Powerlong Commercial Real Estate Investment Trust 寶龍商業

The Stock Exchange of Hong Kong Limited and the Securities and Futures Commission take no responsibility for the contents of thisApplication Proof, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever forany loss howsoever arising from or in reliance upon the whole or any part of the contents of this Application Proof.

Powerlong Commercial Real Estate Investment Trust寶龍商業房地產投資信託基金

(a Hong Kong collective investment scheme authorized under section 104 of the Securities and Futures Ordinance(Chapter 571 of the Laws of Hong Kong))

WARNINGThe publication of this Application Proof is required by The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) andthe Securities and Futures Commission (the “Commission”) solely for the purpose of providing information to the public in HongKong.

This Application Proof is in draft form. The information contained in it is incomplete and is subject to change which can bematerial. By viewing this document, you acknowledge, accept and agree with Powerlong Commercial Real Estate Investment Trust(the “Scheme”), Powerlong REIT Management Limited (in its capacity as manager of the Scheme) (the “REIT Manager”), DBTrustees (Hong Kong) Limited (in its capacity as trustee of the Scheme) (the “Trustee”), the Scheme’s joint listing agents, advisersand members of the underwriting syndicate that:

(a) this document is only for the purpose of providing information about the Scheme to the public in Hong Kong and not for anyother purposes. No investment decision should be based on the information contained in this document;

(b) the publication of this document or any supplemental, revised or replacement pages on the Stock Exchange’s website doesnot give rise to any obligation of the Scheme, the REIT Manager, the Trustee, the Scheme’s joint listing agents, advisers ormembers of the underwriting syndicate to proceed with an offering in Hong Kong or any other jurisdiction. There is noassurance that the Scheme will proceed with any offering;

(c) the contents of this document or supplemental, revised or replacement pages may or may not be replicated in full or in part inthe actual final listing document;

(d) this document is not the final listing document and may be updated or revised by the Scheme from time to time in accordancewith the Rules Governing the Listing of Securities on the Stock Exchange and the Securities and Futures Ordinance (Chapter571 of the Laws of Hong Kong);

(e) this document does not constitute a prospectus, offering circular, notice, circular, brochure or advertisement offering to sellany securities to the public in any jurisdiction, nor is it an invitation to the public to make offers to subscribe for or purchaseany securities, nor is it calculated to invite offers by the public to subscribe for or purchase any securities;

(f) this document must not be regarded as an inducement to subscribe for or purchase any securities, and no such inducement isintended;

(g) neither the Scheme nor any of its affiliates, the REIT Manager, the Trustee, the Scheme’s joint listing agents, advisers ormembers of its underwriting syndicate is offering, or is soliciting offers to buy, any securities in any jurisdiction through thepublication of this document;

(h) no application for the securities mentioned in this document should be made by any person nor would such application beaccepted;

(i) the Scheme has not and will not register the securities referred to in this document under the U.S. Securities Act of 1933, asamended, or any state securities laws of the United States;

(j) as there may be legal restrictions on the distribution of this document or dissemination of any information contained in thisdocument, you agree to inform yourself about and observe any such restrictions applicable to you; and

(k) the application to which this document relates has not been approved or authorised for listing and the Stock Exchange and theCommission may accept, return or reject the application for the subject public offering and/or listing.

THIS APPLICATION PROOF IS NOT FOR PUBLICATION OR DISTRIBUTION TO PERSONS IN THE UNITEDSTATES. ANY SECURITIES REFERRED TO HEREIN HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDERTHE U.S. SECURITIES ACT OF 1933, AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES WITHOUTREGISTRATION THEREUNDER OR PURSUANT TO AN AVAILABLE EXEMPTION THEREFROM. NO PUBLICOFFERING OF THE SECURITIES WILL BE MADE IN THE UNITED STATES.

NEITHER THIS APPLICATION PROOF NOR ANY INFORMATION CONTAINED HEREIN CONSTITUTES AN OFFERTO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES IN THE UNITED STATES OR IN ANYOTHER JURISDICTIONS WHERE SUCH AN OFFER OR SALE IS NOT PERMITTED. THIS APPLICATION PROOF ISNOT BEING MADE AND MAY NOT BE DISTRIBUTED OR SENT INTO ANY JURISDICTION WHERE SUCHDISTRIBUTION OR DELIVERY IS NOT PERMITTED.

If an offer or an invitation is made to the public in Hong Kong in due course, prospective investors are reminded to make theirinvestment decisions solely based on the final listing document issued by the Scheme, copies of which will be distributed to thepublic during the offer period.

IMPORTANT: If you are in any doubt about the contents of this Document, you should seek independent professional financial advice.

Powerlong Commercial Real Estate Investment Trust寶龍商業房地產投資信託基金

(a Hong Kong collective investment scheme authorized under section 104 of the Securities and Futures Ordinance(Chapter 571 of the Laws of Hong Kong))

Managed by

Powerlong REIT Management Limited

[REDACTED]

Number of [REDACTED] underthe [REDACTED]

: [REDACTED] (subject to the [REDACTED])


: [REDACTED] (subject to reallocation)


: [REDACTED] (including [REDACTED] [REDACTED]under the [REDACTED]) (subject to reallocation andthe [REDACTED])

[REDACTED] : HK$[REDACTED] per [REDACTED], plus brokerageof 1.0%, Stock Exchange trading fee of 0.005% andSFC transaction levy of 0.0027% (payable in full onapplication in Hong Kong dollars and subject torefund)

[REDACTED] : [●]

Joint Listing Agents

[REDACTED], [REDACTED] and [REDACTED]

The Securities and Futures Commission of Hong Kong, Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong KongSecurities Clearing Company Limited take no responsibility for the contents of this Document, make no representation as to its accuracy or completeness andexpressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this Document.

The [REDACTED] is expected to be determined by agreement between the [REDACTED] (for themselves and on behalf of the [REDACTED]) and the REITManager on the [REDACTED]. The [REDACTED] is expected to be on or about [REDACTED], and in any event, not later than [REDACTED]. The[REDACTED] will be no more than HK$[REDACTED] and is currently expected to be no less than HK$[REDACTED].

The [REDACTED] (for themselves and on behalf of the [REDACTED]), with the consent of the REIT Manager, may reduce the number of Units being[REDACTED] under the [REDACTED] and/or the indicative [REDACTED] below that stated in this Document (which is HK$[REDACTED] toHK$[REDACTED] per [REDACTED]) at any time on or prior to the morning of the last day for lodging applications under the [REDACTED]. In such a case, anannouncement will be published and on the websites of the Stock Exchange at www.hkexnews.hk and Powerlong REIT at www.powerlongreit.com not later thanthe morning of the last day for lodging applications under the [REDACTED]. Before submitting applications for the [REDACTED], applicants under the[REDACTED] should note that applications cannot be withdrawn once submitted. However, if the number of Units being [REDACTED] under the [REDACTED]and/or the [REDACTED] range is reduced, applicants under the [REDACTED] will be entitled to withdraw their applications unless positive confirmations fromthe applicants to proceed with their applications are received. Further details are set forth in the sections headed “Structure of the [REDACTED]” and “How toApply for [REDACTED]” in this Document.

The [REDACTED] have not been and will not be registered under the U.S. Securities Act or any state securities law in the United States. The [REDACTED] arebeing offered and sold only outside the United States in offshore transactions in accordance with Regulation S under the U.S. Securities Act.

Prior to making an investment decision, prospective investors should consider carefully all of the information set out in this Document, including the risk factorsset out in the section headed “Risk Factors” in this Document. The obligations of the [REDACTED] under the [REDACTED] to subscribe for, and to procureapplications for the subscription of, the [REDACTED], are subject to termination by the [REDACTED] (for themselves and on behalf of the [REDACTED]) ifcertain grounds arise prior to 8: 00 a.m. on the [REDACTED]. Such grounds are set out in the section headed “[REDACTED]” in this Document. It is importantthat you refer to that section for further details.

[REDACTED]

THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BEREAD IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

IMPORTANT

[REDACTED]

[REDACTED]


IMPORTANT

[REDACTED]


IMPORTANT

[REDACTED]


IMPORTANT

[REDACTED]


EXPECTED TIMETABLE

– i –

[REDACTED]


EXPECTED TIMETABLE

– ii –

[REDACTED]


EXPECTED TIMETABLE

– iii –

This Document is issued by Powerlong Commercial Real Estate Investment Trust solely in connectionwith the [REDACTED] and the [REDACTED] and does not constitute an offer to sell or a solicitation of anoffer to buy any securities other than the [REDACTED] and the [REDACTED] offered by this Documentpursuant to the [REDACTED] and the [REDACTED]. This Document may not be used for the purpose of, anddoes not constitute, an offer or invitation in any other jurisdiction or in any other circumstances. No actionhas been taken to permit a [REDACTED] of the [REDACTED] or the distribution of this Document in anyjurisdiction other than Hong Kong (save for the [REDACTED] made to the Qualifying PowerlongShareholders). The distribution of this Document and the [REDACTED] of the [REDACTED] in otherjurisdictions are subject to restrictions and may not be made except as permitted under the applicablesecurities laws of such jurisdictions pursuant to registration with or authorization by the relevant securitiesregulatory authorities or an exemption therefrom. You should rely only on the information contained in thisDocument and the [REDACTED] to make your investment decision. Powerlong REIT has not authorizedanyone to provide you with information that is different from what is contained in this Document. Anyinformation or representation not made in this Document must not be relied on as having been authorized byPowerlong REIT, the Joint Listing Agents, [REDACTED], [REDACTED], [REDACTED], [REDACTED],any of their respective directors, officers, representatives, employees, agents or professional advisors or anyother person or party involved in the [REDACTED] and the [REDACTED].

Page

EXPECTED TIMETABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i

CONTENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv

SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

TECHNICAL TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

THE [REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

INFORMATION ABOUT THIS DOCUMENT AND THE [REDACTED] . . . . . . . . . . . . . . . . . . . . . 40

PARTIES INVOLVED IN THE [REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

USE OF [REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

OWNERSHIP OF AND INTEREST IN UNITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

DISTRIBUTION POLICY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74

KEY INVESTMENT HIGHLIGHTS OF POWERLONG REIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76

STRATEGY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81

THE REIT PROPERTIES AND BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

SELECTED FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111


CONTENTS

– iv –

Page

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONAND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FUTURE OPERATIONS . . . . . . . . . . . . . . 136

PROFIT FORECAST FOR THE PROFIT FORECAST PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . 140

STATEMENT OF DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150

UNAUDITED PRO FORMA STATEMENTS OF FINANCIAL POSITION . . . . . . . . . . . . . . . . . . . 151

INDUSTRY OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152

REORGANIZATION, STRUCTURE AND ORGANIZATION OF POWERLONG REIT . . . . . . . . . 170

THE REIT MANAGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185

THE OPERATIONS AND PROPERTY MANAGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202

INFORMATION ABOUT AND RELATIONSHIP WITH POWERLONG HOLDINGS . . . . . . . . . . 207

CORPORATE GOVERNANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212

THE TRUST DEED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221

MATERIAL AGREEMENTS AND OTHER DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240

CONNECTED PARTY TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 246

MODIFICATIONS, WAIVERS AND LICENSING CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 257

TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260

[REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 268

STRUCTURE OF THE [REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 277

HOW TO APPLY FOR [REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 289

EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 314

APPENDIX I – ACCOUNTANT’S REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1

APPENDIX II – UNAUDITED PRO FORMA FINANCIAL INFORMATION . . . . . . . . . . . II-1

APPENDIX III – LETTERS IN RELATION TO THE PROFIT FORECAST . . . . . . . . . . . . III-1

APPENDIX IV – VALUATION REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV-1


CONTENTS

– v –

Page

APPENDIX V – MARKET RESEARCH REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-1

APPENDIX VI – LETTER FROM THE BUILDING SURVEYOR IN RELATION TO ITSBUILDING SURVEY REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VI-1

APPENDIX VII – OVERVIEW OF THE RELEVANT LAWS AND REGULATIONS INTHE PRC AND OF COMPARISON CERTAIN ASPECTS OF ITSPROPERTY LAWS AND THE LAWS OF HONG KONG . . . . . . . . . . . . VII-1

APPENDIX VIII – GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VIII-1


CONTENTS

– vi –

The following summary aims to provide you with an overview of the information contained in thisDocument and should be read in conjunction with the full text of this Document. As it is a summary only, itdoes not contain all the information that may be important to you. You should read the whole Documentcarefully before deciding to invest in the Units. There are risks involved in any investment. Some of theparticular risks involved in investing in the Units are set out in “Risk Factors” in this Document, which youshould read carefully before you decide to invest in the Units.

In making your investment decision, you should rely on the information contained in this Document.Neither Powerlong REIT, Powerlong Holdings, the REIT Manager, the Trustee, the [REDACTED], the JointListing Agents nor any of their respective directors, agents, employees or advisers or any other personsinvolved in the [REDACTED] has authorized anyone to provide you with information or make anyrepresentation that is different from that contained in this Document.

Statements contained in this summary that are not historical facts may be forward-looking statements,based on certain reasonable assumptions, expectations and beliefs of the REIT Manager. You are cautionedthat there are certain risks and uncertainties associated with Powerlong REIT and the actual results may differmaterially from those projected by such forward-looking statements.

A REIT AS AN INVESTMENT VEHICLE

A REIT is a collective investment scheme constituted as a unit trust that invests primarily in

income-generating properties and uses the income to provide stable returns to its unitholders. Holding units in a

REIT allows investors to share the benefits and risks of owning the properties held by the REIT. An investment in

the units of a REIT in Hong Kong is governed primarily by the REIT Code and also the trust deed constituting the

REIT and offers the following benefits: (i) certainty as to business focus of the REIT, as a REIT does not have

complete discretion to diversify outside of the real estate sector or to own significant non-real estate assets; (ii) a

distribution which is required by the REIT Code to be at least 90% of the REIT’s audited net income after tax for

each financial year, subject to certain adjustments; (iii) significantly enhanced liquidity in comparison to direct

investments in real estate; (iv) a REIT manager licensed and regulated on an ongoing basis by the SFC; and (v) a

corporate governance framework, compliance with which is overseen by an independent trustee.

OVERVIEW OF POWERLONG REIT

Powerlong REIT is a Hong Kong collective investment scheme constituted as a unit trust and authorized

under section 104 of the SFO. Powerlong REIT is a REIT formed to primarily own and invest in quality

income-generating commercial properties in the PRC. Powerlong REIT is managed by the REIT Manager whose

key investment objectives are to provide Unitholders with stable distributions, sustainable and long-term

distribution growth, and enhancement in the value of Powerlong REIT’s properties.

Powerlong REIT shall initially comprise the following eight REIT Properties in the PRC, all of which are

shopping malls located in East China and Central China: Shanghai Fengxian Powerlong Plaza, Hangzhou Lin’an

Powerlong Plaza, Yancheng Powerlong Plaza, Suqian Powerlong Plaza, Quanzhou Anxi Powerlong Plaza, Qingdao

Jiaozhou Powerlong Plaza, Luoyang Powerlong Plaza, and Xinxiang Powerlong Plaza.

As of June 30, 2021, the REIT Properties had an aggregate Gross Rentable Area of approximately 453,475

sq.m. with an Appraised Value of RMB8,231.3 million and an average Occupancy Rate of approximately 96.5%.

As of June 30, 2021, the REIT Properties housed a total of 1,161 tenants, with the top five tenants in terms of total

monthly Gross Rental Income contributing to approximately 14.3% of the total monthly Gross Rental Income for

the month ended June 30, 2021.


SUMMARY

– 1 –

KEY INVESTMENT HIGHLIGHTS OF POWERLONG REIT

The REIT Manager believes that the REIT Properties have the following competitive strengths: (i) firstPRC-based commercial property REIT in Hong Kong with a focus on shopping malls strategically located tobenefit from the high growth in local economies; (ii) quality and diverse tenants with high Occupancy Ratemanaged by Powerlong CM, the first PRC commercial operation services provider listed on the Stock Exchange;(iii) strong organic growth and future acquisitions supported by reputable sponsor; and (iv) highly experienced andcommitted management team with a proven track record. For further details, please see “Key InvestmentHighlights of Powerlong REIT” in this Document.

OBJECTIVES AND INVESTMENT STRATEGIES OF POWERLONG REIT

The REIT Manager’s key objectives for Powerlong REIT are to provide Unitholders with stable distributions,sustainable and long-term distribution growth, and enhancement in the value of Powerlong REIT’s properties. TheREIT Manager intends to achieve this through holding and investing in quality income-generating commercialproperties located in the PRC. The REIT Manager’s strategy can be broadly categorized as follows: (i) assetmanagement strategy: proactively managing Powerlong REIT’s property portfolio to maintain optimaloccupancy level and operational efficiency; seeking asset enhancement opportunities through property upgradeand/or renovation to promote rental income growth; (ii) investments and acquisition strategy: investing in andacquiring quality properties in the PRC from Powerlong Group or third parties that satisfy the REIT Manager’sinvestment strategy; and (iii) capital and risk management strategy: optimizing returns on Powerlong REIT’sportfolio and distributions to Unitholders, while maintaining an appropriate level of financial prudence. Forfurther details, please see “Strategy” in this Document.

SUMMARY INFORMATION OF THE REIT PROPERTIES AS OF JUNE 30, 2021

Shanghai Fengxian Powerlong Plaza(上海奉賢寶龍廣場)

Address No. 5639 Hangnan Highway, Fengxian District, Shanghai, PRC

Description Shanghai Fengxian Powerlong Plaza is a one-stop four-story shoppingmall with integrated shopping, catering and entertainment functionsbuilt on top of a metro station in Fengxian District.

Opening date/Expiry of land use right November 2015/December 18, 2051

Occupancy Rate 100.0%

Average Monthly Rental per Leased Square Meter (for the sixmonths ended June 30, 2021)

RMB121.5

GFA/Gross Rentable Area (sq.m.) 40,689/27,953

Number of tenants/Number of leases(1) 103/108

Contribution of the top five tenants (in terms of total monthlyGross Rental Income for the month ended June 30, 2021)

Gross Rentable Area: 7,781 sq.m.Percentage of total Gross Rentable Area: 27.8%Percentage of total monthly Gross Rental Income for the month endedJune 30, 2021: 18.1%

Appraised Value(2) RMB981.0 million


SUMMARY

– 2 –

Hangzhou Lin’an Powerlong Plaza(杭州臨安寶龍廣場)

Address Baihufan, Jinbei Road, Lin’an District, Hangzhou, ZhejiangProvince, PRC

Description Hangzhou Lin’an Powerlong Plaza is a four-story shopping mall with865 car parking spaces in Lin’an with many well-known national andinternational brands.

Opening date/Expiry of land use right November 2019/February 27, 2058



RMB97.2






Yancheng Powerlong Plaza(鹽城寶龍廣場)

Address No. 9 Renmin Middle Road, Tinghu District, Yancheng, JiangsuProvince, PRC

Description Yancheng Powerlong Plaza is a one-stop four-story shopping mallwith 916 car parking spaces and integrated shopping, catering andentertainment functions in Yancheng.

Opening date/Expiry of land use right September 2011/September 30, 2048



RMB54.9





Appraised Value(2) RMB1,544.9 million


SUMMARY

– 3 –

Suqian Powerlong Plaza(宿遷寶龍廣場)

Address No. 6 Xihu Road, Sucheng District, Suqian, Jiangsu Province, PRC

Description Suqian Powerlong Plaza is a fashion lifestyle four-story shoppingmall with 680 car parking spaces.

Opening date/Expiry of land use right September 2011/November 27, 2049



RMB79.6





Appraised Value(2) RMB1,572.5 million

Quanzhou Anxi Powerlong Plaza(泉州安溪寶龍廣場)

Address No. 2 Jianan Avenue, Chengxiang Town, Anxi County, Quanzhou,Fujian Province, PRC

Description Quanzhou Anxi Powerlong Plaza is a three-story shopping mall withmultiple functions and brands.

Opening Date/Expiry of land use right December 2010/February 3, 2050



RMB76.2







SUMMARY

– 4 –

Qingdao Jiaozhou Powerlong Plaza(青島膠州寶龍廣場)

Address No. 97 Fuzhou South Road, Jiaozhou, Shandong Province, PRC

Description Qingdao Jiaozhou Powerlong Plaza is a leisure lifestyle four-storyshopping mall.

Opening Date/Expiry of land use right February 2015/June 17, 2053



RMB42.4






Luoyang Powerlong Plaza(洛陽寶龍廣場)

Address No. 219 Kaiyuan Avenue, Luolong District, Luoyang, HenanProvince, PRC

Description Luoyang Powerlong Plaza is a one-stop three-story shopping mallwith integrated shopping, catering and entertainment functions.

Opening Date/Expiry of land use right December 2011/February 1, 2046



RMB62.1







SUMMARY

– 5 –

Xinxiang Powerlong Plaza(新鄉寶龍廣場)

Address Jinsui Avenue East Portion, Hongqi District, Xinxiang, HenanProvince, PRC

Description Xinxiang Powerlong Plaza is a four-story shopping mall withintegrated catering and entertainment functions.

Opening Date/Expiry of land use right September 2012/January 7, 2048



RMB69.8






Notes:

(1) The number of leases exceeds the number of tenants as some tenants enter into more than one lease for different units in the REIT

Properties.

(2) As determined by the Independent Property Valuer in its valuation report set forth in Appendix IV to this Document.


SUMMARY

– 6 –

OVERVIEW OF POWERLONG REIT’S STRUCTURE

The following diagram sets forth the ownership structure of Powerlong REIT and the REIT Properties

(assuming the [REDACTED] is not exercised), and the primary structural and/or contractual relationships

between Powerlong REIT, the Unitholders, the REIT Manager, the Trustee, the Operations and Property Manager

immediately after completion of the Asset Injection and the [REDACTED].

[REDACTED]%

100%

100%

100%

100%

62.89%

Powerlong CM(Cayman Islands)

(Stock Code: 9909)

Powerlong Holdings(Cayman Islands)

(Stock Code: 1238)

Powerlong REIT

Management services

Trustee fee

Hold assets ofPowerlong REIT ontrust for Unitholders

Management fees(4)

Target Company(BVI)

OperationsManagement

Fee

Commercial Operational

Services as theOperations

and PropertyManager

BVI Holdco(BVI)

Powerlong REIT Management (BVI) Limited

(BVI)

REIT Manager

Trustee(HK)

100%

Starlong (BVI) I(BVI)

100%

Starlong (HK) 1(HK)

100%

Starlong (BVI) II(BVI)

100%

Starlong (HK) 2(HK)

100%

100%100%

100%

HangzhouLin’an

PowerlongPlaza

Starlong (BVI) III(BVI)

100%

Starlong (HK) 3(HK)

100%100%

Lin’an WFOE(PRC)

100%

100%

Lin’anProject

Company(PRC) 100%

100%

SuqianPowerlong

Plaza

Starlong (BVI) VIII(BVI)

100%

Starlong (HK) 8(HK)

100%

SuqianProject

Company(PRC)

100%

100%

100%

100%

YanchengPowerlong

Plaza

Starlong (BVI) V(BVI)

Starlong (HK) 5(HK)

YanchengProject

Company(PRC)

100%

100%

QuanzhouAnxi

PowerlongPlaza

Starlong (BVI) VII(BVI)

100%

Starlong (HK) 7(HK)

100%

Anxi ProjectCompany

(PRC)

100%

100%

ShanghaiFengxian

PowerlongPlaza

Starlong (BVI) VI(BVI)

100%

Starlong (HK) 6(HK)

100%

FengxianProject

Company(PRC)

Ms. Hoi Wa Fan

Other shareholders

Mr. Hoi Kin Hong

Skylong Holdings Limited

(BVI)

Ms. Wong Lai Chan(Note 1)

Ms. Shih Sze Ni

Cecilia(Note 3)

Walong Holdings Limited

(BVI)

Mantong (HK) Trading Co., Ltd.

(HK)

Sky Infinity Holdings Limited

(BVI)(Note 2)

Mr. Hoi Wa Fong

1.48%

100%100%

0.01%0.22%14.39%0.07%0.69%

100%

43.59%34.57% 0.41%4.57%

XinxiangProject

Company(PRC)

LuoyangProject

Company(PRC)

XinxiangPowerlong

Plaza

LuoyangPowerlong

Plaza

100%

Starlong (BVI) IX(BVI)

100%

Starlong (HK) 9(HK)

100%

100%

Jiaozhou WFOE(PRC)

JiaozhouProject

Company(PRC)

QingdaoJiaozhou

PowerlongPlaza

offshore

onshore

REITProperties

[REDACTED]%

[REDACTED]

“//” indicates indirect ownership

Notes:

1. Ms. Wong Lai Chan is the spouse of Mr. Hoi Kin Hong.

2. Sky Infinity Holdings Limited is wholly owned by Sky Infinity Family Limited, which is in turn wholly owned by Credit Suisse Trust

Limited through its two wholly-owned subsidiaries and nominees: Serangoon Limited and Seletar Limited. Credit Suisse Trust Limited

is the trustee of a discretionary trust established by Mr. Hoi Wa Fong, the settlor.

3. Ms. Shih Sze Ni Cecilia is the spouse of Mr. Hoi Wa Fong.


SUMMARY

– 7 –

4. Pursuant to the Trust Deed, the REIT Manager will manage Powerlong REIT and will receive management fees from Powerlong REIT.

Please refer to the section headed “The REIT Manager—Further Details Regarding the REIT Manager—Fees, Costs and Expenses of the

REIT Manager” in this Document for further details.

5. Pursuant to the Commercial Operational Services Framework Agreement, the Powerlong CM Group will provide Commercial

Operational Services in respect of the REIT Properties including, among other things, leasing services, marketing services and property

management services, and will receive Operations Management Fee from the Powerlong REIT Group. Please refer to “The Operations

and Property Managers—The Commercial Operational Services Framework Agreement” and “Connected Party

Transactions—Continuing Connected Party Transactions—Non-Exempt Continuing Connected Party Transactions with Connected

Persons—The Commercial Operational Services Framework Agreement” in this Document for further details.

THE REIT MANAGER

The REIT Manager was incorporated in Hong Kong on April 16, 2021 for the sole purpose of managing theassets of Powerlong REIT. The REIT Manager is an indirect wholly-owned subsidiary of Powerlong Holdings,being a company incorporated in the Cayman Islands and listed on the Main Board of the Stock Exchange (stockcode: 1238).

The REIT Manager is licensed by the SFC to conduct the regulated activity of asset management. The REITManager is responsible for the overall management of Powerlong REIT and ensuring compliance with theapplicable provisions of the REIT Code, the SFO, the Listing Rules, the Trust Deed, all relevant contracts and allother relevant laws, rules and regulations.

For further details on the REIT Manager, see “The REIT Manager” in this Document.

THE TRUSTEE

The trustee of Powerlong REIT is DB Trustees (Hong Kong) Limited. The Trustee is a company incorporatedin Hong Kong and registered as a trust company under section 77 of the Trustee Ordinance. The Trustee is qualifiedto act as a trustee for collective investment schemes authorized under the SFO pursuant to the REIT Code.

The Trustee has the fiduciary duty to hold assets of Powerlong REIT in trust for the benefits of theUnitholders, and to oversee the activities of the REIT Manager for compliance with the relevant constitutivedocuments of, and relevant regulatory requirements applicable to, Powerlong REIT. This includes ensuring that allinvestment activities carried out by the REIT Manager are in line with the investment objective and policy ofPowerlong REIT and the constitutive documents of Powerlong REIT, and are in the interest of the Unitholders.

For details of the Trustee’s obligations under the Trust Deed and the REIT Code, see “The Trust Deed” in thisDocument.

THE OPERATIONS AND PROPERTY MANAGER

The Operations and Property Manager, Powerlong CM, is an indirect non-wholly owned subsidiary ofPowerlong Holdings which is a Substantial Unitholder, and therefore it is a connected person of Powerlong REIT.The Operations and Property Manager is a commercial operational service provider in the PRC and a companylisted on the Main Board of the Stock Exchange (stock code: 9909).

Pursuant to the Commercial Operational Services Framework Agreement, the Powerlong CM Group [hasagreed] to provide, among other things, the Commercial Operational Services including leasing services,marketing services and property management services, and is entitled to receive the Operations Management Feefrom the Powerlong REIT Group.

For details, see “The Operations and Property Manager” in this Document.


SUMMARY

– 8 –

CORPORATE GOVERNANCE

With the objectives of establishing and maintaining high standards of corporate governance, certain policiesand procedures have been put in place to promote the operation of Powerlong REIT in a transparent manner andwith built-in checks and balances. The Trustee and the REIT Manager are independent of each other, with theirrespective roles in relation to Powerlong REIT set out in the REIT Code and the Trust Deed. The REIT Manager isrequired under the REIT Code to act in the best interests of Unitholders, to whom the Trustee also owes fiduciaryduties. The Board comprises seven members, three of whom are independent non-executive Directors. Policies andprocedures have been established for, amongst other things, monitoring and supervising dealings in Units by theDirectors and the REIT Manager. For further details, see “Corporate Governance” in this Document.

SUMMARY FINANCIAL INFORMATION

The following tables set forth summary financial information on a historical basis for the Predecessor Group.

The combined balance sheets as of December 31, 2018, 2019 and 2020 and June 30, 2021 and the combinedstatements of comprehensive income, the combined statements of changes in equity and the combined statementsof cash flows for each of the years ended December 31, 2018, 2019 and 2020 and the six months ended June 30,2021 have been derived from the Predecessor Group’s financial information and related notes thereto, which havebeen included in Appendix I to this Document. Such financial information and related notes have been prepared inaccordance with HKFRS and have been audited by PricewaterhouseCoopers, the reporting accountant of thePredecessor Group. The combined statements of comprehensive income and the combined statements of cashflows for the six months ended June 30, 2020 have been derived from the Predecessor Group’s unaudited financialinformation and related notes thereto, which have been included in Appendix I to this Document.

The selected historical financial included below and set forth in Appendix I to this Document is not indicativeof Powerlong REIT’s future performance. You should read the following summary of financial informationtogether with “The REIT Properties and Business,” “Management’s Discussion and Analysis of FinancialCondition and Results of Operations” and “Unaudited Pro Forma Statement of Financial Position” in thisDocument and the historical financial information of the Predecessor Group and related notes thereto set forth inAppendix I to this Document. For a discussion of Powerlong REIT’s future financial condition and results ofoperations, please see “Management’s Discussion and Analysis of Future Operations” in this Document.

SELECTED COMBINED STATEMENTS OF COMPREHENSIVE INCOME ITEMS

Year ended December 31Six months ended

June 30

2018 2019 2020 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000(unaudited)

Revenue 323,977 335,849 358,445 178,509 203,615Property operating expenses (82,803) (90,411) (89,524) (39,438) (51,199)

Net property income 241,174 245,438 268,921 139,071 152,416

Operating profit 889,558 656,881 331,100 165,751 170,922

Profit before income tax 963,984 640,607 300,602 164,385 159,452Income tax expense (218,414) (160,444) (77,300) (38,665) (43,202)

Profit for the year/period and totalcomprehensive income 745,570 480,163 223,302 125,720 116,250

Profit and total comprehensive incomeattributable to:– Owners of the Company 702,113 470,680 219,207 122,500 112,427– Non-controlling interests 43,457 9,483 4,095 3,220 3,823


SUMMARY

– 9 –

SELECTED COMBINED BALANCE SHEETS ITEMS

As of December 31As of

June 3020212018 2019 2020

RMB’000 RMB’000 RMB’000 RMB’000

Non-current assets 8,027,988 8,561,494 8,614,350 8,138,108Current assets 1,822,103 1,338,440 736,913 592,621Non-current liabilities 1,773,432 1,706,887 1,742,969 1,742,682Current liabilities 2,182,206 2,321,685 1,874,430 1,977,861Net current liabilities (360,103) (983,245) (1,137,517) (1,385,240)Total equity 5,894,453 5,871,362 5,733,864 5,010,186

SUMMARY COMBINED STATEMENTS OF CASH FLOWS


June 30

2018 2019 2020 2020 2021


Net cash generated from operatingactivities 206,932 181,341 195,332 51,295 86,109

Net cash (used in)/generated frominvesting activities (1,404,102) 516,454 757,525 421,217 258,718

Net cash generated from/(used in)financing activities 1,157,625 (716,894) (932,427) (448,250) (263,527)

Net (decrease)/increase in cash andcash equivalents (39,545) (19,099) 20,430 24,262 81,300

Cash and cash equivalents at beginningof year/period 111,392 71,847 52,748 52,748 73,178

Cash and cash equivalents at end ofyear/period 71,847 52,748 73,178 77,010 154,478

PROFIT FORECAST FOR THE PERIOD FROM THE [REDACTED] TO DECEMBER 31, 2021

The REIT Manager forecasts that, in the absence of unforeseen circumstances and on the bases and

assumptions set out in “Profit Forecast for the Profit Forecast Period” in this Document, the profit attributable to

Unitholders and the distributable income of Powerlong REIT for the period from the [REDACTED] to December

31, 2021 (being the Profit Forecast Period) will be not less than approximately RMB[REDACTED] and

approximately RMB[REDACTED], respectively.

The profit forecast assumes that the anticipated [REDACTED] will be [REDACTED] and will vary if the

actual [REDACTED] is different.


SUMMARY

– 10 –

The following table sets forth summarized Profit Forecast of Powerlong REIT for the Profit Forecast Period.

For the ProfitForecast

Period

RMB’ 000

Forecast

Revenue [REDACTED]Property operating expenses [REDACTED]Administrative expenses [REDACTED]REIT manager’s fee and trustee’s fees [REDACTED]Other gains-net [REDACTED]Finance (costs)/income, net [REDACTED]

Profit before income tax [REDACTED]Income tax expenses [REDACTED]

Profit for the period [REDACTED]

Distribution Data:Profit for the period [REDACTED]Adjustments(1) [REDACTED]

Distributable income for the Profit Forecast Period [REDACTED]

For the Profit Forecast Period

[REDACTED] [REDACTED]

[REDACTED] (HK$) [REDACTED] [REDACTED]Assumed number of Units outstanding as of December 31, 2021

for the Profit Forecast Period (in thousand) [REDACTED] [REDACTED]Forecast DPU (HK$)(1) [REDACTED] [REDACTED]Annualized DPU (HK$) [REDACTED] [REDACTED]Forecast annualized DPU yield(2) [REDACTED] [REDACTED]

Notes:

(1) Forecast DPU is calculated from profit for the Profit Forecast Period of RMB[REDACTED] as adjusted by (i)

RMB[REDACTED] in respect of the deferred tax charged, (ii) RMB[REDACTED] in respect of the upfront debt coordination fee

amortisation, (iii) RMB[REDACTED] in respect of the difference between financial costs and interest payable in accordance with

contractual obligations, and (iv) RMB[REDACTED] in respect of the portion of the REIT Manager’s fee to be paid in the form of

Units. Assuming that the number of Units outstanding as of December 31, 2021 for the Profit Forecast Period is [REDACTED],

the forecast DPU is HK$[REDACTED]. The translation of RMB to HK$ was made at the rate of RMB0.83186 to HK$1.

(2) The annualized forecast distribution yields are provided for illustrative purpose only. The annualized actual distribution yield may

differ from the annualized forecast distribution yield based on the forecast DPU for the Profit Forecast Period. The annualized

forecast distribution yields have been calculated with the reference to the [REDACTED] and [REDACTED] only. Such yield will

vary for investors who purchase Units in the secondary market at a [REDACTED] that differs from the [REDACTED] and the

[REDACTED] or for investors who do not hold Units for the entire Profit Forecast Period.


SUMMARY

– 11 –

REORGANIZATION DEED

The REIT Manager (in its capacity as manager of Powerlong REIT) and the Trustee entered into the

Reorganization Deed with Powerlong Holdings (as seller), pursuant to which Powerlong Holdings has

conditionally agreed to transfer all of the issued shares of the Target Company to the Trustee (in its capacity as

trustee of Powerlong REIT) in exchange for the issue of [REDACTED] Units (which represents [REDACTED]%

of the issued Units upon completion of the Reorganization) to Powerlong Holdings or its nominees.

CERTAIN FEES AND CHARGES

The following is a summary of certain fees and charges payable by Powerlong REIT in connection with the

establishment and ongoing management of Powerlong REIT:

Payable by Powerlong REIT Amount Payable

(a) REIT Manager’s fees Base Fee

On a semi-annual basis, a Base Fee not exceeding 0.25%per annum (and being 0.25% as of the [REDACTED]) ofthe Value of the Deposited Properties.

Variable Fee

On an annual basis, a Variable Fee of 3.0% per annum ofthe Net Property Income (in respect of each REITProperty, provided that the NAV per Unit exceeds theNAV Unit on which the Variable Fee was last calculatedand paid)

Acquisition Fee

An Acquisition Fee not exceeding 1.0% (and being 1.0%as of the [REDACTED]) of the acquisition price of eachreal estate asset in the form of land acquired, directly orindirectly, by Powerlong REIT (pro-rated if applicable tothe proportion of Powerlong REIT’s interest in the realestate acquired)

Divestment Fee

A Divestment Fee not exceeding 0.5% (and being 0.5% asof the [REDACTED]) of the sale price of each real estateasset in the form of land sold or divested, directly orindirectly, by Powerlong REIT (pro-rated if applicable tothe proportion of Powerlong REIT’s interest in the realestate sold).


SUMMARY

– 12 –

Payable by Powerlong REIT Amount Payable

(b) Trustee’s fees Currently 0.0150% to 0.0250% per annum of the value ofthe Deposited Property payable semi-annually in arrears,which may be adjusted from time to time but subject to aminimum of RMB56,000 per month and a maximum capof 0.06% per annum of the value of the DepositedProperty. Powerlong REIT will also pay to the Trustee aone-off acceptance fee of RMB180,000 upon[REDACTED].

The Trustee may also charge Powerlong REIT additionalfees on a time-cost basis at a rate to be agreed with theREIT Manager from time to time if the Trustee were toundertake duties that are of an exceptional nature orotherwise outside the scope of its normal duties in theordinary course of normal day-to-day business operationof Powerlong REIT, such as acquisition or divestment ofinvestments by Powerlong REIT after [REDACTED].

(c) Operations Management Fee An amount equivalent to 5% per annum of the rentalincome in respect of each REIT Property.

USE OF [REDACTED]

The REIT Manager estimates that the total [REDACTED] from the [REDACTED], which consist entirely of

[REDACTED] to the [REDACTED] from the [REDACTED] of the [REDACTED], will be approximately

HK$[REDACTED] (based on the [REDACTED]), and approximately HK$[REDACTED] (based on the

[REDACTED]), assuming the [REDACTED] is not exercised.

[REDACTED]

The total expenses for the [REDACTED] are estimated to be approximately RMB[REDACTED] assuming

an [REDACTED] of HK$[REDACTED] per [REDACTED] (which is the [REDACTED] of the [REDACTED]

range), which includes [REDACTED] and other legal and professional fees directly related to the [REDACTED],

assuming the [REDACTED] is not exercised. All [REDACTED] will be borne by the [REDACTED].

RISK FACTORS

There are risks associated with any investment. These risks include without limitation: (i) the REIT

Properties are all located in the PRC, which exposes Powerlong REIT to economic and property market conditions

in the PRC; (ii) Powerlong REIT’s results of operations may be adversely affected if the Operations and Property

Manager fails to operate or manage the REIT Properties in an effective and efficient manner or the REIT Manager

decides to terminate the Commercial Operational Services Framework Agreement before expiration or decides not

to renew such agreement upon expiration; (iii) the REIT Manager may not be able to achieve its key objectives for

Powerlong REIT and its stated strategies for accomplishing such objectives may change; (iv) Powerlong REIT’s

portfolio growth depends on its ability to obtain external sources of capital; (v) Powerlong REIT’s investments or

acquisitions in the future may not be successful, which may adversely affect the results of operations of Powerlong

REIT.


SUMMARY

– 13 –

For further information, please see “Risk Factors” in this Document. Investors should read that entire section

carefully before they decide to invest in the Units.

NO MATERIAL ADVERSE CHANGE

The Directors have confirmed that, since June 30, 2021 and up to the date of this Document, there had been

no material adverse change in Powerlong REIT’s financial or trading position or prospects and no event had

occurred that would materially and adversely affect the financial information in the Accountant’s Report included

as Appendix I to this Document.


