahong Parties to return the remaining Equity Transfer Price B (if any), and Target Equity Interest B shall also be transferred from the Purchaser to the Huahong Parties.

Encumbrances over the Target Land and the Target Company upon completion of the Target Company Acquisition

Upon completion of the Target Company Acquisition, certain encumbrances would have been created over the land use rights of the Target Land and the equity interest in the Target Company, details of which are as follow:

(a) the land use rights of the Yihe Land for an area of approximately 48,751.60 sq.m. would have been mortgaged to Zheshang Asset Management and the Trustee as the first mortgagee and the second mortgagee, respectively;
(b) the land use rights of the Yihe Land for an area of approximately 4,169.53 sq.m. would have been mortgaged to the Trustee as the first mortgagee;
(c) the land use rights of the Yihe Land for an area of approximately 223,305.04 sq.m. would have been mortgaged to Zheshang Asset Management and the Trustee as the first mortgagee and the second mortgagee, respectively; and

(d) 49% equity interest in the Target Company which shall then be held by the

Purchaser would have been registered under the name of Hangzhou Hongyuyuan LLP as security for the loan provided by Hangzhou Hongyuyuan LLP to the Purchaser.

Information of the Parties to the Acquisition Framework Agreements

The Group

The Company is a company incorporated in the Cayman Islands with limited liability, and the shares of which are listed on the Main Board of the Stock Exchange. The Group is an established property developer in the PRC focusing on developing quality residential properties in the Yangtze River Delta Megalopolis for customers of all ages. The Group commenced property development operations in Nanjing and successfully expanded its footprint to other cities in the Yangtze River Delta Megalopolis, including Wuxi, Suzhou, Zhenjiang, Hangzhou, Ma'anshan and Hefei.

The Purchaser is a company established under the laws of the PRC with limited liability and an indirect wholly-owned subsidiary of the Company. The Purchaser principally engages in enterprise management.

Yihe Real Estate

Yihe Real Estate is a company established under the laws of the PRC with limited liability and principally engages in property development. As at the Latest Practicable Date, Yihe Real Estate was wholly-owned by Long Sen Investments (Hong Kong) Limited and in turn ultimately wholly-owned by Mr. He Jianliang (何建梁先生).

Zhejiang Huahong

Zhejiang Huahong is a company established under the laws of the PRC with limited liability and principally engages in trading and real estate investment. As at the Latest Practicable Date, Zhejiang Huahong was owned as to 70% and 30% by Mr. Zhao and Mr. Zhao Zhihao (趙志昊先生), respectively.

Hangzhou Hongyuyuan LLP

Hangzhou Hongyuyuan LLP is a limited partnership established in the PRC and principally engages in enterprise management. As at the Latest Practicable Date, Yinzehong, Zheshang Asset Management, Zheyue Asset Management and Zhejiang Jinyu were the partners of Hangzhou Hongyuyuan LLP whose capital contribution are RMB150,000,000, RMB975,000,000, RMB175,000,000 and RMB10,000, respectively.

To the best of the Directors' knowledge, information and belief after having made all reasonable enquiries, each of (i) Yihe Real Estate and its ultimate beneficial owner; (ii) Zhejiang Huahong and its ultimate beneficial owners; (iii) the Target Company and its ultimate beneficial owners; and (iv) the Guarantors is an Independent Third Party.

To the best of the Directors' knowledge, information and belief after having made all reasonable enquiries, save for Yinzehong which is an indirect wholly-owned subsidiary of the Company, each of Hangzhou Hongyuyuan LLP and its ultimate beneficial owners is an Independent Third Party.

Basis of the Consideration

The total amount payable for the Target Company Acquisition is RMB1,650 million, comprising the Target Company Acquisition Consideration of RMB1,196,998,491.87, the consideration of the Kunlun Debt of RMB304,657,271.23 and certain assumed liability of the Target Company of RMB148,354,236.90. Such total amount payable was determined after arm's length negotiation among the Purchaser, Yihe Real Estate, the Huahong Parties, the Target Company, the Guarantors and Hangzhou Hongyuyuan LLP on normal commercial terms with reference to:

(i) the major assets owned by the Target Company, namely the Yihe Project, of which the total asset value (including the Yihe Land and the properties that were under construction thereon) was approximately RMB0.36 billion as per the unaudited financial position of the Target Company as at 31 May 2020 and approximately RMB2.19 billion as per the valuation report issued by an independent valuer as at 19 June 2020;

(ii) the room for possible increment of the appraised total asset value of the Yihe Project from time to time. The appraised total asset value as at 31 December 2020 was approximately RMB2.47 billion as per the valuation report appended in Appendix VII to this circular;
(iii) the total liabilities of the Target Company of approximately RMB0.86 billion as at 31 May 2020; and
(iv) the business development opportunities and prospect of the Target Project upon completion of the Target Company Acquisition.

Funding Arrangement and Financial Effect of the Target Company Acquisition

In order to facilitate the Target Company Acquisition, the Group financed RMB500 million from its internal resources and obtained funding of RMB1,150 million from the Asset Management Parties via Hangzhou Hongyuyuan LLP. The funding for the Target Company Acquisition shall be used in the following manner:

(i) RMB350 million of the Group's internal resources and RMB846,998,491.87 of the funding provided by the Asset Management Parties, respectively, shall be used to settle the Target Company Acquisition Consideration;

(ii) RMB150 million of the Group's internal resources and RMB154,657,271.23 of the funding provided by the Asset Management Parties, respectively, shall be used to settle the consideration of the Kunlun Debt; and

(iii) the remaining RMB148,354,236.90 of the funding provided by the Asset

Management Parties shall be used for settlement of certain assumed liability of the Target Company.

Based on the Group's experience, commercial banks generally do not provide funding to facilitate distressed assets acquisition. As such, the Group approached asset management corporations and trust companies to explore financing and funding arrangement. The Group decided to obtain funding from the Asset Management Parties due to the reasons as follows:

(i) the Asset Management Parties are state-owned enterprises (國有企業)

incorporated in the PRC which are well-established and experienced in dealing with distressed assets;

(ii) the Group had previously obtained funding from the Asset Management Parties for acquisition of another company which was under financial difficulties;
(iii) the annualised rate of return at 11.5% offered by the Asset Management Parties is at the lower end of the range of interest rates normally offered by asset management corporations and trust companies which are in the range of 11% to 15%; and
(iv) the approval process for the obtaining of funds from the Asset Management Parties is relatively faster as the funding application can be passed directly to the headquarters of the Asset Management Parties which are located in Zhejiang Province of the PRC, while the headquarters of other asset management corporations and trust companies that are experienced in funding distressed assets acquisition are located in the other cities.

With regard to the RMB1,150 million provided by the Asset Management Parties via Hangzhou Hongyuyuan LLP, the Group shall pay a return on such RMB1,150 million at an annualised rate of return at 11.5% every three months. The amount of RMB1,150 million together with all returns accrued thereon due and payable shall be repaid by the Group to the Asset Management Parties on or before 3 September 2023.

As at the Latest Practicable Date, the Target Company Acquisition has been completed. The Target Company has become an indirect wholly-owned subsidiary of the Company and its financial results has been consolidated into the consolidated financial statements of the Group.

The aggregate of the remuneration payable to and benefits in kind receivable by the Directors will not be varied in consequence of the Target Company Acquisition.

Reasons for and Benefits of the Target Company Acquisition

The Target Project is located in Qingshan Lake Technology Town* (青山湖科技城) of the Lin'an District* (臨安區) which is currently one of the core developing areas in the Lin'an District* (臨安區) and is currently under the town planning with an aim of having the elements of research and development, industrialisation and modern and comprehensive life services support integrated in the community. The location of the Target Project is approximately 6.5 kilometres away from the Lin'an District Government buildings and approximately 1.1 kilometres away from the Hanglin Chengji Babaili Station* (杭臨城際八百里站), a railway station for interchanging other railway lines to the Hangzhou downtown area. The Target Project is also surrounded by beautiful scenery of mountains and the Qingshan Lake* (青山湖).

As such, the Board is of the view that the Target Company Acquisition can expand the Group's land reserve and its existing business in developing quality residential properties in the Yangtze River Delta Megalopolis, hence would exert its strength, further enhance its presence and influence in the Yangtze River Delta Megalopolis, and bring in more investment return for the Shareholders.

The Directors (including the independent non-executive Directors) considered that the Target Company Acquisition is carried out on normal commercial terms, which are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

The Group's Development Plan of the Target Land

Undeveloped Area of the Target Land

The market demand for residential properties in the Lin'an District has been consistently strong for the past five years as the average annual turnover in the past five years amounted to approximately 131 million sq.m. The Qingshan Lake Technology Town in which the Target Land is located ranks the first in the Lin'an District in terms of residential properties turnover rate.

The Group believes that given the high demand for small to medium size residential properties in the Qingshan Lake Technology Town, there is a market opportunity for high-rise residential units and high-end low-rise residential units as they are relatively rarer in the market. Therefore, the Group intends to develop various types of such aforementioned quality residential properties to capture the market opportunity. Besides, the Group also plans to develop commercial properties to capture the potential demand that could be brought by Lin'an District's town planning which is aimed to integrate the elements of research and development, industrialisation and modern and comprehensive life services support into the community.

The Group plans to invest approximately RMB4 billion in total for the development of the undeveloped area of the Target Land. Such total investment amount is mainly for settlement of the Target Company Acquisition Consideration and payment of theconstruction costs, management fees, marketing expenses and other administrative expenses in relation to the development of the undeveloped area of the Target Land and the sale of properties to be built thereon.

The undeveloped area of the Target Land is divided into five plots, namely A2, B1, B2, C and D. Set forth below is the types of properties the Group plans to develop thereon:

Plot	Property type
A2	Commercial properties
B1	High-rise residential units and high-end low-rise residential units
B2	High-rise residential units and high-end low-rise residential units
C	High-rise residential units and high-end low-rise residential units
D	High-end low-rise residential units

The development will be carried out in five phases and the expected milestone dates are shown in the table below:

1	2	3	4	5
B1	A2	C	B2	D
High-rise	High-rise	High-rise
residential	residential	residential
units and	units and	units and
high-end	high-end	high-end	High-end
low-rise	low-rise	low-rise	low-rise
residential	Commercial	residential	residential	residential
units	properties	units	units	units
Estimated date of commencement of	15 October	30 March 2021	30 March 2021	20 November	10 October
construction works	2020	2021	2022
Estimated date of commencement of	30 December	1 July 2023	30 October	5 March 2022	1 July 2023
sale of properties	2020	2021
Estimated date of completion of	28 February	30 April 2023	30 October	30 July 2023	30 April 2024
construction works	2022	2022
Estimated date of completion of sale	30 May 2022	30 June 2023	30 December	30 September	30 July 2024
and handover of properties	2022	2023

Phase

Plot

Milestone Property type

Completed Inventories Held for Sale

The completed inventories held by the Target Company for sale includes the following:

(i) residential properties developed under the Huahong Project by the Huahong

Parties which had originally been sold but were then returned to the Target Company for re-sale; and

(ii) unsold car parking spaces developed under the Yihe Project by Yihe Real Estate.

In relation to item (i) above, the residential properties will be open for sale upon completion of the Acquisition. The sale proceeds will be paid to the Huahong Parties who had been the developer of the Huahong Project as the Group only carries on with such sale for and on behalf of the Huahong Parties.

In relation to item (ii) above, the car parking spaces will be open for sale upon completion of the Acquisition. As the Group also acquired the unsold car parking spaces built on the Yihe Land in addition to the Target Land through the acquisition of the Target Company, the revenue to be generated from the sale of such car parking spaces will be recorded in the financial statements of the Group.

(2) COOPERATION AGREEMENT IN RELATION TO DEVELOPMENT OF THE PROJECT LAND HELD BY WUXI XUELANG

On 20 October 2020, Wuxi Huayu won the tender for acquiring (i) the entire equity interest in the Project Company from Wuxi Shanshui; and (ii) the debt in the amount of RMB700,000,000 owed by the Project Company to Wuxi Shanshui, at the Project Company Acquisition Consideration of RMB752,087,000 and the Transaction Service Fee of RMB4,708,600. The principal asset of the Project Company is the Project Land. On 10 November 2020, the Equity Transaction Agreement was entered into between Wuxi Huayu and Wuxi Shanshui for the Project Company Acquisition.

On 23 December 2020 (after trading hours), Wuxi Huayu, Wuxi Yinzetao (a wholly-owned subsidiary of the Company) and Wuxi Yinzexuan (a wholly-owned subsidiary of the Company) entered into the Cooperation Agreement, pursuant to which:

(i) after Wuxi Huayu pays 30% of the Project Company Acquisition Consideration to

Wuxi Shanshui and Wuxi Shanshui completes the transfer of the entire equity interest in the Project Company to Wuxi Huayu pursuant to the Equity Transaction Agreement, Wuxi Huayu shall transfer the entire equity interest in the Project Company to Wuxi Yinzexuan;

(ii) in consideration of Wuxi Huayu transferring the entire equity interest in the Project Company to Wuxi Yinzexuan:

(a) Wuxi Yinzexuan shall allot its 50% equity interest to Wuxi Huayu;
(b) Wuxi Yinzexuan shall together with Wuxi Yinzetao, pay RMB150,417,400 to Wuxi Huayu to facilitate Wuxi Huayu to settle 20% of the Project Company Acquisition Consideration and RMB89,797,000 to the Project Company for settlement of the Supplemental Land Fee; and

Wuxi Huayu to facilitate Wuxi Huayu to settle the remaining 50% of the Project Company Acquisition Consideration; and

(iii) Wuxi Huayu and Wuxi Yinzetao shall co-develop the Project Land through Wuxi

Yinzexuan and the Project Company.

Principal Terms of the Cooperation Agreement

Basic information of the Project Land

Location:	Situated at the east to Wuhu Avenue, south to
Gaoyuan Road, west to Planning Road and north to
Hefeng Road* (東至五湖大道、南至高遠路、西至規
劃道路、北至和風路)
Total site area:	28,845.3 m2
Term of land use rights:	70 years for residential use and 40 years for
commercial use

Restrictions on development and	(i)	the floor area ratio shall be no less than 2.5 and
constructions:	no more than 2.7;

(ii) the building density shall be no more than 40%;
(iii) the building height limit shall be 80 metres; and
(iv) the green space ratio shall be no less than 30%.

Capital contribution to Wuxi Yinzexuan

As at the date of the Cooperation Agreement, Wuxi Yinzexuan had an unpaid registered capital of RMB1,000,000.

The registered capital of Wuxi Yinzexuan shall be increased to RMB300,000,000 immediately upon execution of the Cooperation Agreement, pursuant to which RMB150,000,000 and RMB150,000,000 shall be contributed by Wuxi Yinzetao and Wuxi Huayu, respectively.

Upon completion of the increase in registered capital of Wuxi Yinzexuan, the equity interest in Wuxi Yinzexuan shall be held as to 50% and 50% by Wuxi Yinzetao and Wuxi Huayu, respectively.

Transfer of the entire equity interest in the Project Company to Wuxi Yinzexuan

Wuxi Huayu agrees that after the payment of 30% of the Project Company Acquisition Consideration by Wuxi Huayu to Wuxi Shanshui, Wuxi Huayu shall procure the transfer of the entire equity interest in the Project Company from Wuxi Shanshui to Wuxi Huayu as soon as possible pursuant to the terms of the Equity Transaction Agreement.

As at the date of the Cooperation Agreement, such 30% of the Project Company Acquisition Consideration has already been settled by Wuxi Huayu and the registration of the transfer of the entire equity interest in the Project Company to Wuxi Huayu has been completed. Upon completion of the registration of the increment of registered capital ofWuxi Yinzexuan, Wuxi Huayu shall, within five (5) business days, transfer the entire equity interest in the Project Company to Wuxi Yinzexuan and complete the relevant registration procedures.

