Chiho Tiande : 【Documents available for inspection 006】Letter from China Galaxy

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China Galaxy International Securtties (Hong Kong) Co., Limited

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._}' CHINA GALAXY INTERNATIONAL

Untts 3501-7 & 3513-14, 35/F, Cosco Tower, 183 Queen's Road Central, Hong Kong

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25 January 2016

To the Independent Sharehold ers, Optionholders and Convertible Bondhold ers,

Dear Sir or Madam,

UNCONDITIONAL MANDATORY GENERAL CASH OFFERS BY CHINA GALAXY INTERNATIONAL SECURITIES (HONG KONG) CO., LIMITED ON BEHALF OF THE OFFEROR TO ACQUIRE ALL OF THE ISSUED SHARES, ALL OUTSTANDING CONVERTIBLE BONDS AND IN

EXCHANGE FOR CASH, TO CANCEL ALL OUTSTANDING SHARE OPTIONS OF CHIHO-TIANDE GROUP LIMITED (OTHER THAN THOSE ALREADY OWNED OR AGREED TO BE ACQUIRED BY THE OFFEROR AND ITS CONCERT PARTIES)

1. INTRODUCTION

Reference is made to the Announcement in relation to the Facility Agreement, the Option, the Deed, the Holding Announcement and the Joint Announcement in relation to the exercise of the Option, completion of acquisition of an approximately 24.54% interest in the Company by the Offeror and the Offers. Unless otherwise defined, capitalized terms used in this letter shall have the same meanings as defined in the Composite Document.

On 17 December 2015 (after trading hours), the Offeror exercised the Option granted under the Deed, requiring HWH to transfer to it all but not part of the Option Shares at the price of HK$3.50 per Share, totaling HK$1,364,255 ,396. The Option Shares represent approximately 24.54% of the issued share capital of the Company as at the Latest Practicable Date. In accordance with the terms of the Deed, Completion took place on 22 December 2015 .

Immediately prior to the transfer of the Option Shares, the Offeror and its Concert Parties (other than HWH) collectively held a total of 509,608,000 Shares, representing approximately 32.08% of the issued share capital of the Company. Upon Completion and as at the Latest Practicable Date, the Offeror and its Concert Parties collectively held a total of 899,395,256 Shares, representing approximately 56.62% of the issued share capital of the Company as at the Latest Practicable Date. Pursuant to Rule 26.1 of the Code, the Offeror and its Concert Parties are required to make an unconditional mandatory general cash offer

Lo purchase al l Lhe issued Shares which are nol already owned or agreed Lo be acquired by the Offeror and its Concert Parties. The Offeror and i ts Concert Parties are also req uired to make the Option Offer and the Converti ble Bond Offer pu rsu ant to Rule 13 of the Code. As the Offeror and i ts Concert Parties are holding more than 50% of the issued share capital of the Compan y u pon Completion , the Share Offer, the Option Offer and the Convertible Bond Offer are u ncondi tional in all respects.

This letter sels oul, among olher things , Lhe principal lerms of the Offers, together with information on the Offeror and the Offeror 's intentions regarding the Group. Fu rther details of the terms of the Offers and procedures of acceptance and settlement are set ou t in Appendix I to the Composite Document and the accompan yi ng Form(s) of Acceptance . Indepen den t Shareholders , Converti ble Bondholders and Opti onholders are strongl y advi sed Lo carefully consider the information contai ned in the section headed "Letter from the Board ", "Letter from the Independent Board Committee ", and "Letter from Somerley Capi tal" and the appendices as set ou t in the Composite Doc ument before reaching a decision as to whether or not to accept the Offers.

1. THE OFFERS

   
   

   Principal terms of the Offers

   
   

   Upon Completi on, as the Offeror and its Concert Parties are hol ding more than 50% of the voti ng rights of the Company, the Offers will not be su bject to any acceptance or other condi tions. The Offers will be made by China Galaxy on behalf of the Offeror in accordance wi th the Code and on the following basis:

   
   

   The Share Offer

   
   

   For each Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HK$3 .50 in cash

   
   

   The Share Offer Price of HK$3.50 per Share is the same as the price per Share paid by the Offeror for the transfer of the Option Shares and represents the highest price paid hy the Offeror and i ts Concert Parties for Shares withi n si x mon ths pri or to the d ate of the Holding Annou ncement.

   
   

   The Share Offer is extended to all Independent Shareholders in accordance wi th the Code. Based on the Share Offer Price of HK$3.50 and 1,588,514,706 Shares in issue as at the Latest Practicable Date, the entire issued share capi tal of the Compan y is val ued a t approximately HK$5 ,559,801,47 l. The Offcror and its Concert Parties owned 899,395 ,256 Shares immediately after the Completion and 689, 119,450 Shares will be subject to the Share Offer. As at the Latest Practicable Date, Mr. Zhang beneficially owned 230, 197,990 Shares, representi ng approximately 14.49% of the issued share capital of the Company. Mr. Zhang has irrevocably u ndertaken that he will not, whether directly or indirectly, at any time during the period from 29 Decem ber 2015 u ntil the close of the Offers dispose of , transfer or otherwise deal i n, any of his Shares and i n particular, accept the Share Offer. Therefore, on the basis of 458 ,921,460

   
   

   Shares subject to acceptance of the Share Offer as at the Latest Practicable Dale, the maxi m u m consideration of the Share Offer would be HK$1,606 ,225 , 110 based on the Share Offer Price.