SUMMARY

– 14 –

In this Document, unless the context otherwise requires, the following terms shall have the meanings setout below. Certain terms are explained in ”Technical Terms” in this Document,

“Accountant's Report” the accountant's report prepared by PricewaterhouseCoopers, asset out in Appendix I to this Document

“Acquisition Fee” as used in the Trust Deed, the acquisition fee not exceeding 1%(and being 1% as of the date of the Trust Deed) of the acquisitionprice of any real estate acquired directly or indirectly byPowerlong REIT (pro-rated if applicable to the proportion ofPowerlong REIT’s interest in the real estate acquired) payable tothe REIT Manager pursuant to the Trust Deed

“Adjustments” has the meaning set out in “Distribution Policy” in this Document

“Affected Units” has the meaning set out in “The Trust Deed—Deemed Applicationof Part XV of the SFO” in this Document

“Annual Distributable Income” has the meaning set out in “Distribution Policy” in this Document

“Anxi Project Company” Anxi Powerlong Asset Management Co., Ltd.* (安溪寶龍資產經營管理有限公司), a company established in the PRC with limitedliability on August 29, 2012, an indirect wholly-owned subsidiaryof Powerlong REIT and the direct owner of Quanzhou AnxiPowerlong Plaza

“Applicable Rules” the SFO, the REIT Code, the Listing Rules and all other law, rulesand regulations applicable to Powerlong REIT

[REDACTED]

“Appraised Value” the value of the REIT Properties as of June 30, 2021, as appraisedby the Independent Property Valuer and set out in Appendix IV tothis Document

“Asset Injection” the transactions contemplated under the Reorganization Deed

“Asset Injection Completion” completion of the Asset Injection

“Asset Injection Completion Date” the date of Asset Injection Completion

“associate(s)” has the meaning ascribed to it under Chapter 14A of the ListingRules (modified as appropriate pursuant to the REIT Code),unless the context otherwise defines


DEFINITIONS

– 15 –

“Assured Entitlement” the entitlement of Qualifying Powerlong Shareholders to applyfor [REDACTED] on an assured basis under the [REDACTED]to be determined on the basis of their respective shareholdings inPowerlong Holdings at 4:30 p.m. on the Assured EntitlementRecord Date

“Assured Entitlement Record Date” [●], 2021, being the record date for ascertaining the AssuredEntitlement

“Audit Committee” the audit committee of the REIT Manager

[REDACTED]

“Bank Loan Drawdown Amount” the gross amount borrowed by the Target Company under theFacilities

“Banking Ordinance” the Banking Ordinance (Chapter 155 of the Laws of Hong Kong),as amended, supplemented or otherwise modified from time totime

“Base Fee” the base fee payable to the REIT Manager on a semi-annual basisunder the Trust Deed, being 0.25% per annum of the aggregatedvaluation value of the Deposited Property

“Beneficial Powerlong Shareholder(s)” any beneficial owner of Powerlong Shares whose PowerlongShares are registered, as shown in the register of members ofPowerlong Holdings, in the name of a registered PowerlongShareholder at 4:30 p.m. on the Assured Entitlement Record Date

[REDACTED]

“Board” the board of Directors

“Building Surveyor” Savills Project Consultancy Limited

“Bulletin 7” has the meaning set out in “Taxation” in this Document

“Bulletin 9” the Bulletin on Certain Issues relating to “Beneficial Owners” inTax Treaties, State Taxation Administration Bulletin 2018 No.9,issued by the SAT

“Business Day” any day (excluding Saturdays, Sundays, public holidays and anyday on which a tropical cyclone warning number 8 or above or a“black” rainstorm warning signal is hoisted in Hong Kong at anytime between the hours of 9:00 a.m. and 5:00 p.m.) on whichlicensed banks are open for general business in Hong Kong


DEFINITIONS

– 16 –

“BVI” the British Virgin Islands

“BVI Holdco” Starlong (BVI) Third Limited, a company incorporated in the BVIwith limited liability on March 31, 2021 and an indirectwholly-owned subsidiary of Powerlong REIT

“BVI Intermediary Companies” has the meaning set out in “Reorganization, Structure andOrganization of Powerlong REIT—Reorganization and AssetInjection” in this Document

“CAGR” compound annual growth rate

[REDACTED]

“Central China” a geographical region in China that covers the provinces ofHenan, Hubei, and Hunan

“Chairman” the chairman of the Board

“Chief Executive Officer” the chief executive officer of the REIT Manager

“Chief Financial Officer” the chief financial officer of the REIT Manager

“Chief Investment and AssetManagement Officer”

the chief investment and asset management officer of the REITManager

“Circular 82” the Circular on the Determination of Chinese-ControlledOffshore-Incorporated Enterprises as China Tax ResidentEnterprises on the Basis of Place of Effective Management, GuoShui Fa 2009 No. 82, issued by the SAT


DEFINITIONS

– 17 –

“Commercial Operational Services” has the meaning set out in “The Operations and PropertyManager—Commercial Operat ional Services FrameworkAgreement” in this Document

“Commercial Operational ServicesFramework Agreement”

the commercial operational services framework agreemententered into between the Operations and Property Manager andthe REIT Manager (for itself and on behalf of the PowerlongREIT Group) relating to the provision of Commercial OperationalServices in respect of the REIT Properties

“Companies Ordinance” the Companies Ordinance (Chapter 622 of the Laws of HongKong), as amended, supplemented or otherwise modified fromtime to time

“connected party rules” has the meaning set out in “Connected Party Transactions—Introduction” in this Document

“connected person(s)” has the meaning ascribed to it in the REIT Code

“Convertible Instruments” any securities convertible or exchangeable into Units, or anyoptions or warrants or similar rights for the subscription or issueof Units (or securities convertible or exchangeable into Units),issued by the REIT Manager on behalf of Powerlong REIT or anySpecial Purpose Vehicle; and references to an issue of Units“pursuant to” any Convertible Instruments means an issue ofUnits pursuant to exercise of any conversion, exchange,subscription or similar rights (as the case may be) under the termsand conditions of such Convertible Instruments

“COVID-19” a coronavirus disease caused by severe acute respiratorysyndrome coronavirus 2

“Deposited Property” as used in the Trust Deed, all of the assets of Powerlong REIT,including all its authorized investments for the time being held ordeemed to be held upon the trusts of the Trust Deed and anyinterest arising on subscription monies from the issuance of Units

“Directors” the directors of the REIT Manager

“Disclosures Committee” the disclosures committee of the REIT Manager

“Distribution Entitlement Record Date” the date or dates in respect of each distribution period determinedby the REIT Manager for the purpose of determining thedistribution entitlement to the distribution amount of theUnitholders

“distribution yield” DPU, on an annualized basis, divided by the [REDACTED] of aUnit


DEFINITIONS

– 18 –

“Divestment Fee” the divestment fee not exceeding 0.5% (and being 0.5% as of the[REDACTED]) of the sale price of each real estate asset sold ordivested directly or indirectly by Powerlong REIT (pro-rated ifapplicable to the proportion of Powerlong REIT’s interest in thereal estate sold) payable to the REIT Manager pursuant to theTrust Deed

“DPU” distribution(s) per Unit

“East China” a geographical region that covers the eastern coastal area ofChina, including provinces of Shandong, Jiangsu, Zhejiang, andFujian and the municipality of Shanghai

“EIT” the PRC enterprise income tax

“EIT Law” the PRC Enterprises Income Tax Law

“Existing Project Companies” has the meaning set out in “Reorganization, Structure andOrganization of Powerlong REIT—Reorganization and AssetInjection” in this Document

“Extreme Conditions” extreme conditions caused by a super typhoon as announced bythe government of Hong Kong, or any extreme conditions orevents, the occurrence of which causes serious interruption to theordinary course business operations in Hong Kong

“Facilities” the Onshore Facilities and the Offshore Facilities

“Fengxian Project Company” Shanghai Xiantong Enterprise Development Co., Ltd.* (上海賢通企業發展有限公司), a company established in PRC with limitedliability on March 12, 2021, an indirect wholly-owned subsidiaryof Powerlong REIT and the direct owner of Shanghai FengxianPowerlong Plaza

“Fuzhou Powerlong” Fuzhou Powerlong Trading Co., Ltd.* (福州寶龍貿易有限公司),a company established the PRC with limited liability on October21, 2003 and an indirect wholly-owned subsidiary of PowerlongHoldings

“GDP” gross domestic product

[REDACTED]


DEFINITIONS

– 19 –

“Guangdong-Hong Kong-MacauGreater Bay Area”

the geographical region that consists of Hong Kong, Macao andnine cities in Guangdong (namely Guangzhou, Shenzhen, Zhuhai,Foshan, Huizhou, Dongguan, Zhongshan, Jiangmen andZhaoqing) with a total land area of 56,000 square kilometers

“Head of Operation” the head of operation of the REIT Manager

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

[REDACTED]

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

“Hong Kong Government” the Government of the Hong Kong

“HK Intermediary Companies” has the meaning set out in “Reorganization, Structure andOrganization of Powerlong REIT—Reorganization and AssetInjection” in this Document

[REDACTED]

“HKFRS” Hong Kong Financial Reporting Standards

“Independent Property Valuer” Savills Valuation and Professional Services Limited

“Independent Unitholders” Unitholders other than those who have a material interest in therelevant transactions within the meaning of the REIT Code


DEFINITIONS

– 20 –

“Interim Distributable Income” for any distribution period, the amount calculated by the REITManager (based on the interim unaudited financial statements ofPowerlong REIT for that distribution period) as representing theconsolidated audited net profit of Powerlong REIT for thatdistribution period, after provision for tax, and taking intoaccount the Adjustments and, for the avoidance of doubt,excludes any additional discretionary distributions out of capital

[REDACTED]

“Investment Committee” the investment committee of the REIT Manager

“Jiaozhou Project Company” Qingdao Powerlong Yingju Land Development Co., Ltd.*(青島寶龍英聚置地發展有限公司), a company established in thePRC with limited liabili ty on June 5, 2013, an indirectwholly-owned subsidiary of Powerlong REIT and the directowner of Qingdao Jiaozhou Powerlong Plaza

[REDACTED]

“Joint Listing Agents” CLSA Capital Markets Limited and BOCI Asia Limited

“Joint Venture Entity” an entity, partnership or other arrangement in which or throughwhich Powerlong REIT invests in any jointly owned property aspermitted under the REIT Code

“Land Use Grant Rules” the Rules Regarding the Grant of State-owned Land Use Rightsby Way of Tender, Auction and Listing-for-sale of the PRC whichare effective from November 1, 2007


DEFINITIONS

– 21 –

“Lapse Event” has the meaning set out in “Material Agreements and OtherDocuments—Deed of Right of First Refusal—Failure to Exercisethe Right of First Refusal” in this Document

“LAT” Land Appreciation Tax

“Latest Practicable Date” August 20, 2021, being the latest practicable date for the purposesof ascertaining certain information contained in this Document

“Lin'an Project Company” Hangzhou Longyao Industrial Co., Ltd.* (杭州龍耀實業有限公司), a company established in the PRC with limited liability onAugust 3, 2017, an indirect wholly-owned subsidiary ofPowerlong REIT and the direct owner of Hangzhou Lin’anPowerlong Plaza

[REDACTED]

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

“Luoyang Powerlong” Luoyang Powerlong Property Development Co., Ltd.* (洛陽寶龍置業發展有限公司), a company established in the PRC withlimited liability on March 3, 2006 and an indirect wholly-ownedsubsidiary of Powerlong Holdings

“Luoyang Project Company” Luoyang Longqian Commercial Management Co., Ltd.*(洛陽龍潛商業管理有限公司), a company established in the PRCwith limited liabil i ty on March 23, 2021, an indirectwholly-owned subsidiary of Powerlong REIT and the directowner of Luoyang Powerlong Plaza

“Macao” Macao Special Administrative Region of the PRC

“Main Board” the stock exchange (excluding the option market) operated by theStock Exchange which is independent from and operated inparallel with GEM

“Management Person(s)” has the meaning set out in “Corporate Governance—Interests of,and Dealings in Units by, Directors, the REIT Manager or theSubstantial Unitholders” in this Document


DEFINITIONS

– 22 –

“Market Consultant” Jones Lang LaSalle Corporate Appraisal and Advisory Limited

“Market Research Report” a market research report prepared by the Market Consultant inconnection with the [REDACTED], as set out in Appendix V tothis Document

[REDACTED]

“MOFCOM” the Ministry of Commerce of the PRC

“Nanjing Powerlong” Nanjing Powerlong Kangjun Property Development Co., Ltd.*(南京寶龍康浚置業發展有限公司), a company established thePRC with limited liability on November 7, 2017 and an indirectnon-wholly owned subsidiary of Powerlong Holdings

“NAV” net asset value, which is calculated as total assets minus totalliabilities

“New Project Companies” has the meaning set out in “Reorganization, Structure andOrganization of Powerlong REIT—Reorganization and AssetInjection” in this Document

“Nomination and RemunerationCommittee”

the nomination and remuneration committee of the REITManager

“Non-qualifying PowerlongShareholder”

registered holders of Powerlong Shares whose addresses on theregister of members of Powerlong Holdings is, at 4:30 p.m. on theAssured Entitlement Record Date, in a place outside Hong Kongand who the directors of Powerlong Holdings, after makingenquiries regarding the legal restrictions under the laws of therelevant place or the requirements of the relevant regulatory bodyor stock exchange in that place, consider his/her/its exclusionfrom the definition of “Qualifying Powerlong Shareholder” isnecessary or expedient

“Non-REIT Properties” has the meaning set out in “Reorganization, Structure andOrganization of Powerlong REIT—Reorganization and AssetInjection” in this Document

“Notice on Land Supply” the Notice on Problems Regarding Strengthening the Supply andRegulation of Land Used for Real Estates Supply promulgated bythe Ministry of Land and Resources on March 8, 2010


DEFINITIONS

– 23 –

[REDACTED]

“Offshore Investors” has the meaning set out in “Taxation—PRC Taxation ofPowerlong REIT—China Indirect Transfer Tax” in this Document

“Offshore Facilities” has the meaning set out in “Material Agreements and OtherDocuments—Facilities Agreements” in this Document

“Offshore Property Holding Companies” collectively, BVI Holdco, the BVI Intermediary Companies andHK Intermediary Companies

“Onshore Facilities” has the meaning set out in “Material Agreements and OtherDocuments—Facilities Agreements” in this Document

“Operations Management Fee” has the meaning set out in “The Operations and PropertyManager—Commercial Operat ional Services FrameworkAgreement” in this Document

“Operations and Property Manager” Powerlong CM

“Ordinary Resolution” a resolution of Unitholders proposed and passed by a simplemajority of the votes of those present and entitled to vote inperson or by proxy where the votes shall be taken by way of poll,but with a quorum of two or more Unitholders registered asholding together not less than 10.0% of Units for the time being inissue

[REDACTED]

“PBOC” The People’s Bank of China

“Percentage Threshold” has the meaning set out in “The Trust Deed—Issue of Units and/or Convertible Instruments and Issue Price” in this Document


DEFINITIONS

– 24 –

“Powerlong CM” Powerlong Commercial Management Holdings Limited (寶龍商業管理控股有限公司) (stock code: 9909), an exempted companyincorporated in the Cayman Islands with limited liability onMarch 25, 2019 and the shares of which are listed on the MainBoard of the Stock Exchange

“Powerlong CM Group” Powerlong CM and its subsidiaries

“Powerlong Group” Powerlong Holdings and its subsidiaries

“Powerlong Group Development” Powerlong Group Development Co., Ltd.* (寶龍集團發展有限公司), a company established in the PRC with limited liability onJuly 11, 1992, which is indirectly owned as to 88.9% and 1% byMr. Hoi Kin Hong and Ms. Hoi Wa Lam, respectively

“Powerlong Holdings” Powerlong Real Estate Holdings Limited (寶龍地產控股有限公司) (stock code: 1238), an exempted company incorporated in theCayman Islands with limited liability on July 18, 2007 and theshares of which are listed on the Main Board of the StockExchange

“Powerlong Shareholders” holders of the Powerlong Shares

“Powerlong Shares” ordinary shares of HK$0.01 each in the share capital ofPowerlong Holdings

“Powerlong Land Development” Powerlong Land Development Limited, a company incorporatedin Hong Kong with limited liability on October 3, 2008 and anindirect non-wholly owned subsidiary of Powerlong Holdings

“Powerlong REIT” Powerlong Commercial Real Estate Investment Trust, a collectiveinvestment scheme constituted as a unit trust and authorizedunder section 104 of the SFO

“Powerlong REIT Group” Powerlong REIT and its subsidiaries

“PRC” The People’s Republic of China excluding, for the purposes ofthis Document only (unless otherwise expressly specified), HongKong, Macao and Taiwan

“PRC GAAP” the Generally Accepted Accounting Principles of the PRC

“PRC Government” the Government of the PRC

“PRC Legal Advisors” Zhong Lun Law Firm, the legal advisors to the REIT Manager asto PRC laws


DEFINITIONS

– 25 –

[REDACTED]

“Project Companies” the respective direct owners of the REIT Properties, being (i)Xinxiang Project Company; (ii) Luoyang Project Company; (iii)Lin’an Project Company; (iv) Yancheng Project Company; (v)Fengxian Project Company; (vi) Anxi Project Company; (vii)Suqian Project Company; (viii) Jiaozhou Project Company, and“Project Company” means any one of them

“Predecessor Group” Target Company and its subsidiaries, whose results of operationsare set out in the combined financial statements in Appendix I tothis Document

[REDACTED]

“Promotional Expenses” has the meaning set out in “Modifications, Waivers and LicensingConditions—Payment of Promotional Expenses from theProperties of Powerlong REIT—Paragraph 9.13(b) of the REITCode” in this Document

“Property Development and RelatedActivities”

the acquisition of incomplete units in a building by a REIT andproperty developments (including both new development projectsand re-development of existing properties) undertaken inaccordance with Chapter 7 of the REIT Code

[REDACTED]

“Qualifying Powerlong Shareholder” the holders of Powerlong Shares, whose names appeared on theregister of members of Powerlong Holdings as holding PowerlongShares at the close of business on the Assured Entitlement RecordDate, other than Non-qualifying Powerlong Shareholders

“Registration Regulations” the Land Registration Regulations promulgated by the State LandAdministration Bureau on December 28, 1995 and implementedon February 1, 1996

“Regulation S” Regulation S under the U.S. Securities Act


DEFINITIONS

– 26 –

“REIT” real estate investment trust

“REIT Code” the Code on Real Estate Investment Trusts published by the SFC(as amended, supplemented or otherwise modified for the timebeing) or, for the purpose of the Trust Deed, from time to time,including but not limited to by published practice statements or inany particular case, by specific written guidance issued orexemptions or waivers granted by the SFC

“REIT Manager” Powerlong REIT Management Limited, the manager ofPowerlong REIT, a company incorporated in Hong Kong withlimited liability on April 16, 2021 and an indirect wholly-ownedsubsidiary of Powerlong Holdings

“REIT Manager’s Remuneration” has the meaning set out in “Modifications, Waivers and LicensingConditions—Payment of REIT Manager’s Fee by way ofUnits—Chapter 12 of the REIT Code” in this Document

“REIT Properties” (i) Xinxiang Powerlong Plaza; (ii) Luoyang Powerlong Plaza;(iii) Hangzhou Lin’an Powerlong Plaza; (iv) Yancheng PowerlongPlaza; (v) Shanghai Fengxian Powerlong Plaza; (vi) QuanzhouAnxi Powerlong Plaza; (vii) Suqian Powerlong Plaza; (viii)Qingdao Jiaozhou Powerlong Plaza, and “REIT Property” meansany one of them

“Relevant Date” as the case may be, the date of the relevant agreement or otherinstrument for the issue or proposed issue of any Units orConvertible Instruments, or the date of the grant of anyConvertible Instruments, whichever is the earlier

“Relevant Investments” the following financial instruments which a REIT may invest in aspermitted under the REIT Code: (a) securities listed on the StockExchange or other internationally recognized stock exchanges;(b) unlisted debt securities; (c) government and other publicsecurities; and (d) local or overseas property funds

“Relevant Property” has the meaning set out in “Material Agreements and OtherDocuments—Deed of Right of First Refusal—Scope ofCoverage” in this Document

“Reorganization” has the meaning set out in “Reorganization, Structure andOrganization of Powerlong REIT—Reorganization” in thisDocument

“Reorganization Deed” the reorganization deed dated [●], 2021 and entered into by andamong the REIT Manager (in its capacity as manager ofPowerlong REIT), the Trustee and Powerlong Holdings for theacquisition of all the issued shares of the Target Company, asdescribed in “Material Agreements and OtherDocuments—Reorganization Deed” in this Document


DEFINITIONS

– 27 –

[REDACTED]

“Responsible Officer” a responsible officer of the REIT Manager appointed pursuant tothe requirements of the SFO

“RET” Real Estate Tax

“Retained Group” Powerlong Holdings and its subsidiaries after completion of theSpin-off, which does not include Powerlong REIT Group

“RMB” Renminbi, the lawful currency of the PRC

“ROFR” has the meaning set out in “Material Agreements and OtherDocuments—Deed of Right of First Refusal” in this Document

“SAFE” the State Administration of Foreign Exchange of the PRC

“Sale Notice” has the meaning set out in “Material Agreements and OtherDocuments—Deed of Right of First Refusal—Sale Notice” in thisDocument

[REDACTED]

“SAT” the State Administration of Taxation of the PRC

[REDACTED]

“SFC” the Securities and Futures Commission of Hong Kong

“SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws ofHong Kong) as amended, supplemented or otherwise modifiedfrom time to time

“Shanghai Longqian” Shanghai Longqian Industrial Development Co., Ltd.* (上海龍潛實業發展有限公司), a company established in the PRC withlimited liabil i ty on November 13, 2013 and an indirectnon-wholly owned subsidiary of Powerlong Holdings

“Shanghai Powerlong Yingju” Shanghai Powerlong Yingju Enterprise Development Co., Ltd.* (上海寶龍英聚企業發展有限公司), a company established in the PRCwith limited liability on June 18, 2013 and an indirect non-whollyowned subsidiary of Powerlong Holdings


DEFINITIONS

– 28 –

“Shanghai Ruilong” Shanghai Ruilong Investment Management Co., Ltd.* (上海瑞龍投資管理有限公司), a company established in the PRC withlimited liability on June 8, 2010 and an indirect wholly-ownedsubsidiary of Powerlong Holdings

“Shanghai Xiantong” Shanghai Xiantong Property Co., Ltd.* (上海賢通置業有限公司),a company established in the PRC with limited liability onFebruary 21, 2012 and an indirect wholly-owned subsidiary ofPowerlong Holdings

“Special Purpose Vehicle(s)” an entity which is wholly or majority owned directly or indirectlyby Powerlong REIT in accordance with the REIT Code throughwhich Powerlong REIT holds or owns real estate

“Special Resolution” a resolution of Unitholders proposed and passed by a majorityconsisting of 75% or more of the votes of those present andentitled to vote in person or by proxy where the votes shall betaken by way of poll, but with a quorum of two or moreUnitholders registered as holding together not less than 25% ofthe Units for the time being in issue

[REDACTED]

“Stamp Duty Ordinance” Stamp Duty Ordinance (Chapter 117 of the Laws of Hong Kong),as amended, supplemented or otherwise modified from time totime

“Starlong (BVI) I” Starlong (BVI) I Limited, a company incorporated in the BVIwith limited liabili ty on April 1, 2021 and an indirectwholly-owned subsidiary of Powerlong REIT

“Starlong (BVI) II” Starlong (BVI) II Limited, a company incorporated in the BVIwith limited liabili ty on April 1, 2021 and an indirectwholly-owned subsidiary of Powerlong REIT

“Starlong (BVI) III” Starlong (BVI) III Limited, a company incorporated in the BVIwith limited liabili ty on April 1, 2021 and an indirectwholly-owned subsidiary of Powerlong REIT

“Starlong (BVI) V” Starlong (BVI) V Limited, a company incorporated in the BVIwith limited liabili ty on April 1, 2021 and an indirectwholly-owned subsidiary of Powerlong REIT

“Starlong (BVI) VI” Starlong (BVI) VI Limited, a company incorporated in the BVIwith limited liabili ty on April 1, 2021 and an indirectwholly-owned subsidiary of Powerlong REIT


DEFINITIONS

– 29 –

“Starlong (BVI) VII” Starlong (BVI) VII Limited, a company incorporated in the BVIwith limited liabili ty on April 1, 2021 and an indirectwholly-owned subsidiary of Powerlong REIT

“Starlong (BVI) VIII” Starlong (BVI) VIII Limited, a company incorporated in the BVIwith limited liabili ty on April 1, 2021 and an indirectwholly-owned subsidiary of Powerlong REIT

“Starlong (BVI) IX” Starlong (BVI) IX Limited, a company incorporated in the BVIwith limited liabili ty on April 1, 2021 and an indirectwholly-owned subsidiary of Powerlong REIT

“Starlong (HK) 1” Starlong (HK) 1 Limited, a company incorporated in Hong Kongwith limited liability on April 16, 2021 and an indirectwholly-owned subsidiary of Powerlong REIT








“State Council” the State Council of the PRC (中華人民共和國國務院)

“Stock Exchange” The Stock Exchange of Hong Kong Limited

“Substantial Unitholder(s)” any person who is a “substantial holder” as defined under theREIT Code


DEFINITIONS

– 30 –

“Successor REIT Manager” has the meaning set out in “The REIT Manager—Further DetailsRegarding the REIT Manager—Retirement or Removal of theREIT Manager” in this Document

“Suqian Project Company” Suqian Powerlong Real Estate Development Co., Ltd.* (宿遷寶龍置業發展有限公司), a company established in the PRC withlimited liability on December 10, 2007, an indirect wholly-ownedsubsidiary of Powerlong REIT and the direct owner of SuqianPowerlong Plaza

“Takeovers Code” the Codes on Takeovers and Mergers and Share Buy-backspublished by the SFC, as amended, supplemented or otherwisemodified for the time being

“Target Company” Starlong (BVI) Second Limited, a company incorporated in theBVI with limited liability on March 31, 2021 and a directwholly-owned subsidiary of Powerlong REIT

“Track Record Period” the years ended December 31, 2018, 2019 and 2020 and the sixmonths ended June 30, 2021

“Trademark Licensing Agreement” has the meaning set out in “Material Agreements and OtherDocuments—Trademark Licensing Agreement” in this Document

“Transition Period” has the meaning set out in “The REIT Manager—Further DetailsRegarding the REIT Manager—Retirement or Removal of theREIT Manager” in this Document

“Trust Deed” the trust deed dated [●], 2021 between the Trustee (in its capacityas trustee of Powerlong REIT) and the REIT Managerconstituting Powerlong REIT, as amended by any supplementaldeed

“Trustee” DB Trustees (Hong Kong) Limited

“Trustee Ordinance” the Trustee Ordinance (Chapter 29 of the Laws of Hong Kong), asamended, supplemented or otherwise modified from time to time

[REDACTED]

“Unit” a unit of Powerlong REIT

“United States” or “U.S.” the United States of America

“Unitholder” any person registered as holding a Unit

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

“U.S. Securities Act” the United States Securities Act of 1933, as amended


DEFINITIONS

– 31 –

“Valuation Report” the valuation report produced by the Independent Property Valuer,as set out in Appendix IV to this Document

“Variable Fee” the variable fee payable to the REIT Manager on an annual basisunder the Trust Deed, being 3.0% per annum of the gross revenueless any operating expenses in respect of each REIT Property,provided that the NAV per Unit exceeds the NAV Unit on whichthe Variable Fee was last calculated and paid

“VAT” Value-Added Tax

“Welly Dragon” Welly Dragon (Hong Kong) Limited (龍麗（香港）有限公司), acompany Hong Kong with limited liability on March 22, 2017 andan indirect non-wholly owned subsidiary of Powerlong Holdings

[REDACTED]

“Xiamen Chengrui” Xiamen Chengrui Investment Management Co., Ltd.* (廈門誠睿投資管理有限公司), a company established the PRC with limitedliability on January 14, 2010

“Xiamen Hongbaorong” Xiamen Hongbaorong Investment Management Co., Ltd.* (廈門弘寶融投資管理有限公司), a company established the PRC withlimited liability on April 10, 2013

“Xinxiang Powerlong” Xinxiang Powerlong Property Development Co., Ltd.* (新鄉寶龍置業發展有限公司), a company established the PRC with limitedliability on December 25, 2007 and an indirect wholly-ownedsubsidiary of Powerlong Holdings

“Xinxiang Project Company” Xinxiang Longqian Enterprise Management Co., Ltd.*(新鄉龍潛企業管理有限公司), a company established in the PRCwith limited liabil i ty on January 29, 2021, an indirectwholly-owned subsidiary of Powerlong REIT and the directowner of Xinxiang Powerlong Plaza

“Yancheng Project Company” Yancheng Powerlong Real Estate Development Co., Ltd.*(鹽城寶龍置業發展有限公司), a company established in the PRCwith limited liability on May 13, 2008, an indirect wholly-ownedsubsidiary of Powerlong REIT and the direct owner of YanchengPowerlong Plaza

“Yangtze River Delta” a geographical region in China that covers ShanghaiMunicipality, Zhejiang Province and Jiangsu Province

* For identification purpose only


DEFINITIONS

– 32 –

In this Document, unless the context otherwise requires, the following terms shall have the meanings set out

below:

“Average Delinquency Rate” calculated by dividing the average delinquency balance by thetotal rental income during the relevant period; delinquency refersto rental receivables that remain unpaid for over 90 days aftertheir due dates

“Average Monthly Rental per LeasedSquare Meter”

in respect of a relevant period, the Gross Rental Income dividedby the Gross Rentable Area occupied by tenants for each month inthat relevant period

“Base Rent” Gross Rental Income as of the relevant time or for the relevantperiod (as the case may be) from the REIT Properties or therelevant REIT Property (as the case may be) as provided for in thetenancy agreements, exclusive of any Turnover Rent

“Gross Floor Area” or “GFA” in respect of a REIT Property, the gross floor area of that REITProperty being the area contained within the external walls of thebuilding measured at each floor level (including any floor belowthe level of the ground), together with the area of each balcony inthe building, which shall be calculated from the overalldimensions of the balcony (including the thickness of the sidesthereof), the thickness of external walls of the building, and thefloor space that is constructed or intended to be used solely forparking motor vehicles, loading or unloading of motor vehicleswhere applicable, excluding floor space for refuse storagechambers, material recovery chambers, refuse chutes, refusehopper rooms and other types of facilities provided to facilitatethe separation of refuse, or for access facil i t ies fortelecommunications and broadcasting services, or occupiedsolely by machinery or equipment for any lift, air-conditioning orheating system or any similar service

“Gross Rentable Area” in respect of a REIT Property, consists of that portion of the GrossFloor Area of that Property determined by the relevant ProjectCompany at any given time to be rentable

“Gross Rental Income” rental income (including Turnover Rent) due from the tenantsunder their tenancy agreements for space in the REIT Propertiesexcluding any income generated from car parking lots, commonareas or advertising space or compensation from the earlytermination of tenancy agreements

“Hybrid Model” rent calculated by taking the higher of Base Rent and TurnoverRent


TECHNICAL TERMS

– 33 –

“market value” the estimated amount for which an asset or liability shouldexchange on the valuation date between a willing buyer and awilling seller in an arm’s length transaction, after propermarketing and where the parties had each acted knowledgeably,prudently and without compulsion

“Net Property Income” total revenue minus property related expenses, including, withoutlimitation, property operating expenses, for each REIT Property

“Occupancy Rate” in respect of the REIT Properties or the relevant REIT Property(as the case may be), the Gross Rentable Area occupied by tenantsas a percentage of total Gross Rentable Area of the REITProperties or the relevant REIT Property (as the case may be)

“sq.m.” square meter

“Turnover Rent” rent calculated by reference to a pre-determined percentage of atenant’s sales turnover


TECHNICAL TERMS

– 34 –

THE [REDACTED]

The following is a description of the key elements of the [REDACTED]:

Powerlong REIT Powerlong Commercial Real Estate Investment Trust, a collectiveinvestment scheme constituted as a unit trust by the Trust Deedand authorized under section 104 of the SFO.

The REIT Manager Powerlong REIT Management Limited, a company incorporatedin Hong Kong with limited liability on April 16, 2021 and anindirect wholly-owned subsidiary of Powerlong Holdings.

The Trustee DB Trustees (Hong Kong) Limited.

[REDACTED]

Structure The Units are being [REDACTED] only outside the United Statesin offshore transactions in reliance on Regulation S. The Unitshave not been and will not be registered under the U.S. SecuritiesAct or any state securities law in the United States.

[REDACTED]


THE [REDACTED]

– 35 –

Charges Payable by Investors In addition to the [REDACTED], investors applying for Units inthe [REDACTED] must pay brokerage of 1.0%, Stock Exchangetrading fee of 0.005% and SFC transaction levy of 0.0027%,calculated on the [REDACTED] and subject to refund if the[REDACTED] is lower than the [REDACTED]

[REDACTED]

Issuance of Units to Powerlong Holdings Prior to and not as part of the [REDACTED], [REDACTED]Units will be issued by Powerlong REIT to Powerlong Holdingsor its nominees upon the Asset Injection Completion pursuant tothe Reorganization Deed.

Lock-ups The REIT Manager has given certain lock-up undertakings to theJoint Listing Agents, the [REDACTED] and [REDACTED] thatPowerlong REIT will not issue any new Units for a period of sixmonths from the [REDACTED], subject to certain exceptions.Powerlong Holdings has given certain undertakings to the REITManager, the Joint Listing Agents, [REDACTED] and the[REDACTED] that it will not (a) transfer or dispose of any Unitsheld by it for a period of six months from the [REDACTED](except for the exercise of the [REDACTED]) and (b) transfer ordispose of any Units which would result in it ceasing to hold atleast 30% of the Units in issue during the following period of sixmonths, subject to certain exceptions. Please refer to the sectionheaded “[REDACTED] – [REDACTED] Arrangements andExpenses – [REDACTED] – Undertakings” in this Document.

[REDACTED]


THE [REDACTED]

– 36 –

NAV per Unit Upon Completion of the[REDACTED]

HK$[REDACTED]. The calculation of the NAV per Unit isarrived at on the basis of the net assets attributable to Unitholdersextracted from the Unaudited Pro Forma Financial Informationset out in Appendix II to this Document based on the basis that[REDACTED] Units will be in issue upon completion of the[REDACTED].

[REDACTED]

No Redemption Right for Unitholders Unitholders have no right to request that the REIT Managerredeem their Units at any time. [REDACTED] of the Units on theStock Exchange does not guarantee a liquid market for the Units.


THE [REDACTED]

– 37 –

Profit Forecast (for the period from the[REDACTED] to December 31, 2021)

The REIT Manager forecasts that, in the absence of unforeseencircumstances and on the basis and assumptions set out in thesection headed “Profit Forecast for the Profit Forecast Period” inthis Document, the profit attributable to Unitholders and thedistributable income of the Powerlong REIT for the period fromthe [REDACTED] to December 31, 2021 (being the ProfitForecast Period) will be not less than approximatelyRMB[REDACTED] and approximately RMB[REDACTED],respectively. For further details, including the principalassumptions on which the forecast is based, Please see “ProfitForecast for the Profit Forecast Period” in this Document.

Distribution The REIT Manager’s policy is to distribute to Unitholders anamount of no less than 90% of Powerlong REIT’s AnnualDistributable Income for each financial year, as more fullydescribed in the section headed “Distribution Policy” in thisDocument. Pursuant to the Trust Deed, the REIT Manager may atits discretion from time to time direct the Trustee to makedistributions over and above the minimum 90% of the AnnualDistributable Income. The REIT Manager currently intends todistribute [REDACTED]% of the Annual Distributable Incomefor the Profit Forecast Period. Distributions will be declared inHong Kong dollars.

Please see “Distribution Policy” in this Document for furtherinformation on Powerlong REIT’s distribution policy. See “RiskFactors” in this Document for a discussion of factors that mayadversely affect the ability of the Powerlong REIT to makedistributions to Unitholders.

Statement of Distributions Unitholders will be paid, in the absence of unforeseencircumstances, total distributions of not less than approximatelyRMB[REDACTED] for the period from the [REDACTED] toDecember 31, 2021, as the REIT Manager’s current policy is todistribute to Unitholders [REDACTED]% of Powerlong REIT’sAnnual Distributable Income for such period, representing anannualized indicative DPU of [REDACTED]% based on the[REDACTED] (excluding other transaction costs) or[REDACTED]% based on the [REDACTED] (excluding othertransaction costs). Such annualized indicative distribution yieldare provided for illustration purposes only, and the actualannualized distribution yield may differ from this illustration.

Tax Considerations Please refer to the section headed “Taxation” in this Document forinformation on certain tax consequences of the purchase,ownership, and disposal of the Units.

Governing Law The Trust Deed, pursuant to which Powerlong REIT isconstituted, is governed by Hong Kong law.


THE [REDACTED]

– 38 –

Termination of Powerlong REIT Powerlong REIT may be terminated by the Trustee or the REITManager in the circumstances set out in the Trust Deed. Pleaserefer to the section headed “The Trust Deed – Termination ofPowerlong REIT” in this Document for further information.

Risk Factors Prospective investors should carefully consider the risksconnected with an investment in the Units. Certain of these risksare discussed in the section headed “Risk Factors” in thisDocument.


THE [REDACTED]

– 39 –

[REDACTED]


INFORMATION ABOUT THIS DOCUMENT AND THE [REDACTED]

– 40 –

[REDACTED]



– 41 –

[REDACTED]



– 42 –

[REDACTED]



– 43 –

Powerlong REIT As constituted by the Trust Deed entered into on [●] inHong Kong

REIT Manager Powerlong REIT Management LimitedRoom 2A, 14/F, Chun Wo Commercial Centre23-29 Wing Wo StreetCentralHong Kong

Directors of the REIT Manager Chairman and Non-executive DirectorHoi Wa Fong

Executive Director and Chief Executive OfficerYong Jia Cherng

Non-executive DirectorsHoi Wa FanHoi Wa Lam

Independent non-executive DirectorsChen XiaoouAllan Wu XiaojunLiu Xiaolan

[REDACTED] of the REIT Manager Yong Jia CherngWen HaixiaTang Qiao

Trustee DB Trustees (Hong Kong) LimitedLevel 60, International Commerce Centre1 Austin Road WestKowloonHong Kong

[REDACTED]

Joint Listing Agents CLSA Capital Markets Limited18/F, One Pacific Place88 QueenswayHong Kong

BOCI Asia Limited26/F, Bank of China Tower1 Garden RoadCentralHong Kong


PARTIES INVOLVED IN THE [REDACTED]

– 44 –

[REDACTED]

Auditor and Reporting Accountant PricewaterhouseCoopersCertified Public AccountantsRegistered Public InterestEntity Auditor22/F, Prince’s Building, CentralHong Kong

[REDACTED]

Legal Advisors to the REIT Manager as to Hong Kong laws:Sidley AustinLevel 39, Two International Finance Centre8 Finance StreetCentralHong Kong

as to PRC laws:Zhong Lun Law Firm23–31/F, South Tower of CP Center20 Jin He East AvenueChaoyang District, BeijingPRC

as to BVI laws:Maples and Calder (Hong Kong) LLP26th Floor, Central Plaza18 Harbour RoadHong Kong



– 45 –

Legal Advisors to the Joint Listing Agents andthe [REDACTED]

as to Hong Kong laws:Jingtian & Gongcheng LLPSuites 3203-3207, 32/FEdinburgh TowerThe Landmark15 Queen’s Road CentralHong Kong

as to PRC laws:Jingtian & Gongcheng45/F, K. Wah Centre1010 Huaihai Road (M)Xuhui DistrictShanghai CityPRC

Legal Advisor to the Trustee Allen & Overy50 Collyer Quay#09-01 OUE BayfrontSingapore 049321

Independent Property Valuer Savills Valuation and Professional Services LimitedRoom 12081111 King’s RoadTaikoo ShingHong Kong

Independent Property Valuer in respect ofConnected Party Transactions

Jones Lang LaSalle Corporate Appraisal andAdvisory Limited7/F, One Taikoo Place979 King’s RoadHong Kong

Building Surveyor Savills Project Consultancy LimitedSuites 805-138/F, 1111 King’s RoadTaikoo ShingHong Kong

Market Consultant Jones Lang LaSalle Corporate Appraisal andAdvisory Limited7/F, One Taikoo Place979 King’s RoadHong Kong

[REDACTED]



– 46 –

An investment in the Units involves significant risks. Prospective investors should consider carefully,together with all other information contained in this Document, the risk factors described below beforedeciding to invest in the Units.

As an investment in a collective investment scheme is meant to produce returns over the long term,investors should not expect to obtain short-term gains.

Investors should be aware that the price of the Units, value of the property and the income from them andthe value of the REIT Properties, may rise or fall. Investors should note that they may not get back theiroriginal investment and that they may not receive any distributions. The occurrence of any of the followingevents could harm Powerlong REIT. If any of these events occurs, the trading price of the Units could declineand you may lose all or part of your investment.

Before deciding to invest in the Units, prospective investors should seek professional advice from theiradvisors regarding their prospective investment in the context of their particular circumstances.

RISKS RELATING TO POWERLONG REIT

The REIT Properties are all located in the PRC, which exposes Powerlong REIT to economic and propertymarket conditions in the PRC.

The REIT Properties are all located in the PRC, which exposes Powerlong REIT to the risk of a downturn in

economic and property market conditions in the PRC. The value of the REIT Properties may be adversely affected

by a number of local property market conditions, such as oversupply of commercial properties, the performance of

other competing commercial properties and reduced demand for commercial space.

Powerlong REIT’s business, financial condition and results of operations also depend, to a large extent, on

the performance of the economy of the PRC. An economic downturn or a downturn in the property market in the

PRC could adversely affect Powerlong REIT.

There are also numerous shopping malls and other types of commercial properties in the PRC that may

compete with the REIT Properties for tenants and cause downward pressure on rental rates.

If, after the [REDACTED], comparable new properties are built or existing properties are upgraded or

refurbished in the areas where the REIT Properties are located, the rental income of Powerlong REIT may be

reduced, thereby adversely affecting Powerlong REIT’s cash flow and the amount of funds available for

distribution to Unitholders.

Powerlong REIT’s results of operations may be adversely affected if the Operations and Property Managerfails to operate or manage the REIT Properties in an effective and efficient manner or the REIT Managerdecides to terminate the Commercial Operational Services Framework Agreement before expiration ordecides not to renew such agreement upon expiration.

The Operations and Property Manager has been engaged to provide certain property management services.

The REIT Manager (for and on behalf of the Powerlong REIT Group) has entered into the Commercial Operational

Services Framework Agreement with the Operations and Property Manager for the provision of certain dedicated

commercial operational services in respect of the REIT Properties including, among other things, leasing,

marketing and tenancy management, daily maintenance, cleaning and security services in relation to the REIT

Properties.


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The failure of the Operations and Property Manager to manage the REIT Properties effectively and efficiently

will adversely affect the underlying value of the REIT Properties and Powerlong REIT’s results of operations and

ability to pay amounts due on its indebtedness and make distributions to Unitholders. In addition, any adverse

changes in Powerlong REIT’s relationship with the Operations and Property Manager could hinder its abilities to

manage Powerlong REIT’s operations and its property portfolio.

In the event of early termination or non-renewal of the Commercial Operational Services Framework

Agreement, subject to market conditions then prevailing, the Project Companies may not be able to substitute the

Operations and Property Manager in a timely manner, or on terms similar to those under the Commercial

Operational Services Framework Agreement. During any period where there is no operations manager or property

manager in place, the REIT Manager will have to operate the REIT Properties directly and Powerlong REIT could

face a substantial disruption to its operations and an increase in costs incurred for management of the REIT

Properties and for certain corporate and administrative services.

The REIT Manager may not be able to achieve its key objectives for Powerlong REIT and its statedstrategies for accomplishing such objectives may change.

The REIT Manager’s key objectives for Powerlong REIT are to provide Unitholders with stable distributions,

sustainable and long-term distribution growth, and enhancement in the value of Powerlong REIT’s properties by

implementing specific strategies outlined in “Strategy” in this Document. There is no assurance that the REIT

Manager will be able to successfully accomplish such objectives, or that it will be able to do so in a timely and cost

effective manner. Unitholders and potential investors should also note that, subject to the requirements of the REIT

Code, the Trust Deed, [REDACTED] and applicable laws and regulations, the REIT Manager has absolute

discretion to determine the strategies of Powerlong REIT. As a result, the strategies outlined in “Strategy” in this

Document may change.

For example, the successful implementation of the investment strategy will depend on a number of factors,

including availability and timely identification of attractive property investments that meet the investment criteria,

property market conditions, and the successful integration of these property investments. Powerlong REIT’s

ability to make new property acquisitions may also be adversely affected by active competition in acquiring

suitable properties. There is no assurance that Powerlong REIT will be able to compete effectively against other

property investors. The asset management strategy will also depend on a number of factors, such as the ability of

the REIT Manager to actively manage early renewal of tenancy agreements, optimizing tenant diversity and

implement competitive leasing programs. There is no assurance that the REIT Manager will be able to implement

these strategies in a timely or effective manner or at all.

Under the REIT Code, Powerlong REIT will be required to distribute at least 90% of its audited annual net

income after tax to Unitholders and Powerlong REIT’s aggregate borrowings shall not at any time exceed 50% of

its total gross asset value. As a result, Powerlong REIT will need to rely primarily on external financing, either by

issuing additional Units or by increasing its borrowings, to fund future acquisitions. Additional equity or debt

financing is subject to prevailing conditions in the equity and debt markets and may not be available on favorable

terms or at all.

Accordingly, there is no assurance that the REIT Manager will be able to successfully implement its stated

strategies, or that any modifications or departure from existing strategies will be successful, or that any changes

will be done in a timely and cost effective manner.


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Powerlong REIT’s portfolio growth depends on its ability to obtain external sources of capital.

The REIT Manager’s policy is to distribute to Unitholders an amount equal to at least 90% of the Annual

Distributable Income for each financial year. Also, in order to maintain Powerlong REIT’s qualification as a REIT,

the REIT Code requires Powerlong REIT to annually distribute at least 90% of its audited annual net income after

tax. In addition, the REIT Manager has the discretion to distribute any additional amounts (including capital).

Therefore, Powerlong REIT may not be able to fund future capital needs, including any necessary acquisition

financing, from operating cash flow. Consequently, it may need to rely on external sources of funding to expand its

property portfolio, which may not be available on commercially acceptable terms or at all. If Powerlong REIT

cannot obtain capital from external sources, it may not be able to acquire properties when strategic opportunities

exist, satisfy its debt obligations or make the necessary cash distributions to the Unitholders to maintain its

qualification as a REIT.

Powerlong REIT’s investments or acquisitions in the future may not be successful, which may adverselyaffect the results of operations of Powerlong REIT.

Powerlong REIT may invest in or acquire other quality income-generating commercial properties in the

future. These assets may expose Powerlong REIT to additional local real estate market conditions, such as

competition and supply and demand. The success of any investment or acquisition will depend on a number of

factors, including the REIT Manager’s ability to identify suitable acquisition targets, complete and integrate

successfully the acquisition into Powerlong REIT’s business, and execute the acquisition strategies. As a result,

there is no assurance that Powerlong REIT’s investments or acquisitions in the future will be successful, which in

turn may incur loss and adversely affect the business, financial condition, the results of operations and prospects of

Powerlong REIT.

Powerlong REIT and the REIT Manager, are all newly established entities and do not have establishedoperating histories for investors to rely on in making an investment decision.

Powerlong REIT was established on [●] and the REIT Manager was incorporated on April 16, 2021.

Accordingly, Powerlong REIT and the REIT Manager have no operating history by which their respective past

performance may be judged and investors may find it difficult to evaluate their business and prospects. In

particular, the historical financial information of the Predecessor Group included in this Document may not

necessarily reflect Powerlong REIT’s results of operations, financial condition and cash flows in the future.

Moreover, there is no assurance that the REIT Manager will be able to successfully operate Powerlong REIT as a

REIT or as a [REDACTED] entity, and there is no assurance that Powerlong REIT will be able to generate

sufficient revenue from operations to make distributions in line with those set out in “Distribution Policy” in this

Document.

Powerlong REIT’s results of operations may be adversely affected if it fails to retain or replace certain keypersonnel of the REIT Manager or the Operations and Property Manager.

Powerlong REIT’s success depends, in part, upon the continued service and performance of the key executive

officers and certain other key senior personnel of the REIT Manager or the Operations and Property Manager.

These persons may leave in the future, and may thereafter compete with Powerlong REIT. The loss of any of these

individuals and the inability to recruit suitable replacements could have a material adverse effect on Powerlong

REIT’s business, financial condition, results of operations and prospects.