Payment of the Project Company Acquisition Consideration and the Supplemental Land Fee

Having regard to the terms and conditions of the Equity Transaction Agreement, the Project Company Acquisition Consideration of RMB752,087,000, the Transaction Service Fee of RMB4,708,600 and the Supplemental Land Fee of RMB89,797,000 shall be borne by Wuxi Yinzetao and Wuxi Huayu in the following manners specifically:

(i) RMB72,208,700 (being the earnest money paid by Wuxi Huayu) shall be applied as part of the Project Company Acquisition Consideration;

(ii) RMB158,126,000 (being 30% of the Project Company Acquisition Consideration minus the earnest money of RMB72,208,700 plus the Transaction Service Fee of RMB4,708,600) has been paid by Wuxi Huayu to Wuxi Shanshui on 16 November 2020;
(iii) RMB150,417,400 (being 20% of the Project Company Acquisition Consideration) shall be provided by Wuxi Yinzetao, directly or indirectly through Wuxi Yinzexuan, to the bank account of Wuxi Huayu upon signing of the Cooperation Agreement;

(iv) RMB89,797,000 (being the Supplemental Land Fee) shall be provided by Wuxi

Yinzetao in the form of a shareholder's loan, directly or indirectly through Wuxi Yinzexuan, to the Project Company upon relevant government authority issuing the notice of payment; and

(v) RMB376,043,500 (being 50% of the Project Company Acquisition

Consideration) shall be paid with the funds of the Project Company and provided to Wuxi Yinzexuan in the form of a loan; and in the event that the funds of the Project Company is insufficient to cover the said payment, the remaining balance shall be provided by Wuxi Yinzetao in the form of an interest-bearing loan, and payable by Wuxi Yinzexuan through the bank account of Wuxi Huayu to Wuxi Shanshui, by 31 May 2021.

Given that Wuxi Yinzetao shall hold majority of the voting rights in Wuxi Yinzexuan pursuant to the Cooperation Agreement, Wuxi Yinzetao shall use its best endeavours to procure the Project Company to obtain sufficient project and land financings from third parties in order to ensure that the Project Company shall settle 50% of the Project Company Acquisition Consideration by 31 May 2021.

The appraised total asset value of the Project Company as at 30 June 2020 was approximately RMB745,757,300, which comprises value of inventories (i.e. the Project Land) and cash and cash equivalents of approximately RMB710,107,600 and RMB35,649,700, respectively. If the Project Land has to be provided by the ProjectCompany to banks and/or other financial institutions as security for obtaining loans of RMB376,043,500, the loan-to-value ratio will be approximately 53% based on the value of the Project Land as determined by an independent valuer. The Group considers that the collateral to be provided by the Project Company, if required, shall be able to obtain loans of RMB376,043,500 from banks and/or financial institutions to settle the relevant portion of the Project Company Acquisition Consideration.

In the event that the funds made available by the Project Company is insufficient to settle such RMB376,043,500 and Wuxi Yinzetao shall settle the shortfall for and on behalf of the Project Company, such shortfall to be settled by Wuxi Yinzetao shall be provided to the Project Company as an interest-bearing loan with the interest rate being 8% per annum. Such loan amount shall be repaid by the Project Company to Wuxi Yinzetao using its surplus funds. In the event that there is no surplus funds in the Project Company, Wuxi Yinzetao shall bear half of the loan amount (which is equivalent to the percentage of equity interest it indirectly holds in the Project Company) while Wuxi Huayu shall repay the other half of the loan amount (which is equivalent to the percentage of equity interest it indirectly holds in the Project Company) to Wuxi Yinzetao on or before 30 September 2023.

Besides, as the formation of Wuxi Yinzexuan was intended for the acquisition of the Project Company for the Group to develop the Project Land with Wuxi Huayu, the required capital injection of RMB150,000,000 by each of Wuxi Yinzetao and Wuxi Huayu to Wuxi Yinzexuan shall be used for settlement of certain portion of the Project Company Acquisition Consideration and Transaction Service Fee.

The settlement of RMB230,334,700 and RMB150,417,400 were made to Wuxi Shanshui by Wuxi Huayu and Wuxi Yinzetao, respectively, on behalf of Wuxi Yinzexuan. For simplicity purpose, it is agreed among Wuxi Yinzexuan, Wuxi Yinzetao and Wuxi Huayu that upon the Transfer and settlement of RMB150,417,400 to Wuxi Shanshui by Wuxi Yinzetao on behalf of Wuxi Yinzexuan, Wuxi Yinzetao and Wuxi Huayu shall be deemed to have contributed their respective committed registered capital in Wuxi Yinzexuan. Any exceeded portion paid by Wuxi Yinzetao and Wuxi Huayu shall be considered as the provision of shareholder's loan to Wuxi Yinzexuan.

Accordingly, Wuxi Yinzetao and Wuxi Huayu are not required to make further capital injection to Wuxi Yinzexuan in respect of the registered capital of RMB300,000,000 under the relevant laws of the PRC.

Wuxi Yinzetao and Wuxi Huayu further agreed that:

(i) if the funds provided by any Party for the settlement of the Project Company

Acquisition Consideration, the Transaction Service Fee and/or the Supplemental Land Fee exceeds the portion which is equivalent to the percentage of equity interest such Party holds in Wuxi Yinzexuan, such excess amount paid shall be considered as an interest-bearing loan provided to the other Party with the interest rate being 8% per annum; and

(ii) any shareholders' loans provided to the Project Company throughout the development of the Project Land shall bear an interest rate of 8% per annum, calculated from the date of provision of such loans.

In light of the above, Wuxi Yinzetao and Wuxi Huayu shall be responsible for settlement of the Project Company Acquisition Consideration, the Transaction Service Fee and the Supplemental Land Fee in accordance with the percentage of equity interest they hold in the Project Company.

The Total Commitment was determined after arm's length negotiations after having taken into account the amount and payment terms of (i) the Project Company Acquisition Consideration of RMB752,087,000 which was determined based on the appraised value of the Tender Subject of approximately RMB722,087,000 as at 30 June 2020 plus the tender premium* (競價溢價) of RMB30,000,000; and (ii) the Supplemental Land Fee of RMB89,797,000 payable to the relevant government authority for adjustment of the floor area ratio of the Project Land from 2.5 to up to 2.7.

The Total Commitment to be borne by Wuxi Yinzetao and Wuxi Yinzexuan will be funded by the internal resources of the Group and the obtaining of project and land financing.

Management and profit distribution

Shareholders' resolutions: (i) Wuxi Yinzetao and Wuxi Huayu shall have 51% and 49% of the voting rights, respectively, at the shareholders' meetings of Wuxi Yinzexuan.

(ii) Unless otherwise provided by the law, matters to be approved by shareholders of Wuxi Yinzexuan shall be passed by a simple majority.
(iii) Shareholder's resolutions of the Project Company shall be passed only if such resolutions are passed by the shareholders of Wuxi Yinzexuan.
(iv) The key responsibilities of the shareholder of the Project Company include, among others, formulating business and investment plans, taking charge of changes in the capital structure and approving profit distribution arrangement of the Project Company.

Board composition and management:

(i)All members of the board of directors of Wuxi Yinzexuan and their respective obligations shall be identical to those of the Project Company.

(ii) Each board of directors of Wuxi Yinzexuan and the Project Company shall consist of five (5) directors, of which three (3) shall be nominated by Wuxi Yinzetao and two (2) shall be nominated by Wuxi Huayu. The chairman of each board of directors of Wuxi Yinzexuan and the Project Company shall be nominated by Wuxi Yinzetao. Pursuant to the Equity Transaction Agreement, Wuxi Shanshui shall be entitled to nominate one (1) director to the Project Company prior to the full settlement of the Project Company Acquisition Consideration. Accordingly, Wuxi Yinzetao shall nominate two (2) directors to the board of the Project Company prior to the full settlement of the Project Company Acquisition Consideration.
(iii) All matters to be approved by each board of directors of Wuxi Yinzexuan and the Project Company shall be passed by a simple majority.
(iv) The key responsibilities of the board of directors of Wuxi Yinzexuan and the Project Company include, among others, convening shareholders' meeting, reporting to shareholders, executing decisions of the shareholders' meetings, formulating business plans, annual budget and undertaking other management tasks.

Supervisors:Senior management:

(i) All supervisors of Wuxi Yinzexuan and their respective obligations shall be identical to those of the Project Company.
(ii) There shall be two (2) supervisors in each of Wuxi Yinzexuan and the Project Company, of which one (1) shall be nominated by Wuxi Yinzetao and one (1) shall be nominated by Wuxi Huayu.

(i)All general managers of Wuxi Yinzexuan and their respective obligations shall be identical to those of the Project Company.

(ii) There shall be one (1) general manager and one (1)

financial director in each of Wuxi Yinzexuan and the

Project Company, whom shall be nominated by Wuxi

Yinzetao; and one (1) co-general manager and one (1)

vice-financial director in each of Wuxi Yinzexuan and

the Project Company, whom shall be nominated by

Wuxi Huayu.

Profit distribution:

Wuxi Yinzetao and Wuxi Huayu shall share the profits of the Project Company in proportion to their respective equity interest in Wuxi Yinzexuan.

Breach of the Cooperation Agreement

If any Party breaches and/or fails to perform its obligations under the Cooperation Agreement, the non-defaulting Party shall have the right to issue a written notice to the defaulting Party. In the event that the defaulting Party fails to perform its obligations and/ or undertake remedial measures acceptable to the non-defaulting Party within ten (10) days of the written notice, the non-defaulting Party shall have the right to terminate the Cooperation Agreement. The defaulting Party shall be liable to pay RMB30,000,000 plus any additional damages exceeding RMB30,000,000 to the non-defaulting Party. If the non-defaulting Party elects to terminate the Cooperation Agreement, the defaulting Party shall, within five (5) business days of receiving a written notice of termination from the non-defaulting Party, return all funds provided by the non-defaulting Party plus an interest at an interest rate of 8% per annum calculated from the day of provision of the funds up to the day of return of the funds. The defaulting Party shall also, at the request of the non-defaulting Party, offer to acquire all equity interests, capital and/or loans in Wuxi Yinzexuan owned by the non-defaulting Party.

If any Party fails to provide funds for the settlement of the Project Company Acquisition Consideration and/or the Supplemental Land Fee in the manner as specified in the Cooperation Agreement and the non-defaulting Party has settled the said payment for and on behalf of the defaulting Party, the defaulting Party shall pay to the non-defaulting Party, on a daily basis, an amount equivalent to 0.04% of the said payment. If the relevant outstanding amount is overdue for over thirty (30) days, the defaulting party shall be seen as refusing to continue to cooperate under the Cooperation Agreement and shall pay an amount equivalent to 20% of the Project Company Acquisition Consideration as penalty to the non-defaulting Party.

In the event that Wuxi Huayu and/or the Project Company fails to procure the (i) transfer of the entire equity interest in the Project Company to Wuxi Yinzexuan and/or (ii) registration of Wuxi Yinzexuan as the shareholder of the Project Company in accordance with the agreed timeframe as stipulated in the Cooperation Agreement, Wuxi Huayu shall be liable to pay to Wuxi Yinzetao, on a daily basis, an amount equivalent to 0.04% of the total funds provided by Wuxi Yinzetao at the time of the breach.

If the aforementioned failure to transfer and/or registration has lasted for thirty (30) days by reason of the breach of Wuxi Huayu, Wuxi Huayu shall be seen as refusing to continue to cooperate under the Cooperation Agreement and shall immediately return all funds provided by Wuxi Yinzetao. Wuxi Huayu shall also pay to Wuxi Yinzetao an amount equivalent to 0.04% of the total amount provided by Wuxi Yinzetao, calculated on a daily basis from the day the funds of Wuxi Yinzetao reached the accounts of Wuxi Huayu or the Project Company, or used for the development of the Project Land, up until the day of return of funds from Wuxi Huayu. Wuxi Huayu shall pay an additional amount equivalent to 20% of the Project Company Acquisition Consideration as penalty to Wuxi Yinzetao.

Financial Effect of the Transactions

Upon completion of the Deemed Disposal and the Transfer, both Wuxi Yinzexuan and the Project Company will become non wholly-owned subsidiaries of the Company and the financial results of which shall be consolidated to the Company's consolidated financial statements. As the Deemed Disposal will not result in the Company's loss of control over Wuxi Yinzexuan, the Deemed Disposal will not result in the recognition of any gain or loss in the Company's consolidated statement of profit or loss and other comprehensive income.

The aggregate of the remuneration payable to and benefits in kind receivable by the Directors will not be varied in consequence of the Transactions.

General Information of the Group, the Parties and the Project Company

The Group

Wuxi Yinzetao is a company established under the laws of the PRC with limited liability and an indirect wholly-owned subsidiary of the Company. Wuxi Yinzetao principally engages in property development.

Wuxi Yinzexuan is a company established on 16 July 2020 under the laws of the PRC with limited liability and a wholly-owned subsidiary of the Company as at the date of the Cooperation Agreement. There has been no material operation since the recent incorporation of Wuxi Yinzexuan. Based on the management accounts of Wuxi Yinzexuan for the period since its establishment until 31 December 2020, Wuxi Yinzexuan recorded a net loss of approximately RMB528 and its net liabilities as at 31 December 2020 was approximately RMB528.

Wuxi Huayu

Wuxi Huayu is a company established under the laws of the PRC with limited liability and principally engages in property development, management and leasing. The ultimate beneficial owners of Wuxi Huayu are Mr. Zhang Linzhong and Ms. Zhang Lihua.

The Project Company

The Project Company is a company established on 17 February 2020 under the laws of the PRC with limited liability and a wholly-owned subsidiary of Wuxi Huayu as at the date of the Cooperation Agreement. The Project Company principally engages in property development.

There has been no material operation since the recent establishment of the Project Company. For the period since its establishment until 31 December 2020, the Project Company recorded a net loss of approximately RMB937,000 and its net asset value as at 31 December 2020 was approximately RMB19,063,000.

To the best of the Directors' knowledge, information and belief after having made all reasonable enquiries, each of Wuxi Huayu and its ultimate beneficial owners is a third party independent of the Company and its connected persons.

Reasons for and Benefits of Entering into the Cooperation Agreement

The Board is of the view that through the arrangement under the Cooperation Agreement, the Group's existing business in developing quality residential properties in the Yangtze River Delta Megalopolis can be enhanced, hence the Group would exert its strength, further enhance its presence and influence in the Yangtze River Delta Megalopolis and bring in more investment return for its Shareholders.

In light of the above and having considered the basis of determining the Total Commitment, the Directors (including the independent non-executive Directors) consider that the terms and conditions of the Cooperation Agreement are fair and reasonable and in the interests of the Company and its Shareholders as a whole.

FINANCIAL EFFECT OF THE TARGET COMPANY ACQUISITION AND THE TRANSACTIONS

Asset and liabilities

Based on the unaudited pro forma consolidated statement of assets and liabilities of the Enlarged Group as set out in Appendix VI to this circular (as if the Target Company Acquisition and the Transactions had been completed on 30 June 2020):

(i) the consolidated total assets of the Group would have increased from approximately RMB37.34 billion to approximately RMB39.08 billion on a pro forma basis;

(ii) the consolidated total liabilities of the Group would have increased from approximately RMB32.45 billion to approximately RMB34.04 billion on a pro forma basis; and
(iii) the consolidated net assets of the Group would have increased from approximately RMB4.89 billion to approximately RMB5.33 billion on a pro forma basis.

Further details of the financial effect of the Target Company Acquisition and the Transactions on the assets and liabilities of the Enlarged Group together with the basis in preparing the unaudited pro forma financial information are set out in Appendix VI to this circular.

Earnings

The Company does not expect the Target Company Acquisition and the Transactions to have a significant effect on the earnings of the Group.

IMPLICATIONS OF THE LISTING RULES

As one or more of the applicable percentage ratios in respect of the Target Company Acquisition exceeds 25% but is less than 100%, the Target Company Acquisition constitutes a major transaction of the Company and is subject to notification, announcement, circular and Shareholders' approval requirements under Chapter 14 of the Listing Rules.

As the transactions contemplated under the Cooperation Agreement involve both the Deemed Disposal and the Transfer, it will be classified by reference to the larger of the two and subject to the reporting, disclosure and/or Shareholders' approval requirements applicable to that classification. As the applicable percentage ratio(s) in relation to the Transfer is more than 25% but less than 100% and the Deemed Disposal is more than 5% but less than 25%, the transactions contemplated under the Cooperation Agreement constitute a major transaction of the Company and are subject to the reporting, announcement, circular and Shareholders' approval requirements under Chapter 14 of the Listing Rules.