   
   

   The Share Offer is extended to all Shareholders other than the Offeror and i ts Concert Parties i n accordance wi th the Code. The Shares to be acqu ired u nder the Share Offer shall be acq uired free from all liens, charges, encumbrances , rights of pre-emption and any other third party righ ts of any natu re and together wi th all rights attachi ng to them as at the date of the Composi te Docu ment or subseq uently becomi ng attached to them, i ncl uding the right to recei ve i n full all dividends and other distribu tions , if any, declared , made or paid on or after the date of the Composi te Docu ment.

   
   

   The Share Offer is also extended to all Shares in issue as at the date of the Composi te Docu ment and to an y further Shares wh i ch are u ncondi tion all y allotted or issued after the date of the Com posi te Docu ment and before the Closi ng Date, i ncl udi ng an y Shares which are u ncondi tionally allotted or issued pursuant to the exercise of the Share Options and the conversion rights attaching to the Convertible Bonds, other than those held by the Offeror and its Concert Parties. On the basis of a total of 1,588,514,706 Shares in issue as at the Latest Practicable Date, if the ou tstanding Share Options and the rights attaching to the outstanding Convertible Bonds are both exercised in full and converted into Shares on or before the close of the Offers (assuming, for the purpose of this scenario, tha t the Converti ble Bonds in the princi pal amou nt of HK$312 ,600,000 held by Delco were to be converted in full i n to Shares notwi thstandi ng the Delco Undertaki ng and the Delco Supplemen tal Undertaki ng as further described i n the section headed "2. The Offers - The Con verti ble Bond Offer" below, and that there will be no other issue or repurchase of Shares by the Compan y up to the close of the Offers). a total of 524,476,127 Shares will be subject to the Share Offer (excluding the 230,197,990 Shares held by Mr. Zhang who has undertaken not to accept the Share Offer) and the maxim um consideration of the Share Offer would be HK$1,835,666,445.

   
   

   Comparison of value

   
   

   The Share Offer Price of HK$3.50 represents:

   
   

2. a d iscou nt of approxi mately 32.3% to the closing price of HK$5.170 per Share as quoted on the Stock Exchange on 17 December 2015, bei ng the Last Trading Day;

   
   

3. a d iscou nt of approximately 31.7 % to the average closing price of approximately HK$5 .126 per Share as quoted on the Stock Exchange for the last 5 tradi ng days prior to and inclu ding the Last Trading Day ;

   
   

4. a discou nt of approximately 32.1% to the average closi ng price of approxi matel y HK$5. l 54 per Share as q uoted on the Stock Exchange for the last 10 tradi ng days prior to and includi ng the Last Trading Day ;

   
   

5. a discou nt of approximately 32.2% to the average closing price of approximately HK$5.165 per Share as quoted on the Stock Exchange for the last 30 tradi ng days prior to and includi ng the Last Trading Day;

   
   

6. a discou nt of approxi mately 20.8% to the closi ng price of HK$4.420 per Share as quoted on the Stock Exchange on the Latest Practicable Date;

   
   

7. a premi u m of approximatel y 471.0% over the audited consolidated net asset val ue of the Compan y of approximately HK$0 .613 per Share as at 31 Decem ber 2014 as set out i n the an n ual report of the Compan y for the year ended 31 December 2014; and

   
   

8. a premiu m of approximately 19.5% over the u naudited consolidated net asset value of the Company of approximately HK$2.929 per Share as at 30 J u ne 2015 as set ou t i n the Interim Report.




Highest and lowest Share prices




The highest closi ng price of the Share as quoted on the Stock Exchange during the Relevant Peri od was HK$10.00 per Share on 30 June 201 5. The l owest closi ng price of the Shares as quoted by the Stock Exchange during the Relevant Period was HK$4.42 on 22 Jan u ary 2016.




The Convertible Bond Offer




For every HK$ I00,000 face val ue of

the Converti ble Bonds . . . . . . . . . . . . . . . . . . . . . . . . . HK$58,333.33 i n cash




As at the Latest Practicable Date, the Company had ou tstand ing Converti ble Bonds wi th principal amou nt of HK$380 ,200,000 conferring rights to the Converti ble Bond holders to convert i nto approxi matel y 63,366 ,667 Shares. The offer price for the Convertible Bonds is HK$58 ,333 .33 for every HK$100 ,000 face value of the Convertible Bonds, determined in accordance with Practice Note 6 to the Code as the "see-through" consideration for the Converti ble Bonds, bei ng the n u mber of Shares into which the Converti ble Bonds is converti ble mu l tiplied by the Share Offer Price, valu ing the total Converti ble Bond Offer at approximately HK$221,783,335.




The Converti ble Bonds will be acquired fully paid and free from all liens, charges, options, eq ui ties, encu mbrances or other third party rights of any nature and together with all rights now or hereaf ter attachi ng or accruing to them , i ncl udi ng the right to all dividends and other distri bu tions (if any) declared, made or paid after the d ate of the Composite Docu ment.




The Convertible Bond Offer is u nconditional in all respects and will apply to all ou tstanding Convertible Bonds in issue on the date on which the Convertible Bond Offer is made and will not apply to any Convertible Bonds wh ich are or have been converted i n to Shares pri or to the close of the Offers.