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Powerlong REIT’s operations may be adversely affected if the Trustee retires or is removed and a newtrustee cannot be identified and appointed in a timely manner.

The Trustee may retire or be removed in the future. Pursuant to the REIT Code, the Trustee shall not retireexcept upon the appointment of a new trustee whose appointment has been approved by the SFC and the retirementof the Trustee shall take effect at the same time as the new trustee takes up office. However, such retirement of theTrustee may incur disruption to the regular management and operation of Powerlong REIT. For more details on theretirement and removal of the Trustee, please see “The Trust Deed—Retirement and Removal of the Trustee” inthis Document. There is no assurance that the new trustee will be found and appointed in a timely manner or theterms of the new trust deed will be the same or similar to the current Trust Deed.

The amount that Powerlong REIT can borrow is limited, which may affect the operations of PowerlongREIT.

Powerlong REIT’s borrowings are limited by the REIT Code to no more than 50% of its total gross assetvalue. Upon [REDACTED], Powerlong REIT is expected to have aggregate borrowings of RMB2,207 million,which represent the amounts that will be drawn down under the Facilities. Other than such amounts, PowerlongREIT is not expected to have any borrowings at the time of [REDACTED]. Powerlong REIT’s borrowings mayexceed 50% of its total gross asset value as a result of a decrease in the market value of its properties, whetherfollowing a revaluation of its assets or otherwise. In such case, the REIT Manager will be required to retain fundsthat could otherwise be distributed to the Unitholders so as to increase Powerlong REIT’s total gross asset value,and Powerlong REIT may have to refrain from engaging in further borrowing. Powerlong REIT may also beprohibited from drawing down on its banking facilities or using overdrafts for general corporate or other purposesdue to the borrowing limit pursuant to the REIT Code, and may face difficulties in securing financing in a timelymanner and on favorable commercial terms. In addition, the use of leverage may increase the exposure ofPowerlong REIT to adverse economic factors such as rising interest rates and economic downturns.

Powerlong REIT may face risks associated with debt financing and the debt covenants in the facilitiesagreements which could limit or adversely affect Powerlong REIT’s operations.

Powerlong REIT’s level of debt and the covenants to which it is subject under its current facilities agreementsor future debt financing could have significant adverse consequences, including, but not limited to, the following:(i) its cash flow may be insufficient to meet its required principal and interest payments; (ii) it may not be able toborrow additional funds as needed or on commercially acceptable terms; (iii) it may not be able to refinance itsindebtedness upon maturity or may only be able to do so with less favorable terms; (iv) it may default on itsobligations, and the lenders or mortgagees may foreclose on its properties and require a forced sale of themortgaged property; and (v) it is subject to restrictive covenants under the facilities agreements and may be subjectto similar covenants in future loan agreements, which may limit or adversely affect Powerlong REIT’s operations,such as their ability to incur additional indebtedness, acquire properties, make certain other investments, makecapital expenditures, or make distributions from the PRC-incorporated property-holding companies to PowerlongREIT and from Powerlong REIT to Unitholders. Further, the terms of Powerlong REIT’s facilities agreements mayrequire Powerlong REIT to comply with certain financial covenants. Powerlong REIT’s ability to meet thesefinancial covenants may be affected by events beyond its control, such as a downward revaluation of assets, and theREIT Manager cannot guarantee that Powerlong REIT will always be able to meet these covenants.

Failure of Powerlong REIT to meet any payment obligation or to comply with any covenant may, afterexpiration of the applicable cure period, constitute an event of default. Powerlong REIT’s default under any one ofits loan agreements may result in a cross-default under its other loan agreements. In such case, the lending banksmay declare an event of default and demand immediate repayments of all outstanding loans and other sums payableunder such loan agreements.

If any one of these events were to occur, Powerlong REIT’s financial condition, cash flow, cash available fordistributions to Unitholders, trading price per Unit, and its ability to satisfy its debt service obligations could bematerially and adversely affected.


RISK FACTORS

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Powerlong REIT is subject to interest rate risks.

The business of Powerlong REIT is affected by local, national and international economic conditions. In

particular, fluctuations in interest rates may increase the interest costs under borrowings obtained by Powerlong

REIT and may adversely affect the financial position of Powerlong REIT and the ability of Powerlong REIT to

make distributions to Unitholders. Additionally, fluctuations in interest rates, as well as changes in other economic

market conditions, may have an adverse effect on the property market, and may have a material adverse effect on

the revenue of Powerlong REIT, the value of its properties, and its financial performance and condition. For details

of the borrowings of Powerlong REIT, please see “Material Agreements and Other Documents—Facilities

Agreements” in this Document.

Currency fluctuations, especially in the value of RMB, could adversely affect the amount of distributions toUnitholders, and in turn, the price of the Units.

Powerlong REIT may be subject to exchange rate risk in satisfying its foreign currency denominated

obligations. The income and profit of Powerlong REIT from its assets are denominated in RMB, which will have to

be converted into Hong Kong dollars for the payment of the distributions to the Unitholders. Fluctuations in the

exchange rate of RMB against Hong Kong dollars may therefore have a material adverse impact on the level of

distributions to Unitholders. The value of RMB against Hong Kong dollar and other foreign currencies fluctuates

and is affected by changes in the PRC and international political and economic conditions and many other factors

outside Powerlong REIT’s control.

There are potential conflicts of interest between Powerlong REIT and Powerlong Group.

Powerlong REIT invests in commercial properties in the PRC. Powerlong Group is a property developer in

China principally engaged in the real estate projects businesses, including residential property development and

sales, property investment and other property development related services. There may be circumstances where

Powerlong REIT will compete directly with Powerlong Group and its associates (acting on their own behalf or as

manager of third-party entities).

The REIT Manager is an indirect subsidiary of Powerlong Holdings. The REIT Manager may have conflicts

of interest with potential acquisitions from Powerlong Group or its affiliates and in agreeing to the terms of such

potential acquisitions. Powerlong REIT may compete for suitable investment opportunities with other subsidiaries

or affiliates of Powerlong Group. Any such potential conflicts of interest may not necessarily be resolved in favor

of Powerlong REIT. The Operations and Property Manager may also face conflicts of interest in other activities of

Powerlong CM Group or affiliates at an operational level in connection with identifying potential tenants and

procuring services. Mr. Hoi Wa Fong, Ms. Hoi Wa Fan and Ms. Hoi Wa Lam of the REIT Manager are also directors

of Powerlong Group and certain affiliated companies of Powerlong Group and, as a result, may have conflicts of

interest in their involvement in the business, policies and other affairs of both Powerlong REIT and Powerlong

Group and their affiliated companies. Additionally, the REIT Properties may face competition for customers from

other shopping malls owned by Powerlong Group and/or managed by Powerlong CM, which could also lead to

potential conflicts of interest.


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Despite the corporate governance measures currently in place, such as Chinese walls and clear reporting linesto safeguard confidential information and mitigate conflicts of interest, conflicts of interest between PowerlongREIT and Powerlong Group in relation to acquisitions of properties, competition for tenants and propertymanagement matters may arise in the future. For further details, please see “Connected Party Transactions” in thisDocument.

The business of Powerlong REIT relies on certain “Powerlong” trademarks and brands and PowerlongREIT may lose the right to use such trademarks and brands.

Powerlong REIT is branded and marketed as a real estate investment trust which is managed by PowerlongGroup and sponsored and supported by Powerlong Group. Pursuant to the Trademark Licensing Agreement,Powerlong Group Development, a company indirectly owned as to 88.9% by Mr. Hoi Kin Hong has granted theREIT Manager the right and license to use certain “Powerlong” trademarks in its company names and inconnection with the business and for the benefit of Powerlong REIT. However, degrading or adverse marketdevelopments relating to the “Powerlong” brand or any negative publicity affecting Powerlong GroupDevelopment or any of its subsidiaries or associates may result in negative perceptions of Powerlong REIT and theREIT Manager. For details of the Trademark Licensing Agreement, please see “Material Agreements and OtherDocuments—Trademark Licensing Agreement” in this Document.

The REIT Manager’s operations are subject to regulations and licensing conditions.

The REIT Manager is required to be licensed under the SFO for the regulated activity of asset management.No assurance can be given that the REIT Manager will be operated and managed in accordance with its licensingand approval conditions. In particular, if any of the responsible officers departs the REIT Manager which makesthe REIT Manager having less than two responsible officers, this will result in the REIT Manager suspending orceasing its business to manage Powerlong REIT. There is no assurance that the REIT Manager will be able to retainits responsible officers or find replacements for any departing responsible officers on commercially acceptableterms and on a timely basis in order to continue the REIT Manager’s business and maintain its license. In the eventthat the REIT Manager ceases to be licensed under the SFO or ceases or suspends its business, Powerlong REITmay need to appoint other management companies as its manager. In the event that no other managementcompanies duly licensed or approved can be identified to replace the existing REIT Manager, the Trustee mayterminate Powerlong REIT.

Powerlong REIT’s internal control policies and procedures may not be effective and Powerlong REIT maynot be able to detect and prevent fraud or other misconduct committed by its tenants, employees of the REITManager and other third parties.

The REIT Manager has established corporate governance policies and operational procedures that aim toprevent misconduct and fraud in operation and financial management of Powerlong REIT. However, there is noassurance that these policies and procedures will prove effective and eliminate misconduct and fraud by themanagement team and employees of the REIT Manager. In addition, Powerlong REIT is managed by managementteams based in two jurisdictions (the PRC and Hong Kong) which may increase the risk of violations of thesepolicies and procedures. If Powerlong REIT’s internal control policies and procedures are not effective, PowerlongREIT’s business, financial condition, results of operations and prospects may be adversely affected. Theabove-mentioned misconduct includes:

• hiding unauthorized or unsuccessful activities, resulting in unknown and unmanaged risks or losses;

• intentionally concealing material facts or failing to perform necessary due diligence proceduresdesigned to identify potential risks, which are material to Powerlong REIT when deciding whether toinvest in or dispose of an asset;


RISK FACTORS

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• maliciously vandalizing Powerlong REIT’s properties, or offering bribes to counterparties in return for any

type of benefits or gains;

• improperly using or disclosing confidential information;

• misappropriating funds;

• engaging in misrepresentation or fraudulent, deceptive or otherwise improper activities;

• engaging in unauthorized or excessive transactions to the detriment of the tenants; or

• violating applicable laws or Powerlong REIT’s internal policies and procedures.

Certain liabilities and obligations of Non-REIT Properties may subsist upon [REDACTED], which mayadversely affect the results of operations of Powerlong REIT.

The Existing Project Companies had historically conducted property development activities and had held and

disposed of various properties including commodity houses consisting of residential properties, commercial

properties other than shopping malls such as shop units of shopping streets, apartments and office buildings, hotels

and certain ancillary car parking spaces, i.e. the Non-REIT Properties. Although they are no longer carrying on

such property development activities, they may remain to be subject to certain liabilities and obligations in relation

to such Non-REIT Properties. See “Reorganization, Structure and Organization of Powerlong

REIT—Reorganization and Asset Injection—(b) Transfer of the REIT Properties—Certain liabilities and

obligations which may subsist upon [REDACTED]” for details.

On the other hand, pursuant to the sale and purchase agreements of the commodity houses sold by Lin‘an

Project Company, the relevant purchasers or Lin’an Project Company is entitled to terminate the agreement and

return (or request for the return of, as the case may be) the relevant commodity house if the other party is in breachof certain terms of the agreement. Furthermore, some commodity houses have already been sold by the ExistingProject Companies, but their registration of transfers with the relevant PRC authorities had not yet beencompleted. See “Reorganization, Structure and Organization of Powerlong REIT—(b) Transfer of the REITProperties—Non-REIT Properties held by the Existing Project Companies” for details. The Directors expect thatthe return of Non-REIT Properties will occur only in rare circumstances and will not have material and adverseimpact on Powerlong REIT. In addition, as advised by the PRC Legal Advisors, the non-registration due to buyer’snon-cooperation is extremely unlikely to cause any liability, loss, damage, fine, fee or cost to Powerlong REITGroup.

To further protect the interest of the Unitholders, pursuant to the Reorganization Deed, Powerlong Holdingshas unconditionally and irrevocably undertaken to indemnify Powerlong REIT, among others, to the fullest extentpermissible by law, for any liability, losses, damages, fines, fees and costs (on a full indemnity basis) which it maysuffer in respect of the sale and return of the Non-REIT Properties as well as other liabilities and obligations inrelation to the property development business which had historically been conducted by certain members of thePowerlong REIT Group.

However, the REIT Manager cannot assure you that the return of Non-REIT Properties, or any other liabilitiesand obligations relating to the Non-REIT Properties will not occur, and the REIT Manager cannot assure you thatthe indemnity provided by Powerlong Holdings will be sufficient to cover all liability, losses, damages, fines, feesand costs arising thereof, which in turn may adversely affect the business, financial condition, the results ofoperations and prospects of Powerlong REIT.


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The Predecessor Group recorded net current liabilities during the Track Record Period, and PowerlongREIT may be subject to liquidity risks accordingly.

The Predecessor Group had net current liabilities of RMB360.1 million, RMB983.2 million, RMB1,137.5

million and RMB984.9 million, respectively, as of December 31, 2018, 2019 and 2020 and June 30, 2021. Going

forward, there can be no assurance that Powerlong REIT will not continue to have net current liabilities that would

expose it to liquidity risk. Powerlong REIT’s future liquidity and ability to make additional capital investments

necessary for its operations and business expansion will depend primarily on its ability to maintain sufficient cash

generated from operating activities and to obtain external financing. If, after [REDACTED], Powerlong REIT

continues to have net current liabilities, its working capital for business operations may be constrained. If

Powerlong REIT is unable to generate sufficient positive operating cash flows or obtain additional financing to

meet its working capital needs, Powerlong REIT’s business, financial condition and results of operations may be

materially and adversely affected.

Powerlong REIT may be involved in legal and other proceedings arising out of its operations from time totime.

The Predecessor Group during the Track Record Period had been involved in disputes with various parties

involved in the development and sale of properties, including contractors, property purchasers and other third

parties. Legal proceedings against Powerlong REIT relating to property development, tenancies and other disputes

may also arise from time to time. These disputes may lead to protests or legal or other proceedings and may result

in damage to Powerlong REIT’s reputation, substantial costs and diversion of resources and REIT Manager’s

attention. In addition, Powerlong REIT may disagree with regulatory bodies in certain respects in the course of its

operations, which may subject Powerlong REIT to administrative proceedings and unfavorable decisions that

result in liabilities. The REIT Manager cannot assure you that Powerlong REIT will not be involved in any major

legal proceedings in the future. Any involvement in these disputes may have a material adverse effect on

Powerlong REIT’s business, financial condition and results of operations.

Powerlong REIT may face risks relating to investments in Relevant Investments

Investments in Relevant Investments may involve, without limitation, the following characteristics and risks:

Market risk

If Powerlong REIT invests in Relevant Investments in the nature of equity securities, debt securities or

property funds, it will be susceptible to the risk of all or certain parts of the market in which it has invested. The

market value of stocks, debt securities and property funds will fluctuate in response to (but not limited to) general

market and economic conditions, and will also be exposed to changes and fluctuation in commodity prices, foreign

exchange rates and interest rates. In particular, since the Hong Kong dollar is pegged to the US dollar, interest rate

movements in Hong Kong will likely be directly and heavily influenced by interest rate movements in the United

States. In addition, there is the risk of inflation, and the return on debt securities such as bond investments may not

necessarily be sufficient to meet with or negate any increase in commodity prices. Such market fluctuations and

uncertainties may affect the value of the Relevant Investments and have an adverse impact on the level of

distributions to Unitholders.


RISK FACTORS

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Default/Credit risk

Powerlong REIT may face financial loss if an issuer or counterparty to the Relevant Investments defaults in

payment, or experiences a decline in its payment capacity. A corporate event such as a merger or takeover may

have an adverse impact on the financial position and thus the credit rating of the issuer. Any decline in the

creditworthiness of an issuer or counterparty may have a major impact on the value of the Relevant Investments.

Price volatility risk

Substantial fluctuations in the price of a financial instrument may negatively affect the investment. In the

case of equity securities, stock prices can be volatile and unpredictable subject to different local and international

market and economic factors. The price volatility of any stock may result from speculations in the market and

changes in business risk of the underlying operations. Moreover, a stock may be suspended from trading on the

relevant stock exchange or market, during which time, Powerlong REIT would not be able to sell or otherwise

liquidate its position in such stock on such stock exchange or market. The price of the stock may fluctuate after its

resumption of trading due to changes in market and/or business risks during the period of suspension. These

fluctuations can be unpredictable, and such occurrences could adversely affect Powerlong REIT’s financial

conditions and results of operations.

Liquidity risk

Powerlong REIT may not be able to sell a sufficient amount of the Relevant Investments at will or at any

desired time and at a satisfactory price because demand in Relevant Investments may become low during certain

periods of time, notwithstanding the Relevant Investments being relatively liquid when they were acquired and

transparently priced. In such circumstances, Powerlong REIT may be forced to sell the Relevant Investments on

unfavorable terms.

Management and policy risk

Powerlong REIT may inadvertently invest in companies with improper or reputation management practices,

which conduct transactions that are detrimental to Powerlong REIT’s interests as an investor or, in the case of

property funds, the risk of poor performance by fund managers. Such improper actions or practices may affect the

value of the Relevant Investments and have an adverse impact on the level of distributions to Unitholders.

Meanwhile, changes in local and/or international government policies and regulations may have a profound impact

on the pricing of equity securities in the relevant sectors or industries.

Risks in relation to property funds

Investments in local or overseas property funds may involve additional risks. There is no assurance that a

property fund can necessarily achieve its investment objective and strategy. Any property fund is susceptible to the

relevant real estate market conditions if it concentrates its investment in a single property or asset class. In the case

of overseas property funds, changes in exchange rates may have an impact and adverse effect on the value of the

fund’s assets. Further, investing overseas will entail regional as well as political risks.


RISK FACTORS

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RISKS RELATING TO THE REIT PROPERTIES

Powerlong REIT may be unable to renew tenancy agreements or re-let vacant space at the same or higherrental rates or at all upon expirations or early terminations of tenancy agreements.

The REIT Manager cannot guarantee that the tenancy agreements will be renewed when they expire or that

the REIT Properties will be re-let at rental rates equal to or above the current average rental rates. Further, when

the tenants of the REIT Properties decide not to renew their tenancy agreements or decide to terminate early,

Powerlong REIT may not be able to re-let the space in a timely manner or at all. Even if tenants decide to renew or

let new space, the terms of renewals or new tenancy agreements, including the cost of required renovations or

concessions to tenants, may be less favorable to Powerlong REIT than current tenancy terms. For details on the

expiry profile of Powerlong REIT’s portfolio, please see “The REIT Properties and Business—Portfolio of REIT

Properties—Duration of the Tenancy Agreements” in this Document. If the rental rates for the REIT Properties

decrease, or Powerlong REIT’s existing tenants do not renew their tenancy agreements or Powerlong REIT does

not re-let a significant portion of the spaces for which tenancy agreements are scheduled to expire, Powerlong

REIT’s business, financial condition, results of operations, cash flow and cash available for distributions to

Unitholders could be materially and adversely affected.

The loss of key tenants or any breach of their obligations under the tenancy agreements may have an adverseeffect on Powerlong REIT’s financial condition and results of operations.

In the event that any key tenant experiences a downturn in its businesses, it may be unable to make timely

rental payments. Factors that affect the ability of such major tenants to meet their obligations include, but are not

limited to: (i) their financial position; (ii) the local economic conditions impacting business operations; (iii) the

ability of such major tenants to compete with their competitors; (iv) where such major tenants have sub-let the

REIT Properties, the failure of the sub-tenants to pay rent; and (v) material losses in excess of insurance proceeds.

Powerlong REIT’s claims for unpaid rent against a bankrupt tenant may not be paid in full. In addition, Powerlong

REIT would incur time and expense relating to any eviction proceedings and would be unable to collect rent during

such proceedings. As a result of these events, Powerlong REIT’s cash flow, rental income and profit could decrease

and it may not be able to make distributions to Unitholders. Furthermore, loss of major tenants, especially tenants

who are international or national leading brands, may adversely affect the attractiveness and prestige of the REIT

Properties and thus Powerlong REIT’s business, financial condition, results of operations and prospects.

The REIT Properties may face increasing competition from other properties in their respective markets.

Although the REIT Properties are landmark shopping malls to the target customers in the located districts,

they may still face competition from other shopping malls in their respective markets. For further details regarding

the competitive landscape of the REIT Properties, please see “The REIT Properties and Business—Competition”

in this Document.

Furthermore, there can be no assurance that new or existing competing properties will not offer lower rental

rates or greater convenience, service, amenities or environmental conditions in the market in which the REIT

Properties operate. An inability to compete effectively could result in loss of tenants and rental income, and a

material adverse effect on Powerlong REIT’s business, financial condition, results of operations and prospects.


RISK FACTORS

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The macroeconomic conditions and real estate markets of the PRC have been and may continue to beaffected by the COVID-19 pandemic. As a result, Powerlong REIT’s results of operations, financialcondition and cash flows may be adversely and materially affected by the COVID-19 pandemic.

Toward the end of 2019, a highly infectious novel coronavirus was identified. The World HealthOrganization, or the WHO, later named it COVID-19, and is closely monitoring and evaluating the situation. InMarch 2020, the WHO characterized the outbreak of COVID-19 a pandemic. Many countries have imposedunprecedented measures to halt the spread of the COVID-19 pandemic, including lockdowns and travel bans. Withan aim to contain the COVID-19 pandemic, the PRC Government has also imposed strict measures across the PRCsince January 2020, including, but not limited to, lock-down measures across various cities in the PRC, extendedshutdown of business operations, and mandatory quarantine requirements on infected individuals and anyonedeemed potentially infected. Such measures were largely lifted towards the second half of 2020 as the number ofnewly confirmed cases began to dwindle. In July 2021, however, new cases started to emerge in China, leading torenewed travel restrictions and quarantine requirements in affected areas. Going forward, the COVID-19 pandemicis likely to continue to have an adverse impact on the livelihood of the people in and the economy of the PRC.

In addition, the COVID-19 pandemic has severely affected the business of commercial property tenants inChina. Some tenants are suffering from income reduction or facing bankruptcy, insolvency and other financialdifficulties. In this case, Powerlong REIT might experience delay in receiving rent payments, and may berequested to waive rent for a certain period and, both rent and Occupancy Rate were affected. Tenants have alsoadjusted their operating strategies to stay in business.

Various incentive policies to boost the economy had been adopted by the PRC Government and its localcounterparts in 2020, such as tax reduction, government investment and relaxed fiscal policies, began to showpositive outcome. According to the data released in February 2021 by the National Bureau of Statistics of China,or the National Statistics Bureau, in 2020, China’s annual GDP increased by 2.3%, the fixed asset investmentincreased by 2.7%, and retail sales decreased by 3.9%.

The Predecessor Group granted rent reductions and waivers amounting to one to two months of rent in early2020 to tenants of certain of the REIT Properties. It remains uncertain as to when the COVID-19 pandemic will becompletely contained globally. In the event that the COVID-19 pandemic is not completely controlled globally, orthat the COVID-19 cases begin to remerge in the PRC at a scale that triggers a renewed round of lock-downs andsignificant travel restrictions, Powerlong REIT’s financial condition, results of operations and prospects may bematerially and adversely affected as a result of the changes in the outlook of the PRC property market, slowdownin China’s economic growth, negative business sentiment or other factors.

The REIT Properties may require significant capital expenditure to be maintained in good condition andPowerlong REIT may not have sufficient cash to make such capital expenditure.

There can be no assurance as to the physical state of the REIT Properties or the capital expenditure necessaryto maintain the REIT Properties in the future. The REIT Properties will require periodic capital expenditure,refurbishments, renovation and improvements to remain competitive and in good condition. Powerlong REIT maynot be able to fund capital improvements solely from cash from its operating activities. Consequently, PowerlongREIT may need to rely on external sources of funding to conduct significant maintenance works on its REITProperties, which may not be available on favorable terms or at all and which is subject to a gearing ratio of 50%of its total gross asset value under the REIT Code.

Physical damage to the REIT Properties resulting from fire or other causes may also impose unbudgeted costson Powerlong REIT and lead to a significant disruption to the business and operation of the REIT Properties. Thismay result in an adverse impact on the business, financial condition, results of operations and prospects ofPowerlong REIT and its ability to make distributions to Unitholders.


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Asset enhancement initiatives deployed by the REIT Manager may not achieve their desired results or mayincur significant costs to Powerlong REIT.

The REIT Manager may deploy asset enhancement initiatives and operation improvements to optimize theREIT Properties’ rental income growth, improve tenant diversity and occupancy levels, and prudently controlexpenses in order to achieve organic and sustainable growth for Powerlong REIT. For further information, pleasesee “Strategy—Asset Management Strategy” in this Document. These asset enhancement initiatives may incursignificant costs to Powerlong REIT, and there is no assurance that any such initiatives will achieve the intendedand desired results for Powerlong REIT.

The building standards applicable in the PRC may become more stringent and Powerlong REIT may incursignificant costs to ensure conformity with such amended standards.

The REIT Properties have passed the examination process and obtained completion certifications certifyingthat it can be handed over for occupation or use in accordance with the building standards that currently apply tothe REIT Properties. However, new and more stringent building standards may retroactively apply to the REITProperties in the future, and the REIT Manager may be required to renovate or redevelop the REIT Properties inorder to keep up with the latest building standards. Compliance with the latest amended building standards couldincur significant costs for Powerlong REIT. In addition, if any of the REIT Properties does not meet the mostrecent requirements for building standards and materials, it may be less desirable than developments which havebeen built in accordance with the latest standards, which may affect the ability to sell or let the Relevant Propertyand consequently may materially affect the business, financial condition, results of operations and prospects ofPowerlong REIT.

The Appraised Value is based on various assumptions and the price at which Powerlong REIT is able to sellthe REIT Properties may be different from the Appraised Value or the initial acquisition price of the REITProperties.

The Valuation Report is contained in Appendix IV to this Document. In conducting its valuation of the REITProperties, the Independent Property Valuer primarily adopted an income capitalization method. The valuation wasbased on certain assumptions and required a subjective determination of certain factors relating to the REITProperties, such as its relative market position, its financial and competitive strengths, location and its physicalcondition.

There can be no assurance that the assumptions are accurate measures of the market or that the REITProperties were valued accurately. Further, the Appraised Value of the REIT Properties is not an indication of, anddoes not guarantee, a sale price at that value at present or in the future. The price at which Powerlong REIT maysell the REIT Properties in the future may be lower than the Appraised Value or the initial acquisition price of theREIT Properties. These factors may have a material adverse effect on the business, financial condition, results ofoperations and prospects of Powerlong REIT.

Decrease in the fair value of the REIT Properties at revaluation may constrain distributions and furtherborrowings of Powerlong REIT.

The REIT Properties are subject to regular revaluation as required under the REIT Code. Under PowerlongREIT’s accounting policy as currently required under the REIT Code and by the applicable HKFRS, any decreasein the valuation of its investment property could result in non-cash charges to the statement of profit or loss andother comprehensive income, and may give rise to a substantial decline in annual consolidated net profit. Under theTrust Deed, Annual Distributable Income for a financial year is the amount calculated by the REIT Manager (basedon the audited financial statements of Powerlong REIT for that financial year) as representing the consolidatedaudited net profit after tax of Powerlong REIT, the Special Purpose Vehicles and Joint Venture Entities for thatfinancial year, taking into account the Adjustments.


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In the event a property revaluation results in a reduction in Powerlong REIT’s gross asset value and consequently

Powerlong REIT’s borrowings as a proportion of its total gross asset value rise above the applicable borrowing

limit requirement, the REIT Manager would be required to retain funds that would otherwise be distributable to the

Unitholders so as to increase Powerlong REIT’s total gross asset value and Powerlong REIT may be constrained

from further borrowing.

The due diligence exercise on the REIT Properties may not have identified all material defects, breaches oflaws and regulations and other deficiencies.

In connection with the [REDACTED], due diligence reviews, surveys and inspections of the REIT Properties

have been conducted by the Building Surveyor. A letter from the Building Surveyor in relation to its due diligence

survey report is set out in Appendix VI to this Document. The due diligence survey comprised, among other things:

(i) visual inspection of the REIT Properties; (ii) visual inspection of the current building layouts and usage against

the latest approved building plans; (iii) visual inspection of major accessible building elements, including the

facade, units, external walls, roofs, corridors, lavatories, electrical and mechanical plant rooms; and (iv) visual

inspection of all major building services installations, including mechanical ventilation, air-conditioning, fire

services, electricity, lifts and plumbing. Nevertheless, the due diligence process with respect to the physical

condition of the REIT Properties has been limited. There can be no assurance that such reviews, surveys or

inspections (or the relevant review, survey or inspection reports on which Powerlong REIT, Powerlong Group, the

REIT Manager, the Trustee and the Joint Listing Agents have relied on) would have revealed all defects or

deficiencies affecting the REIT Properties. In particular, there can be no assurance as to the absence of: (i) latent

or undiscovered defects or deficiencies; or (ii) inaccuracies or deficiencies in such reviews, surveys or inspection

reports.

Design, construction or other latent property or equipment defects in the REIT Properties, or any other

properties that may in the future be in Powerlong REIT’s portfolio, may require additional capital expenditure,

special repair or maintenance expenses or the payment of damages or other obligations to third parties, other than

those disclosed in this Document. Costs or liabilities arising from such property or equipment defects may involve

significant and potentially unpredictable patterns and levels of expenditure which may have a material adverse

effect on Powerlong REIT’s earnings and cash flows. The costs of maintaining the REIT Properties and the risk of

unforeseen maintenance or repair requirements tend to increase over time as the REIT Properties age. The business

and operation of the REIT Properties may be disrupted and adversely affected as a result of renovation works and

it may not be possible to collect the full rate of, or, as the case may be, any rental income on the space affected by

such renovation work.

Existing or planned amenities and transport infrastructure near the REIT Properties may be closed,relocated, terminated, delayed or uncompleted.

There is no assurance that the amenities and transportation infrastructure and public transport services near

the REIT Properties will not be closed, relocated, terminated, delayed or uncompleted, or that there will be no

impediment to the traffic flow in the vicinity. Such closure, relocation, termination, delay, non-completion or

impediment may adversely affect the accessibility of the REIT Properties. This may then have an adverse effect on

the attractiveness and marketability of the REIT Properties to customers and may adversely affect the business,

financial condition, results of operations and prospects of Powerlong REIT, thereby reducing the ability of

Powerlong REIT to make distributions to the Unitholders.


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Powerlong REIT may suffer material losses not covered by insurance or in excess of insurance proceeds.

The REIT Properties could suffer physical damage caused by fire or other causes and Powerlong REIT maysuffer public liability claims, resulting in losses (including loss of rent), which may not be fully compensated byinsurance proceeds. In addition, Powerlong REIT has not obtained insurance covering certain types of losses, suchas losses from war and nuclear contamination. Should an uninsured loss or a loss in excess of insured limits occur,Powerlong REIT or the Project Companies could be required to pay compensation and/or lose the capital investedin the REIT Properties as well as anticipated future revenue from the REIT Properties. Nonetheless, PowerlongREIT or the Project Companies would remain liable for any debt or other financial obligation, such as committedcapital expenditures, related to the relevant REIT Properties. It is also possible that third-party insurance carrierswill not be able to maintain reinsurance sufficient to cover any losses that may be incurred. Any material uninsuredloss could materially and adversely affect Powerlong REIT’s business, financial condition, results of operationsand prospects.

In addition, when its current insurance policies expire, Powerlong REIT will have to seek renewal of thepolicies and negotiate acceptable terms of coverage, exposing it to the volatility of the insurance markets,including the possibility of increased premiums. The REIT Manager will regularly monitor the state of theinsurance market, but it cannot anticipate what coverage will be available on commercially reasonable terms infuture policy years. Any material increase in insurance premiums or decrease in available coverage in the futurecould adversely affect Powerlong REIT’s business, financial condition and results of operations.

Accidents in Powerlong REIT’s business may expose it to liability and reputational risk.

Accidents may occur during the course of Powerlong REIT’s business. Powerlong REIT engages theOperations and Property Manager and third-party service providers to provide repair and maintenance services tothe REIT Properties. Repair and maintenance services such as elevator maintenance involve the operation of heavymachinery and therefore, are generally subject to certain risks of accidents. These occurrences could result indamage to, or destruction of, properties of the communities, personal injury or death and legal liability. Working ina dangerous environment presents risks to its employees and third-party service providers. In addition, PowerlongREIT may be exposed to claims that may arise due to employees’ or third-party service providers’ negligence orrecklessness when performing repair and maintenance services. Powerlong REIT may be held liable for theemployees’, service providers’ or tenants’ injuries or deaths. Powerlong REIT may also experience interruptionsto its business and may be required to change the manner in which it operates as a result of governmentalinvestigations or the implementation of safety measures upon occurrence of accidents. Any of the foregoing couldadversely affect Powerlong REIT’s reputation, business, financial position and results of operations.

Powerlong REIT may be adversely affected by increases in operating expenses without a correspondingincrease in revenue in the same period.

Powerlong REIT’s results of operations and ability to make distributions to Unitholders may be adverselyaffected if its operating expenses increase without a corresponding increase in revenue. Factors which could leadto an increase in operating expenses include, but are not limited to, the following: (i) increases in taxes and otherstatutory charges; (ii) changes in statutory laws, regulations or government policies which increase the cost ofcompliance with such laws, regulations or policies; (iii) changes in direct or indirect tax policies, laws orregulations; (iv) increases in sub-contracted service costs; (v) increases in repair and maintenance costs; (vi)increases in the rate of inflation; (vii) defects affecting Powerlong REIT’s properties; (viii) environmentalpollution in connection with Powerlong REIT’s properties; (ix) increases in insurance premium; (x) increases inthe cost of utilities; (xi) costs and expenses not covered by the existing insurance policies; and (xii) increases inlabor costs.


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The REIT Properties are located on land which is under long-term land use rights granted by the PRCGovernment. There is uncertainty about the amount of land grant premium which the Project Companieswill have to pay and additional conditions which may be imposed if the REIT Manager decides to seek anextension or renewal of the land use rights for the REIT Properties.

The REIT Properties are directly held by the respective Project Companies under land use rights granted by

the PRC Government. Under PRC laws, the maximum term of the land use rights is 40 years for commercial use

purposes and 50 years for mixed-use purposes. The existing terms of land use rights in respect of the REIT

Properties will expire in years between 2046 and 2058. For details, please see “The REIT Properties and

Business—Portfolio of REIT Properties” in this Document. Upon expiration, the land use rights will return to the

PRC Government unless the holder of land use rights applies for and is granted an extension of the term of the land

use rights.

These land use rights do not have automatic rights of renewal and the holders of land use rights are required

to apply for extension of the land use rights one year prior to the expiration of their terms under the PRC laws. If

an application for extension is granted (and such grant would usually be given by the PRC Government unless the

land in issue is to be taken back for the purpose of public interests), the holder of land use rights will be required

to, among other things, pay a land grant premium. An additional land premium may also be payable if the holder of

land use rights elects to change the use stated on the real estate ownership certificate of the land in issue. If no

application for extension is made, or such application is not granted, the properties upon the land use rights will be

disposed of in accordance with the land use right grant contracts. As there are few instances where land use right

granted by the PRC Government similar to those granted for the REIT Properties has run its full term as of the

[REDACTED], the REIT Manager is unable to determine the exact amount of the land grant premium which the

Project Companies will have to pay or any additional conditions which may be imposed if the REIT Manager

decides to seek an extension of the land use rights for the REIT Properties upon the expiry thereof.

If the PRC Government charges a high land grant premium, imposes additional conditions, or does not grant

an extension of the term of the land use rights of any REIT Properties, the operations and business of the relevant

Project Companies could be disrupted, and the business, financial condition and results of operations of Powerlong

REIT could be materially and adversely affected.

The land which the REIT Properties occupy or parts thereof may be resumed compulsorily by the PRCGovernment when the term of the land expires or before the end of such term where a legitimate publicinterest for requisition of such land is established, and any compensation paid to Powerlong REIT may notbe sufficient.

The PRC Government has the right to resume compulsorily any land in the PRC pursuant to the provisions of

applicable legislation. In certain circumstances, the PRC Government may, where it considers to be in the public

interest, terminate land use rights before the expiration of the term. In the event of any compulsory resumption of

property in the PRC, the amount of compensation to be awarded will be based on the open market value of a

property and is assessed on the basis prescribed in the relevant law. If the REIT Properties are subsequently

resumed by the PRC Government, the level of compensation paid to Powerlong REIT pursuant to this basis of

calculation may be less than the price which Powerlong REIT has paid or would have paid for such properties. In

addition, the PRC Government has the right to terminate long-term land use rights and expropriate the land in the

event the grantee fails to observe or perform certain terms and conditions pursuant to the land use rights grant

contracts, in which case compensation may be below market value, or at all. Any of the above cases may have a

material adverse effect on the business, financial condition, results of operations and prospects of Powerlong

REIT.


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Powerlong REIT may face penalties for the non-registration of the leases in the PRC.

According to Urban Real Estate Administration Law of the PRC (《中華人民共和國城市房地產管理法》), the

lessor and lessee shall sign written leases regulating the term of the lease, lease purpose, lease price, repair

responsibilities as well as other rights and obligations of both parties. The leases shall be registered and filed with

the relevant government authorities. According to Administrative Measures for Commodity House Leasing (《商品房屋租賃管理辦法》), the parties to a lease shall register and file with the relevant government authorities within

30 days after the execution of leases and if the filing is not made, the governmental authorities may require that the

filing to be made within a stated period of time, failing which, they may impose a fine ranging from RMB1,000 to

RMB10,000. As of the Latest Practicable Date, certain Project Companies were unable to register some of the

leases in respect of the REIT Properties with the relevant land and real estate administration bureaus primarily due

to the administrative difficulty in seeking tenants’ cooperation.

As advised by the PRC Legal Advisors, non-registration of the abovementioned leases does not affect the

rights or entitlements of Powerlong REIT to lease out the REIT Properties to tenants, or the validity or the binding

effect of the leases over contracting parties. However, Powerlong REIT may be subject to requests by the local

authorities to complete the registration formalities, and penalties may be imposed for the non-registration of

leases. As of the Latest Practicable Date, none of the Project Companies had received a request from any

government authority in the PRC to complete the registration formalities or been penalized for the non-registration

of the leases. However, there can be no assurance that Powerlong REIT will not be subject to such penalties and/or

requests for undertaking the registration formalities in the future, and Powerlong REIT’s business, financial

condition and results of operations may be adversely affected as a result.

RISKS RELATING TO THE REAL ESTATE INDUSTRY AND THE PRC

The real estate industry may be adversely affected by changes in laws and regulations in the future.

The real estate industry is subject to extensive governmental regulations. As with other property owners in the

PRC, Powerlong REIT must comply with various requirements mandated by the PRC laws and regulations,

including the policies and procedures established by local authorities designed for the implementation of such

laws and regulations. In particular, the PRC Government exerts considerable direct and indirect influence on the

development of the PRC property sector by imposing industry policies and other economic measures, such as

control of foreign exchange, taxation, financing and foreign investment. Among other things, these measures

include raising benchmark interest rates of commercial banks, placing additional limitations on the ability of

commercial banks to make loans to property developers, imposing additional taxes and levies on property sales,

restricting foreign investment in the PRC property sector and restricting domestic individuals to purchase

properties in some cities in the PRC.

For additional information on the PRC laws and regulations relating to the real estate market, please see

Appendix VII to this Document. Many of the real estate industry policies carried out by the PRC Government are

unprecedented and are expected to be refined and improved over time. This refining and adjustment process may

not necessarily have a positive effect on Powerlong REIT’s operations and future business development. The REIT

Manager cannot assure that the PRC Government will not adopt additional and more stringent industry policies

and regulations governing, for example, property ownership and tenancy matters, in the future. If Powerlong REIT

fails to adapt its operations to comply with new policies and regulations that may come into effect from time to

time with respect to the real estate industry, or such policy changes disrupt Powerlong REIT’s business prospects

or cause Powerlong REIT to incur additional costs, Powerlong REIT’s business, financial condition, results of

operations and prospects may be adversely affected.


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The PRC legal system is in the process of continuous development and has inherent uncertainties, includingthe interpretation of PRC laws and regulations.

The taxation and real estate laws and in particular, the laws relevant to the rights of foreign investors and theentities through which they may invest are in the process of continuous development and often involve inherentuncertainties in the PRC.

The PRC legal system is based on written statutes and prior court decisions can only be cited as reference.Since 1979, the PRC Government has promulgated laws and regulations in relation to economic matters such asforeign investment, corporate organization and governance, commerce, taxation and trade, with a view todeveloping a comprehensive system of commercial law. However, as these laws and regulations are continuallyevolving in response to changing economic and other conditions, and because of the limited volume of publishedcases and their non-binding nature, any particular interpretation of PRC laws and regulations may not bedefinitive. The PRC may not accord equivalent rights to those rights investors might expect in countries with moresophisticated real estate laws and regulations.

Furthermore, the PRC is geographically large and divided into various provinces and municipalities and assuch, different laws, rules, regulations and policies apply in different provinces and they may have different andvarying applications and interpretations in different parts of the PRC. Legislation or regulations, particularly forlocal applications, may be enacted without proper prior notice or announcement to the public. Accordingly, theREIT Manager may not be aware of the existence of new legislation or regulations if Powerlong REIT invests inthe PRC property market in the future.

There is at present also no integrated system in the PRC from which information can be obtained in respect oflegal actions, arbitrations or administrative actions. Even if an individual court-by-court search was performed,each court may refuse to make the documentation which it holds available for inspection. Accordingly, there is arisk that the PRC entities being acquired by Powerlong REIT in the future may be subject to proceedings whichmay not have been disclosed. Agreements which are governed under the PRC laws may be more difficult to enforceby legal or arbitral proceedings in the PRC than in countries with more mature legal systems.

The outlook for the financial markets and economic conditions is uncertain and Powerlong REIT may beadversely affected by economic slowdown caused by the trade dispute between the PRC and the UnitedStates.

China’s economic growth may also slow down due to weakened exports as a result of the recent developmentssurrounding the trade dispute with the United States. Adverse economic conditions could negatively affectPowerlong REIT if they result in:

• a negative impact on the ability of tenants to pay their rent in a timely manner or to continue theirtenancies;

• a negative impact on Powerlong REIT’s ability to attract new tenants, retain existing tenants andmaintain high occupancy and rental rates;

• an increased likelihood that one or more of (i) Powerlong REIT’s lending banks; or (ii) PowerlongREIT’s insurers becoming unable to honor or renew their financial commitments to Powerlong REIT, orthat Powerlong REIT cannot obtain sufficient funding for its operations or refinance its indebtednesswhen necessary; or

• an increase in counterparty risk (being the risk of monetary loss which Powerlong REIT may be exposedto if any of its counterparties fails to meet its obligations under the terms of its respective transactions).

Any of these factors could have a material adverse effect on Powerlong REIT’s business, financial condition,results of operations and prospects.


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The Offshore Property Holding Companies and Powerlong REIT may be classified as “resident enterprise”for the purposes of EIT, which could result in unfavorable PRC tax consequences for Powerlong REIT andthe Unitholders.

The EIT Law provides that non-resident enterprises whose “place of effective management” are located in thePRC are considered “resident enterprises” for EIT purposes and would be subject to EIT at a rate of 25% on theirworldwide taxable income. Under the Implementation Rules to the EIT Law, a “place of effective management” isdefined as the place where substantive and overall management and control over production and businessoperations, personnel, finance and accounting, and properties, etc., of the enterprise is conducted.

The SAT has issued Circular 82 to provide guidance on whether an offshore enterprise with a PRC enterpriseas its primary controlling shareholder is a PRC residential enterprise. Circular 82 sets forth four conditions fordetermining if an offshore enterprise with a PRC enterprise as its primary controlling shareholder has establishedeffective management and control in the PRC for residential enterprise purposes. The PRC residential enterprisestatus is recognized only when confirmation from the SAT is obtained via self-application or if this is deemed soby the tax authorities. Circular 82 is targeted at offshore enterprises with PRC enterprises as their primarycontrolling shareholder. It is possible that the SAT may make reference to the conditions used in Circular 82 whendetermining whether an offshore enterprise controlled by a non-PRC enterprise is a PRC residential enterprise. Itremains unclear how the PRC tax authorities will interpret such a broad definition and whether Powerlong REIT orany of the offshore entities of Powerlong REIT will be deemed to be a PRC residential enterprise. As of the LatestPracticable Date, none of the offshore entities of Powerlong REIT has been notified or informed by the PRC taxauthorities that it is considered as a PRC residential enterprise for EIT purposes.