No Shareholder has a material interest in the Target Company Acquisition and the Transactions and is required to abstain from voting if the Company were to convene a general meeting for approving the Target Company Acquisition and the Transactions. Pursuant to Rule 14.44 of the Listing Rules, the Company had obtained a written approval for the Target Company Acquisition and the Transactions from the Relevant Shareholders as set out below, being a closely allied group of Shareholders which together hold 746,542,411 Shares, representing approximately 51.59% of the issued share capital of the Company as at the Latest Practicable Date, carrying rights to vote at a general meeting of the Company:

Approximate percentage of

Number of	shareholding
Shareholders	Shares held	(Note 7)
Silver Huang Holding Limited (Note 1)	517,833,810	35.79%
Silver Vally Holding Limited (Note 1)	21,255,724	1.47%
Silver Xie Holding Limited (Note 2)	78,085,490	5.40%
Silver Li Holding Limited (Note 3)	36,192,609	2.50%
Silver Ma Holding Limited (Note 4)	71,919,056	4.97%
Silver Shao Holding Limited (Note 5)	10,627,861	0.73%
Silver Wang Holding Limited (Note 6)	10,627,861	0.73%
Total:	746,542,411	51.59%
Notes:

1. Each of Silver Huang Holding Limited and Silver Vally Holding Limited is directly wholly-owned by Mr. Huang Qingping, a non-executive Director, the chairman of the Board and a controlling Shareholder.
2. Silver Xie Holding Limited is directly wholly-owned by Mr. Xie Chenguang, a non-executive Director.
3. Silver Li Holding Limited is directly wholly-owned by Mr. Zhu Li, an executive Director.
4. Silver Ma Holding Limited is directly wholly-owned by Mr. Ma Baohua, an executive Director.
5. Silver Shao Holding Limited is directly wholly-owned by Ms. Shao Lei, an executive Director.
6. Silver Wang Holding Limited is directly wholly-owned by Mr. Wang Zheng, an executive Director.
7. The approximate shareholding percentage were calculated based on 1,446,962,138 Shares in issue as at the date of these resolutions.

The relationships among the Relevant Shareholders which constitute ''a closely-allied group of Shareholders'' under Rule 14.45 of the Listing Rules are, among other things, briefly set out below:

(i) the ultimate beneficial owner of each of the Relevant Shareholders as mentioned above is a Director and all of such Directors have been involved in the management roles overseeing the daily operations of the property development arm of the Yincheng Real Estate Group, which have been separated from the Yincheng Real Estate Group to form the Group for the purpose of the Listing;

(ii) Mr. Huang Qingping, Mr. Xie Chenguang, Mr. Ma Baohua and Mr. Zhu Li have been shareholders of Yincheng Real Estate for more than 12 years with Mr. Huang Qingping first became a shareholder since 2001. Mr. Huang Qingping, Mr. Xie Chenguang, Mr. Ma Baohua and Mr. Zhu Li have continued to be shareholders of Yincheng Real Estate after the Reorganisation and the Yincheng Real Estate Group continues to carry on a variety of business operations other than property development in the PRC;
(iii) Mr. Huang Qingping, Mr. Xie Chenguang, Mr. Ma Baohua and Mr. Zhu Li, being the ultimate beneficial shareholders of the Yincheng Real Estate Group in aggregate holding more than 50% shareholding interests of Yincheng Real Estate, have nominated Mr. Wang Zheng and Ms. Shao Lei to be appointed as Directors so that the six of them continue with their close cooperation in the Group both as Directors and Shareholders through their respective investment vehicles (namely, the respective Relevant Shareholders); and
(iv) since the inception of the Company and as a result of the Reorganisation, Mr. Huang Qingping, Mr. Xie Chenguang, Mr. Ma Baohua and Mr. Zhu Li, by reason of their ultimate shareholding interest in Yincheng Real Estate, first became interested in the Shares through their respective investment vehicles, namely, Silver Huang Holding Limited, Silver Xie Holding Limited, Silver Ma Holding Limited and Silver Li Holding Limited. Silver Vally Holding Limited (being directly wholly-owned by Mr. Huang Qingping) also became a Shareholder as part of the Reorganisation. In recognition of the contribution of Mr. Wang Zheng and Ms. Shao Lei in the Group, they also became the Shareholders through their respective investment vehicles, namely, Silver Wang Holding Limited and Silver Shao Holding Limited.

On the basis that the Relevant Shareholders form a closely allied group of Shareholders under Rule 14.45 of the Listing Rules, pursuant to Rule 14.44 of the Listing Rules, their written approvals may be accepted in lieu of holding a general meeting for the purpose of approving the Target Company Acquisition and the Transactions and therefore no extraordinary general meeting of the Company will be convened for such purpose.

RECOMMENDATION

The Directors (including the independent non-executive Directors) considered that the Target Company Acquisition and the Transactions are carried out on normal commercial terms, which are fair and reasonable and in the interests of the Company and the Shareholders as a whole. If a general meeting were to be convened for the approval of the Target Company Acquisition and the Transactions, the Board would recommend the Shareholders to vote in favour of the resolution to approve the Target Company Acquisition and the Transactions at such general meeting.

ADDITIONAL INFORMATION

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

Yours faithfully,

By order of the Board

Yincheng International Holding Co., Ltd.

Huang Qingping

Chairman

1. FINANCIAL INFORMATION OF THE GROUP

Details of the financial information of the Company for each of the three years ended 31 December 2017, 2018 and 2019 and the six months ended 30 June 2020 are disclosed in the annual reports of the Company for each of the three years ended 31 December 2017, 2018 and 2019 and the interim report of the Company for the six months ended 30 June 2020, respectively. These annual reports and interim report, together with the relevant notes thereto, are disclosed in the following documents which have been published and are available on the website of the Stock Exchange (http://hkexnews.hk) and the website of the Company (http://yincheng.hk):

(a) the audited consolidated financial statements of the Group for the year ended 31 December 2017 are set out on pages I-1 to I-123 of the Prospectus;
(b) the audited consolidated financial statements of the Group for the year ended 31 December 2018 are set out on pages 63 to 172 of the 2018 annual report of the Company published on 29 April 2019;
(c) the audited consolidated financial statement of the Group for the year ended 31 December 2019 are set out on pages 147 to 306 of the 2019 annual report of the Company published on 27 April 2020; and
(d) the unaudited interim condensed consolidated financial statements of the Group for the six months ended 30 June 2020 as set out on pages 55 to 114 of the interim report of the Company published on 25 September 2020.

2. INDEBTEDNESS STATEMENT

As at the close of business on 31 December 2020, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular, the Group had (i) outstanding senior notes of approximately RMB2,218.5 million; (ii) bank and other borrowings of approximately RMB11,792 million, comprising secured and guaranteed bank loans and other secured loans of approximately RMB9,734.9 million, and approximately RMB2,057.1 million, respectively; (iii) unsecured and unguaranteed loans of approximately RMB568.5 million; and (iv) current and non-current lease liabilities of approximately RMB3.5 million and RMB4.0 million, respectively.

As at 31 December 2020, certain of the Group's secured borrowings were secured by the pledges of the asset portfolio which includes investment properties, right-of-use assets, properties under development and completed properties held for sale.

Contingent liabilities

The Group provides mortgage guarantees to banks in respect of the mortgage loans they provided to the Group's customers in order to secure the repayment obligations of such customers. The mortgage guarantees are issued from the date of grant of the relevant mortgage loans and released upon the earlier of (i) the transfer of the relevant real estate ownership certificates to the customers, or (ii) the settlement of mortgage loans by the customers. If a customer defaults on the mortgage loan, the Group is typically required to repurchase the underlying property by paying off the mortgage loan. If it fails to do so, the mortgagee banks will auction the underlying property and recover the balance from the Group if the outstanding loan amount exceeds the net foreclosure sale proceeds.

The Group provided guarantees in respect of mortgage facilities granted by certain banks to the customers of its completed properties held for sale. Pursuant to the terms of the guarantee arrangements, in case of default on mortgage payments by the customers, the Group is responsible to repay the outstanding mortgage principals together with any accrued interest and penalties owed by the defaulted purchasers to those banks. Under the above arrangement, the related properties were pledged to the banks as collaterals for the mortgage loans, upon default on mortgage repayments by these customers, the banks are entitled to take over the legal titles and will realise the pledged properties through open auction. The Group's guarantee period starts from the dates of grant of the relevant mortgage loans and ends upon the issuance and registration of property ownership certificates to the purchasers, which will generally be available within one to two years after the customers take possession of the relevant properties.

As at 31 December 2020, the material contingent liabilities incurred for the Group's provision of guarantees to financial institutions in respect of the mortgage loans they provided to the Group's customers were approximately RMB5,323.7 million.

As at 31 December 2020, the material contingent liabilities incurred for the Group's provision of guarantees to banks and other institutions in connection with financial facilities granted to the related companies were approximately RMB2,435 million.

The Group may be involved in lawsuits and other proceedings in its ordinary course of business from time to time. The Group believes that no liabilities resulting from these proceedings will have a material and adverse effect on its business, financial condition or operating results. Save as disclosed in this circular, the Group had no other material contingent liabilities.

Save for the aforesaid or as otherwise disclosed herein, and apart from the intra-group liabilities and normal trade payables in the ordinary course of the business of the Group, at the close of business on 31 December 2020, the Group did not have any (i) debt securities issued and outstanding, and authorised or otherwise created but unissued; (ii) term loans, distinguishing between guaranteed, unguaranteed, secured (whether the security is provided by the Company or by third parties) and unsecured; (iii) other borrowings or indebtedness in the nature of borrowing including bank overdrafts and liabilities under acceptances (other than normal trade bills) or acceptance credits or hirepurchase commitments, distinguishing between guaranteed, unguaranteed, secured and unsecured borrowings and debt; (iv) any outstanding mortgages or charges; or (v) any material contingent liabilities or guarantees.

3. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors confirmed that there has not been any material adverse change in the financial or trading position or outlook of the Group since 31 December 2019, being the date to which the latest published audited consolidated financial statements of the Group were made up.

4. WORKING CAPITAL

The Directors are of the opinion that, taking into account the financial resources available to the Group including the internally generated funds and the present available bank facilities, and taking into account the impact of the Target Company Acquisition and the Transactions, the Group will have sufficient working capital for its requirements for at least the next 12 months from the date of this circular.

5. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

The Group is an established property developer in the PRC focusing on developing quality residential properties in the Yangtze River Delta Megalopolis for customers of all ages. With over 18 years of real estate development experience in the Yangtze River Delta Megalopolis, the Group has always adhered to the development strategy of ''based in Nanjing, cultivate the Yangtze River Delta and radiate the urban area''. As at 30 June 2020, the business of the Group covered 46 projects in ten cities in the PRC, including Nanjing, Wuxi, Suzhou, Hangzhou, Taizhou, Xuzhou, Wenzhou, Hefei, Zhenjiang and Ma'anshan, and the Group had a land bank with an aggregate estimated gross floor area of over 5.5 million sq.m., out of which the land bank with interests attributable to the Group amounted to approximately 4.3 million sq.m.

Throughout the recent years, the Group has been actively searching for mergers and acquisitions and city-industry integration opportunities in the megalopolis. As stated in the interim report of the Company for the six months ended 30 June 2020 published on 25 September 2020, in terms of land bank, the Group aims to continue its expansion in the Yangtze River Delta Megalopolis. In particular, the Group has recently made its first foray into Wenzhou and Changshu (a county-level city hosted by Suzhou City), which was a further step of its entry into the five regional markets of Nanjing, Southern Jiangsu, Zhejiang, Huaihai and Anhui.

The Group believes that the Target Company Acquisition and the Transactions can help to increase the Group's land reserve and strengthen its presence in Hangzhou, Wuxi and the Yangtze River Delta Megalopolis in general, which is consistent with the Group's expansion strategy and would put the Group in an advantageous position to capture the potential growth of the property market in the region. Furthermore, by increasing the depth of the Group's land bank, it will provide the Group with more options when it follow through with its expansion plan. The Group aims to leverage on its strong reputation and market foundation to take onmore small and medium-sized development projects with great development potential and large-scale development projects through the rapid turnaround model. The Target Company Acquisition and the Transactions would therefore not only enhance the Group's strategic strengths and brand advantages in the region, but also bring more fruitful returns to the Shareholders and employees in the long run.

The Group responded proactively to COVID-19 pandemic's impact on the Group's performance during the year of 2019 and 2020 by adjusting its project launch schedule and adopting ''cloud property viewing'', ''cloud sales'' and ''cloud delivery'' through online live broadcasting and small application of the new media. Through such approach, the Group could develop its online customer base and undergo digital transformation at the same time. It is expected that such effort could be transformed into offline purchasing power in the long term.

In light of the current guiding principle of ''no speculation of residential properties'' in the real estate industry in the PRC, gradual alleviation of the impact of the COVID-19 pandemic, recovery of the domestic economy and increase in demand for property purchase, the Group remains cautiously optimistic about the property sales market for the near future. Nonetheless, the Group is determined to enhance its capabilities in all aspects according to its long-term development strategies, and shall continue to strive with the goal of becoming a leading real estate enterprise and generating more fruitful returns for the Shareholders.

The following is the text of a report on the Company's reporting accountants, Ernst & Young, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this circular.

22nd Floor

CITIC Tower

1 Tim Mei Avenue

Central

Hong Kong

The Directors

Yincheng International Holding Co., Ltd. Sertus Chambers

Governors Square Suite # 5-204

23 Lime Tree Bay Avenue P.O. Box 2547

Grand Cayman KY1-1104 Cayman Islands

Dear Sirs,

We report on the historical financial information of Hangzhou Qingcheng Property Development Co., Ltd (杭州青城房地產開發有限公司, the ''Target Company'') set out on pages II-4 to II-41, which comprises the statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows of the Target Company for each of the years ended 31 December 2017, 2018 and 2019, and the nine months ended 30 September 2020 (the ''Relevant Periods''), and the statements of financial position of the Target Company as at 31 December 2017, 2018 and 2019 and 30 September 2020 and a summary of significant accounting policies and other explanatory information (the ''Historical Financial Information''). The Historical Financial Information set out on pages II-4 to II-41 forms an integral part of this report, which has been prepared for inclusion in the circular of Yincheng International Holding Co., Ltd. dated 26 February 2021 (the ''Circular'' ) in connection with the acquisition by Hangzhou Zezhou Enterprise Management Co. (杭州澤洲企業管理有限公司), a subsidiary of the Company, of the entire equity interests in the Target Company.

DIRECTORS' RESPONSIBILITY FOR THE HISTORICAL FINANCIAL INFORMATION

The directors of the Target Company are responsible for the preparation of the Historical Financial Information that gives a true and fair view in accordance with the basis of preparation and presentation set out in Note 2.1 to the Historical Financial Information, and for such internal control as the directors determine is necessary to enable the preparation of the Historical Financial Information that is free from material misstatement, whether due to fraud or error.

REPORTING ACCOUNTANTS' RESPONSIBILITY

Our responsibility is to express an opinion on the Historical Financial Information and to report our opinion to you. We conducted our work in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 200 Accountants' Reports on Historical Financial Information in Investment Circulars issued by the Hong Kong Institute of Certified Public Accountants (''HKICPA''). This standard requires that we comply with ethical standards and plan and perform our work to obtain reasonable assurance about whether the Historical Financial Information is free from material misstatement.

Our work involved performing procedures to obtain evidence about the amounts and disclosures in the Historical Financial Information. The procedures selected depend on the reporting accountants' judgement, including the assessment of risks of material misstatement of the Historical Financial Information, whether due to fraud or error. In making those risk assessments, the reporting accountants consider internal control relevant to the entity's preparation of the Historical Financial Information that gives a true and fair view in accordance with the basis of preparation and presentation set out in Note 2.1 to the Historical Financial Information, respectively, in order to design procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Our work also included evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the Historical Financial Information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

OPINION

In our opinion, the Historical Financial Information gives, for the purposes of the accountants' report, a true and fair view of the financial position of the Target Company as at 31 December 2017, 2018 and 2019 and 30 September 2020 and of the financial performance and cash flows of the Target Company for each of the Relevant Periods in accordance with the basis of preparation and presentation set out in Note 2.1 to the Historical Financial Information.

REVIEW OF INTERIM COMPARATIVE FINANCIAL INFORMATION

We have reviewed the interim comparative financial information of the Target Company which comprises the statements of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the nine months ended 30 September 2019 and other explanatory information (the ''Interim Comparative Financial Information''). The directors of the Target Company are responsible for the preparation and presentation of the Interim Comparative Financial Information in accordance with the basis of presentation and the basis of preparation and presentation set out in Note 2.1 to the Historical Financial Information, respectively. Our responsibility is to express a conclusion on the Interim Comparative Financial Information based on our review. We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by theHKICPA. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Based on our review, nothing has come to our attention that causes us to believe that the Interim Comparative Financial Information, for the purposes of the accountants' report, is not prepared, in all material respects, in accordance with the basis of presentation and preparation set out in Note 2.1 to the Historical Financial Information.

ADJUSTMENTS

In preparing the Historical Financial Information, no adjustments to the Underlying Financial Statements as defined on page II-4 have been made.

DIVIDENDS

We refer to note 12 to the Historical Financial Information which states that no dividends have been paid by the Target Company in respect of the Relevant Periods.

Yours faithfully,

Ernst & Young

Certified Public Accountants

Hong Kong

26 February 2021

I HISTORICAL FINANCIAL INFORMATION

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

The financial statements of the Target Company for the Relevant Periods, on which the Historical Financial Information is based, were audited by Ernst & Young in accordance with Hong Kong Standards on Auditing issued by the HKICPA (the ''Underlying Financial Statements'').

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

Statements of profit or loss and other comprehensive income

Nine months ended

2019
Notes	RMB'000

REVENUE	5	200,414	643,264	357,974
Cost of sales	(197,112)	(460,137)	(346,636)
GROSS PROFIT	3,302	183,127	11,388
Other income and gains	5	354	296	234
Selling and distribution expenses	(32,534)	(31,148)	(3,410)
Administrative expenses	(9,623)	(11,548)	(8,433)
Other expenses	7	(1,845)	(294,134)	(18,518)
Finance costs	8	(142)	(8,497)	(42,396)
(LOSS)/PROFIT BEFORE TAX	(40,488)	(161,904)	(61,185)
Income tax expense	11	-	(38,489)	(837)
(LOSS)/PROFIT AND TOTAL
COMPREHENSIVE
(EXPENSE)/INCOME FOR
THE YEAR/PERIOD	(40,488)	(200,393)	(62,022)
- II-4 -

RMB'000 RMB'000

Year ended 31 December
2017 2018	2019	2020
RMB'000	RMB'000
(unaudited)
278,349	25,374
(275,014)	(24,259)
3,335	1,115
234	54,118
(2,905)	(981)
(6,481)	(11,510)
(18,218)	(13,043)
(31,819)	(23,207)
(55,854)	6,492
(437)	(1,148)
(56,291)	5,344

30 September

Statements of financial position
31 December	30 September
2017	2018	2019	2020
Notes	RMB'000	RMB'000	RMB'000	RMB'000
NON-CURRENT ASSETS
Property, plant and equipment	257	154	114	71
Other long term assets	1,071	5,051	5,051	5,051
Total non-current assets	1,328	5,205	5,165	5,122
CURRENT ASSETS
Properties under development	13	799,299	620,323	281,846	281,846
Completed properties held for sale	14	116,677	61,151	54,508	30,249
Trade receivables	-	-	-	4,570
Due from related companies	26	297,776	47,624	62,025	-
Prepayments, deposits and other receivables	15	23,663	15,992	6,154	4,467
Tax recoverable	8,162	7,260	7,260	7,260
Other current assets	16	13,086	2,459	628	-
Restricted cash	17	99,199	1,727	1,727	108
Cash and cash equivalents	17	31,047	805	584	125
Total current assets	1,388,909	757,341	414,732	328,625
CURRENT LIABILITIES
Trade payables	18	258,798	247,101	199,251	196,979
Other payables, deposits received and accruals	19	53,252	75,459	155,997	657,652
Due to related companies	26	268,983	218,105	239,208	-
Contract liabilities	20	813,525	394,865	17,878	800
Interest-bearing other borrowings	21	292,021	294,007	335,738	-
Tax payable	11	-	29,744	30,582	31,729
Total current liabilities	1,686,579	1,259,281	978,654	887,160
NET CURRENT LIABILITIES	(297,670)	(501,940)	(563,922)	(558,535)
TOTAL ASSETS LESS CURRENT
LIABILITIES	(296,342)	(496,735)	(566,757)	(553,413)
NON-CURRENT LIABILITIES
Total non-current liabilities	-	-	-	-
NET LIABILITIES	(296,342)	(496,735)	(566,757)	(553,413)
EQUITY
Equity attributable to owners of the parent
Share capital	22	151,515	151,515	151,515	151,515
Reserves	23	(447,857)	(648,250)	(710,272)	(704,928)
(296,342)	(496,735)	(558,757)	(553,413)
TOTAL DEFICITS	(296,342)	(496,735)	(558,757)	(553,413)

Statements of changes in equity

Accumulated
Issued capital	losses	Total deficits
RMB'000	RMB'000	RMB'000
(note 22)	(note 23)
As at 1 January 2017	151,515	(407,369)	(255,854)
Loss and other comprehensive expense
for the year	-	(40,488)	(40,488)
As at 31 December 2017 and 1 January 2018	151,515	(447,857)	(296,342)
Loss and other comprehensive income
for the year	-	(200,393)	(200,393)
As at 31 December 2018 and 1 January 2019	151,515	(648,250)	(496,735)
Loss and other comprehensive expense
for the year	-	(62,022)	(62,022)
As at 31 December 2019 and 1 January 2020	151,515	(710,272)	(558,757)
Profit and other comprehensive income
for the period	-	5,344	5,344
As at 30 September 2020	151,515	(704,928)	(553,413)
Accumulated
Issued capital	losses	Total deficits
RMB'000	RMB'000	RMB'000
As at 31 December 2018 and 1 January 2019	151,515	(648,250)	(496,735)
Loss and other comprehensive expense
for the period (unaudited)	-	(56,291)	(56,291)
As at 30 September 2019 (unaudited)	151,515	(704,541)	(553,026)

Statements of cash flows

CASH FLOWS FROM

OPERATING ACTIVITIES (Loss)/profit before tax Adjustments for:

Depreciation of items of property, plant and equipment

Gain on disposal of items of property, plant and equipment

Gain on restructuring of debt

Impairment losses recognised

Impairment losses written off

Finance costs

Interest income

Decrease in properties for development and for sale (Increase)/decrease in trade receivables

Decrease in prepayments, deposits and other receivables Decrease in trade payables Increase/(decrease) in other payables, deposits received and accruals

(Increase)/decrease in restricted cash

(Increase)/decrease in other long term assets (Increase)/decrease in other current assets Increase/(decrease) in contract liabilities

Notes

6 6 6 6 8 5

RMB'000 RMB'000

(197,687)

(157,408) (71,020) (2,671)

63 187,745 (86,764)

286,837

(89,721)

(11,121)

(40,488)

91,772

80,338

Year ended 31 December
2017 2018	2019	2020
RMB'000	RMB'000
(unaudited)
(55,854)	6,492
36	43
(233)	-
-	(54,117)
-	817
(1,202)	(1,029)
31,819	23,207
(1)	(1)
(25,435)	(24,588)
274,814	25,288
-	(5,387)
8,160	1,686
(47,740)	(2,273)
86,623	13,603
-	1,620
-	-
1,464	628
(325,133)	(17,249)

2019

(161,904)

383

116

- -

- 280,527

RMB'000

(61,185)

(233)

- -

142 8,497 42,396

(316)

(211) (1)

56,005 (21,654)

345,076

347,791

5,645

9,838

(11,697) (47,852)
34,534 60,426

Nine months ended

30 September

97,471

(3,979)

- -

10,627

1,831

(427,156)

(377,652)

Nine months endedYear ended 31 December 2017 2018

NotesRMB'000 RMB'000

2019

30 September 2019

2020

RMB'000

RMB'000 (unaudited)

RMB'000

Cash generated/(used in) from operations

261,462

106,526

(27,272)

(27,247)

(6,672)Interest received Interest paid Tax paid

Net cash flows from/(used in)

operating activities

CASH FLOWS FROM

INVESTING ACTIVITIES Disposal of items of property, plant and equipment

Purchase of items of property, plant and equipment

Advance to related companies Recover of advance to related companies

Net cash flows from/(used in)

investing activities

CASH FLOWS FROM

FINANCING ACTIVITIES Advance from related companies Repayment of advance from related companies

Repayment of other interest-bearing borrowings

Advance from third companies Repayment of advance from third companies

Net cash flows from/(used in)

financing activities

316

(142) (8,991)

252,645

(33)

26 (107,641)

211 (26,567) (7,843)

1 - -

72,327 (27,271)

234

(14) (283,417)

255,069

- - -

(107,674)

(28,362)

234

26 26 21

34,566

7,163

14,597

(163,574)

(58,040)

(7,895)

(22,583) 23,638

(11,000)

- 20,114

(5,000)

(12,331)

(132,953)

(74,208) 26,816

1 - -

(27,246)

(6,671)

234

- - -

- (14,549)

234 (14,549)

14,597

7,198

(7,895)

- 20,114

- 13,563

26,816

20,761

Nine months endedYear ended 31 December 2017 2018

NotesRMB'000 RMB'000

2019

30 September 2019

2020

RMB'000

RMB'000 (unaudited)

RMB'000

NET INCREASE/(DECREASE)

IN CASH AND CASH EQUIVALENTS

12,018

(30,242)

(221)

(196) (459)Cash and cash equivalents a beginning of year/period

CASH AND CASH

EQUIVALENT AT END OF YEAR/PERIOD

ANALYSIS OF BALANCES OF

CASH AND CASH

EQUIVALENTS

Cash and bank balances Less: Restricted cash

CASH AND CASH

EQUIVALENTS AS STATED IN THE STATEMENTS OF FINANCIAL POSITION AND STATEMENTS OF CASH FLOWS

19,029

31,047

805

805 584

31,407

805

584

609 125

17 17

130,246 99,199

2,532 1,727

2,311 1,727

2,335 233

1,726 108

31,047

805

584

609 125

IINOTES TO THE HISTORICAL FINANCIAL INFORMATION

CORPORATE INFORMATION

Hangzhou Qingcheng Property Development Co., Ltd. (杭州青城房地產開發有限公司, the ''TargetCompany'') was established in the People's Republic of China (the ''PRC'') with limited liability. The registered office of the Target Company is located at Qingshan Minzhu Village, Lin'an Street, Hangzhou, Zhejiang ProvinceAs at 30 September 2020, the Target Company's shareholder was Hangzhou Zezhou Enterprise Management Co. (杭州澤洲企業管理有限公司), which holds 100% equity interests of the Target Company.

2.1

BASIS OF PREPARATION

The Historical Financial Information has been prepared in accordance with International Financial ReportingStandards (''IFRSs'') which comprise all standards and interpretations approved by the International Accounting Standards Board (the ''IASB''). All IFRSs effective for the accounting period commencing from 1 January 2019 and 1 January 2020, together with the relevant transitional provisions, have been early adopted by the Target Company in the preparation of the Historical Financial Information throughout the Relevant Periods and in the period covered by the Interim Comparative Financial Information.

The Historical Financial Information are presented on a going concern basis.

The Target Company was in a loss-making position in year 2017, 2018 and 2019, with a net current liabilities position of RMB558 million and a net deficits position of RMB553 million as of 30 September 2020. In September 2020, the Target Company was acquired by Yincheng International Holding Co., Ltd. (''Yincheng International'' ),a Hong Kong listed company. After acquisition, Yincheng International will provide financing to the Target Company to settle the liabilities and to complete the development of the project. According to the cash flow forecast prepared by management of the Target Company, net cash inflow from operating activities will be generated in the next 12 months since 30 September 2020. Therefore, management is of the opinion that it is appropriate to prepare Historical Financial Information on a going concern basis.

The historical financial information is presented in Renminbi (''RMB'') and all values are rounded to the nearest thousand except when otherwise indicated.

The Historical Financial Information has been prepared under the historical cost convention.

2.2

ISSUED BUT NOT YET EFFECTIVE IFRSS

The Target Company has not applied the following new and revised IFRSs, that have been issued but are notyet effective, in this Historical Financial Information. The Target Company intends to adopt them, if applicable, when they become effective.

IFRS 17	Insurance Contracts2
Amendments to IAS 1	Classification of Liabilities as Current or Non-current2
Amendments to IFRS 3	Reference to the Conceptual Framework1
Amendments to IAS 16	Property, Plant and Equipment: Proceeds before Intended Use1
Amendments to IAS 37	Onerous Contracts - Cost of Fulfilling a Contract1
Annual Improvements to	Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 411
IFRS Standards
2018-2020 Cycle
Amendments to IFRS 4	Extension of the Temporary Exemption from Applying IFRS 92
Amendments to IFRS 17	Insurance Contracts2, 4
Amendments to IAS 28	Sale or Contribution of Assets between an Investor and its Associate or
and IFRS 10	Joint Venture3

1 2 3 4

Effective for annual periods beginning on or after 1 January 2022 Effective for annual periods beginning on or after 1 January 2023

No mandatory effective date yet determined but available for adoption

As a consequence of the amendments to IFRS 17 issued in June 2020, IFRS 4 was amended to extend the temporary exemption that permits insurers to apply IAS 39 rather than IFRS 9 for annual periods beginning before 1 January 2023

The management of the Target Company anticipates that the application of the new and revised IFRSs will have no material impact on the Target Company's financial position and financial performance in the foreseeable future.

2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Fair value measurement

Fair value is 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 measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability, or in the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible by the Target Company. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Target Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

Level 1 - based on quoted prices (unadjusted) in active markets for identical assets or liabilities

Level 2 - based on valuation techniques for which the lowest level input that is significant to the fair value measurement is observable, either directly or indirectly

Level 3

- based on valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

For assets and liabilities that are recognised in the Historical Financial Information on a recurring basis, the Target Company determines whether transfers have occurred between levels in the hierarchy by reassessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each of the Relevant Periods.

Impairment of non-financial assets

Where an indication of impairment exists, or when annual impairment testing for an asset is required (other than financial assets), the asset's recoverable amount is estimated. An asset's recoverable amount is the higher of the asset's or cash-generating unit's value in use and its fair value less costs of disposal, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case the recoverable amount is determined for the cash-generating unit to which the asset belongs.

An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is charged to profit or loss in the period in which it arises in those expense categories consistent with the function of the impaired asset.

An assessment is made at the end of each of the Relevant Periods as to whether there is an indication that previously recognised impairment losses may no longer exist or may have decreased. If such an indication exists, the recoverable amount is estimated. A previously recognised impairment loss of an asset other than goodwill is reversed only if there has been a change in the estimates used to determine the recoverable amount of that asset, but not to an amount higher than the carrying amount that would have been determined (net of any depreciation/amortisation) had no impairment loss been recognised for the asset in prior years. A reversal of such an impairment loss is credited to profit or loss in the period in which it arises (only if there are revalued assets in the financial statements), unless the asset is carried at a revalued amount, in which case the reversal of the impairment loss is accounted for in accordance with the relevant accounting policy for that revalued asset.

Related parties

A party is considered to be related to the Target Company if:

(a) the party is a person or a close member of that person's family and that person

(i) has control or joint control over the Target Company;
(ii) has significant influence over the Target Company; or
(iii) is a member of the key management personnel of the Target Company or of a parent of the Target Company;

(b) the party is an entity where any of the following conditions applies:

(i) the entity and the Target Company are members of the same Group;
(ii) one entity is an associate or joint venture of the other entity (or of a parent, subsidiary or fellow subsidiary of the other entity);
(iii) the entity and the Target Company are joint ventures of the same third party;
(iv) one entity is a joint venture of a third entity and the other entity is an associate of the third entity;
(v) the entity is a post-employment benefit plan for the benefit of employees of either the Target Company or an entity related to the Target Company;

(vi) the entity is controlled or jointly controlled by a person identified in (a);
(vii) a person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity); and
(viii) the entity, or any member of a Target Company of which it is a part, provides key management personnel services to Target Company or to the parent of the Target Company.

Property, plant and equipment and depreciation

Property, plant and equipment, other than construction in progress, are stated at cost less accumulated depreciation and any impairment losses. The cost of an item of property, plant and equipment comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use.

Expenditure incurred after items of property, plant and equipment have been put into operation, such as repairs and maintenance, is normally charged to profit or loss in the period in which it is incurred. In situations where the recognition criteria are satisfied, the expenditure for a major inspection is capitalised in the carrying amount of the asset as a replacement. Where significant parts of property, plant and equipment are required to be replaced at intervals, the Target Company recognises such parts as individual assets with specific useful lives and depreciates them accordingly.

Depreciation is calculated on the straight-line basis to write off the cost of each item of property, plant and equipment to its residual value over its estimated useful life. The principal annual rates used for this purpose are as follows:

Motor and electronic vehicles Office equipment device

22% 6.28%-19.42%

Where parts of an item of property, plant and equipment have different useful lives, the cost of that item is allocated on a reasonable basis among the parts and each part is depreciated separately. Residual values, useful lives and the depreciation method are reviewed, and adjusted if appropriate, at least at each financial year/period end.