If the PRC tax authorities subsequently determine that Powerlong REIT or the Offshore Property HoldingCompanies are deemed to be or should be classified as PRC residential enterprises, they will be subject to EIT ata rate of 25% on their worldwide taxable income. In addition, any dividends paid by the PRC residential enterpriseto its Unitholders or foreign shareholders and gains derived from the disposal of Units or equity interest in the PRCresidential enterprise by its Unitholders or foreign shareholders would be subject to PRC withholding tax at a rateof 10%, subject to applicable tax treaty relief.

Therefore, if any of the Offshore Property Holding Companies or Powerlong REIT is deemed to be a PRCresidential enterprise, this may adversely affect the amount of distributions made by Powerlong REIT to theUnitholders.

In addition, should there be any change to the existing PRC tax laws or regulations as mentioned above or theinterpretation thereof, or any new PRC laws or regulations promulgated in the future, which have the effect ofincreasing the rate of withholding tax or restricting or withdrawing the preferential tax treatment, or whichotherwise adversely affect the tax payable in respect of the distributions by Powerlong REIT, there may be amaterial adverse impact on the Unitholders.

Powerlong REIT may be adversely affected by the illiquidity of property investments.

Powerlong REIT invests predominantly in real estate. In particular, the high value properties in whichPowerlong REIT may from time to time invest are relatively illiquid. The market for acquiring or disposing ofcommercial building properties has historically not been very active in the PRC and is affected by many factors,such as general economic conditions, availability of financing, interest rate, supply and demand of real propertyand other factors beyond Powerlong REIT’s control. In addition, commercial buildings may become unprofitabledue to competition, age, decreased demand or other factors, but commercial buildings may not be readilyconverted for alternative uses. Conversion of a commercial building to a building with an alternative use wouldalso generally require extra capital expenditures. Such factors, together with the fact that the tenancy agreementsusually continue following the sale of commercial properties, may reduce the attractiveness of the properties topotential purchasers, thus affecting the ability of Powerlong REIT to dispose of its property investments whenrequired or warranted to do so. Although it is intended that the properties of Powerlong REIT will be held on a


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long-term basis and the REIT Manager will thus have a longer time horizon for implementing any plans to dispose

of Powerlong REIT’s interest in any property that has reached a stage such that it offers only limited scope forgrowth, these factors could nonetheless have a material adverse effect on Powerlong REIT’s business, financialcondition, results of operations, prospects and ability to make expected distributions to Unitholders.

RMB is not freely convertible.

The ability of the Project Companies to remit RMB offshore and of Powerlong REIT to make distributions tothe Unitholders is subject to foreign exchange controls. The PRC Government continues to regulate conversionbetween RMB and foreign currencies, including Hong Kong dollar, despite PRC Government’s significantrelaxation of control in recent years over routine foreign exchange transactions on the current account.

The SAFE, under the authority of PBOC, is empowered with the functions of administering all mattersrelating to foreign exchange, including the enforcement of foreign exchange control regulations. Transactionsinvolving conversion between foreign currencies and RMB are subject to significant foreign exchange controls andthe approval of the SAFE. PRC Government continues to regulate conversion between RMB and foreigncurrencies, including Hong Kong dollars, despite the significant reduction over the years by PRC Government incontrolling routine foreign exchange transactions on the current account. There is no assurance that the currentpolicies regarding conversion of RMB into foreign currencies will not be subject to tighter controls or restrictionsin the future. In this regard, in the event that Powerlong REIT invests in the PRC property market, any changes tothe foreign exchange regulations of the PRC may result in foreign exchange losses to Powerlong REIT andsubsequently reduce the distribution payable to Unitholders.

In addition, there is no assurance that the PRC Government will continue to gradually liberalize the level ofcontrol over cross-border remittances in the future or that new PRC regulations which have the effect of restrictingremittances into or out of the PRC will not be promulgated. Powerlong REIT’s results of operations and theamount distributable to Unitholders would be adversely affected by any changes to the foreign exchange andcross-border remittance regulations in the PRC if it invests in the PRC property market. In the event that a problemarises in the future with respect to the repatriation of proceeds originating from the REIT Properties out of thePRC, the REIT Manager will consider an alternative arrangement at the time, including credit facilities or theestablishment of reserves, in order to meet its obligation to make distributions on a timely basis.

The ability of Powerlong REIT’s PRC-incorporated companies to declare and pay dividends is limited by theavailability of retained earnings and other factors, which may in turn have an impact on Powerlong REIT’sdistributions to Unitholders.

Powerlong REIT operates principally through the Project Companies established in the PRC and relies ondividend payments and other payments and/or distributions from the Project Companies for its income and cashflows to satisfy its payment obligations and to make distributions to Unitholders.

Under PRC law, a PRC enterprise is only permitted to declare and repatriate dividends on after-tax earningsafter deducting amounts for mandated reserves. These reserve funds, if set aside discretionally by the board ofdirectors of a Sino-foreign joint venture or mandatorily by law, cannot be repatriated even if an enterprise has nolosses or likely prospect of losses or these reserve funds are not needed for their prescribed purpose. Additionally,dividends may only be paid from after-tax earnings after taking into account depreciation expense, which is anon-cash charge. These reserves and depreciation charges potentially create a significant pool of trapped cash thatcannot be used to pay dividends. If there are not enough retained earnings for these reserves, the amount ofdividends that the Project Companies can declare will be limited, thereby potentially reducing the amount of cashthat can be used for distribution to Unitholders.


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In the event that the Project Companies are unable to obtain tax clearance certificates from the PRC taxauthorities in a timely manner, Powerlong REIT’s ability to make distributions to Unitholders will also beadversely affected. As advised by the PRC Legal Advisors, there is no impediment on the remittance ofdividends on retained earnings of the Project Companies out of the PRC to Powerlong REIT provided thatthere are no accumulated losses and the required contributions to statutory reserves have been made and thatsuch remittance is made in accordance with the procedures set out under the relevant PRC foreign investmentand foreign exchange laws and regulations. The ability to make payments to Powerlong REIT may also berestricted by applicable laws and regulations that may restrict the repatriation in RMB out of the PRC. Pleasesee “—RMB is not freely convertible” above.

Further, the profits available for distribution by the Project Companies are determined in accordancewith PRC GAAP and relevant PRC laws. Such profits available for distribution by the Project Companies maydiffer from those by Powerlong REIT, which will be determined using HKFRS, in certain significant respects,including but not limited to differences in the accounting treatments of depreciation, amortization andimpairment loss in the REIT Properties and other fixed assets of the Project Companies and deferred taxthereon. Thus, the amount of profit which is available for distribution by the Project Companies asdetermined pursuant to the relevant PRC laws and accounting requirements could be less than the amount ofany distribution determined to be payable by Powerlong REIT to the Unitholders under HKFRS pursuant toits distribution policy.

Accordingly, there can be no assurance that Powerlong REIT will receive sufficient dividends from theProject Companies to meet Powerlong REIT’s own distribution requirements. In such circumstances,Powerlong REIT may be required to take loan facilities to satisfy the payment of distributions to Unitholders.If Powerlong REIT utilizes loan facilities or other forms of borrowings to support the making of distributionsto Unitholders, additional finance costs may be incurred and that in turn will reduce the distributable incomeof Powerlong REIT.

Powerlong REIT is subject to extensive PRC regulatory control on foreign investment in the real estatesector.

Pursuant to the Circular on Strengthening Administration of Approval and Filing of Foreign Investment inReal Estate Industry (《關於加強外商投資房地產業審批備案管理的通知》), real estate enterprises established byoverseas investors within the territory of China shall not conduct arbitrage through purchasing and sellingdomestic real properties, whether built or under construction. The regulation is believed to be aimed at controllinginflow of foreign capital by regulating the practice of reselling properties for profit adopted by some foreigninvestors.

The promulgation of the regulation is an indication that the PRC Government has been imposing stricterpolicies on foreign investment in the real estate industry. There can be no assurance that the PRC Government willnot deem any transaction of real estate property or any transfer of equity interest in real estate companies asmaking profit through transaction of real estate. There is also no assurance that the PRC Government will notimplement additional restrictions on foreign investment in the real estate industry and sale and purchase of realestate property by foreign investors. Such measures may adversely affect Powerlong REIT’s investments as it mayexperience difficulty in remitting profits generated from the Project Companies or residual income fromliquidation of the Project Companies to overseas. In addition, in accordance with the laws and regulations of thePRC, the Project Companies are required to obtain and maintain various valid licenses, permits, or satisfy filingrequirements in order to commence and operate their business. The Project Companies are required to comply withapplicable laws, regulations and standards and are subject to regular and random inspections for compliance by therelevant PRC authorities. Failure to pass these inspections, or the loss of or failure to obtain or renew any licensesand permits, could disrupt the operations and business of the Project Companies and the business, financialcondition, results of operations and prospects of Powerlong REIT could be materially and adversely affected.


RISK FACTORS

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Changes in the political, economic and social conditions in the PRC may have a material adverse effect onPowerlong REIT’s financial condition and results of operations.

Currently, all of the REIT Properties are located in the PRC. Accordingly, Powerlong REIT’s business,financial condition, results of operations and prospects depend, to a significant extent, on the economicdevelopments in the PRC. The political, economic and social conditions in the PRC differ from those in mostdeveloped countries in many respects, including: (i) economic and political structure; (ii) level of development;(iii) growth rate; (iv) control of foreign exchange; and (v) allocation of resources.

While the PRC Government has implemented economic reform measures emphasizing utilization of marketforces in the development of the PRC economy and the PRC economy has experienced significant growth in thepast 40 years, growth has been uneven, both geographically and among different sectors of the economy. Inaddition, the PRC Government continues to regulate industries’ development by imposing top-down policies andcontrol over the PRC’s economic growth through various means such as the allocation of resources, monetarypolicy, control over foreign currency denominated payment obligations and the provision of preferential treatmentto particular industries and companies. The REIT Manager cannot predict whether changes in the PRC’s political,economic and social conditions will have any material adverse effect on Powerlong REIT’s business, financialcondition, results of operations or prospects.

There are significant uncertainties under the EIT Law relating to the withholding tax liabilities of theProject Companies.

Under the EIT Law and its implementation rules, the profits of a foreign-invested enterprise generated in2008 and onwards which are distributed to its immediate holding company outside the PRC are generally subjectto a withholding tax rate of 10%. However, the withholding tax rate of 10% may be reduced under an applicable taxtreaty between the PRC and the jurisdiction in which the overseas parent company is incorporated containing aprovision that specifically reduces such withholding tax. Pursuant to the avoidance of double taxation arrangementbetween Hong Kong and the PRC, such rate is lowered to 5% if a Hong Kong tax resident enterprise owns over 25%of a PRC company, and the Hong Kong tax resident enterprise is the “beneficial owner” of the dividendsdistributed by the PRC company.

The SAT promulgated rules concerning the determination of a recipient’s beneficial owner status under taxtreaties. In that regard, the currently Applicable Rules are principally set out in the Bulletin 9. Bulletin 9 providesthat a “beneficial owner” is a person who has the ownership and control over the relevant income or the rights orproperties that generate the relevant income. A beneficial ownership analysis will be made based on a totality offacts of each case and the “substance-over-form” principle to determine whether a recipient is entitled to tax treatybenefits. Generally speaking, a conduit or shell company without substantial business activities will not berecognized as a “beneficial owner.”

The SAT grants certain exceptions for a listed company in Bulletin 9. Where the recipient of the dividendincome is an overseas resident enterprise which is listed or is 100% directly or indirectly held by a listed companyand the listed company and the overseas resident enterprise and all intermediate holding companies between thelisted company and the overseas resident enterprise are resident in the same country/jurisdiction, the overseasresident enterprise could be recognized as the beneficial owner of the dividend income.

The REIT Properties are currently directly owned by the Project Companies, which are held by the HKIntermediary Companies. Although the REIT Manager believes that the HK Intermediary Companies, which aredirectly held by the BVI Intermediary Companies, may have the opportunity to qualify as the “beneficial owner” ofthe dividends from the Project Companies, so as to avail themselves of the avoidance of double taxation agreementbetween Hong Kong and the PRC under the listed company exception in Bulletin 9, there is no assurance thatPowerlong REIT will be able to enjoy the reduced withholding tax rate of 5% under the avoidance of doubletaxation arrangement between Hong Kong and the PRC for dividends distributed by the Project Companies.


RISK FACTORS

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Moreover, according to a tax circular issued by the SAT in February 2009, if the main purpose of an offshorearrangement is to obtain a preferential tax treatment, the PRC tax authorities have the discretion to adjust thepreferential tax rate for which an offshore entity would otherwise be eligible. Furthermore, if there is any changeto the existing PRC tax laws or regulations or the interpretation thereof, or any new PRC laws or regulations arepromulgated in the future which have the effect of increasing the rate of withholding tax or restricting orwithdrawing the preferential tax treatment, or which otherwise adversely affect the tax payable in respect of thedividend payment by the Project Companies, there may be a material adverse impact on Powerlong REIT’s abilityto make distributions to the Unitholders.

RISKS RELATING TO AN INVESTMENT IN THE UNITS

The Units have never been publicly traded and the [REDACTED] may not result in an active or liquidmarket for the Units.

Prior to the [REDACTED], there has been no public market for the Units and an active public market for theUnits may not develop or be sustained after the [REDACTED]. Although the Units will be [REDACTED] on theStock Exchange following the completion of the [REDACTED], this does not guarantee that a trading market forthe Units will develop or, if a market does develop, the liquidity of that market. The REIT Manager is requiredunder the Trust Deed to use best efforts to ensure that a minimum of 25% (or such other percentage specified orpermitted by the SFC from time to time) of the outstanding Units are held by the public. There can be no assuranceas to the percentage of Units which will be held by the public or as to the number of Unitholders in PowerlongREIT at any time.

Powerlong REIT cannot be privatized by way of the scheme of arrangement or compulsory acquisitionmechanisms provided under the Companies Ordinance.

Powerlong REIT is not a company and the Companies Ordinance is not applicable to Powerlong REIT.Therefore, the scheme of arrangement mechanism and the compulsory acquisition mechanism as provided underthe Companies Ordinance which may be used to privatize a company listed on the Stock Exchange and to which theCompanies Ordinance applies cannot be used to privatize Powerlong REIT.

An investment in the Units presents taxation risk.

Powerlong REIT, as a collective investment scheme constituted as a unit trust and authorized under section104 of the SFO, is exempt from Hong Kong profits tax, although the Special Purpose Vehicles and the ProjectCompanies are subject to taxation in the respective jurisdictions in which they were incorporated and the REITProperties are subject to taxation in the PRC. Any change in the tax status of Powerlong REIT, the ProjectCompanies or any other entities which are controlled by Powerlong REIT, or in taxation legislation in the PRC,Hong Kong or the Cayman Islands generally or any other jurisdiction affecting the Unitholders could affect thevalue of the investments held by Powerlong REIT or affect Powerlong REIT’s ability to achieve its investmentobjectives or alter after-tax returns to the Unitholders. REITs in Hong Kong may differ in significant aspects,including tax treatment, from REITs in other jurisdictions. If there is any doubt as to tax position, investors shouldconsult their own tax advisors.

Unitholders will be structurally subordinated to all existing and future claims of creditors of the ProjectCompanies.

The claims of creditors of the Project Companies will have priority to the assets of such entities over theclaims of Powerlong REIT. The Project Companies may in the future incur unsecured or secured obligationsdirectly. Secured creditors of the Project Companies would have prior rights of claim over the pledged assets. To acertain extent, direct creditors of the Project Companies would rank ahead of the claims of Powerlong REIT.


RISK FACTORS

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Unitholders have no right to require the redemption of their Units.

Unitholders have no right to require the redemption of their Units. Therefore, there can be no assurance thata Unitholder will be able to dispose of its Units at the [REDACTED] or any price, or at all. Accordingly,Unitholders may only be able to liquidate or dispose of their Units through a sale of such Units to third parties inthe secondary market.

The price of the Units may decline after the [REDACTED]

The [REDACTED] of the Units will be determined by agreement between the REIT Manager, PowerlongGroup and [REDACTED] (on behalf of the [REDACTED]) and may not be indicative of the [REDACTED] forthe Units after completion of the [REDACTED]. The Units may trade at prices significantly below the[REDACTED] after the [REDACTED] and the price of the Units may be volatile. The price of the Units willdepend on many factors, which may change from time to time, including but not limited to: (i) the perceivedprospects of Powerlong REIT’s business and investments and the PRC real estate market; (ii) differences betweenPowerlong REIT’s actual financial and operating results and those expected by investors and analysts; (iii) changesin Powerlong REIT’s revenues or earnings estimates or analysts’ recommendations or projections; (iv) changes ingeneral economic or market conditions both domestically and internationally; (v) the market value of PowerlongREIT’s assets; (vi) changes in market valuations of similar companies; (vii) increases in interest rates; (viii) theperceived attractiveness of the Units against those of other equity securities, including those not relating to the realestate sector; (ix) the future size and liquidity of the market for the Units and the Hong Kong REIT marketgenerally; (x) any future changes to the regulatory system, including the tax system, both generally andspecifically in relation to Hong Kong REITs and owners and operators of property in East China and Central Chinaor elsewhere; (xi) the ability on Powerlong REIT’s part to implement successfully its investment and growthstrategies and to retain its key personnel; and (xii) broad market fluctuations, including weakness of the equitymarket and increases in interest rates.

For these reasons, among other things, Units may trade at prices that are higher or lower than the attributableNAV per Unit. If Powerlong REIT retains operating cash flow for investment purposes, as working capital reservesor for other purposes, these retained funds, while increasing the value of its underlying assets, may notcorrespondingly increase the [REDACTED] of the Units. Any failure on Powerlong REIT’s part to meet marketexpectations with regard to future earnings and cash distributions may adversely affect the [REDACTED] for theUnits. In addition, there is no guarantee provided to investors. Unitholders may not get back their full investmentamount. If Powerlong REIT is terminated or liquidated, it is possible that investors may lose all or part of theirinvestment in the Units.

The forward-looking statements and information in this Document, including the profit forecast, may proveinaccurate.

This Document contains forward-looking statements regarding, among other things, forecast of net profitsand distribution levels for the period from the [REDACTED] to December 31, 2021. These forward-lookingstatements are based on a number of assumptions regarding the REIT Manager’s strategies and environment inwhich Powerlong REIT or the REIT Manager will operate in the future, which are subject to significantuncertainties and contingencies, many of which are outside of Powerlong REIT’s control. Moreover, PowerlongREIT’s revenue is dependent on a number of factors, including the ability of the REIT Manager to fully implementits strategies, the receipt of dividends and distributions, directly or indirectly, from each Project Company as wellas rent from the REIT Properties. Such rent, dividends and distributions may decrease for a number of reasons,including the lowering of occupancy and rental rates, and insolvency or delay in rent payment by tenants, whichmay adversely affect Powerlong REIT’s ability to achieve the forecast distributions as some or all events andcircumstances assumed may not occur as expected, or events and circumstances which are not currentlyanticipated may arise. Because such statements and financial information reflect the REIT Manager’s current viewconcerning future events, such statements and financial information necessarily involve risks, uncertainties and


RISK FACTORS

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assumptions. These statements speak only as of the date they are made and reflect only the REIT Manager’s viewsas of that time and the REIT Manager undertakes no obligation to update them in light of new information,circumstances or future developments. While the REIT Manager has no reason to doubt the reasonableness of itsassumptions on which the forward-looking statements are based, there are known and unknown risks, uncertaintiesand other factors which may cause the actual results, performance or achievements of Powerlong REIT or the REITManager to be materially different from any future results, performance or achievements expressed or implied bysuch forward-looking statements and financial information.

Therefore, Powerlong REIT’s actual results may be materially different from the forecast. Although the REITManager considers the assumptions to be reasonable, no assurance can be given that the assumptions will berealized.

Distributions to the Unitholders will be subject to the availability of cash flow from the companies held byPowerlong REIT.

The REIT Properties are held through the Project Companies, and Powerlong REIT will rely, directly orindirectly, on dividend payments and other distributions from the Project Companies for its income and cash flows.In order to meet its payment obligations and to pay distributions to the Unitholders, Powerlong REIT will rely onthe receipt of direct dividends, distributions, interest or intra-group loan repayments from the companies held byit.

There can be no assurance that the Project Companies will have sufficient distributable or realized profits orsurpluses in any future period to pay dividends, make distributions, pay interest, or make repayments or advances.The ability of the Project Companies to make such payments may be restricted by, among other things, theirrespective business and financial positions, any operating losses, the availability of distributable profits, changesin accounting standards, ability of obtaining financings, applicable laws and regulations which may restrict thepayment of dividends, or the terms of agreements to which they are, or may become, a party. The occurrence ofsuch factors would adversely affect the level of distributions paid to the Unitholders.

Property yield on real estate to be held by Powerlong REIT is not equivalent to yield on the Units.

Generally, property yield depends on Net Property Income and is calculated as the amount of revenuegenerated by the properties, less the expenses incurred in maintaining, operating, managing and leasing theproperties compared against the current value of the properties. Distribution yield on the Units, however, dependson the distributions payable on the Units, after taking into account other expenses including (i) taxes, (ii) interestcost for any debt facilities, (iii) REIT management fees and trustee’s fees, and (iv) other operating costs includingadministrative fees of Powerlong REIT, as compared with the purchase price of the Units.

The number of Units available for future sale could have adverse effects on the Unit price of PowerlongREIT.

No prediction can be made as to the effect, if any, that the issue of Units in the future, or the availability of theUnits for future sale, will have on the [REDACTED] of the Units.

Upon completion of the [REDACTED], it is expected that Powerlong Holdings will own [REDACTED]%(or [REDACTED]% if the [REDACTED] is exercised in full) of the Units. Although there are restrictions on thedisposal of Units by Powerlong Holdings for a lock-up period ending on the first anniversary of the[REDACTED], there can be no assurance that sales of substantial numbers of Units by other parties will not occuror that Powerlong Holdings will not dispose of a substantial portion of Units upon the lapse of such restrictions.Sales of a substantial number of Units by Powerlong Holdings or other parties in the public market following the[REDACTED], or the perception that such sales could occur, could adversely affect prevailing market prices forthe Units.


RISK FACTORS

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The NAV per Unit will be diluted if further issues are priced below the existing NAV per Unit.

The Trust Deed contemplates new issues of Units, the issue price for which may be above, at or below the

current NAV of Powerlong REIT. Where new Units are issued at a price less than the existing NAV per Unit, this

will result in dilution on a NAV per Unit basis.

Unitholders’ interests will be diluted if all or part of the REIT Manager’s compensation is paid in Units.

All or part of the REIT Manager’s compensation may be paid in Units in lieu of cash, in which event

Unitholders will experience dilution in their holdings of Units. In addition, any issue of the Units below Powerlong

REIT’s NAV for payment to the REIT Manager would result in immediate dilution to Unitholders. For further

details, please see “The REIT Manager—Further Details Regarding the REIT Manager—Fees, Costs and Expenses

of the REIT Manager” in this Document.

Certain laws, rules and regulations affecting companies listed on the Stock Exchange do not generally applyto REITs listed on the Stock Exchange or to holdings of Units and only limited information may be availablein relation to the interests held by Substantial Unitholders and other connected persons of Powerlong REIT.

Unitholders’ rights differ from, and may be less protected in certain respects than, those granted to

shareholders of companies listed on the Stock Exchange, as more fully described below.

Although the REIT Code contains provisions which are intended to address certain issues under the Listing

Rules, not all of the Listing Rules apply to REITs, including Powerlong REIT, as such entities are not “listed

issuer(s)” within the meaning of those rules. For example, in accordance with the REIT Code, interests in Units

held by connected persons of Powerlong REIT are required to be disclosed in the annual report of Powerlong REIT.

However, as the SFO does not state that the rules on disclosure of interests set out in Part XV of the SFO apply to

Units, and the provisions of the Trust Deed requiring Unitholders to disclose their interests in Powerlong REIT do

not have the force of law, this may render it difficult for the REIT Manager to enforce such provisions.

Certain rights in relation to Units in which a person has an interest or is deemed to have an interest may besuspended under the provisions of the Trust Deed.

The Trust Deed contains provisions that require relevant persons to disclose to the REIT Manager

information in relation to the acquisition or disposal of interests in the Units. If the REIT Manager believes a

person has not complied with such disclosure of interest provisions in the Trust Deed, irrespective of whether such

person is a Unitholder, the REIT Manager may, in its absolute discretion, take certain actions in respect of all or

part of the Units in which such person holds or is deemed to hold an interest. Such actions may include suspending

the voting rights of such Units, suspending the payment of distributions on such Units, imposing an administrative

fee for such non-compliance, suspending the registration and/or declining to register any transfer of such Units.

The Units may be [REDACTED] from the Stock Exchange.

The Stock Exchange imposes certain requirements for the continued [REDACTED] of securities, including

the Units, on the Stock Exchange. Investors cannot be assured that Powerlong REIT will continue to meet the

requirements necessary to maintain the [REDACTED] of Units on the Stock Exchange or that the Stock Exchange

will not change the [REDACTED] requirements. Powerlong REIT may be terminated if the Units are

[REDACTED] from the Stock Exchange.


RISK FACTORS

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The REIT Manager estimates that the total [REDACTED] from the [REDACTED], which consist entirely of

[REDACTED] to the [REDACTED] from the [REDACTED] of the [REDACTED], will be approximately

HK$[REDACTED] (based on the [REDACTED]), and approximately HK$[REDACTED] (based on the

[REDACTED]), assuming the [REDACTED] is not exercised.


USE OF [REDACTED]

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OWNERSHIP OF AND INTEREST IN UNITS

So far as the Directors are aware, save as disclosed below, no person will, upon completion of the

[REDACTED], hold or be deemed to hold an interest in 5% or more of the issued Units.

The following table sets out the number and percentage of Units to be held or, pursuant to Part XV of the SFO

(which, except for sections 328 and 351 thereof, will be deemed to have effect after the [REDACTED], under the

terms of the Trust Deed), deemed to be interested in, by the following persons (i) upon completion of the

[REDACTED] assuming no exercise of the [REDACTED]; and (ii) upon completion of the [REDACTED]

assuming full exercise of the [REDACTED]:

Nature ofinterest

Upon completion of the[REDACTED] assuming no

exercise of the [REDACTED]

Upon completion of the[REDACTED] assuming fullexercise of the [REDACTED]

No. of Units

% of totalUnits in

issue No. of Units

% of totalUnits in

issue

Powerlong Holdings Beneficialowner

[REDACTED] [REDACTED] [REDACTED] [REDACTED]

Skylong HoldingsLimited(Note)

Interest in acontrolledcorporation


Mr. Hoi Kin Hong(Note) Interest in acontrolledcorporation


Ms. Wong Lai Chan(Note) Interest ofspouse


Public Unitholders [REDACTED] [REDACTED] [REDACTED] [REDACTED]

Total [REDACTED] 100.0 [REDACTED] 100.0

Note:

Powerlong Holdings is owned as to approximately 43.59% by Skylong Holdings Limited, a company wholly owned by Mr. Hoi Kin

Hong. By virtue of the SFO, each of Skylong Holdings Limited and Mr. Hoi Kin Hong is deemed to be interested in the same number of

Units in which Powerlong Holdings is interested in. Mr. Hoi Kin Hong and Ms. Wong Lai Chan also hold approximately 0.69% and

0.07% of direct interest in Powerlong Holdings, respectively. Ms. Wong Lai Chan is the spouse of Mr. Hoi Kin Hong.


OWNERSHIP OF AND INTEREST IN UNITS

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Distributions to Unitholders will, subject to compliance with applicable legal and regulatory requirements,be declared and paid in Hong Kong dollars. The REIT Manager’s policy is to distribute to Unitholders an amountof no less than 90.0% of Powerlong REIT’s Annual Distributable Income for each financial year.

For these purposes, and under the terms of the Trust Deed, “Annual Distributable Income” for a financial yearis the amount calculated by the REIT Manager (based on the audited financial statements of Powerlong REIT forthat financial year) as representing the consolidated audited net profit after tax of Powerlong REIT’s. The SpecialPurpose Vehicles and Joint Venture Entities for that financial year, taking into account the Adjustments (as definedbelow) and, for the avoidance of doubt, calculated after accounting for the Base Fee and the Variable Fee payableto the REIT Manager and excludes any additional discretionary distributions out of capital. After eliminating theeffects of these Adjustments, Annual Distributable Income may be different from the net profit recorded for therelevant financial year.

“Adjustments” means adjustments of certain items which are charged or credited to the consolidatedstatement of profit or loss and other comprehensive income for the relevant financial year or relevant distributionperiod (as the case may be) of Powerlong REIT and the Special Purpose Vehicles (pro-rated, if applicable, toPowerlong REIT’s interest in the real estate held), including: (i) unrealized property revaluation gain and losses,including impairment provisions and reversals of impairment provisions; (ii) goodwill impairment (charged)and/or negative goodwill (credited); (iii) differences between financial costs recognized on the financialstatements and interest paid and payable in accordance with contractual obligations during that financial year orthat distribution period (as the case may be); (iv) realized gains on the disposal of properties and/or disposal of theSpecial Purpose Vehicle or Joint Venture Entity which holds such properties; (v) fair value gains and losses onfinancial instruments; (vi) deferred tax charges/credits in respect of property valuation movements commercialbuilding allowances/capital allowances, withholding tax on retained profits to be distributed and other tax losses orother deductions claimed; (vii) allocation of statutory reserve as required by applicable laws; (viii) the portion ofthe REIT Manager’s fee that is paid in the form of Units; (ix) non-cash foreign exchange gains or losses; (x) costsof any [REDACTED] of Units, Convertible Instruments or other forms of debt and/or securities that are expensedthrough the consolidated statement of profit or loss and comprehensive income but are funded by proceeds fromthe issuance of such Units, Convertible Instruments or other forms of debt and/or securities; (xi) depreciation andamortization in respect of a real estate directly or indirectly owned by Powerlong REIT, and its ancillarymachinery, equipment and other fixed assets; and (xii) other material non-cash gains/losses, in each case asrecorded in the consolidated statement of profit or loss and comprehensive income for the financial year. Based onand in sole reliance upon the information and assurances provided by the REIT Manager, and having regard to theminimum distribution requirement expressed in paragraph 7.12 of the REIT Code, the Trustee’s duties under theREIT Code and the Trustee’s fiduciary duties, the Trustee has no objection to the definition of “Adjustments” asdescribed above.

The REIT Manager also has the discretion to direct the Trustee from time to time to make distributions overand above the minimum 90.0% of Annual Distributable Income if and to the extent Powerlong REIT, in the opinionof the REIT Manager, has funds surplus to its business requirements, provided that no amount of revaluationsurplus on the Powerlong REIT credited to income or gains on disposal of real estate, whether directly or indirectlythrough the disposal of any Special Purpose Vehicle and/or Joint Venture Entity, shall form part of any distributionto Unitholders unless the REIT Manager shall have obtained the Trustee’s prior consent.

Under the Trust Deed, the REIT Manager will, subject to applicable laws, endeavor to ensure that at least onedistribution shall be made in respect of each financial year and paid no later than five months after the distributioncalculation date for the relevant distribution period. Powerlong REIT’s first distribution after the [REDACTED]will comprise the distribution for the period from and including the [REDACTED] to December 31, 2021.

Powerlong REIT’s initial distribution policy is that two distributions will be made in respect of each year,being distributions with respect to the six-month periods ending June 30 and December 31. The Directorsanticipate that interim and final distributions will be paid by the end of November and May in each year,respectively.


DISTRIBUTION POLICY

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The REIT Manager may also adopt such rules as it considers appropriate for the reinvestment by Unitholders of

any distributions to be made by Powerlong REIT in return for new Units, provided that no Unitholder shall be

obliged to receive Units in lieu of a cash distribution. Under Hong Kong’s current tax law, distributions may be

made free of withholdings or deductions on account of Hong Kong tax. It is understood that, under the Hong Kong

Inland Revenue Department’s current practice, Hong Kong profits tax will not be payable by a Unitholder on

distributions made by Powerlong REIT. However, Unitholders should take advice from their own professional

advisors as to their particular tax position.

Distributions to Unitholders will be declared and paid in Hong Kong dollars. Powerlong REIT’s ability to make

distributions is dependent on, among other things, the Trustee having sufficient cash in Powerlong REIT to make

the payments required and the ability to remit profits generated from the Project Companies from the PRC to

overseas. If the Trustee does not have sufficient cash in Powerlong REIT to pay distributions, Powerlong REIT

may be required to obtain financing to satisfy the payment of distributions to Unitholders. For further details,

please see “Risk Factors—Risks relating to the Real Estate Industry and the PRC—The ability of Powerlong

REIT’s PRC-incorporated companies to declare and pay dividends is limited by the availability of retained

earnings and other factors, which may in turn have an impact on Powerlong REIT’s distributions to Unitholders”

and “Risk Factors—Risks relating to the Real Estate Industry and the PRC—RMB is not freely convertible” in this

Document.

Powerlong REIT may make distributions out of capital beyond the Annual Distributable Income. The composition

of distributions declared by Powerlong REIT (including, but not limited to, the extent to which the distribution

declared or made is composed of, and the types of, income and capital) shall be determined by the REIT Manager

in its absolute discretion and will be disclosed in the relevant results announcements, semi-annual reports and

annual reports of Powerlong REIT.

For information on the forecast distributions for the period from the [REDACTED] to December 31, 2021, please

see “Statement of Distributions” in this Document.


DISTRIBUTION POLICY

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Powerlong REIT is a REIT formed to primarily own and invest in quality income-generating commercialproperties in the PRC. Powerlong REIT is managed by the REIT Manager whose key investment objectives are toprovide Unitholders with stable distributions, sustainable and long-term distribution growth, and enhancement inthe value of Powerlong REIT’s properties.

Powerlong REIT shall initially comprise the following eight REIT Properties in the PRC:

• Shanghai Fengxian Powerlong Plaza, a shopping mall with a GFA of 40,689 sq.m.;

• Hangzhou Lin’an Powerlong Plaza, a shopping mall with a GFA of 92,619 sq.m.;

• Yancheng Powerlong Plaza, a shopping mall with a GFA of 171,097 sq.m.;

• Suqian Powerlong Plaza, a shopping mall with a GFA of 150,660 sq.m.;

• Quanzhou Anxi Powerlong Plaza, a shopping mall with a GFA of 55,489 sq.m.;

• Qingdao Jiaozhou Powerlong Plaza, a shopping mall with a GFA of 76,057 sq.m.;

• Luoyang Powerlong Plaza, a shopping mall with a GFA of 69,735 sq.m.; and

• Xinxiang Powerlong Plaza, a shopping mall with a GFA of 84,288 sq.m..

The REIT Manager believes that the REIT Properties have the following competitive strengths:

• First PRC-based commercial property REIT in Hong Kong with a focus on shopping malls strategicallylocated to benefit from the high growth in local economies;

• Quality and diverse tenants with high Occupancy Rate managed by Powerlong CM, the first PRCcommercial operation services provider listed on the Stock Exchange;

• Strong organic growth and future acquisitions supported by reputable sponsor; and

• Highly experienced and committed management team with a proven track record.

First PRC-based Commercial Property REIT in Hong Kong with a Focus on Shopping Malls StrategicallyLocated to Benefit from the High Growth in Local Economies

Powerlong REIT will be the first PRC-based commercial property REIT in Hong Kong with a focus onshopping malls, providing Unitholders with a unique opportunity to invest in the portfolio of pure shopping mallproperty assets in the PRC and to take advantage of the growing PRC retail sector resulting from PRC’sfast-growing economy and domestic consumption. According to the Market Consultant, fundamentals in PRC’sretail sector are expected to remain strong, driven by further development of metropolitan clusters, acceleratingurbanization and rising disposable income and expenditure of urban household, among other factors.

As of the June 30, 2021, Powerlong REIT had eight quality shopping malls with a total GFA of 740,635 sq.m.in its portfolio. These shopping malls are well-positioned to benefit from the growth of the PRC retail market.During the Track Record Period, these REIT Properties had consistently provided high return for their owners,with an Average Monthly Rental per Leased Square Meter of RMB61.4, RMB65.4, RMB65.2 and RMB70.3 for theyears ended December 31, 2018, 2019 and 2020 and the six months ended June 30, 2021, respectively.



– 76 –

The REIT Manager believes that the REIT Properties are well-positioned to capture the opportunitiesarising from the urban development, the favorable government policies and the expected growth of theregions in which they are located, particularly in the Yangtze River Delta. According to the MarketConsultant, the Yangtze River Delta has always served as a key driver for the economic development of thePRC, with its GDP representing nearly one-fourth of the nominal GDP of the PRC, which ranked the firstamong the major urban agglomerations in 2020, and its total retail sales of consumer goods, accounting forone-fourth of the total retail sales of consumer goods in the PRC in 2020, demonstrating a boomingconsumption market in the region. For details of the competitive locations of the REIT Properties, please see“Industry Overview—Overview of the Real Estate Market in Selected Cities.”

Given the REIT Properties are located in high-growth areas, the REIT Manager believes that PowerlongREIT is well-positioned to capture growth opportunities arising from the economic development andfavorable government policies of the regions in which the REIT Properties are located.

Quality and Diverse Tenants with High Occupancy Rate Managed by Powerlong CM, the First PRCCommercial Operation Services Provider Listed on the Stock Exchange

The REIT Manager believes that the REIT Properties’ quality and diverse tenant base, combined with theirproactive tenant management, has helped the REIT Properties in maintaining a high average Occupancy Rate of94.4%, 96.0%, 95.8% and 96.5% as of December 31, 2018, 2019 and 2020 and June 30, 2021, as well as increasingthe Average Monthly Rental per Leased Square Meter from RMB61.4 in 2018 to RMB65.2 in 2020 and RMB70.3for the six months ended June 30, 2021.

• Professional operations and property manager. The REIT Properties are managed by Powerlong CM, aleading commercial operational service provider in the PRC and the first commercial propertymanagement and operational service provider listed on the Stock Exchange operating based on anasset-light model. Powerlong CM has been recognized as the 2020 China Top 10 Commercial RealEstate Brand (2020年中國商業地產品牌十強) by Leju Financial Research Institute (樂居財經研究院),2020 China Top 10 Commercial Real Estate (2020中國商業地產十強) by China Index Academy (中國指數研究院), and 2020 Top 10 of China Commercial Real Estate Developers with ComprehensiveStrengths (2020中國房地產開發企業商業地產綜合實力十強) by China Real Estate Association (中國房地產協會), Shanghai E-House Real Estate Research Institute (上海易居房地產研究院) and ChinaReal Estate Evaluation Center (中國房地產測評中心).

In addition, the REIT Properties’ Operations and Property Manager has benefited from Powerlong CMGroup’s relationships with a wide range of tenants, including anchor stores such as department storesand supermarkets, other national in-line tenants and local retailers. Powerlong CM has been assistingthe REIT Properties in formulating tailored plans for allocating different types of tenants in acommercial property based on its positioning by considering the target consumer, property location andsize and property type, and helping the REIT Properties forming long-term relationships with majortenants across various kinds of retail businesses. Recognizing that consumer preferences changefrequently, the REIT Properties proactively engage and introduce new tenants to maintain an attractivetenant portfolio that adapt to new consumer trends.

• Quality tenants. The REIT Properties have a quality tenant base which is evidenced by the highretention rates and low delinquency rates. As of June 30, 2021, the REIT Properties had a total of 1,161tenants. For each of the three years ended December 31, 2018, 2019 and 2020 and the six months endedJune 30, 2021, the retention rate of the REIT Properties (calculated by dividing Gross Rentable Area fortenants who stayed from the last period by the total Gross Rentable Area of all REIT Properties duringthe relevant period) was approximately 84.9%, 79.8%, 76.8% and 91.4%, respectively, and the AverageDelinquency Rate of the REIT Properties was 0.5%, 0.5%, 0.7% and 0.6%, respectively. During theTrack Record Period, there was no major dispute on rent collection. The REIT Manager believes that thequality of the tenants provide a high degree of income stability to Powerlong REIT.



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• Diverse and defensive tenant base. The REIT Properties have a diverse tenant base with tenants from

different industries, including anchor stores such as department stores and supermarkets, as well as other

stores in food & beverage, fashion & sportswear and other industries. The tenants of the REIT Properties

include various domestic and international brands and chain stores. The top tenant and the top five tenants in

terms of total monthly Gross Rental Income in the portfolio contributed approximately 4.8% and 14.3%,

respectively, of total monthly Gross Rental Income of the REIT Properties for the month ended June 30, 2021.

No single industry group accounted for more than 30% of the Gross Rental Income over the REIT Properties

for the month ended June 30, 2021. Given the diversity of tenants, the REIT Manager believes that the tenant

and industry concentration risks are limited. In addition, a significant portion of the tenants belong to the

lifestyle and experiential service sector, making the REIT Properties relevant to consumers and defensive to

the expansion of e-commerce.

Strong Organic Growth and Future Acquisitions Supported by Reputable Sponsor

Organic growth from existing properties

Powerlong REIT is well-positioned to benefit from the organic growth in revenue from its existing REIT

Properties resulting from PRC’s fast-growing economy and domestic consumption. The REIT Properties generally

charge their tenants (i) Base Rent, (ii) Turnover Rent, or (iii) the higher of the two. As such, with the growing sales

performance of the REIT Properties’ tenants, Powerlong REIT’s revenue may also grow. In addition, many of the

REIT Properties’ tenancy agreements contain terms that allow for annual increase in Base Rent, providing for the

steady growth of Gross Rental Income. Moreover, the REIT Manager expects that the Gross Rentable Area under

the relevant tenancy agreements can potentially be leased at higher rental rates after expiry in the coming few

years, provided that the market condition is steady and the assumptions set out in this Document are met. For

further details, please see “Profit Forecast for the Profit Forecast Period—Bases and Assumptions” in this

Document. The REIT Manager believes that such lease structures help provide stability and potential upside in

revenue for Powerlong REIT. Furthermore, the REIT Manager may deploy asset enhancement initiatives and

operation improvements to negotiate for higher rental rates for existing tenants, optimize the REIT Properties’

rental income growth, improve tenant diversity and occupancy levels, and prudently control expenses in order to

achieve organic and sustainable profitability growth for Powerlong REIT. See “Strategy—Asset Management

Strategy.”

Moreover, Powerlong REIT benefits from the service and expertise of Powerlong CM, which has been

providing commercial operational services to the REIT Properties to further enhance the financial and operational

performance of the REIT Properties and their tenants. See “—Quality and Diverse Tenants with High Occupancy

Rate Managed by Powerlong CM, the first PRC commercial operation services provider listed on the Stock

Exchange.”



– 78 –

Future acquisition growth sponsored by Powerlong Group

Powerlong REIT is sponsored and supported by the Powerlong Group, a property developer dedicated to

developing and operating high quality, large-scale and multi-functional commercial real estate projects. According

to its 2020 annual report, as of December 31, 2020, Powerlong Group had developed, owned and operated 193 real

estate projects, with its commercial projects covering the series of “Powerlong One Mall,” “Powerlong City,”

“Powerlong Plaza” and “Powerlong Land” products, while its residential projects covering various formats

including middle and high class commodity housings and villas, complemented by high-standard office buildings

and hotel projects with comprehensive service support. Having entered the commercial real estate industry for 17

years, Powerlong Group has been awarded TOP 10 Brands of China Commercial Real Estate Companies (中國商業地產公司品牌價值十強) for ten consecutive years since 2010. Powerlong Plazas operated by Powerlong Group

have been awarded TOP 10 Brands of China Commercial Real Estate Projects (中國商業地產項目品牌價值十強)

for eleven consecutive years since 1999.

As of December 31, 2020, Powerlong Group (together with its associates and joint ventures) (i) held

investment properties, mainly shopping malls, with a total GFA of approximately 5,642,485 sq.m., (ii) held 48

commercial plazas; and (iii) had 13 shopping malls expected to open in 2021.

Powerlong Group has granted a ROFR to Powerlong REIT that, in the event that Powerlong Group proposes

to dispose of any majority ownership or control of any commercial or retail property (other than such property that

will be disposed of: (i) pursuant to an internal reorganization exercise; or (ii) by public auction as required under

the applicable laws and regulations) that: (a) fulfills (or would reasonably be regarded as fulfilling) the investment

criteria and property characteristics, and is consistent (or would reasonably be regarded as being consistent) with

the investment strategy of the REIT Manager for property investments by Powerlong REIT; (b) is a commercial or

retail property completed by Powerlong Group; and (c) is owned or developed by Powerlong Group and in which

Powerlong Group has an ownership interest of 95.0% or more, Powerlong REIT shall have a right of first refusal to

acquire such qualifying property. For further details on the ROFR granted by Powerlong Group to Powerlong

REIT, please see “Material Agreements and Other Documents—Deed of Right of First Refusal” in this Document.