An item of property, plant and equipment including any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on disposal or retirement recognised in profit or loss in the year/period the asset is derecognised is the difference between the net sales proceeds and the carrying amount of the relevant asset.

Construction in progress represents a building under construction, which is stated at cost less any impairment losses, and is not depreciated. Cost comprises the direct costs of construction and capitalised borrowing costs on related borrowed funds during the period of construction. Construction in progress is reclassified to the appropriate category of property, plant and equipment when completed and ready for use.

Properties under development

Properties under development are intended to be held for sale after completion.

Properties under development are stated at the lower of cost comprising land costs, construction costs, borrowing costs, professional fees and other costs directly attributable to such properties incurred during the development period and net realisable value.

Properties under development are classified as current assets unless those will not be realised in the normal operating cycle. On completion, the properties are transferred to completed properties held for sale.

Completed properties held for sale

Completed properties held for sale are stated in the statement of financial position at the lower of cost and net realisable value. Cost is determined by an apportionment of the total costs of land and buildings attributable to the unsold properties. Net realisable value takes into account the price ultimately expected to be realised, less estimated costs to be incurred in selling the properties.

Allocation of property development cost

Land costs are allocated to each unit according to its occupied gross floor area (''GFA'') to the total occupied GFA. Construction costs relating to units were identified and allocated specifically. Common construction costs have been allocated according to the saleable GFA similar to land costs.

Investments and other financial assets

Initial recognition and measurement

Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through other comprehensive income, and fair value through profit or loss.

The classification of financial assets at initial recognition depends on the financial asset's contractual cash flow characteristics and the Target Company's business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Target Company has applied the practical expedient, the Target Company initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables that do not contain a significant financing component or for which the Target Company has applied the practical expedient are measured at the transaction price determined under IFRS 15 in accordance with the policies set out for ''Revenue recognition'' below.

In order for a financial asset to be classified and measured at amortised cost or fair value through other comprehensive income, it needs to give rise to cash flows that are solely payments of principal and interest (''SPPI'') on the principal amount outstanding. Financial assets with cash flows that are not SPPI are classified and measured at fair value through profit or loss, irrespective of the business model.

The Target Company's business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both. Financial assets classified and measured at amortised cost are held within a business model with the objective to hold financial assets in order to collect contractual cash flows, while financial assets classified and measured at fair value through other comprehensive income are held within a business model with the objective of both holding to collect contractual cash flows and selling. Financial assets which are not held within the aforementioned business models are classified and measured at fair value through profit or loss.

All regular way purchases and sales of financial assets are recognised on the trade date, that is, the date that the Target Company commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace.

Subsequent measurement

The subsequent measurement of financial assets depends on their classification as follows:

Financial assets at amortised cost (debt instruments)

Financial assets at amortised cost are subsequently measured using the effective interest method and are subject to impairment. Gains and losses are recognised in the statement of profit or loss when the asset is derecognised, modified or impaired.

Derecognition of financial assets

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e., removed from the Target Company's statement of financial position) when:

. the rights to receive cash flows from the asset have expired; or
. the Target Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ''pass-through'' arrangement; and either (a) the Target Company has transferred substantially all the risks and rewards of the asset, or (b) the Target Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Target Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if, and to what extent, it has retained the risk and rewards of ownership of the asset. When it has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the Target Company continues to recognise the transferred asset to the extent of the Target Company's continuing involvement. In that case, the Target Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Target Company has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Target Company could be required to repay.

Impairment of financial assets

The Target Company recognises an allowance for expected credit losses (''ECLs'') for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Target Company expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.

General approach

ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12 months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).

At each reporting date, the Target Company assesses whether the credit risk on a financial instrument has increased significantly since initial recognition. When making the assessment, the Target Company compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition and considers reasonable and supportable information that is available without undue cost or effort, including historical and forward-looking information.

The Target Company considers a financial asset in default when contractual payments are 90 days past due. However, in certain cases, the Target Company may also consider a financial asset to be in default when internal or external information indicates that the Target Company is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Target Company. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.

Financial assets at amortised cost are subject to impairment under the general approach and they are classified within the following stages for measurement of ECLs except for trade receivables which apply the simplified approach as detailed below.

Stage 1

- Financial instruments for which credit risk has not increased significantly since initial recognition and for which the loss allowance is measured at an amount equal to 12-month ECLs

Stage 2

Financial instruments for which credit risk has increased significantly since initial recognition but that are not credit-impaired financial assets and for which the loss allowance is measured at an amount equal to lifetime ECLs

Stage 3

- Financial assets that are credit-impaired at the reporting date (but that are not purchased or originated credit-impaired) and for which the loss allowance is measured at an amount equal to lifetime ECLs.

Simplified approach

For trade receivables, the Target Company applies a simplified approach in calculating ECLs. Therefore, the Target Company does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at the end of each of the Relevant Periods. The Target Company has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.

Financial liabilities

Initial recognition and measurement

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.

The Target Company's financial liabilities include trade payables, financial liabilities included in other payables, deposits received and accruals, other liabilities and interest-bearing bank and other borrowings.

Subsequent measurement

The subsequent measurement of financial liabilities depends on their classification as follows:

Financial liabilities at amortised cost (loans and borrowings)

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost, using the effective interest rate method unless the effect of discounting would be immaterial, in which case they are stated at cost. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the effective interest rate amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate. The effective interest rate amortisation is included in finance costs in profit or loss.

Derecognition of financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled, or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and a recognition of a new liability, and the difference between the respective carrying amounts is recognised in profit or loss.

Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.

Cash and cash equivalents

For the purpose of the statements of cash flows, cash and cash equivalents comprise cash on hand and demand deposits, and short term highly liquid investments that are readily convertible into known amounts of cash, are subject to an insignificant risk of changes in value, and have a short maturity of generally within three months when acquired, less bank overdrafts which are repayable on demand and form an integral part of the Target Company's cash management.

For the purpose of the statements of financial position, cash and cash equivalents comprise cash on hand and at banks which are not restricted as to use.

Provisions

A provision is recognised when a present obligation (legal or constructive) has arisen as a result of a past event and it is probable that a future outflow of resources will be required to settle the obligation, provided that a reliable estimate can be made of the amount of the obligation.

When the effect of discounting is material, the amount recognised for a provision is the present value at the end of each of the Relevant Periods of the future expenditures expected to be required to settle the obligation. The increase in the discounted present value amount arising from the passage of time is included in finance costs in profit or loss.

Income tax

Income tax comprises current and deferred tax. Income tax relating to items recognised outside profit or loss is recognised outside profit or loss, either in other comprehensive income or directly in equity.

Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of each of the Relevant Periods, taking into consideration interpretations and practices prevailing in the countries in which the Target Company operates.

Deferred tax is provided, using the liability method, on all temporary differences at the end of each of the Relevant Periods between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all taxable temporary differences, except:

. when the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
. in respect of taxable temporary differences associated with investments in subsidiaries and associates, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, the carryforward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, the carryforward of unused tax credits and unused tax losses can be utilised, except:

where the deferred tax asset relating to the deductible temporary differences arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

in respect of deductible temporary differences associated with investments in subsidiaries and associates, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at the end of each of the Relevant Periods and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at the end of each of the Relevant Periods and are recognised to the extent that it has become probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of each of the Relevant Periods.

Deferred tax assets and deferred tax liabilities are offset if and only if the Target Company has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

Revenue recognition

Revenue from contracts with customers

Revenue from contracts with customers is recognised when control of goods or services is transferred to the customers at an amount that reflects the consideration to which the Target Company expects to be entitled in exchange for those goods or services.

When the consideration in a contract includes a variable amount, the amount of consideration is estimated to which the Target Company will be entitled in exchange for transferring the goods or services to the customer. The variable consideration is estimated at contract inception and constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognised will not occur when the associated uncertainty with the variable consideration is subsequently resolved.

When the contract contains a financing component which provides the customer with a significant benefit of financing the transfer of goods or services to the customer for more than one year, revenue is measured at the present value of the amount receivable, discounted using the discount rate that would be reflected in a separate financing transaction between the Target Company and the customer at contract inception. When the contract contains a financing component which provides the Target Company a significant financial benefit for more than one year, revenue recognised under the contract includes the interest expense accreted on the contract liability under the effective interest method. For a contract where the period between the payment by the customer and the transfer of the promised goods or services is one year or less, the transaction price is not adjusted for the effects of a significant financing component, using the practical expedient in IFRS 15.

Sale of properties

Revenue is recognised when or as the control of the asset is transferred to the purchaser. Depending on the terms of the contract and the laws that apply to the contract, control of the asset may transfer over time or at a point in time. Control of the asset is transferred over time if the Target Company's performance:

. provides benefits which are received and consumed simultaneously by the purchaser; or

. creates and enhances an asset that the purchaser controls as the Target Company performs; or

does not create an asset with an alternative use to the Target Company and the Target Company has an enforceable right to payment for performance completed to date.

If control of the asset transfers over time, revenue is recognised over the period of the contract by reference to the progress towards complete satisfaction of that performance obligation. Otherwise, revenue is recognised at a point in time when the purchaser obtains control of the asset.

The progress towards complete satisfaction of the performance obligation is measured based on the Target Company's efforts or inputs to the satisfaction of the performance obligation that best depict the Target Company's performance in satisfying the performance obligation.

In determining the transaction price, the Target Company adjusts the promised amount of consideration for the effect of a financing component if it is significant.

For property development and sales contracts for which the control of the property is transferred at a point in time, revenue is recognised when the purchaser obtains the physical possession or the legal title of the completed property and the Target Company has the present right to payment and the collection of the consideration is probable.

Revenue recognition

Revenue from other sources

Rental income

Rental income is recognised on a time proportion basis over the lease terms.

Interest income

Interest income is recognised, on an accrual basis using the effective interest method by applying the rate that discounts the estimated future cash receipts over the expected life of the financial instrument of the net carrying amount of the financial asset.

Contract liabilities

A contract liability is recognised when a payment is received or a payment is due (whichever is earlier) from a customer before the Target Company transfers the related goods or services. Contract liabilities are recognised as revenue when the Target Company performs under the contract (i.e., transfers control of the related goods or services to the customer).

Contract costs

Other than the costs which are capitalised as inventories, property, plant and equipment and intangible assets, costs incurred to fulfil a contract with a customer are capitalised as an asset if all of the following criteria are met:

(a) The costs relate directly to a contract or to an anticipated contract that the entity can specifically identify.
(b) The costs generate or enhance resources of the entity that will be used in satisfying (or in continuing to satisfy) performance obligations in the future.
(c) The costs are expected to be recovered.

The capitalised contract costs are amortised and charged to the statement of profit or loss and other comprehensive income on a systematic basis that is consistent with the pattern of the revenue to which the asset related is recognised. Other contract costs are expensed as incurred.

Other employee retirement benefits

The employees of the Target Company which operate in Mainland China are required to participate in a central pension scheme operated by the local municipal government. The Target Company is required to contribute a certain proportion of their payroll costs to the central pension scheme. The contributions are charged to profit or loss as they become payable in accordance with the rules of the central pension scheme.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, i.e. assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of those assets. The capitalisation of such borrowing costs ceases when the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs capitalised. All other borrowing costs are expensed in the period in which they are incurred. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

Dividends

Dividends are recognised as a liability when they are approved by the shareholders in a general meeting.

3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES

The preparation of the Target Company's financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and their accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amounts of the assets or liabilities affected in the future.

Estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the end of each of the Relevant Periods, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are disclosed below:

Provision of properties under development and completed properties held for sale

The Target Company's properties under development and completed properties held for sale are

stated at the lower of cost and net realisable value. Based on the Target Company's historical

experience and the nature of the subject properties, the Target Company makes estimates of the selling

prices, the costs of completion of properties under development, and the costs to be incurred in selling

the properties based on prevailing market conditions.

If there is an increase in costs to completion or a decrease in net sales value, the net realisable

value will decrease and this may result in a provision for properties under development and completed

properties held for sale. Such provision requires the use of judgement and estimates. Where the

expectation is different from the original estimate, the carrying value and provision for properties in the

periods in which such estimate is changed will be adjusted accordingly.

Provision for expected credit losses on trade receivables

The Target Company uses a provision matrix to calculate ECLs for trade receivables. The

provision rates are based on days past due for groupings of various customer segments that have similar

loss patterns.

The provision matrix is initially based on the Target Company's historical observed default rates. The Target Company will calibrate the matrix to adjust the historical credit loss experience with forward-looking information. For instance, if forecast economic conditions (i.e., consumer price index) are expected to deteriorate over the next year which can lead to an increased number of defaults in the manufacturing sector, the historical default rates are adjusted. At the end of each of the Relevant Periods, the historical observed default rates are updated and changes in the forward-looking estimates are analysed.

The assessment of the correlation among historical observed default rates, forecast economic conditions and ECLs is a significant estimate. The amount of ECLs is sensitive to changes in circumstances and forecast economic conditions. The Target Company's historical credit loss experience and forecast of economic conditions may also not be representative of a customer' actual default in the future.

Impairment of non-financial assets (other than goodwill)

The Target Company assesses whether there are any indicators of impairment for all non-financial assets (including the right-of-use assets) at the end of each of the Relevant Periods. Other non-financial assets are tested for impairment when there are indicators that the carrying amounts may not be recoverable. An impairment exists when the carrying value of an asset or a cash-generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value-in-use. The calculation of the fair value less costs of disposal is based on available data from binding sales transactions in an arm's length transaction of similar assets or observable market prices less incremental costs for disposing of the asset. When value in use calculations are undertaken, management must estimate the expected future cash flows from the asset or cash-generating unit and choose a suitable discount rate in order to calculate the present value of those cash flows.

4. OPERATING SEGMENT INFORMATION

For management purposes, the Target Company is organised as one business unit - property development. Management monitors the operating results of the Target Company's property development business as a whole to make decisions about resource allocation and performance assessment. Accordingly, no separate segment information is prepared.

Geographical information

No geographical information is presented as the Target Company's revenue from the external customers is derived solely from its operation in Mainland China and no assets of the Target Company are located outside Mainland China.

Information about major customers

No sales to a single customer or a Target Company of customers under common control accounted for 10% or more of the Target Company's revenue for each of the Relevant Periods.

REVENUE, OTHER INCOME AND GAINS

Revenue represents income from the sale of properties during the relevant periods.

An analysis of revenue and other income and gains is as follows:

Year ended 31 December 2017 2018 2019

RMB'000 RMB'000 RMB'000

Revenue

Sale of properties

Represented by:

Recognised at a point in time

Revenue from sale of properties

200,414

643,264

357,974

Year ended 31 December 2017 2018 2019

RMB'000 RMB'000 RMB'000

Nine months ended

30 September 2019

2020

RMB'000 (unaudited)

RMB'000

278,349

25,374

Nine months ended

30 September 2019

2020

RMB'000 (unaudited)

RMB'000

200,414

643,264

357,974

278,349

25,374

The following table shows the amounts of revenue recognised in the current reporting period that were included in the contract liabilities at the beginning of the reporting period and recognised from performance obligations satisfied in previous periods:

Nine months ended

Revenue recognised that was included in contract liabilities at the beginning of the reporting period:

Sale of properties

Other income and gains Gain on restructuring of debt Gain on disposal of items of

Year ended 31 December
2017 2018 2019	2019	2020
RMB'000 RMB'000 RMB'000	RMB'000	RMB'000
(unaudited)
243,860	16,402

30 September

150,311

463,150

350,908

Interest income Others

Totalproperty, plant and equipment - - 233

Year ended 31 December
2017 2018 2019	2019	2020
RMB'000 RMB'000 RMB'000	RMB'000	RMB'000
(unaudited)
-	54,117
233	-
1	1
-	-
234	54,118

354

316 38

211 1

Nine months ended

30 September

85 296

234

6. (LOSS)/PROFIT BEFORE TAX
The Target Company's (loss)/profit before tax is arrived at after charging/(crediting):
Year ended 31 December
Nine months ended
30 September
Employee benefit expenseCost of properties sold Impairment of trade receivables
Impairment loss of receivables due from related parties Written down of completed properties held for sale to net realisable value Depreciation of items of property, plant and equipment
Gain on disposal of items of property, plant and equipment
(including directors' and chief executive's remuneration): Wages and salaries Pension scheme contributions and social welfare

7. OTHER EXPENSES

Notes

14 (157,408)

7 7

2017 2018	2019	2019	2020
RMB'000 RMB'000	RMB'000	RMB'000	RMB'000
(unaudited)
346,636	275,014	24,259
-	-	817
-	-	-
(2,671)	(1,202)	(1,029)
40	36	43
233	233	-
192	151	135
2,561	1,792	3,586

198

An analysis of other expenses is as follows:Compensation for suppliers and customers

Bad debt provision Penalty

197,112

460,137

- 280,527

(71,020)

383

116

249

2,559

3,443

Others

NoteRMB'000 RMB'000

1,845 294,134

1,100 - 255 490

Year ended 31 December
2017 2018	2019	2020
RMB'000	RMB'000
(unaudited)
18,153	12,226
-	817
-	-
65	-
18,218	13,043

30 September

1,616 18,453

Nine months ended

2019

RMB'000

280,527 11,860 131

- - 65

18,518

8. FINANCE COSTS
An analysis of finance costs is as follows:
Nine months endedYear ended 31 December 2017 2018
NoteRMB'000 RMB'000
30 September
2019
2019
2020
RMB'000
RMB'000 (unaudited)
RMB'000
Interest on other borrowing Interest on pre-sales deposits Less: Interest capitalised
37,748 8,195 45,801
- 39,554 41,731
  18,213 49,270
  665 -
  31,298 521 -
  23,037 170 -
  142
- 8,497 42,396
9. DIRECTORS' AND CHIEF EXECUTIVE'S REMUNERATIONYear ended 31 December 2017 2018 2019

RMB'000 RMB'000 RMB'000

31,819

23,207

Nine months ended

30 September 2019

2020

RMB'000 (unaudited)

RMB'000

Salaries, allowances and benefits in kind

Performance-related bonuses Pension scheme contributions and social welfare

246 36

185 27

138 - -

282

The remuneration of the Target Company's directors is set out below:

Year ended 31 December 2017

Executive directors:

- Mr. Dai Long
- Mr. He Jianliang
- Mr. Zhao Chongqing

Salaries, allowances and benefits in kind RMB'000

Performance-related bonuses RMB'000

282

212

Pension scheme contributions and social welfare RMB'000

138

Total remuneration

RMB'000

- -

246 36 - 282

Year ended 31 December 2018

- Mr. Zhao Chongqing

- Mr. He Jianliang
- - Mr. Zhao Chongqing
- - Mr. Zhao Chongqing

- Mr. Dai Long

- Mr. He Jianliang

scheme
Performance-	contributions
related	and social	Total
bonuses	welfare	remuneration
RMB'000	RMB'000	RMB'000
-	-	-
-	-	-
36	-	282
36	-	282
Pension
scheme
Performance-	contributions
related	and social	Total
bonuses	welfare	remuneration
RMB'000	RMB'000	RMB'000
-	-	-
-	-	-
27	-	212
27	-	212
Nine months ended 30 September 2019 (unaudited)
Pension
Salaries,	scheme
allowances	Performance-	contributions
and benefits	related	and social	Total
in kind	bonuses	welfare	remuneration
RMB'000	RMB'000	RMB'000	RMB'000
-	-	-
-	-	-
-	-	185
-	-	185

Salaries, allowances and benefits in kind RMB'000

Executive directors:

- Mr. Dai Long
Year ended 31 December 2019
Executive directors:
- - Mr. Dai LongExecutive directors:
  - - 246 246
  Salaries, allowances and benefits in kind RMB'000
  - - 185 185
  - - 185 185
  Pension

Nine months ended 30 September 2020

Pension

Salaries,	scheme
allowances	Performance-	contributions
and benefits	related	and social	Total
in kind	bonuses	welfare	remuneration
RMB'000	RMB'000	RMB'000	RMB'000
Executive directors:
- Mr. Dai Long	-	-	-	-
- Mr. He Jianliang	-	-	-	-
- Mr. Zhao Chongqing	138	-	-	138
138	-	-	138

Mr. Dai Long and Mr. He Jianliang, a board members of Hangzhou Qingcheng Real Estate Development Co.,

Ltd. never received any remuneration from the Target Company during the years ended 31 December 2017, 2018 and 2019 and for the nine months ended 30 September 2019 and 2020, respectively.

10. FIVE HIGHEST PAID EMPLOYEES

The five highest paid employees for the years ended 31 December 2017, 2018 and 2019 and the nine months ended 30 September 2019 and 2020 all included 1 director of the Target Company. Details of the remuneration for the years ended 31 December 2017, 2018 and 2019 and the nine months ended 30 September 2019 and 2020 of the highest paid employees of the Target Company are as follows:

Nine months ended

Salaries, allowances and benefits in kind

Performance-related bonuses Pension scheme contributions and social welfare

Total

Year ended 31 December
2017 2018 2019	2019	2020
RMB'000 RMB'000 RMB'000	RMB'000	RMB'000
(unaudited)
887	754
112	-
50	124
1,049	878

30 September

1,075 158 68 1,301

1,075 1,180

158 150

68 70

1,301 1,400

The number of non-director highest paid employees whose remuneration fell within the following bands is as follows:

Nine months ended

Nil to RMB200,000 1 1

RMB200,000 to RMB400,000 3 3

Total 4 4

Year ended 31 December
2017 2018	2019	2019	2020
(unaudited)
-	3	3
4	1	1
4	4	4

30 September

11. INCOME TAX

Provision for Mainland China current income tax is based on a statutory rate of 25% of the assessable profits of the Target Company, which was determined in accordance with the PRC Corporate Income Tax Law which was approved and became effective on 1 January 2008 (the ''New Corporate Income Tax Law'').

LAT is levied at progressive rates ranging from 30% to 60% on the appreciation of land value, being the proceeds from sale of properties less deductible expenditures including land costs, borrowing costs and other property development expenditures. The Target Company has estimated, made and included in taxation a provision for LAT according to the requirements set forth in the relevant Mainland China tax laws and regulations. The LAT provision is subject to the final review and approval by the local tax bureau.

Nine months ended

Current tax:

PRC corporate income tax

PRC LAT

Deferred tax

Total tax charge for the year/period

Year ended 31 December
2017 2018 2019	2019	2020
RMB'000 RMB'000 RMB'000	RMB'000	RMB'000
(unaudited)
-	-
437	1,148
-	-
437	1,148

30 September

- - - -

- 38,489 -

- 837 -

38,489

837

A reconciliation of income tax expense applicable to (loss)/profit before tax at the statutory rate for the jurisdictions in which the Target Company is domiciled to the income tax expense at the effective income tax rate for each of the Relevant Periods is as follows:

Nine months ended



(Loss)/profit before tax	(40,488)	(161,904)	(61,185)
At the statutory income tax rate	(10,122)	(40,476)	(15,296)
Expenses not deductible for tax	64	3,472	-
Tax losses utilised from previous
periods	-	(27,301)	-
Deductible temporary differences
not recognised	4,609	73,927	379
Provision for LAT	-	38,489	837
Tax effect on LAT	-	(9,622)	(209)
Tax losses not recognised	5,449	-	15,126
Tax charge at the Target Company's
effective rate	-	38,489	837

Year ended 31 December
2017 2018 2019	2019	2020
RMB'000 RMB'000 RMB'000	RMB'000	RMB'000
(unaudited)
(55,854)	6,492
(13,964)	1,623
-	-
-	(1,603)
283	267
437	1,148
(109)	(287)
13,790	-
437	1,148

30 September

Tax payable in the statement of financial position represents:
31 December	30 September
2017	2018	2019	2020
RMB'000	RMB'000	RMB'000	RMB'000
29,744	30,582	31,729

PRC LAT payable

12. DIVIDENDS
No dividends have been paid or declared by the Target Company since its date of incorporation.

13. PROPERTIES UNDER DEVELOPMENT

31 December	30 September
2017	2018	2019	2020
RMB'000	RMB'000	RMB'000	RMB'000
At the beginning of the year/period	727,302	799,299	620,323	281,846
Additions	311,929	225,635	1,516	-
Transferred to completed properties held for sale
(note 14)	(461,296)	(404,611)	(339,993)	-
Impairment losses transferred to completed
properties held for sale (note 14)	221,364	-	-	-
At the end of the year/period	799,299	620,323	281,846	281,846

The Target Company's properties under development are situated on leasehold lands in Mainland China.

Certain of the Target Company's properties under development with aggregate carrying amounts of approximately RMB434,566,000, RMB126,645,000 and RMB126,645,000 and RMB126,645,000 as at 31 December 2017, 2018 and 2019 and 30 September 2020, respectively, have been pledged to secure other borrowings granted to the Target Company (note 21).

The movements in provision for impairment of properties under development are as follows:

31 December 30 September

2017

2018 2019

2020

RMB'000

RMB'000 RMB'000

RMB'000

At the beginning of the year/period Impairment losses transferred to completed properties held for sale (note 14)

221,364

(221,364)At the end of the year/period

- - -

The value of properties under development was assessed at the end of each of the Relevant Periods. An impairment exists when the carrying value exceeds its net realisable value. The net realisable value is determined by the Target Company with reference to the prevailing market conditions and existing prices, less applicable variable selling expenses and anticipated costs at completion, at the end of each reporting period.

14.	COMPLETED PROPERTIES HELD FOR SALE
31 December	30 September
2017	2018	2019	2020
RMB'000	RMB'000	RMB'000	RMB'000
At the beginning of the year/period	73,857	116,677	61,151	54,508
Transferred from properties under development
(note 13)	461,296	404,611	339,993	-
Transferred to cost of sales	(354,520)	(531,157)	(349,307)	(25,288)
Impairment losses transferred from properties
under development (note 13)	(221,364)	-	-	-
Impairment losses written off (note 6)	157,408	71,020	2,671	1,029
At the end of the year/period	116,677	61,151	54,508	30,249

Certain of the Target Company's completed properties held for sale with aggregate carrying amounts of approximately RMB95,764,000, RMB49,304,000, RMB35,739,000 and Nil as at 31 December 2017, 2018 and 2019 and 30 September 2020, respectively, have been pledged to secure other borrowings granted to the Target Company (note 21). As of 30 September 2020, the legal title for one unit of completed house (with book value of RMB1,538,029) to the Target Company is in the process.

The movements in provision for impairment of completed properties held for sale are as follows:

2017	2020
RMB'000	RMB'000
At the beginning of the year/period	20,005	83,961	12,941	10,270
Transferred from properties under development
(note 13)	221,364	-	-	-
Written off (note 6)	(157,408)	(71,020)	(2,671)	(1,029)
At the end of the year/period	83,961	12,941	10,270	9,241

31 December 30 September 2018 2019

RMB'000 RMB'000

The value of completed properties held for sale is assessed at the end of each of the Relevant Periods. An impairment exists when the carrying value exceeds its net realisable value, which is the higher of its fair value less costs of disposal. The calculation of the fair value less costs of disposal is based on available data from binding sales transactions in an arm's length transaction of similar assets or observable market prices less incremental costs for disposing of the asset.

15. PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES

31 December	30 September
2018	2019	2020
RMB'000	RMB'000	RMB'000
Other tax recoverable	8,962	3,260	-	-
Advance to staffs	3,279	2,629	-	-
Due from third parties (note 26)	8,351	6,499	4,856	3,406
Other receivables (note 26)	3,071	3,604	1,298	1,061
23,663	15,992	6,154	4,467

RMB'000

2017

The financial assets included in the above balances relate to receivables for which there was no recent history of default and past due amounts. As at the end of each of the Relevant Periods, the loss allowance was assessed to be minimal.

16. OTHER CURRENT ASSETS

Other current assets are initially recognised for commission to the sales agents when the agreement for sale and purchase is signed with a property buyer, if recoverable. The amounts recognised as other current assets are amortised on a systematic basis which is consistent with the transfer of the related property to the customer.

The expected timing of recovery or settlement for other current assets as at 31 December 2017, 2018 and 2019 and 30 September 2020 is as follows:

2017

31 December 2018

2019

30 September 2020

RMB'000

Within one year After one year

12,273 813

1,831 628

628 -

13,086

2,459

628

- - -

17. CASH AND CASH EQUIVALENTS

2017

31 December 2018

2019

30 September 2020

RMB'000

Cash and bank balances Less: Restricted cash

Cash and cash equivalents

130,246 99,199 31,047 31,047

2,532 1,727

2,311 233

1,727 108

805 805

584 125

Pursuant to relevant regulations in the PRC, the Target Company is required to place certain amounts of cash in the designated bank accounts for a specified use. As at 31 December 2017, 2018 and 2019 and 30 September 2020, such restricted cash amounted to RMB99,199,000, RMB1,727,000, RMB1,727,000 and RMB108,000, respectively.

Cash at banks earns interest at floating rates based on daily bank deposit rates. The bank balances are deposited with creditworthy banks with no recent history of default. The carrying amounts of the cash and cash equivalents approximated to their fair values.

18. TRADE PAYABLES

An ageing analysis of the trade payables as at the end of each of the Relevant Periods, based on the invoice

date, is as follows:
31 December	30 September
2017	2018	2019	2020
RMB'000	RMB'000	RMB'000	RMB'000
Within 1 year	207,038	168,061	43,003	17,050
Over 1 year	51,760	79,040	156,248	179,929
258,798	247,101	199,251	196,979

The trade payables are interest-free and normally settled based on the progress of construction.

19. OTHER PAYABLES, DEPOSITS RECEIVED AND ACCRUALS

31 December 30 September

2019	2020
RMB'000	RMB'000
Deposits related to construction	22,926	16,190	34,331	46,004
Tax payable	18,160	28,378	35,323	36,035
Payroll and welfare payable	1,413	1,447	1,629	3,138
Advances from third parties (note 26)	-	11,553	33,078	506,511
Accrued liabilities	10,124	17,812	45,847	65,964
Others	629	79	5,789	-
53,252	75,459	155,997	657,652

2017 2018

RMB'000 RMB'000

Other payables are unsecured and repayable on demand. The fair values of other payables at the end of each of the Relevant Periods approximated to their corresponding carrying amounts.

20. CONTRACT LIABILITIES

2017

31 December 2018

2019

30 September 2020

RMB'000

Contract liabilities

813,525

394,865

17,878

800

The Target Company receives payments from customers based on billing schedules as established in the property sale contracts. Payments are usually received in advance of the performance under the contracts which are mainly from property development and sales. According to the business model of the Target Company, for revenue recognised from the sale of properties, all such revenue are carried forward from contract liabilities during the Relevant Periods.

The expected timing of recognition of revenue at the end of each of the Relevant Periods is as follows:

31 December 30 September

2017

2018 2019

2020

RMB'000

RMB'000 RMB'000

RMB'000

Within one year More than one year

504,834 308,691 813,525

382,490 17,878
12,375
-
800 -
394,865 17,878

800

21. INTEREST-BEARING OTHER BORROWINGS

31 December 2017

Effective interest rate (%) Maturity

RMB'000

Current

Other loans - secured

8.50

Within 1 year

292,021

31 December 2018

Effective interest rate (%) Maturity

RMB'000

Current

Other loans - secured

8.50/12

Within 1 year

294,007

31 December 2019

Effective interest rate (%) Maturity

RMB'000

Current

Other loans - secured

on demand

335,738

30 September 2020

Effective interest rate (%) Maturity

RMB'000

Current

Other loans - secured

Other borrowings

2017

31 December 2018

2019

30 September 2020

RMB'000

Analysed into:

Repayable within one year or on demand

292,021

294,007

335,738

The Target Company's borrowings are all denominated in RMB with fixed interest rates.

Certain of the Target Company's other loans are secured by the Target Company's properties under development and completed properties held for sale. Details were shown in note 13 and 14.

The fair values of interest-bearing other borrowings are based on the discounted cash flow approach using the prevailing market rates of interest available to the Target Company for financial instruments with substantially the same terms and characteristics at the end of each of the Relevant Periods. The fair values of these borrowings were showed in note 27.

Note: The required interest rate for the borrowing was changed from 8.5% per annum to 12% per annum since August 2018.

22. SHARE CAPITALIssued and fully paid:
As at 31 December 2017, 2018 and 2019 and 30 September 2020
23. RESERVES
RMB'000
151,515
The amounts of the Target Company's reserves and the movements therein for the years ended 31 December
2017, 2018 and 2019, and the nine months ended 30 September 2020 are presented in the statements of changes in equity.

24.