Given its experience in commercial property development and operation, Powerlong Group has in-depth

knowledge of the property market and its existing tenants and property portfolio. Powerlong REIT may leverage

the extensive industry experience and expertise of Powerlong Group in assessing suitable potential acquisition

opportunities.

In view of the above, the REIT Manager believes that Powerlong REIT’s relationship with Powerlong Group

will facilitate Powerlong REIT’s future growth. As of the Latest Practicable Date, the REIT Manager had not

identified any acquisition target and did not have any plan for Powerlong REIT to acquire any properties in the

twelve-month period starting on the [REDACTED].



– 79 –

Highly Experienced and Committed Management Team with Interest Aligned with the Unitholders

The REIT Manager has the power to manage Powerlong REIT and has delegated certain operation functions

such as rental and marketing; and the property management function to the Operations and Property Manager.

There is a Variable Fee of 3.0% per annum of the gross revenue less operating expenses in respect of each REIT

Property (provided that the NAV per Unit exceeds the NAV Unit on which the Variable Fee was last calculated and

paid) in the REIT Manager’s management fee structure to align the interest of the REIT Manager with those of the

Unitholders and incentivize REIT Manager to grow distributable income. The REIT Manager has elected to receive

no less than 70.0% of its Variable Fee in the form of Units for 2021 and 2022.

The REIT Manager is wholly owned by Powerlong Holdings, and the Operations and Property Manager is an

indirect subsidiary of Powerlong Holdings. As a result, such wholly owned entities can benefit from Powerlong

Group and Powerlong CM’s large resource base, experienced management team with a proven track record as well

as recognized brand name in the PRC, especially in the regions where the REIT Properties are located.

Furthermore, the Board and the senior executives of the REIT Manager have extensive experience in property

investment and property management. The REIT Manager is able to leverage its management team’s wealth of

experience. For example, Mr. Yong Jia Cherng, an executive Director, the Chief Executive Officer and one of the

[REDACTED] of the REIT Manager, has abundant experience in the real estate and asset management industries.

He has been the general manager of fund management of Powerlong Holdings’ asset management center since

2020 and used to be responsible for the investment and asset management of various real estate investment and

development entities, including CapitaMalls Asia Limited, Mapletree Investments Pte Ltd. and CapitaLand

Limited. Ms. Wen Haixia, the Chief Financial Officer, the Head of Compliance and one of the [REDACTED] of

the REIT Manager, has been the general manager of the financial management center of Powerlong CM Group

since 2018 and had previously served in various financial management positions in entities, such as various

subsidiaries of Parkson Retail Group Limited, Shanghai Shimao Co., Ltd. and Shanghai Aegean Commercial

Group Co., Ltd.. For details of the Board and senior executives, please see “The REIT Manager” in this Document.

Based on the foregoing, the REIT Manager believes that the management team’s experience and insight in

property investment, management, marketing, leasing and financing, which are complemented by the team’s

familiarity with the market practice and economic dynamics of the property market and retail trend in the PRC,

will enable Powerlong REIT to capitalize on market growth and achieve optimal operational results.



– 80 –

The REIT Manager’s key objectives for Powerlong REIT are to provide Unitholders with stable distributions,

sustainable and long-term distribution growth, and enhancement in the value of Powerlong REIT’s properties. The

REIT Manager intends to achieve this through holding and investing in quality income-generating commercial

properties located in the PRC.

The REIT Manager’s strategy can be broadly categorized as follows: (i) asset management strategy:

proactively managing Powerlong REIT’s property portfolio to maintain optimal occupancy level and operational

efficiency; seeking asset enhancement opportunities through property upgrade and/or renovation to promote rental

income growth; (ii) investments and acquisition strategy: investing in and acquiring quality properties in the

PRC from Powerlong Group or third parties that satisfy the REIT Manager’s investment strategy; (iii) capital andrisk management strategy: optimizing returns on Powerlong REIT’s portfolio and distributions to Unitholders,

while maintaining an appropriate level of financial prudence.

Powerlong REIT may invest in Relevant Investments or engage or participate in Property Development and

Related Activities if the REIT Manager considers it appropriate and in the interest of Unitholders to do so in the

future. However, before Powerlong REIT may undertake such investments or activities, the REIT Manager will

seek Unitholders’ approval to amend the investment scope of Powerlong REIT set out in the Trust Deed and

comply with all applicable requirements under the REIT Code.

Asset Management Strategy

The REIT Manager will take proactive measures to enhance the current distributions and the long-term

capital growth prospect of Powerlong REIT’s property portfolio. The key of this strategy is to maintain optimal

Occupancy Rate and realize sustainable growth in rental income and Net Property Income. Accordingly, the REIT

Manager intends to:

• Attract new tenants and maintain high occupancy

The REIT Manager will collaborate with Powerlong CM to increase service quality, improve tenant

satisfaction, implement marketing strategies to attract tenants, enhance the properties’ reputation and market

recognition, and preserve the properties’ long term value; optimize space allocation and improve tenant

diversity; actively manage the early renewal of tenancy agreements for the properties to minimize downtime

arising from expiration of tenancy agreements; and solicit new tenants with a view of achieving synergy with

existing tenants.

• Assist existing tenants to improve performance

The REIT Manager will attract customer traffics to improve tenants’ profitability and increase the

properties’ rental income; work with the Operations and Property Manager to provide high-standard and

professional services to meet the tenants’ ongoing needs, enhance tenant loyalty and increase tenant retention

rates; and assist existing tenants with their expansion or relocation plans, and explore future business

opportunities.


STRATEGY

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• Enhance operational efficiency and explore further opportunities

The REIT Manager will leverage Powerlong Group’s expertise in asset management and value

enhancement to maintain high standard operational performance and improve the REIT Properties’ market

competitiveness; conduct internal audit for the properties and establish performance-based compensation

schemes to incentivize the Operations and Property Manager to achieve better results; review industry trend

and the performance of competitors to continuously adjust the positioning of the REIT Properties and carry

out asset enhancement initiatives such as upgrade or renovation as necessary to maintain the REIT

Properties’ market competitiveness; actively monitor tenants’ rent payment status to reduce rent collection

risk and maintain income stability; and leverage the business partnerships formed by Powerlong Group and

Powerlong CM to further explore leasing business opportunities.

The REIT Manager will explore different strategies and opportunities to carry out asset enhancement

initiatives to upgrade or renovate the REIT Properties to further enhance and improve the rate of return of the REIT

Properties, such as undertaking upgrade of facilities; renovating and/or reconstructing the common area.

Investments and Acquisition Strategy

The REIT Manager will pursue acquisition opportunities with income growth potential for Unitholders. The

REIT Manager intends to proactively source and acquire quality income-generating commercial properties located

in the PRC.

In evaluating potential acquisition opportunities, the REIT Manager will focus on the following criteria that

are in line with the REIT Manager’s strategy and in accordance with the investment mandate:

• Yield requirements

The REIT Manager will seek to acquire properties that will enhance the overall distribution to the

Unitholders. It will seek to identify properties that have value-enhancement potential after considering the

regulatory, commercial, political and other relevant factors, and to acquire properties with yields that are

estimated to be higher than the cost of capital and properties that are expected to maintain or enhance returns

to Unitholders while balancing the various risks associated with such investments.

• Geographical location and growth potential

The REIT Manager will assess each property’s location in the PRC and the growth potential of each

property from time to time in the market. The REIT Manager will evaluate the surroundings of the properties,

including, but not limited to, their ease of access and connectivity to major business and transportation hubs.

Other factors that the REIT Manager will consider include the reputation of the properties in the

neighborhood and the presence and concentration of competitors in the vicinity of the properties. In addition,

Powerlong Group has granted a ROFR to Powerlong REIT to acquire Powerlong Group’s properties that meet

certain criteria. See “Material Agreements and Other Documents—Deed of Right of First Refusal.” As

Powerlong Group has adopted the “1+1+N” development strategy by focusing on Yangtze River Delta and the

Guangdong-Hong Kong-Macau Greater Bay Area while exploring other premium regions that offer

opportunities, the REIT Manager will also prioritize on assessing growth opportunities offered by Powerlong

Group.


STRATEGY

– 82 –

• Asset enhancement potential

The REIT Manager will consider a property’s price appreciation potential as part of its asset

management, market repositioning and other asset enhancement initiatives. The REIT Manager will evaluate

the cost-effectiveness of potential asset enhancement initiatives that could be implemented (such as property

upgrade and renovation) to assess the overall attractiveness of a potential target.

• Occupancy and tenant characteristics

The REIT Manager will assess the properties’ rental and tenant retention rates as compared to those of

the competing properties in their respective areas. In addition, the REIT Manager will evaluate the quality of

the tenants, rent collection record, and estimate the Occupancy Rate prior to the acquisition of such new

properties.

• Building and facilities specifications

With respect to potential properties to be acquired by Powerlong REIT, the REIT Manager will adhere to

relevant legal and zoning regulations as well as quality specifications, with consideration to be given to the

size and age of the buildings. The properties will be assessed by independent experts with respect to their

repairs, maintenance and capital expenditure requirements in the short to medium term.

To mitigate against the risk that may arise from future acquisitions, the REIT Manager will implement

appropriate policies and conduct proper due diligence on potential acquisition targets. Relevant due diligence will

focus on, among others, the ownership and title of the property, government approval and town planning

requirements, restrictions on property usage and foreign ownership, safety requirements, land premium

requirements, encumbrances on the property, zoning and building requirements, current and prospective tenancies

and material agreements, maintenance and operational expenses, the scope and value of insurance policies in

place, foreign exchange and all other relevant government approval.

If the REIT Manager considers that any property has reached a stage such that it offers only limited scope for

growth, the REIT Manager may consider selling that property (either in whole or in part) through either the

disposal of Powerlong REIT’s interest in that property directly or the disposal of Powerlong REIT’s interest in the

relevant special purpose vehicle and recycling capital from the sale proceeds to pursue other opportunities.

As of the Latest Practicable Date, the REIT Manager had not identified any acquisition targets and did not

have any plan for Powerlong REIT to acquire any properties in the twelve-month period starting on the

[REDACTED].

Capital and Risk Management Strategy

The REIT Manager will operate Powerlong REIT in accordance with the REIT Code with respect to

borrowing, whereby Powerlong REIT’s borrowings will not exceed 50% (or such other percentage as may, from

time to time, be prescribed in the REIT Code) of its total gross asset value. The REIT Manager intends to use an

appropriate mix of debt and equity financing for its property investments and enhancements, and may adopt

interest rate hedging strategies to optimize Powerlong REIT’s distributions to the Unitholders. The gearing ratio of

Powerlong REIT is expected to be lower than 40% upon [REDACTED], which is in compliance with the

requirement of the REIT Code. The REIT Manager will adopt a prudent financial policy to ensure that the gearing

ratio does not exceed the threshold percentage under the REIT Code.


STRATEGY

– 83 –

The objectives of the REIT Manager in relation to capital management are as follows:

• maintaining a strong balance sheet with a healthy gearing ratio within the limits set out in the REIT

Code;

• securing diversified sources of funding from financial institutions and the capital markets, including

adopting a combination of debt and equity financing to fund future acquisitions and asset enhancements;

• managing the cost of financing and the debt maturity profile to minimize repayment or refinancing risks,

including reviewing and optimizing fixed and floating rates profile of Powerlong REIT’s borrowings

and evaluating its refinancing options which may include long-term borrowings, bonds and

medium-term notes;

• where appropriate, adopting a proactive interest rate management and hedging strategy to manage risks

related to interest rate fluctuations; and

• adopting prudent cash management strategies and keeping sufficient working capital to maintain

flexibility in making decisions for capital expenditure or acquisition.

The REIT Manager may enter into hedging arrangements in order to manage exposure to foreign exchange

risks. The REIT Manager will periodically review Powerlong REIT’s capital management policies with respect to

its aggregate borrowings and modify the policy as the REIT Manager deems prudent in light of the prevailing

market conditions. As of the Latest Practicable Date, the REIT Manager had not entered into any hedging

arrangement or transaction to manage its exposure to foreign exchange risks.


STRATEGY

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OVERVIEW OF POWERLONG REIT

Upon completion of the Reorganization, Powerlong REIT’s portfolio shall comprise eight REIT Properties,

which are shopping malls located in East China and Central China. The REIT Properties are Shanghai Fengxian

Powerlong Plaza, Hangzhou Lin’an Powerlong Plaza, Yancheng Powerlong Plaza, Suqian Powerlong Plaza,

Quanzhou Anxi Powerlong Plaza, Qingdao Jiaozhou Powerlong Plaza, Luoyang Powerlong Plaza and Xinxiang

Powerlong Plaza. The map below illustrates the locations of the REIT Properties:

Shanghai Fengxian Powerlong PlazaFengxian District, Shanghai

Yancheng Powerlong PlazaYancheng, Jiangsu

Qingdao Jiaozhou Powerlong PlazaQingdao, Shandong

Luoyang Powerlong PlazaLuoyang, Henan

Xinxiang Powerlong PlazaXinxiang, Henan

Quanzhou Anxi Powerlong PlazaQuanzhou, Fujian

Suqian Powerlong Plaza Suqian, Jiangsu

Hangzhou Lin’an Powerlong PlazaHangzhou, Zhejiang


THE REIT PROPERTIES AND BUSINESS

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The REIT Manager believes that the REIT Properties have the following competitive strengths:

• First PRC-based commercial property REIT in Hong Kong with a focus on shopping malls strategicallylocated to benefit from the high growth in local economies;

• Quality and diverse tenants with high Occupancy Rate managed by Powerlong CM, the first PRCcommercial operation services provider listed on the Stock Exchange;

• Strong organic growth and future acquisitions supported by reputable sponsor; and

• Highly experienced and committed management team with a proven track record.

For details of the competitive strengths of the REIT Properties, please see “Key Investment Highlights ofPowerlong REIT” in this Document.

As of June 30, 2021, the REIT Properties had an aggregate Gross Rentable Area of approximately 453,475sq.m. with an Appraised Value of RMB8,231.3 million. The average Occupancy Rate of the REIT Properties as ofJune 30, 2021 was approximately 96.5%. For further details of the portfolio’s operating data, please see“—Portfolio of REIT Properties” below.

The REIT Properties have a diverse base of quality tenants. As of June 30, 2021, the REIT Properties houseda total of 1,161 tenants, with the top five tenants in terms of total monthly Gross Rental Income contributing toapproximately 14.3% of the total monthly Gross Rental Income for the month ended June 30, 2021. For furtherdetails of the tenant profile of Powerlong REIT, please see “—Portfolio of REIT Properties—Tenant Profile ofPowerlong REIT” below.

PORTFOLIO OF REIT PROPERTIES

The table below sets forth certain details regarding the REIT Properties as of June 30, 2021:

Property Location Opening DateExpiry of landuse right

Gross FloorArea

(sq.m.)

GrossRentable

Area(sq.m.)

AppraisedValue

(RMB’ million)(1)

Number oftenants

Number oftenancies(2)

Number ofcar parking

spaces

Shanghai FengxianPowerlong Plaza

Fengxian District,Shanghai

November 2015 December 18, 2051 40,689 27,953 981.0 103 108 –

Hangzhou Lin’anPowerlong Plaza

Hangzhou, Zhejiang November 2019 February 27, 2058 92,619 32,599 926.1 148 153 865

YanchengPowerlong Plaza

Yancheng, Jiangsu September 2011 September 30, 2048 171,097 102,987 1,544.9 220 231 916

Suqian PowerlongPlaza

Suqian, Jiangsu September 2011 November 27, 2049 150,660 82,572 1,572.5 220 234 680

Quanzhou AnxiPowerlong Plaza

Quanzhou, Fujian December 2010 February 3, 2050 55,489 45,595 900.0 80 83 –

Qingdao JiaozhouPowerlong Plaza

Qingdao, Shandong February 2015 June 17, 2053 76,057 56,089 721.7 127 130 –

Luoyang PowerlongPlaza

Luoyang, Henan December 2011 February 1, 2046 69,735 45,669 684.0 120 122 –

XinxiangPowerlong Plaza

Xinxiang, Henan September 2012 January 7, 2048 84,288 60,011 901.1 143 154 –

Total 740,635 453,475 8,231.3 1,161 1,215 2,461



– 86 –

Notes:

(1) As determined by the Independent Property Valuer in its valuation report set forth in Appendix IV to this Document.

(2) The number of tenancies exceeds the number of tenants as some tenants enter into more than one tenancy agreement for differentunits in the same Property.

The table below sets out the Gross Rental Income and Net Property Income of the REIT Properties during the

Track Record Period:

Gross Rental Income Net Property Income

Property

Year ended December 31,

Sixmonths

endedJune 30,

2021


Sixmonths

endedJune 30,

20212018 2019 2020 2018 2019 2020

(RMB’000)

Shanghai Fengxian Powerlong Plaza 34,660 36,334 37,888 20,382 23,467 26,387 29,023 16,964Hangzhou Lin’an Powerlong Plaza – 4,014 36,649 19,021 – (17,325) 25,705 15,217Yancheng Powerlong Plaza 56,838 60,579 53,846 30,746 49,119 53,497 46,099 27,481Suqian Powerlong Plaza 70,076 72,466 70,719 38,632 59,378 62,917 60,294 32,189Quanzhou Anxi Powerlong Plaza 34,663 40,013 37,199 20,839 31,305 36,456 32,306 17,440Qingdao Jiaozhou Powerlong Plaza 22,308 25,454 24,703 13,887 18,948 20,482 19,255 12,462Luoyang Powerlong Plaza 27,312 27,086 27,811 15,788 22,686 22,198 21,229 10,908Xinxiang Powerlong Plaza 41,343 46,556 44,906 25,119 36,271 40,826 35,010 19,755

The table below sets out the Occupancy Rate of each Property, the average Occupancy Rate of the REIT

Properties, and the Average Monthly Rental per Leased Square Meter during the Track Record Period:

Occupancy RateAverage Monthly Rentalper Leased Square Meter

Property

As of December 31,As of

June 30,2021


Sixmonths

endedJune 30,

20212018 2019 2020 2018 2019 2020

(%)

Shanghai Fengxian Powerlong Plaza 91.6 96.1 99.3 100.0 112.7 112.6 113.6 121.5Hangzhou Lin’an Powerlong Plaza – 100.0 100.0 100.0 – 94.7 93.7 97.2Yancheng Powerlong Plaza 88.9 90.1 90.6 90.7 54.7 58.2 51.6 54.9Suqian Powerlong Plaza 100.0 99.0 93.9 98.0 70.9 74.0 76.2 79.6Quanzhou Anxi Powerlong Plaza 99.9 100.0 99.5 100.0 64.0 73.8 69.0 76.2Qingdao Jiaozhou Powerlong Plaza 97.5 97.4 98.8 97.3 34.0 38.8 37.1 42.4Luoyang Powerlong Plaza 84.9 90.0 93.4 92.8 58.7 54.9 54.3 62.1Xinxiang Powerlong Plaza 98.2 99.3 99.3 100.0 61.2 68.2 65.7 69.8

Average 94.4 96.0 95.8 96.5 61.4 65.4 65.2 70.3



– 87 –

Tenant Profile of Powerlong REIT

The REIT Properties housed a total of 1,161 tenants as of June 30, 2021, with the top five tenants in terms of

total monthly Gross Rental Income in the portfolio contributing to approximately 14.3% of total monthly Gross

Rental Income for the month ended June 30, 2021. The top five tenants of the REIT Properties included those from

department store and supermarket, food & beverage, and fashion & sportswear sectors. For the same period, no

single tenant’s Gross Rental Income contributed to more than 5% of total monthly Gross Rental Income from the

REIT Properties.

The REIT Manager believes that the portfolio faces limited tenant and industry concentration risks as no

single tenant accounted for more than 5% of the total monthly Gross Rental Income and no single industry

accounted for more than 30% of the total Gross Rental Income for the month ended June 30, 2021 over the REIT

Properties.

Tenants’ Industry Sectors

The following table sets out details of the REIT Properties’ tenants by reference to industry sectors, their

Gross Rentable Area as a percentage of the total Gross Rentable Area as of June 30, 2021, and the percentages of

their respective contributions to the Gross Rental Income for the month ended June 30, 2021:

Tenants’ Industry Sectors(1)

Gross Rentable Area asa percentage of the totalGross Rentable Area as

of June 30, 2021

Gross Rental Income asa percentage of totalGross Rental Incomefor the month ended

June 30, 2021

Department Store and Supermarket 29.2 11.3Food & Beverage 17.3 26.9Fashion & Sportswear 13.3 25.5Kid’s Wear 5.2 4.7Convenient Store & Services 8.7 19.0Training and Personal Development 3.9 2.8Sports 1.9 1.0Entertainment 15.3 7.8Home Furnishings 1.8 1.0

Total 96.5 100.0

Note:

(1) The tenants’ industry sectors are based on the classification of the REIT Manager.



– 88 –

Tenants’ Rent Models

The following table sets out details of the REIT Properties’ tenants by reference to rent models, their Gross

Rentable Area as a percentage of the total Gross Rentable Area as of June 30, 2021, and the percentages of their

respective contributions to the Gross Rental Income for the month ended June 30, 2021:

Tenants’ Rent Models(1)


of June 30, 2021

Gross Rental Income asa percentage of total

Gross Rental Income forthe month ended June

30, 2021

Base Rent 52.6 42.6Turnover Rent 4.2 4.5Hybrid Model 39.7 52.9(2)

Total 96.5 100.0

Note:

(1) The tenants’ rent models are based on the classification of the REIT Manager.

(2) Tenants who paid Based Rent under the Hybrid Model contributed to 50.4% of the Gross Rental Income for the month ended June

30, 2021.

Top Five Tenants

The following table sets out information on the five largest tenants in terms of total monthly Gross Rental

Income for the month ended June 30, 2021:

Tenant Industry sector Expiry date(1)

GrossRentable

Areaattributable

to tenant

Percentageof total

GrossRentable

Areaattributable

to tenant

Percentageof total

monthlyGross

RentalIncome

attributableto tenant

A Department Store and Supermarket August 2035 30,667.8 6.8 4.8B Department Store and Supermarket September 2031 – November 2034 51,532.0 11.4 3.5C Department Store and Supermarket December 2031 – December 2034 42,430.0 9.4 2.4D Food & Beverage August 2021 – December 2035 4,156.0 0.9 2.2E Fashion & Sportswear September 2021 – November 2024 3,225.2 0.7 1.4

Note:

1. Certain tenants had entered into multiple tenancy agreements in different REIT Properties with varying expiry dates.

As of the Latest Practicable Date, none of the five largest tenants of the REIT Properties set out in the above

table was a connected person (as defined in the REIT Code) of Powerlong REIT.



– 89 –

Duration of the Tenancy Agreements

The terms of the tenancy agreements for the REIT Properties mostly range from one to twenty years. Inaccordance with the terms of the tenancy agreements, negotiation on potential renewal usually take placeapproximately three months prior to the expiry of a tenancy agreement. As of June 30, 2021, more than half of thetenancy agreements were for a term of at least three years or above. Shorter or longer terms may be agreed on acase-by-case basis.

The following table sets out the expiry periods of the tenancies for the REIT Properties by reference to theirrespective percentages of Gross Rentable Area of the total Gross Rental Area as of June 30, 2021 and theirrespective percentages of Gross Rental Income of the total Gross Rentable Income for the month ended June 30,2021:

Expiry Period

Gross Rentable Area ofthe tenancies expiring

during the relevantexpiry periods as a

percentage of the totalGross Rentable Area as

of June 30, 2021

Gross Rental Incomegenerated from thetenancies expiring


percentage of the totalGross Rental Incomefor the month ended

June 30, 2021

(%) (%)

Prior to December 31, 2021(1) 13.9 21.7Year ending December 31, 2022 12.1 26.9Year ending December 31, 2023 7.7 13.8Year ending December 31, 2024 6.2 6.5Year ending December 31, 2025 and beyond 56.6 31.1Vacant 3.5 –

Total 100.0 100.0

Note:

(1) As of the Latest Practicable Date, among those tenancies expiring in the period between July 1 and December 31, 2021,approximately 22.4% and 77.6%, respectively, of the Gross Rentable Area (i) were renewed or signed with new tenants; and (ii)were in discussions over renewal terms or were currently identifying new tenants.

Provisions in Tenancy Agreements

The tenancy agreements entered into by the tenants, in respect of each of the REIT Properties, are largelybased on standard form agreements and do not contain any unusual feature compared with other commercialtenancy agreements in the same areas. In some of the anchor tenants’ tenancy agreements, changes to the standardform agreements have been made to provide for a lower security deposit and a more flexible tenancy termination.

At the time of entering into a tenancy agreement, tenants of the REIT Properties are usually required to paya security deposit of approximately three months’ Base Rent. Security deposits do not bear interest. Tenants mayalso be required to pay a sum of quality guarantee as a promise to the quality control of their products and servicesand compliance with all applicable laws and regulations in the PRC. Tenants usually pay the higher of the BaseRent and the Turnover Rent pursuant to the terms in the tenancy agreements and are usually required to pay theirrent at a specified period of time each month or quarter, such as by paying the Base Rent at the beginning of aperiod and the additional portion from the Turnover Rent if applicable at the end of each month or period.



– 90 –

Under the tenancy agreements, tenants are normally responsible for payment of outgoings such as property

management fees. Tenants are generally also responsible for repairing, and payment of all other expenses relating

to, the interior of the premises, while the landlord is generally responsible for repairing the public facilities and

main structures. In the event that the premises or a substantial part of it are rendered unfit for use or inaccessible

by force majeure or by any cause other than the result of the negligence or fault of the tenants, the tenants are

usually entitled to rent abatement until the premises shall again be rendered fit for occupation and, in some tenancy

agreements, either the landlords or the tenants are entitled to terminate the tenancy agreement if the premises are

not reinstated after a certain period of time. Tenants are generally not permitted to assign or sublet the premises

without the written consent of the landlord.

The majority of the tenancy agreements grants the landlord the right to collect the remaining rents during the

tenancy periods when tenants unilaterally terminate their tenancies prior to the schedule expiration dates. For

some anchor tenants, the tenancy agreements provide the tenants the right to terminate the tenancies prior to the

scheduled expiration dates upon a three-month prior written notice, while granting the landlord the right to collect

termination fees. The tenants may also have the right to an early termination in limited situations such as when

there are major defects in the premises under the tenancy agreement that are not rectified within a reasonable time.

The landlord has the right to terminate the tenancy agreement upon the occurrence of certain events, such as

non-payment of rent or breach of covenants by the tenants. In addition, the tenants are required to use the premises

for the permitted purposes only and otherwise in accordance with all applicable laws and regulations in the PRC.

Such non-compliance and the failure to rectify within a reasonable period of time after receiving notice from the

landlord requesting rectification will allow the landlord to unilaterally terminate the tenancy agreement without

penalty, and the landlord will also have the right to forfeit the tenant’s security deposit.

THE REIT PROPERTIES

The following provides details of the different features and strengths of each of the REIT Properties,

including their locations, size and surroundings, their tenant profiles, duration of the tenancy agreements,

ownership and transaction history.

1. Shanghai Fengxian Powerlong Plaza

Shanghai Fengxian Powerlong Plaza was opened in November 2015 and is a one-stop shopping center with

integrated shopping, catering and entertainment functions built on top of a metro station in Fengxian District. As

of June 30, 2021, Shanghai Fengxian Powerlong Plaza had a total Gross Rentable Area of 27,953 sq.m., which

comprises a four-story shopping mall.

Shanghai Fengxian Powerlong Plaza is located at the center of Fengxian District, Shanghai. The REIT

Property is surrounded by over 260 residential communities within the five-kilometer radius, living approximately

550,000 people. Shanghai Fengxian Powerlong Plaza sits at the crossroad of two main commuting routes in

Fengxian District and is located in a commercial and residential area that is well-served by public transportation

such as Subway Line 5 (Huanchengdong Road Station), buses, and taxis.



– 91 –

Tenant Profile of Shanghai Fengxian Powerlong Plaza

Shanghai Fengxian Powerlong Plaza housed a total of 103 tenants as of June 30, 2021, with its five largest

tenants in terms of monthly Gross Rental Income contributing to approximately 18.1% of total monthly Gross

Rental Income for the month ended June 30, 2021 and approximately 27.8% of total Gross Rentable Area as of

June 30, 2021. Representative tenants of Shanghai Fengxian Powerlong Plaza include a national chain of

multifunctional cinema; a world-renowned retail brand in the fast-fashion industry focusing on providing

high-quality design clothing; and a Chinese tea drink chain founded in 2012 and operating in over 30 cities as one

of the most popular brands in China.

The following table sets out details of Shanghai Fengxian Powerlong Plaza’s tenants by reference to their

industry sectors, the Gross Rentable Area occupied by them as a percentage of the total Gross Rentable Area as of

June 30, 2021:



of June 30, 2021

Department Store and Supermarket 2.4Food & Beverage 25.0Fashion & Sportswear 24.0Kid’s Wear 4.5Convenient Store & Services 11.5Training and Personal Development 6.0Entertainment 21.9Sports 3.3Home Furnishings 1.4

Total 100.0

Note:




– 92 –


The terms of the tenancy agreements for Shanghai Fengxian Powerlong Plaza range from one to nineteen

years. The following table sets out the expiry periods of the tenancy agreements for Shanghai Fengxian Powerlong

Plaza by reference to their respective percentages of Gross Rentable Area of the total Gross Rental Area as of June

30, 2021 and their respective percentages of Gross Rental Income of the total Gross Rentable Income for the month

ended June 30, 2021:

Expiry Period




of June 30, 2021




June 30, 2021

(%) (%)

Prior to December 31, 2021 12.4 26.0Year ending December 31, 2022 14.8 18.0Year ending December 31, 2023 14.9 16.4Year ending December 31, 2024 6.2 6.6Year ending December 31, 2025 and beyond 51.7 33.0Vacant – –

Total 100.0 100.0

Ownership and Five Year Transaction History

Shanghai Fengxian Powerlong Plaza is wholly-owned by Powerlong REIT through Fengxian Project

Company, the principal business activity of which is the ownership and operation of Shanghai Fengxian Powerlong

Plaza. The land use right for Shanghai Fengxian Powerlong Plaza will expire on December 18, 2051. Based on land

searches dated August 12, 2021 and updated to the Latest Practicable Date, there had not been any sale and

purchase transactions for Shanghai Fengxian Powerlong Plaza in the past five years other than as specified in the

Reorganization.



– 93 –

2. Hangzhou Lin’an Powerlong Plaza

Hangzhou Lin’an Powerlong Plaza was opened in November 2019 and is a shopping center in Lin'an Districtwith many well-known national and international brands. As of June 30, 2021, Hangzhou Lin’an Powerlong Plazahad a total Gross Rentable Area of 32,599 sq.m., which comprises (a) a four-story shopping mall and (b) 865 carparking spaces.

Hangzhou Lin’an Powerlong Plaza is located in Lin’an District, Hangzhou. The REIT Property sits next toNanshao River, a major tourist attraction place in Lin’an, and is situated along one of the main commuting route inLin’an District. Northeast of the REIT Property is the campus of a reputable university in Zhejiang. HangzhouLin’an Powerlong Plaza is surrounded by about 319 residential communities housing approximately 650,000people and is located in an area well-served by public transportation such as Subway Line 16, buses and taxis, allwithin the five-kilometer radius.

Tenant Profile of Hangzhou Lin’an Plaza

Hangzhou Lin’an Powerlong Plaza housed a total of 148 tenants as of June 30, 2021, with its five largesttenants in terms of monthly Gross Rental Income contributing to approximately 21.3% of total monthly GrossRental Income for the month ended June 30, 2021 and approximately 35.3% of total Gross Rentable Area as ofJune 30, 2021. Representative tenants of Hangzhou Lin’an Powerlong Plaza include a national chain ofmultifunctional cinema; a leading manufacturing and retail brand from Japan that specializes in selling casualwear, fashion cloth and designer cloth; a national supermarket chain established in Fuzhou in early 2000 thatspecializes in providing a wide variety of fresh food and agricultural and sideline products; and a renownedrestaurant chain that serves authentic Shanghainese food.

The following table sets out details of Hangzhou Lin’an Powerlong Plaza’s tenants by reference to theirindustry sectors, the Gross Rentable Area occupied by them as a percentage of the total Gross Rentable Area as ofJune 30, 2021:



of June 30, 2021


Total 100.0

Note:




– 94 –


The terms of the tenancy agreements for Hangzhou Lin’an Powerlong Plaza range from one to fifteen years.The following table sets out the expiry periods of the tenancy agreements for Hangzhou Lin’an Powerlong Plaza byreference to their respective percentages of Gross Rentable Area of the total Gross Rental Area as of June 30, 2021and their respective percentages of Gross Rental Income of the total Gross Rentable Income for the month endedJune 30, 2021:

Expiry Period




of June 30, 2021




June 30, 2021

(%) (%)


Total 100.0 100.0


Hangzhou Lin’an Powerlong Plaza is wholly-owned by Powerlong REIT through Lin’an Project Company,the principal business activity of which is the ownership and operation of Hangzhou Lin’an Powerlong Plaza. Theland use right for Hangzhou Lin’an Powerlong Plaza will expire on February 27, 2058. Based on land searchesdated August 16, 2021 and updated to the Latest Practicable Date, there had not been any sale and purchasetransactions for Hangzhou Lin’an Powerlong Plaza in the past five years other than as specified in theReorganization.

Transfer Condition of Hangzhou Lin’an Powerlong Plaza

According to the land grant agreement and its supplemental agreement dated July 31, 2017 and August 24,2017, respectively entered into between Lin’an Project Company, the relevant government department of Lin’andistrict, Hangzhou and other relevant parties, as well as the real estate title certificate of the land on whichHangzhou Lin’an Powerlong Plaza is situated (the “Lin’an Land”), Hangzhou Lin’an Powerlong Plaza isrestricted from being transferred in all or in part to other parties for an unlimited period (the “Lin’an TransferCondition”). However, none of the provisions of these documents restricts the transfer of the equity interest inLin’an Project Company.



– 95 –

According to the confirmation letters issued by the Hangzhou Planning and Natural Resources Bureau Lin’anBranch (杭州市規劃與自然資源局臨安分局) (the “Hangzhou PNRB Lin’an Branch”), the competent authorityas advised by the PRC Legal Advisors, and the verbal consultation with its officer by Lin’an Project Company, thePRC Legal Advisers, the Joint Listing Agents and their PRC legal advisers in August 2021, Hangzhou PNRBLin’an Branch confirmed that, among others, (i) the proposed transaction contemplated under the Reorganizationin relation to Hangzhou Lin’an Powerlong Plaza will not constitute a breach of the Lin’an Transfer Condition orany other restrictive regulations; (ii) the Lin’an Transfer Condition only applies to land use rights attached toLin’an Land; and (iii) should there be any transfer restriction, all relevant terms should have been specified in theland grant agreement, and in respect of equity transfer, there is no such restriction in the case where no specificrestriction is stipulated in the land grant agreement.

As such, the PRC Legal Advisors are of the view and the Joint Listing Agents concur that, having consideredthe above and the fact that none of the provisions of the relevant land grant agreements and its supplementalagreement or the real estate title certificate restricts the transfer of the equity interest in Lin’an Project Companyor its direct or indirect shareholders, the ownership of Lin’an Land and Hangzhou Lin’an Powerlong Plaza couldbe indirectly sold to a third party through the sales of the equity interest in Lin’an Project Company or its direct orindirect shareholders. As such, Powerlong REIT’s legal and beneficial title in Lin’an Land and Hangzhou Lin’anPowerlong Plaza (which is held indirectly through the Lin’an Project Company) could be transferred to anotherparty without any restrictions.

Based on the above, as advised by the PRC Legal Advisors, Powerlong REIT (through Lin’an ProjectCompany) is considered to have held a good marketable legal and beneficial title to Lin’an Land and HangzhouLin’an Powerlong Plaza upon completion of the Reorganization despite the fact that it is subject to the Lin’anTransfer Condition, and its title shall be protected by the laws of the PRC, upon which no person may unlawfullychallenge or infringe. In particular:

(i) the Lin’an Transfer Condition will not prevent Hangzhou Lin’an Powerlong Plaza from being leased orbeing accepted by banks as security or being sold to third party indirectly through the sales of the equityinterest in Lin’an Project Company or its direct or indirect shareholders;

(ii) the subsisting tenancies at Hangzhou Lin’an Powerlong Plaza remain legal and enforceable; and

(iii) the proposed transaction contemplated under the Reorganization in relation to Hangzhou Lin’anPowerlong Plaza shall be legal and valid, and there shall be no legal consequences or enforcementactions in relation thereto pursuant to the laws of the PRC.

To minimize the potential adverse impact of the Lin’an Transfer Condition, if any, on Powerlong REIT,Powerlong Holdings has provided an irrevocable undertaking to indemnify Powerlong REIT, among others, to thefullest extent permissible by law, for any liability, losses, damages, fines, fees and costs (on a full indemnity basis)which it may suffer in respect of the Lin’an Transfer Condition. The REIT Manager shall procure that all otherproperties to be acquired by Powerlong REIT after [REDACTED] are not subject to any transfer restrictions.

None of the other REIT Properties is subject to any transfer restrictions. As such, as advised by the PRCLegal Advisers, Powerlong REIT shall have held good marketable legal and beneficial title in all of the REITProperties upon the completion of the Reorganization.

Having considered the above, the REIT Manager is of the view that the Lin’an Transfer Condition would nothave any material and adverse effect on the financial condition and business of Powerlong REIT.



– 96 –

3. Yancheng Powerlong Plaza

Yancheng Powerlong Plaza was opened in September 2011 and is a one-stop shopping center with integratedshopping, catering and entertainment functions in Yancheng. As of June 30, 2021, Yancheng Powerlong Plaza hada total Gross Rentable Area of 102,987 sq.m., which comprises (a) a four-story shopping mall and (b) 916 carparking spaces.

Yancheng Powerlong Plaza is located at Yannan High Tech Zone, Yancheng City. Nearby YanchengPowerlong Plaza, there are over 550 residential communities living over one million people within thefive-kilometer radius. Immediately adjacent to the REIT Property in the east is the city’s second largest ecologicalpark covering 0.7 million sq.m., an area designed for family activities, recreational activities, visiting andsightseeing. Yancheng Powerlong Plaza sits next to Qingnian Road, a urban high speed road and a main commutingroute in Yancheng City, and is located in a commercial and residential area that is well-served by publictransportation such as taxis and nine bus lines.

Tenant Profile of Yancheng Powerlong Plaza

Yancheng Powerlong Plaza housed a total of 220 tenants as of June 30, 2021, with its five largest tenants interms of monthly Gross Rental Income contributing to approximately 19.6% of total monthly Gross Rental Incomefor the month ended June 30, 2021 and approximately 34.2% of total Gross Rentable Area as of June 30, 2021.Representative tenants of Yancheng Powerlong Plaza include a national chain of multifunctional cinema featuringDolby Atmos and iMax screens; a Chinese tea drink chain founded in 2012 and operating more than 200 stores inover 30 cities as one of the most popular brand in China; the largest hotpot chain in China that serves wide rangeof dishes from spicy broths to special services; and a national supermarket chain established in Fuzhou in early2000 that specializes in providing a wide variety of fresh food and agricultural and sideline products.

The following table sets out details of Yancheng Powerlong Plaza’s tenants by reference to their industrysectors, the Gross Rentable Area occupied by them as a percentage of the total Gross Rentable Area as of June 30,2021:



of June 30, 2021


Total 90.7

Note:




– 97 –


The terms of the tenancy agreements for Yancheng Powerlong Plaza range from one to twenty years. The

following table sets out the expiry periods of the tenancy agreements for Yancheng Powerlong Plaza by reference

to their respective percentages of Gross Rentable Area of the total Gross Rental Area as of June 30, 2021 and their

respective percentages of Gross Rental Income of the total Gross Rentable Income for the month ended June 30,

2021:

Expiry Period




of June 30, 2021




June 30, 2021

(%) (%)

Prior to December 31, 2021 18.7 24.3Year ending December 31, 2022 9.1 25.0Year ending December 31, 2023 7.7 18.1Year ending December 31, 2024 8.7 6.4Year ending December 31, 2025 and beyond 46.4 26.2Vacant 9.3 –

Total 100.0 100.0


Yancheng Powerlong Plaza is wholly-owned by Powerlong REIT through Yancheng Project Company, the

principal business activity of which is the ownership and operation of Yancheng Powerlong Plaza. The land use

right for Yancheng Powerlong Plaza will expire on September 30, 2048. Based on land searches dated August 10,

2021 and updated to the Latest Practicable Date, there had not been any sale and purchase transactions for

Yancheng Powerlong Plaza in the past five years other than as specified in the Reorganization.

4. Suqian Powerlong Plaza

Suqian Powerlong Plaza was opened in September 2011 and is a fashion lifestyle shopping center. As of June

30, 2021, Suqian Powerlong Plaza had a total Gross Rentable Area of 82,572 sq.m., which comprises (a) a

four-story shopping mall and (b) 680 car parking spaces.

Suqian Powerlong Plaza is located at the commercial center of Suqian City, Jiangsu Province. Suqian

Powerlong Plaza is situated along the ancient course of the Yellow River and surrounded by residential

communities, hotels, restaurants, and major banks. Within the five-kilometers radius, there are approximately 300

residential communities residing over 560,000 people. The REIT Property is located at a focal point of a

commercialized area that is well-served by public transportation such as buses and taxis.



– 98 –

Tenant Profile of Suqian Powerlong Plaza

Suqian Powerlong Plaza housed a total of 220 tenants as of June 30, 2021, with its five largest tenants in terms

of monthly Gross Rental Income contributing to approximately 31.0% of total monthly Gross Rental Income for

the month ended June 30, 2021 and approximately 52.7% of total Gross Rentable Area as of June 30, 2021.

Representative tenants of Suqian Powerlong Plaza include a national chain of multifunctional cinema; a leading

department store in China that provides one-stop shopping and a full range of daily supplies and living necessities

to customers of all groups; one of China’s largest health and beauty product retail chain stores; and the world’s

largest coffeehouse chain that offers a wide range of coffee and tea beverages and products as well as a friendly

in-store dining experience.

The following table sets out details of Suqian Powerlong Plaza’s tenants by reference to their industry

sectors, the Gross Rentable Area occupied by them as a percentage of the total Gross Rentable Area as of June 30,

2021:



of June 30, 2021


Total 98.0

Note:




– 99 –


The terms of the tenancy agreements for Suqian Powerlong Plaza range from one to twenty years. The

following table sets out the expiry periods of the tenancy agreements for Suqian Powerlong Plaza by reference to

their respective percentages of Gross Rentable Area of the total Gross Rental Area as of June 30, 2021 and their


2021:

Expiry Period




of June 30, 2021




June 30, 2021

(%) (%)


Total 100.0 100.0


Suqian Powerlong Plaza is wholly-owned by Powerlong REIT through Suqian Project Company, the principal

business activity of which is the ownership and operation of Suqian Powerlong Plaza. The land use right for Suqian

Powerlong Plaza will expire on November 27, 2049. Based on land searches dated August 17, 2021 and updated to

the Latest Practicable Date, there had not been any sale and purchase transactions for Suqian Powerlong Plaza in

the past five years other than as specified in the Reorganization.

5. Quanzhou Anxi Powerlong Plaza

Quanzhou Anxi Powerlong Plaza was opened in December 2010 and is a one-stop shopping center with

multiple functions and brands. As of June 30, 2021, Quanzhou Anxi Powerlong Plaza had a total Gross Rentable

Area of 45,595 sq.m., which comprises a three-story shopping mall.

Quanzhou Anxi Powerlong Plaza is located at Anxi County where resides approximately one million of

population. Within the five-kilometer radius of Quanzhou Anxi Powerlong Plaza, there are over 100 residential

communities, 20 hotels, serving over 240,000 people. The REIT Property is adjacent to a main urban commuting

route and expressway G1523 that across through Anxi County. Quanzhou Anxi Powerlong Plaza is located in a

commercial and residential area that is well-served by public transportation such as taxis and buses with over ten

bus lines stopping at the crossroads on the northwest and southeast sides of the REIT Property.