NOTE TO THE STATEMENTS OF CASH FLOWS

Changes in liabilities arising from financing activities

Total liabilities
Due to related	from financing
companies	activities
RMB'000	RMB'000
At 1 January 2017	276,857	421,535	698,392
Cash flows from financing activities	(22,583)	(129,008)	(151,591)
Cash flows from non-financing activities	37,747	(23,544)	14,203
At 31 December 2017	292,021	268,983	561,004
Cash flows from financing activities	(11,000)	(50,878)	(61,878)
Cash flows from non-financing activities	12,986	-	12,986
At 31 December 2018	294,007	218,105	512,112
Cash flows from financing activities	-	6,702	6,702
Cash flows from non-financing activities	41,731	14,401	56,132
At 31 December 2019	335,738	239,208	574,946
Cash flows from financing activities	-	7,198	7,198
Cash flows from non-financing activities	(335,738)	(246,406)	(582,144)
At 30 September 2020	-	-	-

RMB'000

Interest-bearing other borrowings

25. CONTINGENT LIABILITIES

At the end of the relevant periods, contingent liabilities not provided for in the financial statements were as follows:

2017

31 December 2018

2019

30 September 2020

RMB'000

Guarantees given to banks in connection with facilities granted to purchasers of the Target Company's properties

(1)

813,525

394,865

17,878

800

(1) The Target Company provided guarantees in respect of mortgage facilities granted by certain banks to the purchasers of the Target Company's completed properties held for sale. Pursuant to the terms of the guarantee arrangements, in case of default on mortgage payments by the purchasers, the Target Company is responsible for repaying the outstanding mortgage principals together with any accrued interest and penalties owed by the defaulted purchasers to those banks.

Under the above arrangement, the related properties were pledged to the banks as collateral for the mortgage loans, upon default on mortgage repayments by these purchasers, the banks are entitled to take over the legal titles and will realise the pledged properties through open auction.

The Target Company's guarantee period starts from the dates of grant of the relevant mortgage loans and ends upon the issuance and registration of property ownership certificates to the purchasers, which will generally be available within one to two years after the purchasers take possession of the relevant properties.

The Target Company did not incur any material losses during the year in respect of the guarantees provided for mortgage facilities granted to purchasers of the Target Company's completed properties held for sale. The directors of the Company considered that in case of default on payments, the net realisable value of the related properties would be sufficient to repay the outstanding mortgage loans together with any accrued interest and penalty, and therefore no provision has been made in connection with the guarantees.

26. RELATED PARTY TRANSACTIONS

(1)	Name and relationship
杭州澤洲企業管理有限公司	The Parent Company
頤和地產集團有限公司 (''頤和''''Yihe '')	The Then Co-investor
浙江華虹控股集團有限公司	The Then Co-investor
(''華虹''''Huahong'')
廣州頤和酒店物業管理有限公司	Company controlled by the then Co-investor ''Yihe''
浙江頤興置業有限公司	Company controlled by the then Co-investor ''Yihe''
寧夏頤和金鳳房地產開發有限公司	Company controlled by the then Co-investor ''Yihe''
上海頤和觀海房地產有限公司	Company controlled by the then Co-investor ''Yihe''
廣州頤和發展集團有限公司	Company controlled by the then Co-investor ''Yihe''
廣州鴻升投資有限公司	Company controlled by the then Co-investor ''Yihe''
臨安頤軒盛世文化創意有限公司	Company controlled by the then Co-investor ''Yihe''
臨安天瓏貿易有限公司	Company controlled by the then Co-investor ''Yihe''
臨安市觀海綠化工程有限公司	Company controlled by the then Co-investor ''Yihe''
浙江正合控股集團有限公司	Company controlled by the then Co-investor ''Huahong''
趙崇清	The Then Shareholder of the Target Company

(2) Significant related party transactions

The following transactions were carried out with related parties during the Relevant Periods:

Nine months ended

Year ended 31 December	30 September
2017 2018 2019	2019 2020
RMB'000 RMB'000 RMB'000	RMB'000 RMB'000

Advances from related parties	34,566	7,163	14,597	14,597	7,198
Repayment of advances from
related parties	163,574	58,040	7,895	7,895	-
Advances to related parties	107,641	283,417	-	-	14,549
Recover of advances to related
parties	-	255,069	-	-	-

Guarantee provided for other borrowings by a related company:

Year ended 31 December 2017 2018 2019

RMB'000 RMB'000 RMB'000

Nine months ended

30 September 2019 2020

RMB'000 RMB'000

頤和地產集團有限公司

292,021

294,007

335,738

325,305

304,657

Note:

These transactions were carried out in accordance with the terms and conditions mutually agreed by the parties involved.

(3) Outstanding balances with related parties

Due from related parties:

Non-trade relatedDue to related parties:

Non-trade related

2017

RMB'000

31 December 2018

2019

30 September 2020

RMB'000

297,776

47,624

62,025

268,983

218,105

239,208

Balances with the above related parties were unsecured, non-interest-bearing and had no fixed repayment terms.

(4)Compensation of key management personnel of the Target Company

Year ended 31 December 2017 2018 2019

RMB'000 RMB'000 RMB'000

Nine months ended

30 September 2019 2020

RMB'000 RMB'000

Short term employee benefits	564	696	857	643	496
Pension scheme contributions
and social welfare	19	19	19	14	13
Total compensation paid to key
management personnel	583	715	876	657	509

Further details of directors' emoluments are included in note 9 to the financial statements.

27. FINANCIAL INSTRUMENTS BY CATEGORY

The carrying amounts of each of the categories of financial instruments as at the end of each of the Relevant Periods are as follows:

30 September 2020

Financial assets

Financial assets at amortised cost

RMB'000

Financial assets included in prepayments, deposits and other receivables (note 15) Trade receivables

Restricted cash (note 17)

Cash and cash equivalents (note 17)

4,467 4,570 108 125 9,270

Financial liabilities

Financial

liabilities at

amortised cost

RMB'000

Trade payables (note 18)

Financial liabilities included in other payables, deposits received and accruals (note 19)

196,979 618,479 815,458

31 December 2019

Financial assets

Financial assets at amortised cost

RMB'000

Financial assets included in prepayments, deposits and other receivables (note 15)

Due from related companies (note 26)

Restricted cash (note 17)

Cash and cash equivalents (note 17)

6,154 62,025 1,727 584 70,490

Financial liabilities

Financial

liabilities at

amortised cost

RMB'000

Trade payables (note 18)	199,251
Financial liabilities included in other payables, deposits received and accruals (note 19)	113,256
Due to related companies (note 26)	239,208
Interest-bearing other borrowings (note 21)	335,738
887,453
31 December 2018
Financial assets
Financial assets
at amortised cost
RMB'000
Financial assets included in prepayments, deposits and other receivables (note 15)	10,103
Due from related companies (note 26)	47,624
Restricted cash (note 17)	1,727
Cash and cash equivalents (note 17)	805
60,259
Financial liabilities
Financial
liabilities at
amortised cost
RMB'000
Trade payables (note 18)	247,101
Financial liabilities included in other payables, deposits received and accruals (note 19)	45,555
Due to related companies (note 26)	218,105
Interest-bearing other borrowings (note 21)	294,007
804,768
31 December 2017
Financial assets
Financial assets
at amortised cost
RMB'000
Financial assets included in prepayments, deposits and other receivables (note 15)	11,422
Due from related companies (note 26)	297,776
Restricted cash (note 17)	99,199
Cash and cash equivalents (note 17)	31,047
439,444

Financial liabilities

Financial

liabilities at

amortised cost

RMB'000

Trade payables (note 18)	258,798
Financial liabilities included in other payables, deposits received and accruals (note 19)	33,050
Due to related companies (note 26)	268,983
Interest-bearing other borrowings (note 21)	292,021
852,852
28.	FAIR VALUE AND FAIR VALUE HIERARCHY OF FINANCIAL INSTRUMENTS

Management has assessed that the fair values of cash and cash equivalents, trade receivables, financial assets included in prepayments, deposits and other receivables, trade payables, financial liabilities included in other payables, deposits received and accruals, interest-bearing other borrowings approximate to their carrying amounts largely due to the short term maturities of these instruments.

29. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Target Company's principal financial instruments mainly include cash and bank balances, trade receivables, financial assets included in prepayments, deposits and other receivables, trade payables, financial liabilities included in other payables, deposits received and accruals which arise directly from its operations. The Target Company has other financial assets and liabilities such as interest-bearing other borrowings, balance due from related parties and balances due to related parties. The main purpose of these financial instruments is to raise finance for the Target Company's operations.

The main risks arising from the Target Company's financial instruments are interest rate risk, credit risk and liquidity risk. Generally, the Target Company introduces conservative strategies on its risk management. To keep the Target Company's exposure to these risks to a minimum, the Target Company has not used any derivatives and other instruments for hedging purposes. The Target Company does not hold or issue derivative financial instruments for trading purposes. The board of directors reviews and agrees policies for managing each of these risks and they are summarised below:

(a) Interest rate risk

The Target Company's exposure to risk for changes in market interest rates relates primarily to the Target Company's interest-bearing other borrowings set out in note 21. The Target Company does not use derivative financial instruments to hedge interest rate risk, and obtains all bank borrowings borrowings with a fixed rate.

(b) Credit risk

The carrying amounts of cash and cash equivalents, trade receivables and financial assets included in prepayments, deposits and other receivables included in the statements of financial position represent the Target Company's maximum exposure to credit risk in relation to its financial assets as the end of each of the Relevant Periods.

At the end of each of the Relevant Periods, all cash and cash equivalents were deposited in high-credit-quality financial institutions without significant credit risk.

The Target Company classifies financial instruments on the basis of shared credit risk characteristics, such as instrument types and credit risk ratings for the purpose of determining significant increases in credit risk and calculation of impairment.

To manage risk arising from trade receivables, the Target Company has policies in place to ensure that credit terms are made only to counterparties with an appropriate credit history and management performs ongoing credit evaluations of the Target Company's counterparties. The credit period granted to the customers is generally from one to three months and the credit quality of these customers is assessed, taking into account their financial position, past experience and other factors. The Target Company also has other monitoring procedures to ensure that follow-up action is taken to recover overdue receivables. In addition, the Target Company reviews regularly the recoverable amount of trade receivables to ensure that adequate impairment losses are made for irrecoverable amounts. The Target Company has no significant concentrations of credit risk, with exposure spread over a large number of counterparties and customers.

The Target Company applies the simplified approach to provide for ECLs prescribed by IFRS 9, which permits the use of the lifetime expected loss provision for all trade receivables. The expected credit losses also incorporate forward-looking information based on key economic variables such as consumer price index.

A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of that financial asset have occurred. Evidence that a financial asset is credit-impaired includes observable data about the following events:

. significant financial difficulty of the debtor;
. a breach of contract such as a default or past due event; and
. it is probable that the debtor will enter bankruptcy or other financial reorganisation.

The Target Company has established a policy to perform an assessment for the period beginning on 1 January 2018, of whether a financial instrument has a significant increase in credit risk since initial recognition, by considering the change in the risk of default occurring over the remaining life of the financial instrument. The Target Company classifies its other receivables and amounts due from related companies into Stage 1, Stage 2 and Stage 3, as described below:

Stage 1	When other receivables and amounts due from related companies are first recognised, the
Target Company recognises an allowance based on 12 months' ECLs.
Stage 2	When other receivables and amounts due from related companies have shown a significant
increase in credit risk since origination, the Target Company records an allowance for the
lifetime ECLs.
Stage 3	When other receivables and amounts due from related companies are considered credit-
impaired, the Target Company records an allowance for the lifetime ECLs.

Management makes periodic collective assessments for financial assets included in prepayments, deposits and other receivables, and amounts due from related parties as well as individual assessment on the recoverability of other receivables based on historical settlement records and past experience. The Target Company has classified financial assets included in prepayments, deposits and other receivables, and amounts due from related parties in stage 1 and continuously monitors their credit risk. The Target Company assessed the expected credit loss rate of minimal, considering the default probability and recovery probability, to estimate the impairment of financial assets included in prepayments, deposits and other receivables. The directors of the Target Company believe that there is no material credit risk inherent in the Target Company's outstanding balance of financial assets included in prepayments, other receivables and adequate provisions were recognised following the assessment. Certain amounts advanced to related companies in year 2018 was assessed as credit-impaired by management, and full loss provision was made to write down those receivables.

The Target Company's objective is to maintain a balance between continuity of funding and flexibility through the use of interest-bearing other borrowings. Cash flows are closely monitored on an ongoing basis.

The maturity profile of the Target Company's financial liabilities as at the end of each of the Relevant Periods, based on contractual undiscounted payments, is as follows:

Less than	3 to 12
On demand	3 months	months	Over 1 year	Total
RMB'000	RMB'000	RMB'000	RMB'000	RMB'000
30 September 2020
Trade payables	196,979	-	-	-	196,979
Other payables	618,479	-	-	-	618,479
815,458	-	-	-	815,458
31 December 2019
Interest-bearing other
borrowings	335,738	-	-	-	335,738
Trade payables	199,251	-	-	-	199,251
Due to related companies	239,208	-	-	-	239,208
Other payables	113,256	-	-	-	113,256
887,453	-	-	-	887,453
31 December 2018
Interest-bearing other
borrowings	294,007	-	-	-	294,007
Trade payables	247,101	-	-	-	247,101
Due from related companies	218,105	-	-	-	218,105
Other payables	45,555	-	-	-	45,555
804,768	-	-	-	804,768
31 December 2017
Interest-bearing other
borrowings	292,021	-	-	-	292,021
Due to related companies	268,983	-	-	-	268,983
Trade payables	258,798	-	-	-	258,798
Other payables	33,050	-	-	-	33,050
852,852	-	-	-	852,852
(d)	Capital management

The primary objectives of the Target Company's capital management are to safeguard the Target Company's ability to continue as a going concern and to maintain healthy capital ratios in order to support its business and maximise shareholders' value.

The Target Company manages its capital structure and makes adjustments to it in light of changes in economic conditions. To maintain or adjust the capital structure, the Target Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares.

The Target Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Target Company includes, within net debt, interest-bearing other borrowings, trade payables, other payables, deposits received and accruals, less cash and cash equivalents. Capital represents equity attributable to owners of the parent. The gearing ratios as at the end of each of the Relevant Periods were as follows:

30.

31 December	30 September
2017	2018	2019	2020
RMB'000	RMB'000	RMB'000	RMB'000
Interest-bearing other borrowings	292,021	294,007	335,738	-
Trade payables	258,798	247,101	199,251	196,979
Other payables, deposits received and accruals	53,252	75,459	155,997	657,652
Due to related companies	268,983	218,105	239,208	-
Other liabilities	813,525	424,609	48,460	32,529
Less: Cash and cash equivalents	(31,047)	(805)	(584)	(125)
Net debt	1,655,532	1,258,476	978,070	887,035
Equity	(296,342)	(496,735)	(561,457)	(553,413)
Gearing ratio	N/A	N/A	N/A	N/A
SUBSEQUENT EVENT

There is no material subsequent event undertaken by the Target Company after 30 September 2020.

The following is the text of a report on the Company's reporting accountants, Ernst & Young, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this circular.

22nd Floor

CITIC Tower 1 Tim Mei Avenue

Central Hong Kong

The Directors

Yincheng International Holding Co., Ltd. Sertus Chambers

Governors Square Suite # 5-204

23 Lime Tree Bay Avenue P.O. Box 2547

Grand Cayman KY1-1104 Cayman Islands

Dear Sirs,

We report on the historical financial information of Wuxi Xuelang Changguang Property Development Co., Ltd. (無錫雪浪長廣置業有限公司, the ''Target Company'') set out on pages III-4 to III-24, which comprises the statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows of the Target Company for the period from 17 February 2020 (the date of establishment) to 31 December 2020 (the ''Relevant Period''), and the statements of financial position of the Target Company as at 31 December 2020 and a summary of significant accounting policies and other explanatory information (the ''Historical Financial Information''). The Historical Financial Information set out on pages III-4 to III-24 forms an integral part of this report, which has been prepared for inclusion in the circular of Yincheng International Holding Co., Ltd. dated 26 February 2021 (the ''Circular'') in connection with the acquisition by Wuxi Yinzexuan Enterprise Management Co., Ltd. (無錫銀澤渲企業管理有限公司), a subsidiary of the Company, of 100% of the entire equity interests in the Target Company.

DIRECTORS' RESPONSIBILITY FOR THE HISTORICAL FINANCIAL INFORMATION

The directors of the Target Company are responsible for the preparation of the Historical Financial Information that gives a true and fair view in accordance with the basis of presentation and the basis of preparation set out in note 2.1 to the Historical Financial Information, and for such internal control as the directors determine is necessary to enable the preparation of the Historical Financial Information that is free from material misstatement, whether due to fraud or error.

REPORTING ACCOUNTANTS' RESPONSIBILITY

Our work involved performing procedures to obtain evidence about the amounts and disclosures in the Historical Financial Information. The procedures selected depend on the reporting accountants' judgement, including the assessment of risks of material misstatement of the Historical Financial Information, whether due to fraud or error. In making those risk assessments, the reporting accountants consider internal control relevant to the entity's preparation of the Historical Financial Information that gives a true and fair view in accordance with the basis of presentation and the basis of preparation set out in notes 2.1 to the Historical Financial Information, respectively, in order to design procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Our work also included evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the Historical Financial Information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

OPINION

In our opinion, the Historical Financial Information gives, for the purposes of the accountants' report, a true and fair view of the financial position of the Target Company as at 31 December 2020 and of the financial performance and cash flows of the Target Company for the Relevant Period in accordance with the basis of presentation and the basis of preparation set out in note 2.1 to the Historical Financial Information, respectively.

ADJUSTMENTS

In preparing the Historical Financial Information, no adjustments to the Underlying Financial Statements as defined on page III-4 have been made.

DIVIDENDS

We refer to note 7 to the Historical Financial Information which states that no dividends have been paid by the Target Company in respect of the Relevant Period.

Yours faithfully,

Ernst & Young

Certified Public Accountants

Hong Kong

26 February 2021

I HISTORICAL FINANCIAL INFORMATION

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

The financial statements of the Target Company for the Relevant Period, on which the Historical Financial Information is based, were audited by Ernst & Young in accordance with Hong Kong Standards on Auditing issued by the HKICPA (the ''Underlying Financial Statements'').

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

Statements of profit or loss and other comprehensive income

From 17 February 2020

(the date of establishment)

31 December 2020

Notes	RMB'000
Other income and gains	30
Administrative expenses	5	(333)
Finance costs	6	(634)
LOSS BEFORE TAX	(937)
Income tax expense	-
LOSS AND TOTAL COMPREHENSIVE
EXPENSE FOR THE PERIOD	(937)

Statements of financial position

31 December
2020
Notes	RMB'000
Total non-current assets	-
CURRENT ASSETS
Properties under development	8	730,953
Prepayments, other receivables and other assets	12
Cash and cash equivalents	9	11,964
Total current assets	742,929
CURRENT LIABILITIES
Other payables, deposits received and accruals	10	22,034
Due to related company	14	701,832
Total current liabilities	723,866
NET CURRENT ASSETS	19,063
TOTAL ASSETS LESS CURRENT LIABILITIES	19,063
NON-CURRENT LIABILITIES
Total non-current liabilities	-
NET ASSETS	19,063
EQUITY
Share capital	11	20,000
Reserves	12	(937)
TOTAL EQUITY	19,063

Statements of changes in equity

Accumulated
Issued capital	losses	Total equity
RMB'000	RMB'000	RMB'000
(note 11)
As at 17 February 2020	-	-	-
Share Capital	20,000	-	20,000
Loss and other comprehensive
expense for the period	-	(937)	(937)
As at 31 December 2020	20,000	(937)	19,063

Statements of cash flows

From 17 February 2020

(the date of establishment) to 31 December 2020

Notes	RMB'000
CASH FLOWS FROM OPERATING ACTIVITIES
Loss before tax	(937)
Adjustments for:
Interest income	(30)
Finance costs	634
(Increase) in properties under development	(707,721)
(Increase) in prepayments, deposits and other receivables	(12)
Cash used in operations	(708,066)
Interest received	30
Net cash flows used in operating activities	(708,036)
CASH FLOWS FROM FINANCING ACTIVITIES
Investment from shareholders	11	20,000
Advance from related company	700,000
Net cash flows from financing activities	720,000
NET INCREASE IN CASH AND CASH
EQUIVALENTS	11,964
CASH AND CASH EQUIVALENTS AT END OF YEAR	11,964
ANALYSIS OF BALANCES OF CASH AND CASH
EQUIVALENTS
Cash and bank balances	7	11,964
CASH AND CASH EQUIVALENTS AS STATED
IN THE STATEMENT OF FINANCIAL POSITION
AND STATEMENT OF CASH FLOWS	11,964

IINOTES TO THE HISTORICAL FINANCIAL INFORMATION

CORPORATE INFORMATION

Wuxi Xuelang Changguang Property Development Co., Ltd. (無錫雪浪長廣置業有限公司) was established inthe People's Republic of China (the ''PRC'') with limited liability. The registered office of the Target Company is located at 16#1107, Science and Education Pioneer Park, 100 Jinxi Road, Binghu District, Wuxi City, Jiangsu Province.

As at 31 December 2020, the Target Company's holding company is Wuxi Yinzexuan Enterprise Management Co., Ltd. (無錫銀澤渲企業管理有限公司), a subsidiary of the Company, which holds 100% equity interests of the Target Company.

2.1

BASIS OF PREPARATION

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

The Historical Financial Information has been prepared under the historical cost convention.

2.2

CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES

The Target Company has adopted the Conceptual Framework for Financial Reporting 2018 and thefollowing revised IFRSs for the first time for the current year's financial statements.

Amendments to IFRS 3

Amendments to IFRS 9, IAS 39 and IFRS 7

Amendment to IFRS 16

Amendments to IAS 1 and IAS 8

Definition of a Business

Interest Rate Benchmark Reform

Covid-19-Related Rent Concessions (early adopted) Definition of Material

The nature and the impact of the Conceptual Framework for Financial Reporting 2018 and the revised IFRSs are described below:

(a)Conceptual Framework for Financial Reporting 2018 (the ''Conceptual Framework'') sets out a comprehensive set of concepts for financial reporting and standard setting, and provides guidance for preparers of financial statements in developing consistent accounting policies and assistance to all parties to understand and interpret the standards. The Conceptual Framework includes new chapters on measurement and reporting financial performance, new guidance on the derecognition of assets and liabilities, and updated definitions and recognition criteria for assets and liabilities. It also clarifies the roles of stewardship, prudence and measurement uncertainty in financial reporting. The Conceptual Framework is not a standard, and none of the concepts contained therein override the concepts or requirements in any standard. The Conceptual Framework did not have any significant impact on the financial position and performance of the Target Company.

(b) Amendments to IFRS 3 clarify and provide additional guidance on the definition of a business. The amendments clarify that for an integrated set of activities and assets to be considered a business, it must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output. A business can exist without including all of the inputs and processes needed to create outputs. The amendments remove the assessment of whether market participants are capable of acquiring the business and continue to produce outputs. Instead, the focus is on whether acquired inputs and acquired substantive processes together significantly contribute to the ability to create outputs. The amendments have also narrowed the definition of outputs to focus on goods or services provided to customers, investment income or other income from ordinary activities. Furthermore, the amendments provide guidance to assess whether an acquired process is substantive and introduce an optional fair value concentration test to permit a simplified assessment of whether an acquired set of activities and assets is not a business. The Target Company has applied the amendments prospectively to transactions or other events that occurred on or after 1 January 2020. The amendments did not have any impact on the financial position and performance of the Target Company.
(c) Amendments to IFRS 9, IAS 39 and IFRS 7 address issues affecting financial reporting in the period before the replacement of an existing interest rate benchmark with an alternative risk-free rate (''RFR''). The amendments provide temporary reliefs which enable hedge accounting to continue during the period of uncertainty before the introduction of the alternative RFR. In addition, the amendments require companies to provide additional information to investors about their hedging relationships which are directly affected by these uncertainties. The amendments did not have any impact on the financial position and performance of the Target Company as the
Target Company does not have any interest rate hedging relationships.
(d) Amendment to IFRS 16 provides a practical expedient for lessees to elect not to apply lease modification accounting for rent concessions arising as a direct consequence of the covid-19 pandemic. The practical expedient applies only to rent concessions occurring as a direct consequence of the pandemic and only if (i) the change in lease payments results in revised consideration for the lease that is substantially the same as, or less than, the consideration for the lease immediately preceding the change; (ii) any reduction in lease payments affects only payments originally due on or before 30 June 2021; and (iii) there is no substantive change to other terms and conditions of the lease. The amendment is effective for annual periods beginning on or after 1 June 2020 with earlier application permitted and shall be applied retrospectively.
During the year ended 31 December 2020, certain monthly lease payments for the leases of the Target Company's plant and machinery have been reduced or waived by the lessors upon reducing the scale of production as a result of the pandemic and there are no other changes to the terms of the leases. The Target Company has early adopted the amendment on 1 January 2020 and elected not to apply lease modification accounting for all rent concessions granted by the lessors as a result of the pandemic during the year ended 31 December 2020.
(e) Amendments to IAS 1 and IAS 8 provide a new definition of material. The new definition states that information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements. The amendments clarify that materiality will depend on the nature or magnitude of information, or both. The amendments did not have any significant impact on the financial position and performance of the Target Company.

2.3

ISSUED BUT NOT YET EFFECTIVE IFRSs

The Target Company has not applied the following new and revised IFRSs, that have been issued butare not yet effective, in the historical financial information.

Amendments to IFRS 3	Reference to the Conceptual Framework2
Amendments to IFRS 9,	Interest Rate Benchmark Reform - Phase 21
IAS 39, IFRS 7,
IFRS 4 and IFRS 16
Amendments to IFRS 10	Sale or Contribution of Assets between an Investor and its Associate or
and IAS 28 (2011)	Joint Venture4
IFRS 17	Insurance Contracts3
Amendments to IFRS 17	Insurance Contracts 3, 6
Amendments to IAS 1	Classification of Liabilities as Current or Non-current 3, 5
Amendments to IAS 16	Property, Plant and Equipment: Proceeds before Intended Use2
Amendments to IAS 37	Onerous Contracts - Cost of Fulfilling a Contract2
Annual Improvements to	Amendments to IFRS 1, IFRS 9, Illustrative Examples accompanying
IFRSs 2018-2020	IFRS 16, and IAS 412

1	Effective for annual periods beginning on or after 1 January 2021
2	Effective for annual periods beginning on or after 1 January 2022
3	Effective for annual periods beginning on or after 1 January 2023
4	No mandatory effective date yet determined but available for adoption
5	As a consequence of the amendments to IAS 1, Hong Kong Interpretation 5 Presentation of
Financial Statements - Classification by the Borrower of a Term Loan that Contains a
Repayment on Demand Clause was revised in October 2020 to align the corresponding wording
with no change in conclusion
6	As a consequence of the amendments to IFRS 17 issued in October 2020, IFRS 4 was amended to
extend the temporary exemption that permits insurers to apply IAS 39 rather than IFRS 9 for
annual periods beginning before 1 January 2023

Further information about those IFRSs that are expected to be applicable to The Target Company is described below.

Amendments to IFRS 3 are intended to replace a reference to the previous Framework for the Preparation and Presentation of Financial Statements with a reference to the Conceptual Framework for Financial Reporting issued in June 2018 without significantly changing its requirements. The amendments also add to IFRS 3 an exception to its recognition principle for an entity to refer to the Conceptual Framework to determine what constitutes an asset or a liability. The exception specifies that, for liabilities and contingent liabilities that would be within the scope of IAS 37 or IFRIC-Int 21 if they were incurred separately rather than assumed in a business combination, an entity applying IFRS 3 should refer to IAS 37 or IFRIC-Int 21 respectively instead of the Conceptual Framework. Furthermore, the amendments clarify that contingent assets do not qualify for recognition at the acquisition date. The Target Company expects to adopt the amendments prospectively from 1 January 2022. Since the amendments apply prospectively to business combinations for which the acquisition date is on or after the date of first application, The Target Company will not be affected by these amendments on the date of transition.

Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 address issues not dealt with in the previous amendments which affect financial reporting when an existing interest rate benchmark is replaced with an alternative RFR. The Phase 2 amendments provide a practical expedient to allow the effective interest rate to be updated without adjusting the carrying amount when accounting for changes in the basis for determining the contractual cash flows of financial assets and liabilities, if the change is a direct consequence of the interest rate benchmark reform and the new basis for determining the contractual cash flows is economically equivalent to the previous basis immediately preceding the change. In addition, the amendments permit changes required by the interest rate benchmark reform to be made to hedge designations and hedge documentation without the hedging relationship being discontinued. Any gains or losses that could arise on transition are dealt with through the normal requirements of IFRS 9 to measure and recognise hedge ineffectiveness. The amendments also provide a temporary relief to entities from having to meet the separately identifiable requirement when an RFR is designated as a risk component. The relief allows an entity, upon

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Delayed Hong Kong S.E. Other stock markets 04:09:15 2023-08-31 am EDT			5-day change	1st Jan Change
0.046 ^HKD	+2.22%		-.--%	-.--%

Jul. 15	Yincheng International Logs About 282 Million Yuan in June Contracted Sales	MT
Jun. 07	Yincheng International Logs Over 133 Million Yuan in May Contracted Sales	MT

Yincheng International Holding Co., Ltd.

Equities

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KYG9841A1040

Real Estate Development & Operations

Yincheng International : MAJOR TRANSACTIONS (1) THE ENTERING INTO OF THE FRAMEWORK AGREEMENTS FOR THE ACQUISITION OF THE ENTIRE EQUITY INTEREST IN AND DEBT OF HANGZHOU QINGCHENG AND (2) COOPERATION AGREEMENT IN RELATION TO DEVELOPMENT OF THE PROJECT LAND HELD BY WUXI XUELANG

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Yincheng International Logs About 282 Million Yuan in June Contracted Sales	Jul. 14	MT
Yincheng International Logs Over 133 Million Yuan in May Contracted Sales	Jun. 07	MT
Yincheng International Holding Co., Ltd. Announces Unaudited Group Sales Results for the Month and Year to Date Ended May 2024	Jun. 07	CI
Yincheng International Logs 300.6 Million Yuan in April Contracted Sales	May. 17	MT
Yincheng International Holding Co., Ltd. Announces Unaudited Group Sales Results for the Month and Year to Date Ended April 2024	May. 16	CI
Yincheng International Posts 195 Million Yuan in March Contracted Sales	Apr. 12	MT
Yincheng International Holding Co., Ltd. Reports Unaudited Group Sales Results for the Month and Year to Date Ended March 2024	Apr. 12	CI
Yincheng International's February Sales Cross 209 Million Yuan	Mar. 11	MT
Yincheng Logs 215.7 Million Yuan in January Sales	Feb. 05	MT
Yincheng International Holding Co., Ltd. Reports Unaudited Group Sales Results for the Month Ended January 2024	Feb. 05	CI
Yincheng International Holding's December Sales Reach 320 Million Yuan	Jan. 08	MT
Yincheng International Holding Co., Ltd. Reports Unaudited Group Sales Results for the Month and Year to Date Ended December 2023	Jan. 05	CI
Yincheng International Books 205.8 Million Yuan in November Contracted Sales	Dec. 11	MT
Yincheng International Holding Co., Ltd. Reports Unaudited Group Sales Results for the Month and Year to Date Ended November 2023	Dec. 08	CI
Yincheng International Holding Co., Ltd. Delays in Publication of Interim Results for the Six Months Ended 30 June 2023	Nov. 06	CI
Yincheng International Holding's October Sales Reach 404.7 Million Yuan	Nov. 06	MT
Yincheng International Holding Co., Ltd. Announces Change of Principal Place of Business in Hong Kong, with Effect from 1 November 2023	23-10-31	CI
Yincheng International's Aggregated Contracted Sales Reach 231 Million Yuan in September	23-10-16	MT
Yincheng International Holding Co., Ltd. Reports Unaudited Group Sales Results for the Month and Year to Date Ended September 2023	23-10-13	CI
Yincheng International Holding Co., Ltd. Announces Delay in Publication of Interim Results for the Six Months Ended 30 June 2023	23-09-25	CI
Yincheng International Holding's August Contracted Sales Hit 279 Million Yuan	23-09-11	MT
Yincheng International Holding Co., Ltd. Reports Unaudited Group Sales Results for the Month and Year to Date Ended August 2023	23-09-11	CI
Yincheng International Halts Trade Pending Release of Interim Results	23-09-04	MT
Yincheng International Holding Co., Ltd. Announces Delay in Preparation of the Financial Statements of the Company and Certain Subsidiaries of the Group for the Six Months Ended 30 June 2023	23-08-21	CI
Yincheng International Holding Co., Ltd. Reports Unaudited Contracted Sales Results for the Month and Year to Date Ended July 2023	23-08-04	CI

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