– 100 –

Tenant Profile of Quanzhou Anxi Powerlong Plaza

Quanzhou Anxi Powerlong Plaza housed a total of 80 tenants as of June 30, 2021, with its five largest tenants

in terms of monthly Gross Rental Income contributing to approximately 21.4% of total monthly Gross Rental

Income for the month ended June 30, 2021 and approximately 66.9% of total Gross Rentable Area as of June 30,

2021. Representative tenants of Quanzhou Anxi Powerlong Plaza include a leading supermarket chain from Taiwan

that specializes in providing fresh low-priced food and daily necessities and featuring a one-stop shopping strategy

and convenient shopping experience; a leading cinema chain in China; the largest hotpot chain in PRC that serves

wide range of dishes from spicy broths to special services; and one of China’s largest health and beauty product

retail chain stores.

The following table sets out details of Quanzhou Anxi Powerlong Plaza’s tenants by reference to their


June 30, 2021:



of June 30, 2021

Department Store and Supermarket 49.7Food & Beverage 12.2Fashion & Sportswear 10.0Kid’s Wear 0.2Convenient Store & Services 4.1Training and Personal Development –Entertainment 24.0Sports –Home Furnishings –

Total 100.0

Note:




– 101 –


The terms of the tenancy agreements for Quanzhou Anxi Powerlong Plaza range from one to twenty years.

The following table sets out the expiry periods of the tenancy agreements for Quanzhou Anxi Powerlong Plaza by

reference to their respective percentages of Gross Rentable Area of the total Gross Rental Area as of June 30, 2021

and their respective percentages of Gross Rental Income of the total Gross Rentable Income for the month ended

June 30, 2021:

Expiry Period




of June 30, 2021




June 30, 2021

(%) (%)


Total 100.0 100.0


Quanzhou Anxi Powerlong Plaza is wholly-owned by Powerlong REIT through Anxi Project Company, the

principal business activity of which is the ownership and operation of Quanzhou Anxi Powerlong Plaza. The land

use right for Quanzhou Anxi Powerlong Plaza will expire on February 3, 2050. Based on land searches dated

August 13, 2021 and updated to the Latest Practicable Date, there had not been any sale and purchase transactions

for Quanzhou Anxi Powerlong Plaza in the past five years other than as specified in the Reorganization.

6. Qingdao Jiaozhou Powerlong Plaza

Qingdao Jiaozhou Powerlong Plaza was opened in February 2015 and is a leisure lifestyle shopping mall. As

of June 30, 2021, Qingdao Jiaozhou Powerlong Plaza had a total Gross Rentable Area of 56,089 sq.m., which

comprises a four-story shopping mall.

Qingdao Jiaozhou Powerlong Plaza is located at the center of Jiaozhou City. Within the five-kilometer radius

of the REIT Property, there are schools and residential communities residing over 80,000 people. Qingdao

Jiaozhou Powerlong Plaza is located at the crossroad of G204 and Yangzhou East Road, two main commuting

routes in Jiaozhou City, and is located at a commercial and residential area that is well-served by public

transportation such as buses and taxis.



– 102 –

Tenant Profile of Qingdao Jiaozhou Powerlong Plaza

Qingdao Jiaozhou Powerlong Plaza housed a total of 127 tenants as of June 30, 2021, with its five largest

tenants in terms of monthly Gross Rental Income contributing to approximately 27.1% of total monthly Gross

Rental Income for the month ended June 30, 2021 and approximately 45.4% of total Gross Rentable Area as of

June 30, 2021. Representative tenants of Qingdao Jiaozhou Powerlong Plaza include a national chain of

multifunctional cinema featuring Dolby Atmos and iMax screens; a leading retail brand in maternal, infant, and

child industry that specializes in one-stop shopping for child aged 0-14; a supermarket chain from Taiwan that

specializes in providing fresh low-priced food and daily necessities and featuring a one-stop shopping strategy and

convenient shopping experience; and a well-known American sports equipment company that manufactures

footwear, sports, and apparel.

The following table sets out details of Qingdao Jiaozhou Powerlong Plaza’s tenants by reference to their


June 30, 2021:



of June 30, 2021

Department Store and Supermarket 35.3Food & Beverage 21.2Fashion & Sportswear 12.0Kid’s Wear 1.7Convenient Store & Services 5.3Training and Personal Development 4.0Entertainment 14.5Sports 3.3Home Furnishings –

Total 97.3

Note:




– 103 –


The terms of the tenancy agreements for Qingdao Jiaozhou Powerlong Plaza range from one to twenty years.

The following table sets out the expiry periods of the tenancy agreements for Qingdao Jiaozhou Powerlong Plaza

by reference to their respective percentages of Gross Rentable Area of the total Gross Rental Area as of June 30,

2021 and their respective percentages of Gross Rental Income of the total Gross Rentable Income for the month

ended June 30, 2021:

Expiry Period




of June 30, 2021




June 30, 2021

(%) (%)


Total 100.0 100.0


Qingdao Jiaozhou Powerlong Plaza is wholly-owned by Powerlong REIT through Jiaozhou Project Company,

the principal business activity of which is the ownership and operation of Qingdao Jiaozhou Powerlong Plaza. The

land use right for Qingdao Jiaozhou Powerlong Plaza will expire on June 17, 2053. Based on land searches dated

June 23, 2021 and updated to the Latest Practicable Date, there had not been any sale and purchase transactions for

Qingdao Jiaozhou Powerlong Plaza in the past five years other than as specified in the Reorganization.

7. Luoyang Powerlong Plaza

Luoyang Powerlong Plaza was opened in December 2011 and is a one-stop shopping mall with integrated

shopping, catering and entertainment functions. As of June 30, 2021, Luoyang Powerlong Plaza had a total Gross

Rentable Area of 45,669 sq.m., which comprises a three-story shopping mall.

Luoyang Powerlong Plaza is located at the center of Luoyang City, Henan Province. Luoyang Powerlong

Plaza is surrounded by over 300 residential communities within the five-kilometer living approximately 740,000

people. The REIT Property is located nearby hotels, supermarkets, major banks, and over 30 schools and situated

along the eastbound of Kai Yuan Road, one of the main commuting route in Luoyang that connects the east and

west sides of the city. Luoyang Powerlong Plaza is located in a commercial and residential area that is well-served

by public transportation such as over ten bus lines on Kai Yuan Road stopping right in the front of the REIT

Property.



– 104 –

Tenant Profile of Luoyang Powerlong Plaza

Luoyang Powerlong Plaza housed a total of 120 tenants as of June 30, 2021, with its five largest tenants in

terms of monthly Gross Rental Income contributing to approximately 30.0% of total monthly Gross Rental Income

for the month ended June 30, 2021 and approximately 43.4% of total Gross Rentable Area as of June 30, 2021.

Representative tenants of Luoyang Powerlong Plaza include a leading retail brand in maternal, infant, and child

industry that specializes in one-stop shopping for child aged 0-14; a national supermarket chain established in

Fuzhou in early 2000, providing a wide variety of fresh food and agricultural and sideline products; one of China’s

largest health and beauty product retail chain stores; the world’s second largest fast food and the largest fried

chicken chain; and the world’s largest sporting goods retailer that provides a full range of sports equipment gears

and apparel for customers of all ages.

The following table sets out details of Luoyang Powerlong Plaza’s tenants by reference to their industry


2021:



of June 30, 2021

Department Store and Supermarket 19.3Food & Beverage 12.8Fashion & Sportswear 21.3Kid’s Wear 4.5Convenient Store & Services 7.0Training and Personal Development 6.5Entertainment 19.2Sports 2.2Home Furnishings –

Total 92.8

Note:




– 105 –


The terms of the tenancy agreements for Luoyang Powerlong Plaza range from one to twenty years. The

following table sets out the expiry periods of the tenancy agreements for Luoyang Powerlong Plaza by reference to

their respective percentages of Gross Rentable Area of the total Gross Rental Area as of June 30, 2021 and their


2021:

Expiry Period




of June 30, 2021




June 30, 2021

(%) (%)


Total 100.0 100.0


Luoyang Powerlong Plaza is wholly-owned by Powerlong REIT through Luoyang Project Company, the

principal business activity of which is the ownership and operation of Luoyang Powerlong Plaza. The land use

right for Luoyang Powerlong Plaza is will expire on February 1, 2046. Based on land searches dated August 12,

2021 and updated to the Latest Practicable Date, there had not been any sale and purchase transactions for Luoyang

Powerlong Plaza in the past five years other than as specified in the Reorganization.

8. Xinxiang Powerlong Plaza

Xinxiang Powerlong Plaza was opened in September 2012 and is a shopping mall with integrated catering and

entertainment functions. As of June 30, 2021, Xinxiang Powerlong Plaza had a total Gross Rentable Area of 60,011

sq.m., which comprises a four-story shopping mall.

Xinxiang Powerlong Plaza is located at the center of Xinxiang City, Henan Province. The REIT Property is

surrounded by approximately 750 residential communities within the five-kilometer radius residing over

1,500,000 people. Xinxiang Powerlong Plaza is adjacent to major banks, hotels, restaurants, and office buildings.

It sits along the eastbound of Jin Sui Road, one of the main commuting route in Xinxiang that connects the city

from the east and to the west. Xinxiang Powerlong Plaza is well-served by public transportation including fifteen

bus lines that stop on the northeast and northwest sides of the REIT Property.



– 106 –

Tenant Profile of Xinxiang Powerlong Plaza

Xinxiang Powerlong Plaza housed a total of 143 tenants as of June 30, 2021, with its five largest tenants in

terms of monthly Gross Rental Income contributing to approximately 18.7% of total monthly Gross Rental Income

for the month ended June 30, 2021 and approximately 46.9% of total Gross Rentable Area as of June 30, 2021.

Representative tenants of the REIT Property include a leading retail brand in maternal, infant, and child industry

that specializes in one-stop shopping for child aged 0-14; a public national grocery chain established in Fuzhou in

early 2000, offering wide variety of fresh food and agricultural and sideline products; the largest hotpot chain in

China that serves a variety of dishes from spicy broths to special services; the world’s second largest fast food and

the largest fried chicken chain; and one of the world’s largest pizza chains and international franchises that serves

pizza and other Italian-American dishes.

The following table sets out details of Xinxiang Powerlong Plaza’s tenants by reference to their industry


2021:



of June 30, 2021

Department Store and Supermarket 29.3Food & Beverage 14.1Fashion & Sportswear 15.5Kid’s Wear 6.5Convenient Store & Services 8.5Training and Personal Development 0.9Entertainment 19.9Sports –Home Furnishings 5.3

Total 100.0

Note:




– 107 –


The terms of the tenancy agreements for Xinxiang Powerlong Plaza range from one to twenty years. The

following table sets out the expiry periods of the tenancy agreements for Xinxiang Powerlong Plaza by reference

to their respective percentages of Gross Rentable Area of the total Gross Rental Area as of June 30, 2021 and their


2021:

Expiry Period




of June 30, 2021




June 30, 2021

(%) (%)


Total 100.0 100.0


Xinxiang Powerlong Plaza is wholly-owned by Powerlong REIT through Xinxiang Project Company, the

principal business activity of which is the ownership and operation of Xinxiang Powerlong Plaza. The land use

right for Xinxiang Powerlong Plaza will expire on January 7, 2048. Based on land searches dated August 20, 2021

and updated to the Latest Practicable Date, there had not been any sale and purchase transactions for Xinxiang

Powerlong Plaza in the past five years other than as specified in the Reorganization.

CAR PARKS, COMMON AREA AND ADVERTISING SPACE MANAGEMENT

During the Track Record Period, the Predecessor Group had engaged Powerlong CM Group and other related

parties to provide car parking lots, common areas and advertising space management services to the REIT

Properties. Under the relevant car parking lots, common area and/or advertising space management services

agreements, the property managers agreed to lease certain car parking lots, common area and/or advertising space

of the REIT Properties from the Predecessor Group and provide management services to such space. In return, the

Predecessor Group received annual rents from the property managers, while the property managers retained all the

fees received from their independent third-party customers generated from the car parking lots, common areas

and/or advertising space.



– 108 –

As such, the Predecessor Group received rental income from car parking lots, common areas and advertising

space from the property managers amounting to RMB36.8 million, RMB23.3 million, RMB24.7 million, RMB11.2

million and RMB19.2 million for 2018, 2019 and 2020 and the six months ended June 30, 2020 and 2021,

respectively, in addition to Gross Rental Income received from tenants of the REIT Properties.

On [●], 2021, the REIT Manager (for itself and on behalf of the Powerlong REIT Group) entered into a Car

Parking Lots Management Services Framework Agreement and a Common Area and Advertising Space

Management Services Framework Agreement with Powerlong CM (for itself and on behalf of the other members of

the Powerlong CM Group), pursuant to which the Powerlong CM Group has agreed to (i) lease certain car parking

lots, common areas and advertising spaces (as applicable) from the Powerlong REIT Group; and (ii) be responsible

for managing such car parking lots, common areas and advertising spaces (as appliable) for an initial term from the

[REDACTED] to December 31, 2023. See “Connected Party Transactions—Continuing Connected Party

Transactions” in this Document for further details.

COMPETITION

The following table sets out the primary competitors of the REIT Properties within the five-kilometer radius,

according to the Market Consultant:

REIT Properties Competitors

Shanghai Fengxian Powerlong Plaza Suning Plaza and Bailian Nanqiao Shopping CenterHangzhou Lin’an Powerlong Plaza Wanhua PlazaYancheng Powerlong Plaza Wanda Plaza, Golden Eagle International Shopping Center and

Wenfeng Shopping CenterSuqian Powerlong Plaza Wanda Plaza and Golden Eagle International Shopping CenterQuanzhou Anxi Powerlong Plaza Wanda PlazaQingdao Jiaozhou Powerlong Plaza Longfor Paradise WalkLuoyang Powerlong Plaza Zhengda International PlazaXinxiang Powerlong Plaza Wanda Plaza and New Metropolis Shopping Center

The REIT Properties face moderate or higher competition from other shopping malls in the respective areas

as well as potential competition from the entry of new shopping malls into the respective markets.

INSURANCE

Powerlong REIT has taken out insurance for the REIT Properties that the REIT Manager believes is

consistent with industry norm in their respective area. This includes comprehensive property insurance (including

insurance against fire and flood) and public liability insurance. No significant or unusual excess or deductible

amounts are required under such policies. There are, however, certain types of risks that are not covered by such

insurance policies, including losses resulting from war, nuclear contamination, acts of terrorism, epidemics and/or

other acts of God.

The REIT Manager believes that there are no significant differences between the extent of insurance coverage

for the REIT Properties and that for commercial and retail properties in the PRC generally, and that there are no

significant differences between the claims recovery processes for the REIT Properties and those for commercial

and retail properties in the PRC generally. The REIT Manager also believes that the REIT Properties are

adequately covered by insurance which will be renewed when they expire.



– 109 –

LITIGATION

There may be disputes or proceedings involving the REIT Properties from time to time that arise in the

ordinary course of business, such as tenancy or rental payment disputes. As of the Latest Practicable Date, none of

the Project Companies nor the REIT Manager were involved in any material litigation or administrative

proceedings nor, to the best of the Directors’ knowledge, was there any material litigation or administrative

proceedings threatened against any such parties.

LEGAL AND REGULATORY COMPLIANCE

The PRC Legal Advisors have confirmed that each Project Company has obtained the necessary approvals,

permits, licenses and certificates for its holding of the land and building use rights over their respective REIT

Property; and that as of the Latest Practicable Date, all material permits, licenses and certificates had been

obtained and are valid for conducting their respective current business and operating in the PRC. Each of the

Project Companies had complied with the relevant PRC laws and regulations in all material respects during the

Track Record Period.

The PRC Legal Advisors have further confirmed that all tenancy agreements in respect of the REIT Properties

are legal, valid and binding and enforceable by or on behalf of Powerlong REIT in accordance with its terms.

COMPLIANCE WITH PARAGRAPH 7.7 OF THE REIT CODE

The REIT Manager has been advised by the PRC Legal Advisors that Powerlong REIT holds good marketable

legal and beneficial title in all of the REIT Properties through the Project Companies.

Title and Ownership

An overview of the relevant property laws and regulations in the PRC is contained in Appendix VII to this

Document. In the PRC, there are two registers for property interests. Land registration involves the issue of a land

use right certificate (土地使用證) by the relevant authority to the land user. It is the evidence that the land user has

obtained land use rights which can be assigned, mortgaged or leased. Building registration involves the issue of a

building ownership certificate (房屋所有權證) or a real estate ownership certificate (房地產權證) to the owner. It

is the evidence that the owner has obtained building ownership rights in respect of the building erected on a piece

of land.

The two different systems are commonly maintained separately in many cities in the PRC. However, pursuant

to the Interim Regulations on Real Estate Registration (不動產登記暫行條例), which came into force on March 1,

2015, the two systems have been consolidated and a single composite real estate and ownership certificate (房地產證╱不動產權證書) is issued to evidence the ownership of both land use rights and the buildings erected on the

land. The holder of a real estate ownership certificate is entitled to deal freely with the property by, for example,

transferring or granting leases in respect of the property or part thereof, and charging or mortgaging the land use

rights in the property as security for any borrowings.

BUILDING SURVEYOR’S REPORT

The REIT Manager has commissioned Savills Project Consultancy Limited, the Building Surveyor, to prepare

a building survey report in respect of the REIT Properties. A copy of the Building Surveyor’s report is included in

Appendix VI to this Document. The REIT Manager is not aware of any issues identified in the Building Surveyor’s

report that are material to an investor’s decision to invest in the Units.



– 110 –

The following discussion and the selected financial and operating information set forth below should beread in conjunction with the Accountant’s Report set forth in Appendix I to this Document as well as thesection headed “Management’s Discussion and Analysis of Financial Condition and Results of Operations” inthis Document. The Accountant’s Report has been prepared in accordance with HKFRS. The selectedhistorical financial included below and set forth in Appendix I to this Document is not indicative of PowerlongREIT’s future performance.

COMBINED STATEMENTS OF COMPREHENSIVE INCOME


June 30

2018 2019 2020 2020 2021



Net property income 241,174 245,438 268,921 139,071 152,416Administrative expenses (442) (501) (634) (316) (286)Fair value changes on investment

properties 646,475 411,119 60,735 28,966 17,137Net impairment losses on financial

assets (329) (444) (869) (2,964) 844Other gains – net 2,680 1,269 2,947 994 811

Operating profit 889,558 656,881 331,100 165,751 170,922Finance costs – net (15,770) (15,801) (22,619) (11,458) (10,800)Share of profit/(losses) of investment

accounted for using the equitymethod 90,196 (473) (7,879) 10,092 (670)


Profit and total comprehensiveincome for the year/period 745,570 480,163 223,302 125,720 116,250

Profit and total comprehensiveincome attributable to:– Owners of the Company 702,113 470,680 219,207 122,500 112,427– Non-controlling interests 43,457 9,483 4,095 3,220 3,823

745,570 480,163 223,302 125,720 116,250


SELECTED FINANCIAL INFORMATION

– 111 –

COMBINED STATEMENTS OF FINANCIAL POSITION


June 30

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

AssetsNon-current assetsInvestment properties 7,526,257 8,060,236 8,120,971 8,138,108Investment accounted for using the equity

method 501,731 501,258 493,379 –

8,027,988 8,561,494 8,614,350 8,138,108

Current assetsRental receivables 92,373 85,804 101,410 93,088Prepayments and other receivables 4,626 3,935 3,034 40,927Amounts due from related parties 1,646,562 1,193,248 559,291 304,128Restricted cash 6,695 2,705 – –Cash and cash equivalents 71,847 52,748 73,178 154,478

1,822,103 1,338,440 736,913 592,621

Total assets 9,850,091 9,899,934 9,351,263 8,730,729

EquityEquity attributable to owners of the

CompanyShare capital – – – –Reserves 1,967,136 1,512,052 1,151,252 577,484Retained earnings 3,630,388 4,101,068 4,320,275 4,432,702

5,597,524 5,613,120 5,471,527 5,010,186Non-controlling interests 296,929 258,242 262,337 –

Total equity 5,894,453 5,871,362 5,733,864 5,010,186



– 112 –


June 30

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

LiabilitiesNon-current liabilitiesBorrowings 550,000 350,000 330,000 319,000Deferred tax liabilities 1,223,432 1,356,887 1,412,969 1,423,682

1,773,432 1,706,887 1,742,969 1,742,682

Current liabilitiesTrade and other payables 121,674 242,274 244,352 197,220Amounts due to related parties 1,251,820 1,486,158 1,247,008 1,366,262Advances from lessees 45,101 53,362 53,823 67,722Current income tax liabilities 132,644 201,194 308,584 325,013Borrowings 630,967 338,697 20,663 21,644

2,182,206 2,321,685 1,874,430 1,977,861

Total liabilities 3,955,638 4,028,572 3,617,399 3,720,543

Total equity and liabilities 9,850,091 9,899,934 9,351,263 8,730,729

Net current liabilities (360,103) (983,245) (1,137,517) (1,385,240)

Total assets less current liabilities 7,667,885 7,578,249 7,476,833 6,752,868



– 113 –

COMBINED STATEMENTS OF CASH FLOWS


June 30

2018 2019 2020 2020 2021





Net (decrease)/increase in cash andcash equivalents (39,545) (19,099) 20,430 24,262 81,300

Cash and cash equivalents at beginningof year/period 111,392 71,847 52,748 52,748 73,178




– 114 –

You should read the following discussion in conjunction with the Predecessor Group’s combinedfinancial statements together with the accompanying notes set forth in the Accountant’s Report included asAppendix I to this Document and the selected historical financial information and operating data includedelsewhere in this Document. The Accountant’s Report has been prepared in accordance with HKFRS.

The Predecessor Group’s historical results do not necessarily indicate results expected for any futureperiods. The following discussion and analysis contains forward-looking statements that involve risks anduncertainties. Actual results may differ from those anticipated in these forward-looking statements as a resultof a number of factors, including those set forth in the section headed “Risk Factors”.

OVERVIEW

Powerlong REIT is a Hong Kong collective investment scheme constituted as a unit trust and authorized

under section 104 of the SFO. Powerlong REIT is a REIT formed to primarily own and invest in quality

income-generating commercial properties in the PRC. Powerlong REIT is managed by the REIT Manager whose

key investment objectives are to provide Unitholders with stable distributions, sustainable and long-term

distribution growth, and enhancement in the value of Powerlong REIT’s properties.

Powerlong REIT shall initially comprise the following eight REIT Properties in the PRC:

• Shanghai Fengxian Powerlong Plaza, a shopping mall with a GFA of 40,689 sq.m.;

• Hangzhou Lin’an Powerlong Plaza, a shopping mall with a GFA of 92,619 sq.m.;

• Yancheng Powerlong Plaza, a shopping mall with a GFA of 171,097 sq.m.;

• Suqian Powerlong Plaza, a shopping mall with a GFA of 150,660 sq.m.;

• Quanzhou Anxi Powerlong Plaza, a shopping mall with a GFA of 55,489 sq.m.;

• Qingdao Jiaozhou Powerlong Plaza, a shopping mall with a GFA of 76,057 sq.m.;

• Luoyang Powerlong Plaza, a shopping mall with a GFA of 69,735 sq.m.; and

• Xinxiang Powerlong Plaza, a shopping mall with a GFA of 84,288 sq.m.

BASIS OF PREPARATION

Powerlong REIT has no operating history and will be set up as part of the Reorganization exercise on the date

of this Document. The Project Companies were under the common control of Powerlong Holdings, immediately

before and after the Reorganization. Accordingly, the Reorganization is regarded as business combinations under

common control, and the financial statements set forth in the Accountant’s Report included as Appendix I to this

Document have been prepared on a combined basis.

The historical financial information of the Predecessor Group has been prepared by combining the historical

financial information of the Project Companies as if the group structure immediately after the Reorganization had

been in existence throughout the periods presented, or since the date when the Project Companies first came under

the common control of Powerlong Holdings, whichever is the shorter period.


MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS

– 115 –

The net assets of the combining companies were combined using the existing book values from

Powerlong Holdings’ perspective. No amount is recognized in consideration for goodwill or excess of

acquirer’s interest in the net fair value of acquiree’s identifiable assets, liabilities and contingent liabilities

over cost at the time of business combinations under common control, to the extent of the continuation of the

controlling party’s interest.

Inter-company transactions, balances and unrealized gains/losses on transactions between group

companies are eliminated on combination.

FACTORS AFFECTING RESULTS OF OPERATIONS

The major factors affecting Powerlong REIT’s results of operations and financial condition include the

following:

General Economic Conditions in the PRC

General economic conditions in the PRC, particularly those in the regions where the REIT Properties are

located, have affected and may continue to affect Powerlong REIT’s business and results of operations. Typically,

during periods of economic growth, the REIT Properties may achieve higher rental rates. On the contrary, rental

increases can be limited during periods of economic slowdown or significant market disruptions. In addition,

challenges from e-commerce faced by traditional retail industry and fluctuations in consumer purchasing power

may affect the demand for commercial premises such as shopping malls, which in turn could affect rental income

from Powerlong REIT’s properties.

In particular, as part of Powerlong REIT’s rental income, the rental rate applicable to certain tenants is (i) a

fixed rental per leased square meter, (ii) a commission calculated as a certain percentage of the total revenue of the

tenants from retail business, or (iii) the higher of the fixed rental per leased square meter and a commission. As a

result, depending on the financial performance of the tenants, which is affected by various factors, such as the

general economic conditions, changes in government policies, and development of retail and other relevant

industries in which the tenants engage, rental income from the shopping malls may fluctuate.

Rental Rates and Occupancy Rates

Powerlong REIT’s rental income depends principally on the rental rates and the Occupancy Rate of REIT

Properties.

Factors affecting rental rates and Occupancy Rate include the competitiveness of the REIT Properties against

other properties, the ability to minimize downtime as a result of expiries or early terminations of tenancy

agreements, property renovation plan, traffic network surrounding the REIT Properties, building conditions,

property management capabilities, market conditions, and macroeconomic and supply/demand trends affecting the

real estate market in the regions where the REIT Properties are located.

For details of the Occupancy Rates and Average Monthly Rental per Leased Square Meter of each of the REIT

Properties, please see “The REIT Properties and Business—Portfolio of REIT Properties.”



– 116 –

Scheduled Expiries and Renewals of Tenancies

The terms of the tenancy agreements for the REIT Properties range from one to twenty years. Certain major

tenants are granted options to renew their tenancies at expiry, based on arms’ length negotiation with factors like

prevailing market rates at the time of renewal being taken into consideration. As of June 30, 2021, tenancies

accounting for approximately 13.3%, 11.5%, 7.7%, 6.2% and 57.4% of the REIT Properties’ Gross Rentable Area

would expire for the years ending December 31, 2021, 2022, 2023, 2024 as well as 2025 and beyond, respectively.

Powerlong REIT’s ability to retain existing tenants upon expiry of the tenancy agreements and to re-let the

expiring spaces will impact its results of operations.

For details of expiry profile for the REIT Properties, please see “The REIT Properties and

Business—Portfolio of REIT Properties—Duration of the Tenancy Agreements” in this Document.

Fluctuation of Operating Expenses

The Predecessor Group’s property operating expenses mainly comprise property tax and other taxes

(including, among others, VAT surcharges, stamp duty, real estate tax and urban land use tax), commercial

operational services fees, promotion and advertising expenses and repairs and maintenance expenses. For the years

ended December 31, 2018, 2019 and 2020 and the six months ended June 30, 2020 and 2021, operating expenses

accounted for 25.6%, 26.9%, 25.0%, 22.1% and 25.1%, respectively, of the total revenue of the same periods.

Depending on the operation efficiency of the REIT Properties, operating expenses may fluctuate, which may in

turn affect Powerlong REIT’s financial condition and results of operations.

After the [REDACTED], there will be certain changes to Powerlong REIT’s operating expenses structure.

For example, certain historical expenses of the Predecessor Group, such as employee benefit expenses, will no

longer be costs of Powerlong REIT. Similarly, certain expenses, such as the REIT Manager’s and Trustee’s fees

which were not expenses of the Predecessor Group historically, will become expenses of Powerlong REIT going

forward. The changes to expenses structure may affect Powerlong REIT's results of operations.

Changes in Fair Value of Investment Properties

The revaluation of the REIT Properties has had an impact on the results of operations of the Predecessor

Group, and may in the future result in significant fluctuations in the results of operations of Powerlong REIT. For

each of the years ended December 31, 2018, 2019 and 2020 and the six months ended June 30, 2020 and 2021, the

Predecessor Group recorded gain from the increase in fair value of the REIT Properties of RMB646.5 million,

RMB411.1 million, RMB60.7 million, RMB29.0 million and RMB17.1 million, respectively.

The fair value of the REIT Properties can be affected by, among other factors, property market conditions, the

rate of economic growth in the regions where the REIT Properties are located, as well as interest rates, inflation,

economic developments and policy changes in the PRC. The fair value of the REIT Properties is valued by the

Independent Property Valuer based on appropriate methods and assumptions so as to reflect the market conditions.

Future changes of the property market may result in significant fluctuations in the fair value of the REIT Properties

and Powerlong REIT’s operating results. For a discussion of the risks relating to revaluation of the REIT

Properties, please see “Risk Factors—Risks Relating to the REIT Properties—Decrease in the fair value of the

REIT Properties at revaluation may constrain distributions and further borrowings of Powerlong REIT.



– 117 –

CRITICAL ACCOUNTING POLICIES, ESTIMATES AND JUDGMENTS

For a discussion of the critical accounting policies, estimates and judgments that have the most significant

effect on the amounts recognized in the financial statements, please see Notes 2 and 4 to the Accountant’s Report

of the Predecessor Group set out in Appendix I to this Document.

RESULTS OF OPERATIONS

The following summary of the Predecessor Group’s operating results is extracted from the Accountant’s

Report set out in Appendix I to this Document. Please read the following summary together with the Accountant’s

Report and the notes thereto.

Combined Statements of Comprehensive Income


June 30

2018 2019 2020 2020 2021



Net property income 241,174 245,438 268,921 139,071 152,416Administrative expenses (442) (501) (634) (316) (286)Fair value changes on investment

properties 646,475 411,119 60,735 28,966 17,137Net impairment losses on

financial assets (329) (444) (869) (2,964) 844Other gains – net 2,680 1,269 2,947 994 811

Operating profit 889,558 656,881 331,100 165,751 170,922Finance costs – net (15,770) (15,801) (22,619) (11,458) (10,800)Share of profit/(losses) of

investment accounted for usingthe equity method 90,196 (473) (7,879) 10,092 (670)





– 118 –

DESCRIPTION OF SELECTED STATEMENTS OF COMPREHENSIVE INCOME ITEMS

Revenue

During the Track Record Period, the Predecessor Group generated revenue from rental income from (i)

shopping malls; and (ii) car parks, common areas and advertising space. Rental income from shopping malls

represented the amounts recognized from tenants under their tenancies for retail space. Rental income from car

parks, common areas and advertising space represented the amount recognized from short-term rental and

long-term rental of the relevant spaces.

The table below sets forth a breakdown of the revenue for the periods indicated:

Year ended December 31 Six month ended June 30

2018 2019 2020 2020 2021

RMB’000 % RMB’000 % RMB’000 % RMB’000 % RMB’000 %(unaudited)

Rental income– Shopping malls 287,200 88.6 312,502 93.0 333,721 93.1 167,306 93.7 184,414 90.6– Car parks, common

areas and advertisingspace 36,777 11.4 23,347 7.0 24,724 6.9 11,203 6.3 19,201 9.4

Total 323,977 100.0 335,849 100.0 358,445 100.0 178,509 100.0 203,615 100.0

Property Operating Expenses

The Predecessor Group’s operating expenses primarily consisted of (i) commercial operational services fees,

which comprise property management and operation service costs and are charged as a percentage of the rental

income based on the terms of the relevant property management agreements; (ii) promotion and advertising

expenses to attract consumers to visit the relevant shopping malls; (iii) repair and maintenance costs; (iv) property

tax and other taxes, including VAT surcharges, stamp duty, real estate tax and urban land use tax; and (v) charges

for market positioning, tenant sourcing and opening preparation services incurred in 2019 relating to the opening

of the Hangzhou Lin’an Powerlong Plaza.



– 119 –

The table below sets forth a breakdown of operating expenses for the periods indicated:

Year ended December 31 Six month ended June 30

2018 2019 2020 2020 2021

RMB’000 % RMB’000 % RMB’000 % RMB’000 % RMB’000 %(unaudited)

Commercial operationalservices fees 30,489 36.8 17,480 19.3 16,607 18.6 5,807 14.7 10,842 21.2

Promotion andadvertising expenses 2,441 3.0 4,208 4.7 13,797 15.4 6,675 16.9 7,752 15.1

Repairs and maintenance 8,684 10.5 8,446 9.3 11,083 12.4 2,824 7.2 6,011 11.7Property tax and other

taxes 40,522 48.9 43,126 47.7 46,377 51.8 23,294 59.1 26,150 51.1Employee benefit

expenses 667 0.8 698 0.8 717 0.8 366 0.9 444 0.9Charges for market

positioning, tenantsourcing and openingpreparation services – – 14,565 16.1 – – – – – –

Charges for trademarklicensing – – 1,888 2.1 943 1.0 472 1.2 – –

Total 82,803 100.0 90,411 100.0 89,524 100.0 39,438 100.0 51,199 100.0

Administrative Expenses

The Predecessor Group’s administrative expenses primarily included insurance expenses and legal and

consultancy fees during the Track Record Period. For the years ended December 31, 2018, 2019 and 2020 and the

six months ended June 30, 2020 and 2021, the Predecessor Group’s administrative expenses amounted to RMB0.4

million, RMB0.5 million, RMB0.6 million. RMB0.3 million and RMB0.3 million, respectively.

Fair Value Changes on Investment Properties

The REIT Properties were valued as of December 31, 2018, 2019 and 2020 and June 30, 2021 by Savills. The

valuations were performed in accordance with the relevant requirements of the Listing Rules and the REIT Code,

as well as the valuation standards on properties issued by the Hong Kong Institute of Surveyors, Royal Institution

of Chartered Surveyors or International Valuation Standards Council (where applicable). The fair value of the

REIT Properties as of December 31, 2018, 2019 and 2020 and June 30, 2021 was approximately RMB7,526.3

million, RMB8,060.2 million, RMB8,121.0 million and RMB8,138.1 million, respectively.

The fair value changes on the REIT Properties resulted in gains recorded from the increase in fair value of

investment properties of approximately RMB646.5 million, RMB411.1 million, RMB60.7 million and RMB17.1

million, respectively, for the years ended December 31, 2018, 2019 and 2020 and the six months ended June 30,

2021.



– 120 –

Net Impairment Losses on Financial Assets

For the years ended December 31, 2018, 2019 and 2020 and the six months ended June 30, 2020, thePredecessor Group made net provision for impairment losses for receivables amounting to RMB0.3 million,RMB0.4 million, RMB0.9 million and RMB3.0 million, respectively, while for the six months ended June 30,2021, the Predecessor Group had net reversal of impairment losses for receivables of RMB0.8 million.

Other Gains, Net

The Predecessor Group’s net other gains primarily comprised (i) compensation income from early leasetermination, consisting primarily of the compensation received from the tenants for early termination of thetenancies or default of the tenants; (ii) one-off government grants and subsidies, consisting primarily of refund ofproperty tax and value added tax; and (iii) others, including administrative fines and other miscellaneous items.

The table below sets forth details of the Predecessor Group’s other income for the periods indicated:


June 30

2018 2019 2020 2020 2021


Compensation income from earlylease termination 1,957 1,338 2,946 993 811

Government grant and subsidies 791 – – – –Others (68) (69) 1 1 –

Total 2,680 1,269 2,947 994 811

Finance Costs, Net

Finance costs of the Predecessor Group mainly represent interest charged on bank borrowings. Financeincome of the Predecessor Group represents interest income from cash advances made to related parties forproperty development purposes.

During the Track Record Period, the Predecessor Group provided certain interest-bearing cash advances torelated parties and recognized interest income of RMB2.5 million, nil, nil, nil and nil in 2018, 2019 and 2020 andthe six months ended June 30, 2020 and 2021, respectively.

The PRC Legal Advisors advised that Article 61 of the General Lending Provisions (《貸款通則》) issued bythe PBOC prohibits any financing arrangements or lending transactions between non-financial institutions.Further, pursuant to Article 73 of the General Lending Provisions, the PBOC may impose on the non-compliantlender a fine of one to five times the income received by the lender from such loans. The PRC Legal Advisorsfurther advised that, notwithstanding the General Lending Provisions, the Supreme People’s Court has made newinterpretations concerning financing arrangements and lending transactions between non-financial institutions inthe Provisions of the Supreme People’s Court on Several Issues concerning the Application of Law in the Trial ofPrivate Lending Cases (《最高人民法院關於審理民間借貸案件適用法律若干問題的規定》) (the “JudicialInterpretations on Private Lending Cases”) which was amended on December 29, 2020 and came into effect onJanuary 1, 2021. According to Article 10 of the Judicial Interpretations on Private Lending Cases, the SupremePeople’s Court recognizes the validity and legality of financing arrangements and lending transactions between



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non-financial institutions so long as certain requirements, such as the purposes of the loans, are satisfied and thereis no violation of mandatory provisions of laws and regulations.

As of the Latest Practicable Date, the Predecessor Group had not received any notice of claim or was subjectto any investigation or penalty relating to the interest-bearing loans to related parties and based on the publicsearches conducted by the PRC Legal Advisors, the Predecessor Group had not been subject to any administrativepenalty in respect of such interest-bearing loans by government authorities as of the Latest Practicable Date. Asadvised by the PRC Legal Advisors, (i) PRC courts will usually support a company’s claim for interest in respectof such loans as long as the annual interest rate does not exceed four times the loan prime rate for one-year loanpublished by the National Interbank Funding Center when the related lawsuit is brought under the Provisions ofthe Supreme People’s Court on Several Issues concerning the Application of Law in the Trial of Private LendingCases (《最高人民法院關於審理民間借貸案件適用法律若干問題的規定》); and (ii) there are few cases thatcompanies have been penalized for extending interest-bearing loans to their related parties by the PBOC. Based onthe above, the PRC Legal Advisors are of the view that the risk that the Predecessor Group would be subject to anypenalty with respect to such interest-bearing loans pursuant to the General Lending Provisions by the relevantregulatory authorities is low, and the interest-bearing loans to related parties do not constitute materialnon-compliance of laws and regulations, and do not have a material adverse impact on the [REDACTED].

The table below sets forth details of the Predecessor Group’s finance costs and income for the periodsindicated:


June 30

2018 2019 2020 2020 2021


Interest expense:Borrowings 44,061 49,485 22,619 11,458 10,800Less: capitalized to investment

properties (25,748) (33,684) – – –

18,313 15,801 22,619 11,458 10,800Interest income (2,543) – – – –

Total 15,770 15,801 22,619 11,458 10,800

Share of Profit/(Losses) of Investment Accounted for Using the Equity Method

The Predecessor Group’s share of profit/(losses) of investment accounted for using the equity methodrepresent the Predecessor Group’s share of profit and loss in Shanghai Powerlong Kangjun Real EstateDevelopment Company Limited (上海寶龍康駿房地產開發有限公司, “Shanghai Kangjun”), an associate thatwas set up for property development activities. In February 2021, the Predecessor Group disposed of all its equityinterest in Shanghai Kangjun as part of the Reorganization.

Income Tax Expense

Profits of the Predecessor Group were assessable at the statutory tax rate of 25% under the EIT Law in thePRC. During the Track Record Period, the Predecessor Group had no estimated assessable profits in Hong Kongand therefore was not subject to Hong Kong profits tax. Pursuant to the rules and regulations of the BVI, thePredecessor Group was not subject to any income tax in the BVI either.



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Effective from January 1, 2008, under the EIT Law, the Predecessor Group is subject to PRC income tax at25% unless otherwise specified. According to EIT Law and its implementation rules, dividends declared in respectof profits earned by the PRC subsidiaries are subject to withholding tax at a rate of 10% for profits earned sinceJanuary 1, 2008, unless reduced by tax treaties or arrangements.

The Predecessor Group’s income tax expense for the years ended December 31, 2018, 2019, 2020 and the sixmonths ended June 30, 2020 and 2021 as approximately RMB218.4 million, RMB160.4 million, RMB77.3million, RMB38.7 million and RMB43.2 million, respectively. The effective tax rates for the same periods wereapproximately 22.7%, 25.0%, 25.7%, 23.5% and 27.1%, respectively. Effective tax rate is derived from dividingincome tax expense by profit before tax.

Deferred taxation was provided for all temporary differences between the carrying amounts of assets andliabilities in the historical financial information of the Predecessor Group as set out in the Accountant’s Report inAppendix I to this Document and their tax base used in the computation of taxable profit, and such temporarydifferences include (i) impairment provision; (ii) unused tax losses; (iii) change in fair value of investmentproperties; (iv) depreciation of investment properties on the tax bases; and (v) withholding tax on retained earningof PRC subsidiaries.

RESULTS OF OPERATIONS

The following discussion of results of operations of the Predecessor Group should be read in conjunctionwith the Predecessor Group’s audited combined Accountant’s Report and the accompanying notes thereto set out inAppendix I to this Document.

Six Months Ended June 30, 2021 Compared against Six Months Ended June 30, 2020

Revenue

The total revenue of the Predecessor Group increased by 14.1% from RMB178.5 million for the six monthsended June 30, 2020 to RMB203.6 million for the six months ended June 30, 2021. The increase was primarily dueto the increase in rental income from shopping malls.

Rental income from shopping malls increased by 10.2% from RMB167.3 million for the six months endedJune 30, 2020 to RMB184.4 million for the six months ended June 30, 2021, primarily due to the PRC economies’recovery from the impact of the COVID-19 pandemic, which led to increased commercial activities and increasedOccupancy Rate of the REIT Properties.

Rental income from car parks, common areas and advertising space increased by 71.4% from RMB11.2million for the six months ended June 30, 2020 to RMB19.2 million for the six months ended June 30, 2021,primarily due to the PRC economies’ recovery from the impact of the COVID-19 pandemic, which led to increasedcommercial activities and increased visitor traffics to the REIT Properties.


The Predecessor Group’s property operating expenses increased by 29.9% from RMB39.4 million for the sixmonths ended June 30, 2020 to RMB51.2 million for the six months ended June 30, 2021, primarily due to (i) anincrease in commercial operational services fees as a result of increased rental income; (ii) an increase in repairsand maintenance expenses to maintain the quality of the REIT Properties; and (iii) an increase in property tax andother taxes a result of increased rental income.


The Predecessor Group’s administrative expenses remained stable at RMB0.3 million and RMB0.3 millionfor the six months ended June 30, 2020 and 2021, respectively.



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The fair value gains of the investment properties were RMB17.1 million for the six months ended June 30,2021 compared to the gains of RMB29.0 million for the six months ended June 30, 2020. The increase in the fairvalue of investment properties for the six months ended June 30, 2021 was less than the fair value gains for the sixmonths ended June 30, 2020, reflecting stabilized property market conditions.


The Predecessor Group’s net provision for impairment losses on financial assets amounted to RMB3.0million for the six months ended June 30, 2020 and net reversal of impairment losses on financial assets RMB0.8million for the six months ended June 30, 2021, reflecting the PRC economies’ recovery from the impact of theCOVID-19 pandemics as well as the Predecessor Group’s enhanced receivables collection efforts, leading toincreased collection of rent receivables.

Other Gains, Net

The Predecessor Group’s net other gains remained stable at RMB1.0 million and RMB0.8 million for the sixmonths ended June 30, 2020 and 2021, respectively.

Finance Costs, Net

The Predecessor Group’s net finance costs decreased by 6.1% from RMB11.5 million for the six monthsended June 30, 2020 to RMB10.8 million for the six months ended June 30, 2021, primarily due to a decrease ininterest expense as a result of the repayment of certain borrowings.


The Predecessor Group’s share of profit/(losses) of investment accounted for using the equity methoddecreased significantly from a profit of RMB10.1 million for the six months ended June 30, 2020 to a loss ofRMB0.7 million for the six months ended June 30, 2021, primarily as a result of the Predecessor Group’s disposalof Shanghai Kangjun in February 2021 and the Predecessor Group no longer shared Shanghai Kangjun’s profits orlosses afterwards.

Profit before Income Tax

In light of the above, the Predecessor Group’s profit before income tax decreased by 3.0% from RMB164.4million for the six months ended June 30, 2020 to RMB159.5 million for the six months ended June 30, 2021.

Income Tax Expense

The Predecessor Group’s income tax expense increased by 11.6% from RMB38.7 million for the six monthsended June 30, 2020 to RMB43.2 million for the six months ended June 30, 2021, primarily due to the tax effect ofwithholding tax on retained earning of PRC subsidiaries.

Profit and Total Comprehensive Income for the Period

As a result of the above, profit for the period decreased by 7.5% from RMB125.7 million for the six monthsended June 30, 2020 to RMB116.3 million for the six months ended June 30, 2021.



– 124 –

Year Ended December 31, 2020 Compared against Year Ended December 31, 2019

Revenue

The total revenue of the Predecessor Group increased by 6.7% from RMB335.8 million in 2019 to RMB358.4million in 2020. The increase was primarily due to the increase in rental income from shopping malls.

Rental income from shopping malls increased by 6.8% from RMB312.5 million in 2019 to RMB333.7 millionin 2020, primarily due to the opening of Hangzhou Lin’an Powerlong Plaza in late 2019, partially offset by rentalfee reductions and waivers given to certain tenants of the REIT Properties in early 2020 to assist these tenants withthe impact of the COVID-19 pandemic.

Rental income from car parks, common areas and advertising space increased by 6.0% from RMB23.3million in 2019 to RMB24.7 million in 2020, primarily due to the opening of Hangzhou Lin’an Powerlong Plaza inlate 2019, partially offset by rental fee reductions and waivers given to the Powerlong CM Group of the REITProperties in early 2020 as a result of the impact of the COVID-19 pandemic.


The Predecessor Group’s property operating expenses decreased by 1.0% from RMB90.4 million in 2019 toRMB89.5 million in 2020, primarily due to a decrease in charges for market positioning, tenant sourcing andopening preparation services as such charges were incurred only in 2019 relating to the opening of HangzhouLin’an Powerlong Plaza, partially offset by (i) an increase in promotion and advertising expenses relating to theopening of Hangzhou Lin’an Powerlong Plaza; (ii) an increase in repairs and maintenance expenses as a result ofthe addition of the Hangzhou Lin’an Powerlong Plaza to the Predecessor Group’s property portfolio; and (iii) anincrease in property tax and other taxes a result of increased rental income.


The Predecessor Group’s administrative expenses remained stable at RMB0.5 million and RMB0.6 million in2019 and 2020, respectively.


The fair value gains of the investment properties were RMB60.7 million in 2020 compared to the gains ofRMB411.1 million in 2019. The increase in the fair value of investment properties in 2020 was less than the fairvalue gains in 2019, primarily because the significant fair value gains in 2019 reflected the completion andopening of Hangzhou Lin’an Powerlong Plaza in 2019.


The Predecessor Group’s net impairment losses on financial assets increased from RMB0.4 million in 2019 toRMB0.9 million in 2020, primarily reflecting the impact of the COVID-19 pandemic on the collection of rentalreceivables.

Other Gains, Net

The Predecessor Group’s net other gains increased by 123.1% from RMB1.3 million in 2019 to and RMB2.9million in 2020, primarily due to an increase in compensation income from early lease termination as a result ofthe impact of the COVID-19 pandemic.



– 125 –

Finance Costs, Net

The Predecessor Group’s net finance costs increased by 43.0% from RMB15.8 million in 2019 to RMB22.6million in 2020, primarily due to an increase in interest expense as part of the interest expenses in 2019 wascapitalized in connection with the development of Hangzhou Lin’an Powerlong Plaza.

Share of Losses of Investment Accounted for Using the Equity Method

The Predecessor Group’s share of losses of investment accounted for using the equity method increased fromRMB0.5 million in 2019 to RMB7.9 million in 2020, reflecting the financial performance of Shanghai Kangjun,which is no longer part of the Powerlong REIT Group after the Reorganization.


In light of the above, the Predecessor Group’s profit before income tax decreased by 53.1% from RMB640.6million in 2019 to RMB300.6 million in 2020.

Income Tax Expense

The Predecessor Group’s income tax expense decreased by 51.8% from RMB160.4 million in 2019 toRMB77.3 million in 2020, in line with the decrease in profit before income tax.

Profit and total comprehensive income for the Year

As a result of the above, profit for the year decreased by 53.5% from RMB480.2 million in 2019 toRMB223.3 million in 2020.

Year Ended December 31, 2018 Compared against Year Ended December 31, 2019

Revenue

The total revenue of the Predecessor Group increased by 3.6% from RMB324.0 million in 2018 to RMB335.8million in 2019. The increase was primarily due to an increase in rental income from shopping malls, partiallyoffset by a decrease in rental income from car parks, common areas and advertising space.

Rental income from shopping malls increased by 8.8% from RMB287.2 million in 2018 to RMB312.5 millionin 2019, primarily due to the opening of Hangzhou Lin’an Powerlong Plaza in late 2019, as well as an increase inthe overall Occupancy Rate of the REIT Properties and the upward adjustment of rental rates.

Rental income from car parks, common areas and advertising space decreased by 36.7% from RMB36.8million in 2018 to RMB23.3 million in 2019, primarily because the fee model for the management of car parks,common areas and advertising space had been changed to a contractor model in 2019: prior to the change, thePredecessor Group would recognize all rental income from car parks, common areas and advertising space asrevenue, and pay a certain percentage of the rental income to the relevant property management service providersas commercial operational services fees; under the contractor model, the Predecessor Group would receive a fixedrent from the property management service providers, and in return the property management service providerswould recognize all income from the end customers and bear all costs related to the management of car parks,common areas and advertising space. Accordingly, the Predecessor Group’s commercial operational services feesalso decreased from 2018 to 2019 as a result of the change in fee model.



– 126 –


The Predecessor Group’s property operating expenses increased by 9.2% from RMB82.8 million in 2018 toRMB90.4 million in 2019, primarily due to (i) an increase in charges for market positioning, tenant sourcing andopening preparation services relating to the opening of Hangzhou Lin’an Powerlong Plaza in 2019; (ii) an increasein promotion and advertising expenses relating to the opening of Hangzhou Lin’an Powerlong Plaza; and (iii) anincrease in property tax and other taxes a result of increased rental income, partially offset by a decrease incommercial operational services fees because the fee model for the management of car parks, common areas andadvertising space had been changed to a contractor model in 2019.


The Predecessor Group’s administrative expenses remained stable at RMB0.4 million and RMB0.5 million in2018 and 2019, respectively.


The fair value gains of the investment properties were RMB646.5 million in 2018 compared to the gains ofRMB411.1 million in 2019. The increase in the fair value of investment properties in 2019 was less than the fairvalue gains in 2018, primarily because the significant fair value gains in 2018 reflected the development progressof Hangzhou Lin’an Powerlong Plaza in 2018, as well as the favorable economic conditions in 2018 that led to anoverall appreciation in value of the investment properties.


The Predecessor Group’s net impairment losses on financial assets remained stable at RMB0.3 million andRMB0.4 million in 2018 and 2019, respectively.

Other Gains, Net

The Predecessor Group’s net other gains decreased by 51.9% from RMB2.7 million in 2018 to and RMB1.3million in 2019, primarily due to (i) a decrease in compensation income from early lease termination and (ii) adecrease in government grant and subsidies.

Finance Costs, Net

The Predecessor Group’s net finance costs remained stable at RMB15.8 million and RMB15.8 million in2018 and 2019, respectively.


The Predecessor Group’s share of profit/(losses) of investment accounted for using the equity methoddecreased significantly from a profit of RMB90.2 million in 2018 to a loss of RMB0.5 million in 2019, reflectingthe financial performance of Shanghai Kangjun, which is no longer part of the Powerlong REIT Group after theReorganization.


In light of the above, the Predecessor Group’s profit before income tax decreased by 33.5% from RMB964.0million in 2018 to RMB640.6 million in 2019.



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Income Tax Expense

The Predecessor Group’s income tax expense decreased by 26.6% from RMB218.4 million in 2018 to

RMB160.4 million in 2019, primarily due to a decrease in the fair value gains of the investment properties.

Profit and Total Comprehensive Income for the Year

As a result of the above, profit for the year decreased by 35.6% from RMB745.6 million in 2018 to

RMB480.2 million in 2019.

LIQUIDITY AND CAPITAL RESOURCES

Overview

The principal sources of funding for the management of the REIT Properties have historically been cash

generated from operating activities and loan facilities.

Cash Flows

The table below shows the selected line items of the Predecessor Group’s combined statements of cash flows

during the Track Record Period:


June 30

2018 2019 2020 2020 2021





Net (decrease)/increase in cashand cash equivalents (39,545) (19,099) 20,430 24,262 81,300

Cash and cash equivalents atbeginning of year/period 111,392 71,847 52,748 52,748 73,178

Cash and cash equivalents atend of year/period 71,847 52,748 73,178 77,010 154,478

Cash flows from operating activities

Net cash from operating activities amounted to RMB86.1 million for the six months ended June 30, 2021,

primarily reflecting (i) profit before tax of RMB159.5 million; (ii) negative total adjustments before movements in

working capital of RMB6.5 million, which in turn primarily reflected change in fair value of investment properties

and finance costs; (iii) negative movements in working capital of RMB23.1 million, which primarily reflected an

increase in prepayment and other receivables, an increase in advances from leasees, a decrease in rental

receivables and an increase in net receivables from related parties; (iv) income tax paid; and (v) interest paid.



– 128 –

Net cash from operating activities amounted to RMB195.3 million for 2020, primarily reflecting (i) profitbefore tax of RMB300.6 million; (ii) negative total adjustments before movements in working capital of RMB29.4million, which in turn primarily reflected change in fair value of investment properties and finance costs; (iii)negative movements in working capital of RMB6.1 million, which primarily reflected an increase in rentalreceivables, an increase in trade and other payables and an increase in net receivables from related parties; (iv)income tax paid; and (v) interest paid.

Net cash from operating activities amounted to RMB181.3 million for 2019, primarily reflecting (i) profitbefore tax of RMB640.6 million; (ii) negative total adjustments before movements in working capital ofRMB394.4 million, which in turn primarily reflected change in fair value of investment properties and financecosts; (iii) positive movements in working capital of RMB34.3 million, which primarily reflected an increase intrade and other payables, a decrease in net receivables from related parties, an increase in advances from leaseesand a decrease in rental receivables; (iv) income tax paid; and (v) interest paid.

Net cash from operating activities amounted to RMB206.9 million for 2018, primarily reflecting (i) profitbefore tax of RMB964.0 million; (ii) negative total adjustments before movements in working capital ofRMB720.6 million, which in turn primarily reflected change in fair value of investment properties, share of profitof investments accounted for using the equity method and finance costs; (iii) positive movements in workingcapital of RMB28.0 million, which primarily reflected an increase in trade and other payables, an increase inadvances from leasees and an increase in net payables from related parties; (iv) income tax paid; and (v) interestpaid.

Cash flows from investing activities

Net cash from investing activities amounted to RMB258.7 million in the six months ended June 30, 2021,primarily reflecting repayments from related parties, partially offset by (i) cash advances made to related partiesand (ii) payments for additions of investment properties.

Net cash from investing activities amounted to RMB757.5 million in 2020, primarily reflecting (i)repayments from related parties and (ii) restricted cash released from guarantee deposits for related parties,partially offset by (i) cash advances made to related parties; (ii) restricted cash pledged as guarantee deposits forrelated parties; and (iii) payments for additions of investment properties.

Net cash from investing activities amounted to RMB516.5 million in 2019, primarily reflecting repaymentsfrom related parties, partially offset by (i) cash advances made to related parties and (ii) payments for additions ofinvestment properties.

Net cash used in investing activities amounted to RMB1,404.1 million in 2018, primarily reflecting (i) cashadvances made to related parties and (ii) payments for additions of investment properties, partially offset byrepayments from related parties.

Cash flows from financing activities

Net cash used in financing activities amounted to RMB263.5 million in the six months ended June 30, 2021,primarily reflecting (i) capital withdrawn by the then shareholders of the Predecessor Group and (ii) repayments ofcash advances to related parties, partially offset by cash advances from related parties.

Net cash used in financing activities amounted to RMB932.4 million in 2020, primarily reflecting (i)repayments of cash advances to related parties; (ii) repayments of borrowings; and (iii) capital withdrawn by thethen shareholders of the Predecessor Group, partially offset by cash advances from related parties.



– 129 –

Net cash used in financing activities amounted to RMB716.9 million in 2019, primarily reflecting (i)repayments of borrowings and (ii) repayments of cash advances to related parties, partially offset by proceeds fromborrowings.

Net cash from financing activities amounted to RMB1,157.6 million in 2018, primarily reflecting (i)proceeds from borrowings and (ii) capital injection from the then shareholders of the Predecessor Group, partiallyoffset by repayments of cash advances to related parties.

CAPITAL EXPENDITURES

During the Track Record Period, the Predecessor Group’s capital expenditures comprised addition toinvestment properties.

During the Track Record Period, the total payments for addition to investment properties amounted toapproximately RMB263.5 million, RMB122.9 million, nil and nil for the 2018, 2019, 2020 and the six monthsended June 30, 2021, respectively.

It is estimated that the future capital expenditures for the four years ending 2024 will be approximatelyRMB16.0 million, which will be funded by bank borrowings and working capital. Such capital expenditure wouldbe mainly for the purpose of refurbishment and enhancement of the REIT Properties.

INDEBTEDNESS

Historically, the indebtedness of the Predecessor Group consisted of bank borrowings and non-trade amountsdue to related companies. All bank and other loans (except for the Facilities) will be paid prior to [REDACTED].The following table sets forth the components of the Predecessor Group’s borrowings as of the dates indicated:


June 30,20212018 2019 2020

RMB’ 000 RMB’ 000 RMB’ 000 RMB’ 000

Non-currentBank borrowings – secured 1,170,479 688,697 350,663 340,644Other borrowings – secured 10,488 – – –Less: current portion of non-current

borrowings (630,967) (338,697) (20,663) (21,644)

550,000 350,000 330,000 319,000

CurrentCurrent portion of non-current borrowings 630,967 338,697 20,663 21,644

Total borrowings 1,180,967 688,697 350,663 340,644

As of December 31, 2018, 2019, 2020 and June 30, 2021, bank borrowings were secured by certaininvestment properties of the Predecessor Group with fair value in aggregate of RMB1,534.9 million, RMB1,832.1million, RMB892.4 million and RMB896.1 million, respectively, and also guaranteed by certain related parties.All such security and guarantees will be released prior to [REDACTED] in connection with the settlement of allbank and other loans (except for the Facilities).



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As of December 31, 2018, 2019 and 2020 and June 30, 2021, the Group provided financial guarantees for

borrowings of related parties as follows:


June 30,20212018 2019 2020

RMB’000 RMB’000 RMB’000 RMB’000

Subsidiaries of Powerlong Holdings 1,338,000 1,441,000 1,670,000 1,296,940

There were no amounts paid nor liabilities incurred during the Track Record Period for the purpose of

fulfilling the guarantee. The guarantee will be fully released upon completion of the Reorganization.

As of December 31, 2018, 2019, 2020 and June 30, 2021, the weighted average effective interest rate on bank

borrowings and other borrowings was 5.7%, 5.4%, 6.0% and 6.2% per annum, respectively.

As of December 31, 2018, 2019, 2020 and June 30, 2021, the Predecessor Group’s borrowings were repayable

as follows:


June 30,20212018 2019 2020

RMB’ 000 RMB’ 000 RMB’ 000 RMB’ 000

Bank borrowingsWithin 1 year 620,479 338,697 20,663 21,6441–2 years 350,000 20,000 22,000 23,0002–5 years 115,000 72,000 78,000 81,000Over 5 years 85,000 258,000 230,000 215,000

1,170,479 688,697 350,663 340,644

Other borrowingWithin 1 year 10,488 – – –


As of December 31, 2018, 2019, 2020 and June 30, 2021, non-trade amounts due to related companies were

RMB1,243.6 million, RMB1,474.2 million, RMB1,240.6 million and RMB1,359.5 million, respectively. All

non-trade amounts due to related companies will be settled prior to [REDACTED].

Other than disclosed in this Document, apart from intra-group liabilities and normal account and other

payables in the ordinary course of business, the Predecessor Group did not have any material mortgages, charges,

debentures, loan capital, debt securities, loans, bank overdrafts or other similar indebtedness, liabilities under

acceptances (other than normal trade bills), acceptance credits, finance leases or hire purchase commitments,

guarantees or other material contingent liabilities as of June 30, 2021.



– 131 –

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT FINANCIAL RISKS

The Predecessor Group’s activities expose the Predecessor Group to a variety of financial risks, including,among others, interest rate risk, foreign currency risk, credit risk and liquidity risk.

Interest Rate Risk

The Predecessor Group’s interest-rate risk arises from its borrowings. Borrowings at variable rates expose theGroup to cash flow interest-rate risk. Borrowings at fixed rates expose the Predecessor Group to fair valueinterest-rate risk. The Predecessor Group currently has not entered into any interest rate swap contract and willonly consider hedging if there is significant interest rate risk.

Credit Risk

Credit risk arises from cash and cash equivalents, rental and other receivables from third parties and relatedparties and financial guarantee contracts. The Predecessor Group’s maximum exposure to credit risk in the event ofthe counterparties’ failure to perform their obligations at the end of each reporting period in relation to each classof recognized financial assets is the carrying amount of these assets and financial guarantee contracts as stated inthe combined balance sheet. The Predecessor Group has no significant concentration of credit risk arising fromthird parties, with exposure spread over certain counterparties and customers.

Rental receivables from third parties

In order to minimize the credit risk of rental receivables, the management of the Predecessor Groupestablished policies in place to ensure that the leases and sales of services are made to customers with anappropriate credit history and the Predecessor Group assesses the credit worthiness and financial strength of itscustomers as well as considering prior dealing history with the customers. The compliance of credit limits by thecustomers is regularly monitored by the management of the Predecessor Group. There has not been any historicalloss during the Track Record Period. The Predecessor Group also has policies in place to ensure that rental securitydeposits are required prior to commencement of leases. In this regard, the management of the Predecessor Groupconsiders that the Predecessor Group’s credit risk of rental receivables is significantly reduced.

Rental receivables from related parties

In respect of amounts due from related parties with gross carrying value of approximately RMB0.3 million,RMB3.5 million, RMB1.8 million and RMB1.6 million as of December 31, 2018, 2019 and 2020 and June 30,2021, respectively, given the strong financial capability of Powerlong Holdings and its subsidiaries, managementof the Predecessor Group does not consider there is a risk of default and does not expect any losses fromnon-performance by these related parties, and accordingly, the impairment loss allowance in respect of theamounts due from related parties was immaterial.

Other financial assets carried at amortized cost

The Predecessor Group’s other financial assets carried at amortized cost include other receivables from thirdparties and related parties. The impairment loss of other financial assets carried at amortized cost is measuredbased on the twelve months expected credit loss. The twelve months expected credit loss is the portion of lifetimeexpected credit loss that results from default events on a financial instrument that are possible within twelvemonths after the reporting date. However, when there has been a significant increase in credit risk sinceorigination, the allowance will be based on the lifetime expected credit loss.



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As of December 31, 2018, 2019 and 2020 and June 30, 2021, the management of the Predecessor Group

considered the credit risk of other receivables from third parties and related parties to be low as counterparties

have a strong capacity to meet their contractual cash flow obligations in the near term. The Predecessor Group has

assessed that the expected credit losses for these other receivables from third parties and related parties were

minimal under twelve months expected losses method. Therefore, the impairment loss allowance required for these

balances was immaterial.

Financial guarantee contracts

The Predecessor Group is also exposed to credit risk in relation to provide financial guarantee for borrowings

of related parties. The maximum exposure as of December 31, 2018, 2019 and 2020 and June 30, 2021 is the

carrying amount of the borrowing. The director of the Target Company expects that no material liabilities will arise

from the financial guarantee contracts.

Liquidity Risk

To manage the liquidity risk, the Predecessor Group monitors and maintains a level of cash and cash

equivalents deemed adequate by the management to finance the Group’s operations. As of June 30, 2021, the

Predecessor Group had net current liabilities of RMB1,385.2 million. Taking into account of the internal resources

and fair value of investment properties that available to pledge to obtain additional financing from financial

institutions, the Predecessor Group will be able to meet its financial obligation when they fall due.



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The table below sets forth the Predecessor Group’s financial liabilities by maturity based on the remainingperiod at the end of each period to the contractual maturity date. The amounts disclosed in the table are contractualundiscounted cash flows.

Less than1 year

Between1 and 2

years

Between2 and 5

yearsOver

5 years Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

December 31, 2018Borrowings 684,676 372,556 140,489 91,353 1,289,074Amounts due to related parties 1,251,820 – – – 1,251,820Trade and other payables(1) 108,972 – – – 108,972

2,045,468 372,556 140,489 91,353 2,649,866

December 31, 2019Borrowings 370,751 41,132 127,118 325,565 864,566Amounts due to related parties 1,486,158 – – – 1,486,158Trade and other payables(1) 222,368 – – – 222,368

2,079,277 41,132 127,118 325,565 2,573,092

December 31, 2020Borrowings 41,795 41,835 128,484 282,364 494,478Amounts due to related parties 1,247,008 – – – 1,247,008Trade and other payables(1) 219,319 – – – 219,319

1,508,122 41,835 128,484 282,364 1,960,805

June 30, 2021Borrowings 42,143 42,140 129,027 260,428 473,738Amounts due to related parties 1,366,262 – – – 1,366,262Trade and other payables(1) 171,036 – – – 171,036

1,579,441 42,140 129,027 260,428 2,011,036

Note:

(1) The balances excluded property tax and other taxes payables.

The Predecessor Group also provides guarantees to secure repayment obligation of the principal ofborrowings of certain related parties, which will have contractual cash flows only if the related parties default therepayment. Such guarantee will be fully released upon completion of the Reorganization. See “—Indebtedness.”

DIVIDEND AND DISTRIBUTABLE RESERVES

During the Track Record Period, no dividend was paid or declared by the Predecessor Group.



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Prior to the transfer of the Predecessor Group to Powerlong REIT, each of the Target Company and itssubsidiaries will declare a dividend to their respective shareholders in accordance with their constitutionaldocuments and the relevant laws and regulations. The dividends will be settled prior to [REDACTED].

Upon [REDACTED], Powerlong REIT’s distributions to Unitholders will, subject to compliance withapplicable legal and regulatory requirements, be declared and paid in Hong Kong dollars. The REIT Manager hasthe discretion to direct the Trustee from time to time to make distributions above the minimum of 90.0% ofPowerlong REIT’s Annual Distributable Income if and to the extent Powerlong REIT, in the opinion of the REITManager, has funds surplus to its business requirements. For details of Powerlong REIT’s distribution policy,please see “Distribution Policy” in this Document.

CAPITAL COMMITMENTS

During the Track Record Period, the amount of capital expenditure contracted for but not yet incurred by thePredecessor Group was as follows:


June 30,20212018 2019 2020

RMB’ 000 RMB’ 000 RMB’ 000 RMB’ 000

Contracted but not provided for 258,402 – – –

OFF-BALANCE SHEET ARRANGEMENTS

As of the Latest Practicable Date, the Predecessor Group did not have any off-balance sheet arrangements.

[REDACTED]

The total expenses for the [REDACTED] are estimated to be approximately RMB[REDACTED] millionassuming an [REDACTED] of HK$[REDACTED] per [REDACTED] (which is the mid-point of the[REDACTED] range), which includes [REDACTED] and other legal and professional fees directly related to the[REDACTED], assuming the [REDACTED] is not exercised. All [REDACTED] will be borne by the[REDACTED].

RECENT DEVELOPMENTS

On [●], 2021: (a) [●] (as lender) and the Target Company (as borrower) entered into the Offshore Facilitiesfor a principal amount up to the HKD/USD equivalent of RMB2,700.0 million; and (b) [●] (as lender) and theProject Companies (as borrowers) entered into the Onshore Facilities for a principal amount up to RMB100.0million. The proceeds from the drawdown of the Offshore Facilities will primarily be used to [(a) fund theoutstanding consideration for the transfer of the equity interests in the Project Companies; (b) fund interestreserve; and (c) fund fee and expenses in relation to the Offshore Facilities]. The proceeds from the drawdown ofthe Onshore Facilities will be used to [(a) refinance the existing onshore indebtedness secured by the REITProperties; and (b) to finance operating expenses of the Onshore Borrowers.] See “Material Agreements and OtherDocuments—Facilities Agreements” for details.


Directors have confirmed that, since June 30, 2021 and up to the date of this Document, there had been nomaterial adverse change in Powerlong REIT’s financial or trading position or prospects and no event had occurredthat would materially and adversely affect the financial information in the Accountant’s Report included asAppendix I to this Document.



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After the [REDACTED], there will be certain changes to Powerlong REIT’s cost structure, level ofindebtedness and operations. As a result, the following discussion has been prepared to assist investors’evaluation of the factors which may affect Powerlong REIT’s future results of operations.

Such statements are subject to uncertainties and assumptions, and under no circumstances should theinclusion of such information herein be regarded as a representation, warranty or prediction by PowerlongHoldings, Powerlong REIT, the REIT Manager, the Trustee, the Joint Listing Agents, the [REDACTED] or anyother person that the underlying assumptions will materialize. Investors are cautioned not to place unduereliance on these forward-looking statements.

OVERVIEW

Powerlong REIT is a Hong Kong collective investment scheme constituted as a unit trust and authorizedunder section 104 of the SFO. Powerlong REIT is a REIT formed to primarily own and invest in qualityincome-generating commercial properties in the PRC. Powerlong REIT is managed by the REIT Manager whosekey investment objectives are to provide Unitholders with stable distributions, sustainable and long-termdistribution growth, and enhancement in the value of Powerlong REIT’s properties.

The audited financial information of the Predecessor Group set forth in Appendix I to this Document and theother historical financial information have been prepared based on the historical operations of the PredecessorGroup. While the sources of revenue of Powerlong REIT will be similar to those of the Predecessor Group, its coststructure after the [REDACTED] will differ in certain significant respects from the historical cost structure of thePredecessor Group. Certain historical costs of the Predecessor Group, such as certain constituents ofadministrative expenses, will no longer be costs of Powerlong REIT and certain new costs that were not costs ofthe Predecessor Group historically, such as fees payable to the REIT Manager, the Operations and PropertyManager and the Trustee and other trust-related expenses, will be costs of Powerlong REIT going forward.

In addition, in accordance with the Trust Deed, distributions to Unitholders will be determined on the basis ofAnnual Distributable Income, which is the consolidated audited net profit after tax of Powerlong REIT and itsSpecial Purpose Vehicles for the relevant financial year adjusted to eliminate the effects of certain significantadjustments, as more specifically described in the section headed “Distribution Policy” in this Document.

Thus, for these and other reasons described below, historical net profit after tax of the Predecessor Groupshould not be treated as comparable to Annual Distributable Income.

Further, the presentation format of Powerlong REIT’s financial information may differ from that of theaudited financial information set forth in Appendix I to this Document. Set forth below are details of the primarycost items and other financial statement items of the Predecessor Group that may be affected by the [REDACTED]and other material agreements to be entered into. Please see “Material Agreements and Other Documents” and“The Trust Deed” in this Document for further details of these agreements.

SIGNIFICANT ACCOUNTING POLICIES TO BE ADOPTED BY POWERLONG REIT

Significant policies are those that are expected to have a significant impact on the reporting of financialcondition and results of operations and require management to make estimates and judgments that affect thereported results. These estimates are evaluated on an ongoing basis, based on historical experience, informationthat is currently available and various assumptions that management believes are reasonable under thecircumstances. Actual results may differ from these estimates under different assumptions or conditions. Due tothe different legal, financial and operating structure of Powerlong REIT compared to the Predecessor Group’soperations, Powerlong REIT will adopt certain accounting treatments that will differ in certain respects from thoseused in preparing the audited financial statements of the Predecessor Group. Based on the provisions of the Trust


MANAGEMENT’S DISCUSSION AND ANALYSIS OF FUTURE OPERATIONS

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Deed, the REIT Manager expects to adopt significant accounting policies materially similar to those adopted bythe Predecessor Group as set out in Note 2 of the Accountant’s Report set out in Appendix I to this Document.Significant accounting policies will require the most significant judgments and estimates in the preparation ofPowerlong REIT’s consolidated financial statements and have the most significant effect on the presentation ofPowerlong REIT’s results. In the event of any future changes to Powerlong REIT’s business, Powerlong REIT maybe required to adopt different or additional critical accounting policies which may be similar to those used in thepreparation of the financial statements of the Predecessor Group.

ADDITIONAL COST ITEMS

Powerlong REIT will incur fees and expenses associated with the REIT structure that were not previouslyincurred by the Predecessor Group in respect of the REIT Properties. Set out below are certain such additional costitems.

REIT Manager’s Fees

Under the Trust Deed, the REIT Manager will receive:

(i) on a semi-annual basis, a Base Fee not exceeding 0.25% per annum (and being 0.25% as of the[REDACTED]) of the aggregated valuation value of the Deposited Properties; and

(ii) on an annual basis, a Variable Fee of 3.0% per annum of the gross revenue less operating expenses inrespect of each REIT Property, provided that the NAV per Unit exceeds the NAV Unit on which theVariable Fee was last calculated and paid;

The REIT Manager currently intends to elect to receive not less than 70.0% of the Variable Fee for 2021 and2022 in the form of Units. The issuance of Units to the REIT Manager as all or part of its compensation will resultin dilution to the Unitholders, including the amount of distributions per Unit. The Base Fee and Variable Fee,whether paid in cash or in Units, will be treated as an expense item in the income statement. When the Base Fee andthe Variable Fee are paid in the form of Units, it will be an adjustment item that will be added back to the net profitafter taxation for purposes of calculating the Annual Distributable Income. For further arrangements and a detaileddescription of the Base Fee and the Variable Fee, see the section headed “The REIT Manager—Further DetailsRegarding the REIT Manager—Fees, Costs and Expenses of the REIT Manager” in this Document.

Acquisition Fee and Divestment Fee

In addition to the Base Fee and the Variable Fee, under the Trust Deed, the REIT Manager is also entitled,with effect from the [REDACTED], to receive an Acquisition Fee not exceeding 1.0% (and being 1.0% as of thedate of the Trust Deed) of the acquisition price of each real estate asset acquired, directly or indirectly, byPowerlong REIT. The Acquisition Fee will be pro-rated if applicable to the proportion of Powerlong REIT’sinterest in the real estate acquired. The Acquisition Fee will be paid to the REIT Manager in the form of cash or, atthe election of the REIT Manager, entirely or partly in the form of Units.

Further, the REIT Manager is entitled to receive, with effect from the [REDACTED], a Divestment Fee notexceeding 0.5% (and being 0.5% as of the date of the Trust Deed) of the sale price of each real estate asset sold ordivested, directly or indirectly, by Powerlong REIT. The Divestment Fee will be pro-rated if applicable to theproportion of Powerlong REIT’s interest in the real estate sold. The Divestment Fee will be paid to the REITManager in the form of cash or, at the election of the REIT Manager, entirely or partly in the form of Units.

For further information on these arrangements and detailed descriptions of the Acquisition Fee and theDivestment Fee, see the section headed “The REIT Manager—Further Details Regarding the REITManager—Fees, Costs and Expenses of the REIT Manager” in this Document.



– 137 –

Operations and Property Manager’s Fees

Under the Commercial Operational and Property Management Services Framework Agreement, the

Operations and Property Manager is entitled to receive from the Powerlong REIT Group an amount equivalent to

5.0% per annum of the rental income in respect of each REIT Property. The Operations Manager will bear its

operating costs and expenses.

For further information on these arrangements and a detailed description of the Operations and Property

Manager’s Fee, please see “The Operations and Property Manager—the Operations and Property Manager—The

Commercial Operational Services Framework Agreement” in this Document.

Trustee’s Fees

Powerlong REIT’s costs will also include the Trustee’s fee which will be calculated and paid semi-annually

as an ongoing fee of not more than 0.025% per annum of the value of the Deposited Property (which may be

increased up to a maximum of 0.06% per annum of the value of the Deposited Property) subject to a minimum of

RMB56,000 per month. In addition, Powerlong REIT will also pay the Trustee a one-off acceptance fee of

RMB180,000 upon [REDACTED]. For further information regarding these arrangements, see the section headed

“The Trust Deed—Trustee’s Fee” in this Document.

The Trustee may also charge Powerlong REIT additional fees on a time-cost basis at a rate to be agreed with

the REIT Manager from time to time, if the Trustee were to undertake duties that are of an exceptional nature or

otherwise outside the scope of its normal duties in the ordinary course of normal day-to-day business operation of

Powerlong REIT, such as acquisitions or divestments of investments by Powerlong REIT after [REDACTED].

[REDACTED] and Capital Resources

After [REDACTED], net cash received from the operations of the REIT Properties will be Powerlong REIT’s

primary source of liquidity to fund cash distributions to Unitholders, debt servicing, repairs and maintenance and

other operating and capital costs. Where appropriate, Powerlong REIT may also seek to issue further Units and

debt securities and incur external borrowings (under the REIT Code, Powerlong REIT is only allowed to borrow up

to 50% of its total gross asset value), particularly in relation to any proposal to acquire further properties. The

issue of additional equity or equity-linked securities may result in additional dilution to Unitholders.

The REIT Manager may incur capital expenditures or other expenses intended to enhance the REIT

Properties to improve the yield or long-term value of the REIT Properties, by improving rental rates or Occupancy

Rate or otherwise increasing the total rentable area of the REIT Properties. Such enhancements should both

increase the cash flows from the REIT Properties and the value of the REIT Properties, which may allow the REIT

Manager further flexibility to borrow in accordance with the REIT Code. The REIT Manager may also incur

capital expenditure for maintaining the REIT Properties or for remedial works.

The Building Survey Report prepared by the Building Surveyor set out in Appendix VI to this Document

includes a ten-year forecast of maintenance and capital expenditure.

As of June 30, 2021, the Predecessor Group did not have any contractual commitments or obligations to make

any capital expenditures.



– 138 –

WORKING CAPITAL STATEMENT

Taking into consideration the financial resources available to Powerlong REIT, including its internally

generated funds and the Facilities, the REIT Manager believes that Powerlong REIT has sufficient liquid assets to

meet its working capital and operating requirements for the 12 calendar months following the date of this

Document.


The REIT Manager confirms that, having performed reasonable due diligence on Powerlong REIT and the

Predecessor Group, there has been no material adverse change in Powerlong REIT’s and the Predecessor Group’s

financial or trading position or prospects since June 30, 2021, which is the end of the period covered by the

Accountant’s Report set out in Appendix I to this Document.



– 139 –

Statements contained in this profit forecast section that are not historical facts may be forward-lookingstatements. Such statements are based on the assumptions set forth in this section and are subject to certainrisks and uncertainties which could cause actual results to differ materially from those projected. Under nocircumstances should the inclusion of such information herein be regarded as a representation, warranty orprediction by Powerlong REIT, the REIT Manager, the Trustee, the [REDACTED], the Joint Listing Agents orany other person involved in the [REDACTED] with respect to the accuracy of the underlying assumptionsused in preparing the profit forecast or that the profit forecast results will be achieved or are likely to beachieved. None of Powerlong REIT, the REIT Manager, the Trustee, the [REDACTED], the Joint ListingAgents or any other person involved in the [REDACTED] guarantees the performance of Powerlong REIT orthe payment of any (or any particular) return on the Units. Investors are cautioned not to place undue relianceon these forward-looking statements which are made only as of the date of this Document.

The profit forecast (including the underlying assumptions), for which the REIT Manager is responsible,has been approved by the Board. The profit forecast has been prepared on the bases and assumptions set outbelow and in accordance with accounting principles generally accepted in Hong Kong and is consistent in allmaterial respects with those accounting policies to be adopted by Powerlong REIT, which are materiallysimilar to those adopted by Powerlong REIT in the Accountant’s Report set out in Appendix I to this Document.The forecast income statement data of Powerlong REIT on the following pages of this Document has beenprepared on a combined basis, reflecting the forecast combined income statement of Powerlong REIT, for theperiod from the [REDACTED] to December 31, 2021 (the “Profit Forecast Period”). The profit forecastassumes that the [REDACTED] will be [REDACTED] and will vary if the [REDACTED] is different.

The audited financial results of Powerlong REIT in this Document only cover the years ended December31, 2018, 2019 and 2020 and the six months ended June 30, 2021. The financial information relating toPowerlong REIT for the period from July 1, 2021 to the [REDACTED] has not been prepared by the REITManager and the financial results of Powerlong REIT for such period have neither been audited nor reviewed.In preparing the profit forecast, the REIT Manager has made certain assumptions with respect to theoperations of Powerlong REIT as set out below. To the extent that the REIT Manager has not identified eventsthat have occurred or may occur in respect of Powerlong REIT during the period from July 1, 2021 to the[REDACTED], the impact of such events on the future results of Powerlong REIT has not been taken intoaccount in the profit forecast.

Investors should note that for reasons stated herein, in arriving at the combined forecast results ofPowerlong REIT, it has been assumed that there will be no change in the price of the Units during the ProfitForecast Period. Should the market value of the REIT Properties as of December 31, 2021 drop below orincrease above the Appraised Value of the REIT Properties as of June 30, 2021, the deficit or surplus, togetherwith any associated deferred taxation, would be charged to the income statement. However, such deficit orsurplus (after taking into account any associated deferred taxation), which is non-cash in nature, would notreduce or increase the Annual Distributable Income for the Profit Forecast Period. Investors should also notethat the format and individual line items in Powerlong REIT’s future financial reports and statements maydiffer from those used for the purposes of the profit forecast and such line items should not be viewed asindividual forecasts but form part of the bases and assumptions used in arriving at the distributable income forthe Profit Forecast Period. The profit forecast should be read together with the letters set out in Appendix IIIheaded “Letters in Relation to the Profit Forecast” and Appendix IV headed “Valuation Report” to thisDocument and the principal bases and assumptions set out below.


PROFIT FORECAST FOR THE PROFIT FORECAST PERIOD

– 140 –

The profit forecast and calculations made in preparing the profit forecast have been reviewed byPricewaterhouseCoopers and the Joint Listing Agents. Please see Appendix III for the letters fromPricewaterhouseCoopers and the Joint Listing Agents on the accounting policies adopted and the calculationsmade in arriving at the profit forecast. The REIT Manager and the Joint Listing Agents consider theassumptions made in arriving at the profit forecast to be reasonable.

Powerlong REIT will incur expenses at the trust level (such as the REIT Manager’s fees, the Trustee’sfees and annual [REDACTED]), which expenses were not incurred before the [REDACTED] (please see“Management’s Discussion and Analysis of Future Financial Condition and Results of Operations” in thisDocument).

Having regard to the various factors noted above, investors should exercise caution when relying on theprofit forecast generally and, in particular, (a) investors should exercise the highest caution in making anycomparison, whether as to individual line items or overall financial performance, as between PowerlongREIT’s forecast income statement set forth below and any historical financial results of Powerlong REIT and(b) investors should not treat any individual line item in Powerlong REIT’s forecast income statement as aforecast in its own right.

The following table sets forth summarized Profit Forecast of Powerlong REIT for the Profit Forecast Period.


Period

RMB’000Forecast

Revenue [REDACTED]Property operating expenses [REDACTED]Administrative expenses [REDACTED]REIT manager’s fee and Trustee’s fees [REDACTED]Other gains – net [REDACTED]Finance costs, net [REDACTED]

Profit before income tax [REDACTED]Income tax expenses [REDACTED]

Profit for the period [REDACTED]

Distribution Data:Profit for the period [REDACTED]Adjustments(1) [REDACTED]

Distributable income for the Profit Forecast Period [REDACTED]



– 141 –

For the Profit Forecast Period

[REDACTED] [REDACTED]

[REDACTED] (HK$) [REDACTED] [REDACTED]Assumed number of Units outstanding as of December 31, 2021

for the Profit Forecast Period (in thousand) [REDACTED] [REDACTED]Forecast DPU (HK$)(1) [REDACTED] [REDACTED]Annualized DPU (HK$) [REDACTED] [REDACTED]Forecast annualized DPU yield(2) [REDACTED] [REDACTED]

Notes:

(1) Forecast DPU is calculated from profit for the Profit Forecast Period of [REDACTED] as adjusted by (i) [REDACTED] in respect

of the deferred tax charged, (ii) [REDACTED] million in respect of the upfront debt coordination fee amortisation, (iii)

[REDACTED] in respect of the difference between financial costs and interest payable in accordance with contractual

obligations, and (iv) [REDACTED] million in respect of the portion of the REIT Manager’s fee to be paid in the form of Units.

Assuming that the number of Units outstanding as of December 31, 2021 for the Profit Forecast Period is [REDACTED], the

forecast DPU is [REDACTED]. The translation of RMB to HK$ was made at the rate of RMB0.83186 to HK$1.

(2) The annualized forecast distribution yields are provided for illustrative purpose only. The annualized actual distribution yield may

differ from the annualized forecast distribution yield based on the forecast DPU for the Profit Forecast Period. The annualized

forecast distribution yields have been calculated with the reference to the [REDACTED] and [REDACTED] only. Such yield will

vary for investors who purchase Units in the secondary market at a [REDACTED] that differs from the [REDACTED] and the

[REDACTED] or for investors who do not hold Units for the entire Profit Forecast Period.

No forecast of profits or DPU whatsoever is made in respect of any period ending after the Profit Forecast

Period. None of Powerlong REIT, the REIT Manager, the Trustee, the [REDACTED], the Joint Listing Agents or

any other person involved in the [REDACTED] guarantees the performance of Powerlong REIT, the repayment of

capital or the payment of any distributions, or any particular return on the Units.

The profit forecast and forecast annualized distribution yields stated in the table above are calculated based

on the [REDACTED] and the [REDACTED]. Such distribution yields will vary for investors who purchase Units

in the secondary market at a [REDACTED] that differs from the [REDACTED] and the [REDACTED] or for

investors who do not hold Units for the entire Profit Forecast Period.

BASES AND ASSUMPTIONS

The REIT Manager has prepared the profit forecast and forecast DPU for the Profit Forecast Period based on

the assumptions listed below. The REIT Manager considers these assumptions to be appropriate and reasonable as

of the date of this Document. However, recipients of this Document and all prospective investors in the Units

should consider the profit forecast and forecast DPU in the light of such assumptions and make their own

assessment of the future performance of Powerlong REIT.



– 142 –

REVENUE

The REIT generates revenue from Shopping malls rental income and car parks, common areas and advertisingspace rental income.


Period

RMB’ 000Forecast

Shopping malls rental income [REDACTED]Car parks, common areas and advertising space rental income [REDACTED]

Total [REDACTED]

Shopping malls rental income

Shopping malls rental income in the Profit Forecast Period comprises the amounts recognized from tenantsunder their tenancies for shopping malls. In accordance with HKFRS 16, the effect of any rent-free period grantedis to be amortized over the term of the lease on a straight line basis. Hence, rental income forecasted representseffective rent expected to be generated under all tenancies for the Profit Forecast Period.

In projecting rental income for the Profit Forecast Period, the REIT has taken into account: (a) the current andexpected general economic conditions in PRC, (b) the current and expected level of demand by existing and newtenants of the REIT Properties and (c) renovation plan for the REIT Properties. The REIT Manager has made thefollowing assumptions.

Leasing schedule assumption

The following table sets forth a breakdown of projected rental income attributable to the different categoriesof tenants for the Profit Forecast Period:

Percentage of Rental Income forthe Profit Forecast Period%

Existing leasecommitments asof June 30, 2021

which will remainfor the Profit

Forecast Period

Expectedrenewals or new

leases during theProfit Forecast

Period

Shanghai Fengxian Powerlong Plaza [REDACTED] [REDACTED]Hangzhou Lin’an Powerlong Plaza [REDACTED] [REDACTED]Yancheng Powerlong Plaza [REDACTED] [REDACTED]Suqian Powerlong Plaza [REDACTED] [REDACTED]Quanzhou Anxi Powerlong Plaza [REDACTED] [REDACTED]Qingdao Jiaozhou Powerlong Plaza [REDACTED] [REDACTED]Luoyang Powerlong Plaza [REDACTED] [REDACTED]Xinxiang Powerlong Plaza [REDACTED] [REDACTED]



– 143 –

Percentage of Rental Income forthe Profit Forecast Period %

Fixed rentalper Leased

Square Meter

Commissioncalculated as

a certainpercentage of the

total revenue ofthe tenants from

retail business

Shanghai Fengxian Powerlong Plaza [REDACTED] [REDACTED]Hangzhou Lin’an Powerlong Plaza [REDACTED] [REDACTED]Yancheng Powerlong Plaza [REDACTED] [REDACTED]Suqian Powerlong Plaza [REDACTED] [REDACTED]Quanzhou Anxi Powerlong Plaza [REDACTED] [REDACTED]Qingdao Jiaozhou Powerlong Plaza [REDACTED] [REDACTED]Luoyang Powerlong Plaza [REDACTED] [REDACTED]Xinxiang Powerlong Plaza [REDACTED] [REDACTED]

Occupancy Rates assumption

The following table sets forth the historical and forecast Occupancy Rates for the REIT Properties for the

periods indicated. The REIT Manager has taken various factors into consideration when forecasting Occupancy

Rates, including the expiry profile during the Profit Forecast Period, the new lease to be entered, the retention rate

and the new lease rate.

Occupancy Rates

Actual Actual Forecast

As ofDecember 31,

2020

As ofJune 30,

2021

As ofDecember 31,

2021

Shanghai Fengxian Powerlong Plaza 99.3% 100.0% [REDACTED]Hangzhou Lin’an Powerlong Plaza 100.0% 100.0% [REDACTED]Yancheng Powerlong Plaza 90.6% 90.7% [REDACTED]Suqian Powerlong Plaza 93.9% 98.0% [REDACTED]Quanzhou Anxi Powerlong Plaza 99.5% 100.0% [REDACTED]Qingdao Jiaozhou Powerlong Plaza 98.8% 97.3% [REDACTED]Luoyang Powerlong Plaza 93.4% 92.8% [REDACTED]Xinxiang Powerlong Plaza 99.3% 100.0% [REDACTED]

Rental Rates assumption

Rental rates are estimated with reference to the general market conditions for property market, the location of

the REIT Properties, age of the REIT Properties and occupancy level.

The forecast Average Monthly Rental per Leased Square Meter for the Profit Forecast Period, as compared to

the historical Average Monthly Rental per Leased Square Meter for the six months ended June 30, 2021, is

expected to achieve a higher year-on-year growth due to reduction of COVID-19’s impact.



– 144 –

Average Monthly Rental per Leased Square Meter

Actual Actual Forecast

For the yearended

December 31,2020

For the sixmonths ended

June 30,2021

ProfitForecast

Period

Shanghai Fengxian Powerlong Plaza 113.6 121.5 [REDACTED]Hangzhou Lin’an Powerlong Plaza 93.7 97.2 [REDACTED]Yancheng Powerlong Plaza 51.6 54.9 [REDACTED]Suqian Powerlong Plaza 76.2 79.6 [REDACTED]Quanzhou Anxi Powerlong Plaza 69.0 76.2 [REDACTED]Qingdao Jiaozhou Powerlong Plaza 37.1 42.4 [REDACTED]Luoyang Powerlong Plaza 54.3 62.1 [REDACTED]Xinxiang Powerlong Plaza 65.7 69.8 [REDACTED]

Car parks, common areas and advertising space rental income

Car parks, common areas and advertising space rental income represents the REIT’s income recognized from

short-term rental and long-term rental of the relevant spaces.

The projected carpark, common areas and advertising space rental income is calculated based on the

historical trends and the expected utilization rate of the relevant spaces. The REIT Manager has forecasted

carpark, common areas and advertising space rental income to be [REDACTED] for the Profit Forecast Period.

PROPERTY OPERATING EXPENSES

Property operating expenses primarily consist of (a) commercial operational services fees; (b) promotion and

advertising expenses; (c) repairs and maintenance; and (d) property tax and other taxes.

The table below shows the estimated property operating expenses by category for the Profit Forecast Period.

For the ProfitForecast Period

RMB’ 000Forecast

Commercial operational services fees [REDACTED]Promotion and advertising expenses [REDACTED]Repairs and maintenance [REDACTED]Property tax and other taxes [REDACTED]

Total [REDACTED]

Commercial operational services fees

The proposed service fees payable to the Powerlong CM Group under the relevant framework agreements will

be determined on an arm’s length basis with reference to 5.0% per annum of the rental income in respect of each

REIT Property.



– 145 –

Promotion and advertising expenses

Promotion and advertising expenses are principally for attracting customers to visit the REIT Properties. The

estimated expenses for the Profit Forecast Period is [REDACTED].

Repairs and maintenance

Repairs and maintenance costs, which are generally incurred as a result of fitting out works undertaken prior

to the commencement of a new tenancy, are projected to be [REDACTED], based on the expected level of new

letting activities for the Profit Forecast Period.

Property tax and other taxes

Property tax and other taxes primarily consist of VAT surcharges, stamp duty, real estate tax and urban land

use tax, and are projected to be [REDACTED] for the Profit Forecast Period.

ADMINISTRATIVE EXPENSES

The administrative expenses are estimated to be [REDACTED] for the Profit Forecast Period, based on

historical trend.

REIT MANAGER’S FEE AND TRUSTEE’S FEES

The REIT Manager’s fee includes a Base Fee and a Variable Fee. Such expenses will be one of the additional

cost items to be incurred post [REDACTED]. The Base Fee shall not exceed 0.25% per annum (and being 0.25%

as of the [REDACTED] [REDACTED]) of the aggregated valuation of the REIT Properties and other assets held

or to be held by the Powerlong REIT Group. The Variable Fee is 3.0% per annum of the Net Property Income (in

respect of each REIT Property, provided that the NAV per Unit exceeds the NAV Unit on which the Variable Fee

was last calculated and paid).

The Trustee is entitled to receive a remuneration of 0.0175% per annum of the value of the Deposited

Property. In addition, Powerlong REIT will also pay the Trustee a one-off acceptance fee of [REDACTED] upon

[REDACTED].

FAIR VALUE CHANGES ON INVESTMENT PROPERTIES

The REIT assumes that the market value of the REIT Properties as of December 31, 2021 will be the same as

the value as of [REDACTED]. Hence, the Profit Forecast does not consider any change in fair value of investment

properties.

NET IMPAIRMENT LOSSES ON FINANCIAL ASSETS

Net impairment losses on financial assets include the impairment loss recognized on trade receivables. The

REIT assumes no impairment losses will be made during the Profit Forecast Period.

OTHER GAINS, NET

Net other gains mainly represents compensation income from early lease termination, default of the tenants

or others. The estimated gains in forecast period is based on historical trend and recent property market condition.



– 146 –

FINANCE COSTS, NET

Finance costs consist of interest expenses on borrowings and interest income. Before [REDACTED], theREIT will enter into the Offshore Facilities of up to a principal amount up to the HKD/USD equivalent ofRMB2,700 million and the Onshore Facilities of up to a principal amount up to RMB100 million. The Facilitieswill bear interest on a floating basis or a fixed interest rate to be determined on the market rate on the drawdowndate.

INCOME TAX EXPENSES

Forecast income tax charge is based on the assumption that the prevailing tax regulations in which the REIToperates remain unchanged during the Profit Forecast Period. Enterprises incorporated in PRC are subject to aprofit tax rate of 25%.

ADJUSTMENTS

Under the Trust Deed, Distributable Income for the Forecast Period is arrived at after taking into account theeffects of the Adjustments from the consolidated audited net profit after tax of Powerlong REIT.

The Adjustments for the Forecast Period is projected to be [REDACTED], which consists of: (i)[REDACTED] in respect of the deferred tax charged, (ii) [REDACTED] in respect of the upfront debtcoordination fee amortisation, (iii) [REDACTED] in respect of the difference between financial costs and interestpayable in accordance with contractual obligations, and (iv) [REDACTED] in respect of the portion of the REITManager’s fee to be paid in the form of Units.

OTHER ASSUMPTIONS

The REIT Manager has made the following additional assumptions in preparing the profit forecast andforecast DPU for the Profit Forecast Period:

(a) There will be no material changes in the existing political, legal, regulatory, fiscal, taxation or economicconditions in the PRC and Hong Kong, or any other countries or territories in which the REIT currentlyoperate or will operate in with material income to the REIT.

(b) There will be no material changes in inflation, interest rates or foreign currency exchange rates fromthose prevailing. For the purpose of preparation of the forecast, save for historical figures, the Directorshave assumed an exchange rate of RMB0.83186: HK$1.00.

(c) There will be no material changes in the bases or rates of taxation or duties in the PRC or any othercountry or territory in which the REIT operates. Expected effective income tax rate used for profitforecast is 25.0%, based on REIT’s income tax rate during the Profit Forecast Period.

(d) There are no material changes in the REIT’s principal accounting policies adopted.

(e) The REIT is not materially and adversely affected by any of the risk factors set out in the section headed“Risk factors” of the Document.

(f) Given the REIT won’t issue new units in the [REDACTED], there is no cash inflow from the initial[REDACTED]. Moreover, expenses will be borne by the [REDACTED].

(g) The expired tenancy will be renewed at the forecasted rental rate in accordance with the forecastedprobability rate and all tenancies are enforceable and tenants will perform their obligations thereunderin accordance with their respective terms.



– 147 –

(h) The forecasts have been prepared taking into account the latest development of COVID-19, which the REIT

has fully assessed and consider to have limited adverse impact to the REIT.

(i) All leases and licenses are enforceable and will be executed in accordance with their terms during the

Forecast Periods.

(j) The REIT will adjust to cater for the growing demand for services during the Forecast Period and the trend of

promotion and advertising expenses, repairs and maintenance, property tax and other taxes are assumed to be

in line with the market situation by reference to historical data.

(k) The forecasts have been prepared taking into account the continued involvement of the Directors, key senior

management and other necessary talents in the development of the REIT’s operations. It is assumed that the

REIT will be able to retain its key management and personnel during the profit Forecast Period.

(l) Barring unforeseen circumstances, there will be no significant abnormal or extraordinary items during the

profit Forecast Period.

(m) The Powerlong REIT will distribute 100% of Annual Distributable Income to Unitholders and there is no

reinvestment arrangement.

(n) There will be no change to the REIT Code.

Although the REIT Manager believe the assumptions and estimates on which the profit forecast is made are

reasonable, the profit forecast based on those assumptions could also be inaccurate, due to the inherent

uncertainties in these assumptions, any or all of these assumptions and estimates could prove to be inaccurate.

SENSITIVITY ANALYSIS

The profit forecast and forecast distributions included in this Document are based on a number of

assumptions that have been outlined above and are subject to a number of risks as outlined in the section headed

“Risk Factors” in this Document. Prospective investors should be aware that future events cannot be predicted with

any certainty and deviations from the figures forecast in this Document are to be expected.

To assist prospective investors in assessing the impact of some but not all assumptions on the annualized

DPU, the following tables demonstrate the sensitivity of the annualized DPU to certain changes in assumptions as

set forth below. It should also be noted that annualized DPU as discussed below assumes that the REIT Manager

will distribute to Unitholders 100% of the Annual Distributable Income for the Profit Forecast Period and will

distribute no additional amounts out of capital. Accordingly, the sensitivity illustrations are based exclusively on

movements of the specified items in Annual Distributable Income resulting from the circumstances considered,

holding all other assumptions and metrics unchanged. The illustrations are not profit forecasts for the purposes of

the relevant rules or any other purpose and accordingly have not been reported on by the reporting accountant.

Prospective investors should be aware that the sensitivity analysis is not intended to be exhaustive and is

limited in scope in that not all principal assumptions or other assumptions which are relevant to the figures forecast

or projected in this Document have been examined or reviewed in this sensitivity analysis.



– 148 –

Care should be taken in interpreting the sensitivities analysis. The sensitivities analysis treats each movement

in the variables in isolation and hold all other assumptions and metrics unchanged whereas, in practice, the

movements could be interdependent and such movements may lead to changes in other metrics. The effects of

movements may offset or compound each other. Accordingly, the effect on the profit forecast presented for each

sensitivity analysis is not intended to indicate the likely range of outcomes with respect to each sensitivity

analysis. No attempt is made to identify the cause of any potential variation or to identify or quantify any

consequential or related changes or variations in other lines.

Results of a sensitivity analysis of the impact of changes in revenue, operating expenses, cost of borrowing on

the forecast profit for the Profit Forecast Period are as follows:

Profitafter Tax

AnnualizedProfit

per UnitAnnualized

DPU

RMB’000 HK$ HK$

Original amount [REDACTED] [REDACTED] [REDACTED]Increase 5% in revenue [REDACTED] [REDACTED] [REDACTED]Decrease 5% in revenue [REDACTED] [REDACTED] [REDACTED]Increase 5% in operating expenses [REDACTED] [REDACTED] [REDACTED]Decrease 5% in operating expenses [REDACTED] [REDACTED] [REDACTED]Increase 0.5% in interest rate [REDACTED] [REDACTED] [REDACTED]Decrease 0.5% in interest rate [REDACTED] [REDACTED] [REDACTED]

Change inprofit

after tax

Change inannualized

Profitper Unit

Change inannualized

DPU

% % %

Original amount [REDACTED] [REDACTED] [REDACTED]Increase 5% in revenue [REDACTED] [REDACTED] [REDACTED]Decrease 5% in revenue [REDACTED] [REDACTED] [REDACTED]Increase 5% in operating expenses [REDACTED] [REDACTED] [REDACTED]Decrease 5% in operating expenses [REDACTED] [REDACTED] [REDACTED]Increase 0.5% in interest rate [REDACTED] [REDACTED] [REDACTED]Decrease 0.5% in interest rate [REDACTED] [REDACTED] [REDACTED]



– 149 –

None of Powerlong REIT, Powerlong Holdings, the REIT Manager, the Trustee, the [REDACTED], the Joint

Listing Agents or any of their respective directors, agents, employees or advisors or any other persons involved in

the [REDACTED] guarantees the performance of Powerlong REIT, the repayment of capital or the payment of any

(or any particular) return on the Units.

Period from the [REDACTED] to December 31, 2021

Unitholders will be paid, in the absence of unforeseen circumstances, a forecast DPU of [REDACTED] in

respect of the period from the [REDACTED] to December 31, 2021, representing an annualized distribution yield

of [REDACTED]% based on the [REDACTED] and [REDACTED]% based on the [REDACTED] (in each case

excluding other transaction costs) assuming no new Units will be issued during such period. The annualized

forecast distribution yields are provided for illustrative purposes only. The annualized actual distribution yield for

the first distribution period (being from the [REDACTED] to December 31, 2021) may differ from the annualized

forecast distribution yields based on the forecast DPU for the period from the [REDACTED] to December 31,

2021.

Bases and Assumptions

The above forecast distribution yields are calculated based on the [REDACTED] and [REDACTED]

(excluding other transaction costs). The distribution yield obtained by investors who purchase Units in the

secondary market at a [REDACTED] that differs from the [REDACTED] or [REDACTED] (excluding other

transaction costs), calculated using such secondary market purchase price, will accordingly differ from the

forecast distribution yields stated above.


STATEMENT OF DISTRIBUTIONS

– 150 –

The Unaudited Pro Forma Financial Information (as defined in Appendix II to this Document) has been

prepared based on the audited combined balance sheet of the Predecessor Group as of 30 June, 2021 as set out in

Appendix I to this Document, assuming (i) the completion of the Reorganization, (ii) the completion of Asset

Injection,(iii) the settlement of the amounts due from/to related parties and existing borrowing, (iv) the loan

draw-down under the facilities of approximately [REDACTED], as if they had taken place on 30 June, 2021.

The Unaudited Pro Forma Financial Information has been prepared for illustrative purposes only and do not

purport to represent what the assets and liabilities of Powerlong REIT will actually be as of the [REDACTED] or

to give a true picture of the financial position of Powerlong REIT as of the [REDACTED] or any future date.

For further details, including Unaudited Pro Forma Financial Information (for illustrative purposes only),

please refer to Appendix II to this Document.


UNAUDITED PRO FORMA STATEMENTS OF FINANCIAL POSITION

– 151 –

Certain information and statistics in this section and elsewhere in this document relating to thereal-estate industry and the overall China economy are derived from various official and Independent ThirdParty sources and have been prepared on the basis of information made public by governmental entities andinter-governmental organizations and the commissioned research report from the Market Consultant. Theinformation presented in this section and elsewhere in this document from these and other sources representsthe most recent information that is currently available from those sources. The REIT Manager believes that thesources of the information in this section and elsewhere in this document are appropriate sources for suchinformation and have taken reasonable care in extracting and reproducing such information. The REITManager has no reason to believe that such information is false or misleading in any material respect or thatany fact has been omitted that would render such information false or misleading in any material respect.Powerlong Holdings, Powerlong REIT, the REIT Manager, the Trustee, the Joint Listing Agents, theirrespective directors, employees, agents, representatives, affiliates and advisers and all other parties otherthan the Market Consultant involved in the [REDACTED] have not independently verified, and make norepresentation as to, the accuracy of the information from official or other third- party sources. Suchinformation may not be consistent with, and may not have been compiled with the same degree of accuracy orcompleteness as, other information compiled within or outside China. Accordingly, the official and otherthird-party sources contained or referred to herein may not be accurate and should not be unduly relied on.

INTRODUCTION

In connection with the [REDACTED], the REIT Manager has commissioned Jones Lang LaSalle Corporate

Appraisal and Advisory Limited, or the Market Consultant, an independent third party and an international

professional services and investment management firm offering specialized real estate services to clients seeking

increased value by owning, occupying and investing in real estate, to prepare the Industry Research Report with

necessary information on the real estate markets in China and the cities where the REIT Properties operate. The

Market Consultant has charged the REIT Manager a total fee of approximately RMB400,000 for the preparation of

the Industry Research Report, which the REIT Manager believes is in line with the market rate for similar reports.

This section was prepared primarily by the designated market research team based on the following

information and statistics collected from (i) various government publications; (ii) site visits and interviews; (iii)

recognized research institutions; and (iv) the proprietary database of the Market Consultant. The information and

statistics are considered reliable.

The following sets out the main reasons the Market Consultant adopted the above sources of information and

considers them as reliable: it is a general market practice to adopt official data and announcements from various

Chinese government agencies, and the Market Consultant understands the data collection methodology and data

source of its proprietary database and the subscribed database from (i) Statista; (ii) CEIC Data; and (iii) China

Real Estate Index System (CREIS) (中國房地產指數系統).

While preparing this section, the Market Consultant has relied on the assumptions listed below: (i) all

documents provided by the Company are true and correct; (ii) all published data by the relevant government

authorities are true and correct; (iii) and where subscribed data is obtained from recognized research and public

institutions, the Market Consultant will rely upon the apparent integrity and expertise of such institutions.

The Directors confirm that, as of the Latest Practicable Date, to the best of their knowledge, after taking

reasonable care, there is no material adverse change in the market information since the date of the Industry

Research Report or the date of the relevant data contained in the Industry Research Report which may qualify,

contradict or have an impact on the information in this section.


INDUSTRY OVERVIEW

– 152 –

OVERVIEW OF THE PRC ECONOMY

As the second-largest economic entity, the PRC’s economy has witnessed a moderate growth in recent years.

Despite the pressure from the trade war between China and the U.S., the PRC’s nominal GDP still increased from

RMB68,885.8 billion in 2015 to RMB101,598.6 billion in 2020 with a CAGR of 8.1%, and the GDP is estimated

to grow at a CAGR of 6.3% between 2021 and 2025. The CPI registered 102.5 in 2020, while the total retail sales

of consumer goods grew from RMB30,093.1 billion in 2015 to RMB39,198.1 billion in 2020 at a CAGR of 5.4%.

In the meantime, per capita disposable income of urban households rose from RMB31,194.8 in 2015 to

RMB43.834.0 in 2020 with a CAGR of 7.0%, indicating a significant increase in purchasing power of the urban

residents. The table below sets out selected economic indicators of the PRC for the years indicated:

Major economic indicators in the PRC (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR

Permanent Population (million) 1,374.6 1,382.7 1,390.1 1,395.4 1,400.1 1,411.8 0.5%Nominal GDP (RMB billion) 68,885.8 74,639.5 83,203.6 91,928.1 99,086.5 101,598.6 8.1%Real GDP growth rate (%) 7.0 6.8 6.9 6.7 6.1 2.3 N/ACPI** 101.4 102.0 101.6 102.1 102.9 102.5 102.1*Total retail sales of consumer

goods (RMB billion) 30,093.1 33,231.6 36,626.2 37,778.3 40,801.7 39,198.1 5.4%Fixed asset investment

(RMB billion) 56,200.0 60,646.6 64,123.8 64,567.5 56,087.4 52,727.0 -1.3%Per capita disposable income of

urban households (RMB) 31,194.8 33,616.2 36,396.2 39,250.8 42,358.8 43,834.0 7.0%Urbanization rate (%) 56.1 57.4 58.5 59.6 60.6 63.9 N/A

Source: China Statistical Yearbook (2020), National Bureau of Statistics

Note: * is the arithmetic mean. ** Preceding year = 100.

Estimation of major economic indicators in the PRC (2021-2025)

2021 2022 2023 2024 20252021-2025

CAGR

Nominal GDP (RMB billion) 112,282.9 119,875.5 127,649.3 135,684.3 143,595.8 6.3%Real GDP growth rate (%) 8.5 5.2 5.0 4.7 4.5 N/A

Source: Economist Intelligence Unit (EIU)


INDUSTRY OVERVIEW

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OVERVIEW OF THE REAL ESTATE MARKET IN THE PRC

Major Indicators of the Real Estate Market in the PRC

Although a series of tightening policies have been released by the PRC government since 2015, the real estate

market has achieved rapid growth in recent years. The real estate investment increased from RMB9,597.9 billion in

2015 to RMB14,144.3 billion in 2020 with a CAGR of 8.1%. Meanwhile, the increasing urbanization rate and

disposable income have promoted the demand for commercial properties. The table below sets out selected

commercial property market indicators of the PRC for the years indicated:

Selected commercial property market indicators of the PRC (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR

Real estate investment(RMB billion) 9,597.9 10,258.1 10,979.9 12,016.5 13,219.4 14,144.3 8.1%

Investment in commercialproperties (RMB billion) 1,460.7 1,583.8 1,564.0 1,417.7 1,322.6 1,307.6 -2.2%

GFA of commercial propertiesunder construction(million sq.m.) 1,001.1 1,045.7 1,052.3 1,026.3 1,003.9 932.0 -1.4%

GFA of commercial properties sold(million sq.m.) 92.5 108.1 128.4 119.7 101.7 92.9 0.1%

GFA of commercial propertiescompleted (million sq.m.) 120.3 125.2 126.7 112.6 108.1 86.2 -6.4%


Impact of the Pandemic on the Real Estate Market in the PRC

The pandemic in 2020 has exerted significant effect on the real estate market, and all segments of the real

estate industry have been affected more or less. The demand and off-plan sales was curbed by the pandemic in 2021

Q1, while the market is gradually recovering from 2021 Q2 under the effective control measures of the

government. As for the commercial property market, investment in commercial properties and GFA of commercial

properties sold decreased slightly in 2020. Due to delayed construction plans and low economic activities, both

supply and demand in the commercial property market declined in 2020 Q1. Nevertheless, the commercial

property market has gradually rebounded since 2020 Q2, and the market indicators are anticipated to demonstrate

an upward trend in the near future.

Drivers of the Real Estate Market in the PRC

Further Development of Metropolitan Clusters

The construction of metropolitan clusters could promote regional economic development through resource

integration and population inflow, providing huge opportunities for the development of commercial market. The

development of urban agglomerations could promote population aggregation and accelerate consumption

upgrading, thereby enhancing the purchasing power of urban households and promoting the development of the

local commercial market.


INDUSTRY OVERVIEW

– 154 –

Accelerating Urbanization

The urbanization process of the PRC has made great progress over the past few years. The urban populationgrew from 771.2 million to 902.0 million from 2015 to 2020 at a CAGR of 3.2%, and the urbanization rate reached63.9% by the end of 2020. The rapid growth of urban population has stimulated the market consumption demandand promoted the consumption level, resulting in a prosperous commercial market in the past decades. In thefuture, the increasing urbanization rate is expected to continuously boost the commercial market and level up thedemand for commercial properties of the PRC.

An Increase in Disposable Income and Expenditure of Urban Households

Benefited from the rapid economic growth of the PRC, both income and expenditure have shown a steadygrowth between 2015 and 2020. Per capita disposable income of urban households experienced a rapid growthfrom RMB31,194.8 to RMB43,834.0 at a CAGR of 7.0% during the same period, while per capita consumptionexpenditure of urban households grew smoothly from RMB21,392.4 to RMB27,007.0 with a CAGR of 4.8%. Theimprovement of disposable income is likely to strengthen the purchasing power and enhance consumption demand,therefore driving the development of the commercial market in the PRC.

E-commerce Opportunities and Consumer Behavior

Driven by the rapid expansion of internet connectivity and mobile technology, the e-commerce industry in thePRC has experienced rapid growth. Retail sales of e-commerce increased from RMB3,877.3 billion in 2015 toRMB11,760.1 billion in 2020 with a CAGR of 24.8%. As the COVID-19 pandemic has gradually shifted people’sconsumption patterns, the e-commerce industry grew even further. Additionally, the changing consumer behaviorshave brought business opportunities for brick-and-mortar stores to push forward their digitalization process. Theshift in consumption patterns is anticipated to increase the demand for high-quality commercial centers andpromote the commercial market of the PRC.

Consumption Habits of Generation Z

Generation Z1 (Z世代) is the first generation to have access to the Internet and portable digital technologysince a young age. Compared with other generations, they tend to pay more attention to shopping experience andhave higher requirements for the environment and services provided by the retailers. As Generation Z hasgradually become the main force of market consumption, its consumption habits could affect the commercialmarket profoundly. With rising purchasing power from Generation Z, the experiential commercial projects areexpected to achieve considerable progress. As a result, the physical retail outlets are likely to focus on improvingthe consumption environment, introducing emerging commercial activities and providing personalized service tomeet the diversified consumption demand of Generation Z.

OVERVIEW OF THE REAL ESTATE MARKET IN SELECTED CITIES

Overview of the Regions

Yangtze River Delta Urban Agglomeration

Yangtze River Delta Urban Agglomeration consists of Shanghai and three neighboring provinces Jiangsu,Zhejiang and Anhui. With over 230 million of total population, it is considered as one of the most denselypopulated areas in the PRC. Yangtze River Delta Urban Agglomeration has always served as a key driver for the

1 Generation Z: It refers to the generation born from mid-to-late 1990s to the early 2010s. According to the National Bureau of Statistics,there are more than 250 million New Generation citizens in the PRC.


INDUSTRY OVERVIEW

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economic development of the PRC. Its nominal GDP reached RMB24.5 trillion in 2020, representing nearly

one-fourth of the nominal GDP of the PRC, which ranks the first among the major urban agglomerations. Total

retail sales of consumer goods reached RMB9.8 trillion in 2020, accounting for approximately one-fourth of the

total retail sales of consumer goods in the PRC, demonstrating a booming consumption market in the region.

Bohai Rim Urban Agglomeration

Bohai Rim has become the engine of economic development in the north of the PRC, which is regarded as the

third largest urban agglomeration in terms of economy, subordinating to the Yangtze River Delta and the

Guangdong-Hong Kong-Macau Greater Bay Area. The nominal GDP of Bohai Rim recorded RMB17.3 trillion in

2020, accounting for 17.1% of the total GDP in the PRC. Meanwhile, total retail sales of consumer goods reached

RMB2.9 trillion in 2020, accounting for approximately one-fifth of the total retail sales of consumer goods of the

PRC, suggesting a strong consumption level and high growth potential in the commercial market.

Urban Agglomeration on the West Side of Taiwan Straits

The Urban Agglomeration on the West Side of Taiwan Straits consists of 20 prefecture-level cities in Fujian,

Zhejiang, Jiangxi and Guangdong provinces. Its nominal GDP reached RMB7.0 trillion in 2020, representing 6.9%

of the total GDP of the PRC. Additionally, total retail sales of consumer goods reached RMB3.0 trillion,

accounting for 7.8% of the total retail sales of the PRC. The shift of development focus from Fujian Province to the

integration of Guangdong, Fujian and Zhejiang provinces may promote the coordinated development of the

economy, as well as drive the growth in consumption power and consumption level in the region.

Central Henan Urban Agglomeration

Central Henan Urban Agglomeration contains 30 prefecture-level cities in Henan, Shanxi, Hebei, Shandong

and Anhui provinces, which plays a vital role in leading the economic development of the central and western

regions. The nominal GDP and total retail sales of consumer goods recorded RMB8.1 trillion and RMB3.4 trillion

in 2020, accounting for nearly 8.0% of the above economic indicators of the PRC respectively. The cooperation of

Central Henan Urban Agglomeration with Yangtze River Delta Urban Agglomeration is estimated to improve the

economic development and boost consumption level of the region.

Overview of the Selected Cities

Shanghai

Economic Overview

As the national hub for economy and commerce, Shanghai has continuously promoted the development of

service industries, including finance and real estate, and implemented the innovation-driven strategy to achieve

high-quality economic progress. Shanghai is an international economic, financial, trade, shipping, scientific and

technological innovation center as well as the core city of the Yangtze River Delta and the Shanghai

Mega-Metropolitan Circle (上海大都市圈). Its nominal GDP increased steadily from RMB2,688.7 billion in 2015

to RMB3,870.1 billion in 2020 with a CAGR of 7.6%, and the GDP is estimated to increase at a CAGR of 6.1%

from 2021 to 2025. Total retail sales of consumer goods grew steadily from RMB1,160.6 billion in 2015 to


INDUSTRY OVERVIEW

– 156 –

RMB1,593.3 billion in 2020 at a CAGR of 6.5%, reflecting the strong consumption demand in Shanghai. The table

below sets out selected economic indicators of Shanghai for the years indicated:

Selected economic indicators of Shanghai (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR

Permanent Population (million) 24.2 24.2 24.2 24.2 24.3 24.9 0.6%Nominal GDP (RMB billion) 2,688.7 2,988.7 3,292.5 3,601.2 3,815.5 3,870.1 7.6%Real GDP growth rate (%) 7.0 6.9 7.0 6.8 6.0 1.7 N/ACPI*** 102.4 103.2 101.7 101.6 102.5 101.7 102.2*Total retail sales of consumer

goods (RMB billion) 1,160.6 1,258.8 1,370.0 1,487.5 1,584.8 1,593.3 6.5%Per capita disposable income of

urban households (RMB) 52,962 57,692 62,596 68,034 73,615 76,437 7.6%Fixed asset investment

(RMB billion) 635.3 675.6 724.7 762.3** 801.2** 883.7** 6.8%

Source: Shanghai Statistical Yearbook (2016-2020), Bureau of Statistics of Shanghai

Note: * is the arithmetic mean. ** is calculated based on the growth rate. *** Preceding year = 100.

Estimation of selected economic indicators in Shanghai (2021-2025)

2021 2022 2023 2024 20252021-2025

CAGR

Nominal GDP (RMB billion) 4,250.0 4,510.0 4,800.0 5,110.0 5,380.0 6.1%Real GDP growth rate (%) 8.3 5.6 5.4 5.2 4.8 N/ATotal retail sales of consumer goods

(RMB billion) 1,756.7 1,854.2 1,955.9 2,058.0 2,161.5 5.3%Per capita disposable income of urban

households (RMB) 84,920 91,300 98,090 105,040 112,340 7.2%


Overview of the Real Estate Market

Both robust consumer demand and strong purchasing power in Shanghai have fuelled the vigorous

development in the real estate market during the past few years. The real estate investment rose steadily from

RMB346.9 billion in 2015 to RMB471.0 billion in 2020 with a CAGR of 6.3%. Meanwhile, investment in

commercial properties fluctuated with a CAGR of 3.7% between 2015 and 2020. The commercial upgrading in

Shanghai will continue to attract new businesses amid the fierce market competition. The entrance of new tenants

could possibly drive up the demand for commercial properties in the local market, leading to a steady rise in


INDUSTRY OVERVIEW

– 157 –

average rent and a gradual decline in vacancy rate in the next five years. The table below sets out selectedcommercial property market indicators of Shanghai for the years indicated:

Commercial property market indicators of Shanghai (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR

Real estate investment(RMB billion) 346.9 370.9 385.7 403.3 423.1 471.0 6.3%

Investment in commercialproperties (RMB billion) 46.8 51.9 50.7 46.1 45.7 56.0 3.7%

GFA of commercial propertiesunder construction(million sq.m.) 19.4 19.9 20.2 18.8 17.8 18.2 -1.3%

GFA of commercial properties sold(million sq.m.) 1.1 2.1 0.8 1.0 0.9 0.8 -5.9%


Source: Shanghai Statistical Yearbook (2016-2020), Bureau of Statistics of Shanghai, CREIS

Hangzhou

Economic Overview

Hangzhou is regarded as the capital city of Zhejiang Province and one of the 15 sub-provincial cities in thePRC. According to “Top 100 Cities by Comprehensive Strength in 2020” (《2020年中國百強城市排行榜》),Hangzhou represented the fifth place, with the pillar industries of digital economy, tourism and cultural creativity.The nominal GDP increased from RMB1,049.5 billion in 2015 to RMB1,610.6 billion in 2020 at a CAGR of 8.9%,and the GDP is estimated to grow at a CAGR of 7.5% from 2021 to 2025. Total retail sales of consumer goods grewremarkably from RMB428.1 billion in 2015 to RMB597.3 billion in 2020 with a CAGR of 6.9%, indicating strongconsumption demand in Hangzhou. The table below sets out selected economic indicators of Hangzhou for theyears indicated:

Selected economic indicators of Hangzhou (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR


goods (RMB billion) 428.1 472.8 522.2 569.0 618.8 597.3 6.9%Per capita disposable income of


(RMB billion) 555.6 584.2 585.7 648.9** 724.2** 773.4** 6.8%

Source: Hangzhou Statistical Yearbook (2016-2020), Bureau of Statistics of HangzhouNote: * is the arithmetic mean. ** is calculated based on the growth rate. *** Preceding year = 100.


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Estimation of selected economic indicators in Hangzhou (2021-2025)

2021 2022 2023 2024 20252021-2025

CAGR


(RMB billion) 688.4 735.1 784.4 834.5 885.8 6.5%Per capita disposable income of urban

households (RMB) 75,360 81,520 87,820 94,390 101,230 7.7%



In recent years the real estate market in Hangzhou has been maintaining healthy development. Real estateinvestment rose rapidly from RMB247.2 billion in 2015 to RMB357.7 billion in 2020 at a CAGR of 7.7%, mainlyresulted from the sustained rise in investment in residential properties, while investment in commercial propertiesremained relatively stable. The promising economic development and increasing consumption capacity ofresidents in Hangzhou could effectively promote an inflow of population, expand consumption level and supportthe commercial market. Driven by the increasing demand and corresponding growth of supply in commercialproperties, both average rent and vacancy rate of commercial properties are anticipated to take positive progress.The table below sets out selected commercial property market indicators of Hangzhou for the years indicated:

Commercial property market indicators of Hangzhou (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR

Real estate investment(RMB billion) 247.2 260.6 273.4 306.9 339.7 357.7* 7.7%

Investment in commercialproperties (RMB billion) 32.4 30.4 32.9 30.6 28.8 29.8* -1.7%

GFA of commercial propertiesunder construction(million sq.m.) 13.2 N/A 14.9 14.6 14.3 15.3 3.0%

GFA of commercial properties sold(million sq.m.) 0.6 N/A 1.7 1.6 1.0 0.3 -12.3%

GFA of commercial propertiescompleted (million sq.m.) 1.2 N/A 2.2 2.0 1.7 2.3 13.0%

Source: Hangzhou Statistical Yearbook (2016-2020), Bureau of Statistics of Hangzhou, CREISNote: * is calculated based on the growth rate.

Suqian

Economic Overview

Suqian is a prefecture-level city located in the north of Jiangsu Province, occupying a total land area of 8,555sq.km. with a permanent population of 5.0 million at the end of 2020. The abundant natural resources of Suqianhave strongly supported the development of the food and beverage, textile and clothing, new materials, mechanicaland electrical equipment industries. The nominal GDP increased rapidly from RMB212.6 billion in 2015 to


INDUSTRY OVERVIEW

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RMB326.2 billion in 2020 with a CAGR of 8.9%, and the GDP is estimated to increase at a CAGR of 7.5% between

2021 and 2025. From 2015 to 2020, per capita disposable income of urban households grew from RMB22,233 to

RMB32,015 with a CAGR of 7.6%. Total retail sales of consumer goods increased rapidly from RMB62.7 billion

to RMB125.8 billion at a CAGR of 15.0% between 2015 and 2020. The table below sets out selected economic

indicators of Suqian for the years indicated:

Selected economic indicators of Suqian (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR

Permanent Population (million) 4.9 4.9 4.9 4.9 4.9 5.0 0.5%Nominal GDP (RMB billion) 212.6 237.5 261.1 286.5 308.4 326.2 8.9%Real GDP growth rate (%) 10.0 9.1 7.5 6.8 6.9 4.5 N/ACPI**** 101.6 102.0 101.9 102.1 103.1 102.4 102.2*Total retail sales of consumer



(RMB billion) 183.9 206.0 219.4 137.1 145.8 145.9** -4.5%***

Source: Suqian Statistical Yearbook (2016-2020), Bureau of Statistics of Suqian; Jiangsu Statistical Yearbook (2016-2020), Bureau of

Statistics of Jiangsu

Note: * is the arithmetic mean. ** is calculated based on the growth rate. *** The negative CAGR is mainly due to the reform of the

statistical method in 2018. **** Preceding year = 100.

Estimation of selected economic indicators in Suqian (2021-2025)

2021 2022 2023 2024 20252021-2025

CAGR

Nominal GDP (RMB billion) 362.0 396.0 426.0 456.0 483.0 7.5%Real GDP growth rate (%) 9.8 6.0 5.9 5.7 5.6 N/APer capita disposable income of urban

households (RMB) 35,430 37,930 40,460 43,060 45,740 6.6%



In the past few years, Suqian has undergone industrial transformation and upgrading, leading to a temporary

cool down in the local commercial market. The real estate investment increased slightly from RMB36.3 billion in

2015 to RMB36.8 billion in 2020 at a CAGR of 0.3%. Meanwhile, investment in commercial properties showed a

downward trend from 2015 to 2019, while slightly increased from RMB2.5 billion in 2019 to RMB2.6 billion in

2020. The strengthened industrial agglomeration effect in Suqian may continue to accelerate economic

developments in the city, promoting consumption upgrading and attracting more retail brands. The growing market


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may lead the average rent and vacancy rate of commercial properties towards a positive direction in the future fiveyears. The table below sets out selected commercial property market indicators of Suqian for the years indicated:

Commercial property market indicators of Suqian (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR


Investment in commercialproperties (RMB billion) 7.7 6.5 4.4 3.2 2.5 2.6 -19.9%




Source: Suqian Statistical Yearbook (2016-2020), Bureau of Statistics of Suqian, Jiangsu Statistical Yearbook (2016-2020), Bureau of

Statistics of Jiangsu, CREIS

Yancheng

Economic Overview

Yancheng is a prefecture-level city located in the central coastal area of Jiangsu Province, and is regarded asone of the core cities of the Yangtze River Delta Urban Agglomeration. It is one of the central cities in the YellowSea Eco-Economic Circle (環黃海經濟圈) and plays an important role in the development of Marine EconomyStrategy (海洋經濟戰略) in Jiangsu Province. The nominal GDP grew steadily from RMB418.2 billion in 2015 toRMB595.3 billion in 2020 at a CAGR of 7.3%, and the GDP is estimated to grow at a CAGR of 6.6% from 2021 to2025. Total retail sales of consumer goods reached RMB221.6 billion in 2020, with a CAGR of 8.6% from 2015 to2020. The table below sets out selected economic indicators of Yancheng for the years indicated:

Selected economic indicators of Yancheng (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR

Permanent Population (million) 7.2 7.2 7.2 7.2 7.2 6.7 -1.5%Nominal GDP (RMB billion) 418.2 454.7 499.0 538.7 570.2 595.3 7.3%Real GDP growth rate (%) 10.5 8.9 6.8 5.5 5.1 3.5 N/ACPI**** 101.6 102.1 101.7 101.9 103.3 102.3 102.2*Total retail sales of consumer



(RMB billion) 337.3 388.3 427.8 468.1** 491.0** 454.7** 6.2%

Source: Yancheng Statistical Yearbook (2016-2020), Bureau of Statistics of Yancheng; Jiangsu Statistical Yearbook (2016-2020),Bureau of Statistics of Jiangsu



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Estimation of selected economic indicators in Yancheng (2021-2025)

2021 2022 2023 2024 20252021-2025

CAGR

Nominal GDP (RMB billion) 649.0 705.0 752.0 797.0 838.0 6.6%Real GDP growth rate (%) 7.6 5.0 4.9 4.7 4.6 N/ATotal retail sales of consumer goods


households (RMB) 44,830 48,240 51,710 55,310 59,040 7.1%



Over the past few years, Yancheng has experienced steady growth in the economy and real estate market. Thereal estate investment rose from RMB36.8 billion in 2015 to RMB51.7 billion in 2020 at a CAGR of 7.1%.Investment in commercial properties decreased from RMB6.3 billion in 2015 to RMB5.6 billion in 2020. Yanchengwill focus on developing as an “International Cooperation Demonstration Area of China and South Korea” (中韓國際合作示範區), supporting economic growth and generating demands for commercial properties. The bloomingmarket is likely to promote a steady rise in average rent and a gradual decline in vacancy rate of commercialproperties in the upcoming five years. The table below sets out selected commercial property market indicators ofYancheng for the years indicated:

Commercial property market indicators of Yancheng (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR

Real estate investment (RMBbillion) 36.8 35.9 42.7 45.5 42.6 51.7 7.1%


GFA of commercial propertiesunder construction (millionsq.m.) 4.5 N/A 4.0 3.8 4.1 4.1 -1.8%

GFA of commercial properties sold(million sq.m.) 0.6 N/A 0.7 0.7 0.7 0.7 2.2%


Source: Yancheng Statistical Yearbook (2016-2020), Bureau of Statistics of Yancheng, Jiangsu Statistical Yearbook (2016-2020), Bureauof Statistics of Jiangsu, CREIS

Qingdao

Economic Overview

Qingdao is one of the major port cities located in eastern China and faces Yellow Sea (黃海) to the east. It isalso the economic center of Shandong Province as well as an important node in the Bohai Economic Rim (環渤海經濟區) and the Economic Corridor of New Eurasia Continental Bridge (新亞歐大陸橋經濟走廊). Its nominalGDP grew continuously from RMB865.9 billion in 2015 to RMB1,240.1 billion in 2020, representing a CAGR of


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7.4%, ranking the top city in terms of economic performance in Shandong Province, and from 2021 to 2025, the

nominal GDP is estimated to increase at a CAGR of 7.4%. Between 2015 and 2020, total retail sales of consumer

goods rose from RMB354.8 billion to RMB520.4 billion at a CAGR of 8.0%, and per capita disposable income of

urban households increased from RMB40,370 to RMB55,905 with a CAGR of 6.7%, demonstrating gradually

enhanced consumption power of urban households. The table below sets out selected economic indicators of

Qingdao for the years indicated:

Selected economic indicators of Qingdao (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR

Permanent Population (million) 9.1 9.2 9.3 9.4 9.5 10.1 2.0%Nominal GDP (RMB billion) 865.9 928.3 1,013.7 1,094.9 1,174.1 1,240.1 7.4%Real GDP growth rate (%) 7.9 7.7 7.4 7.3 6.5 3.7 N/ACPI*** 101.2 102.5 102.0 102.1 103.3 102.4 102.3*Total retail sales of consumer



(RMB billion) 655.6 745.5 777.7 839.1** 1,020.4** 1,053.0** 9.9%

Source: Qingdao Statistical Yearbook (2016-2020), Bureau of Statistics of Qingdao


Estimation of selected economic indicators in Qingdao (2021-2025)

2021 2022 2023 2024 20252021-2025

CAGR



households (RMB) 62,560 67,020 71,210 75,490 79,860 6.3%



Empowered by the steady economic growth and increasing purchasing power, Qingdao has witnessed rapid

development in commercial market in recent years. The real estate investment increased from RMB112.2 billion in

2015 to RMB204.5 billion in 2020 with a CAGR of 12.8%. Nevertheless, due to the competition from online

shopping, the commercial market underperformed in recent years, while community-based commercial properties

may provide new growth opportunity in the future. Qingdao will focus on developing as an “International

Consumption Central City” (國際消費中心城市), attracting more consumption in order to promote the

development of the commercial market. With new advancements in the market, the average rent and vacancy rate


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of commercial properties may take steady progress in the following five years. The table below sets out selectedcommercial property market indicators of Qingdao for the years indicated:

Commercial property market indicators of Qingdao (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR




GFA of commercial properties sold(million sq.m.) 0.9 0.8 1.3 1.2 0.9 0.5 -11.9%


Source: Qingdao Statistical Yearbook (2016-2020), Bureau of Statistics of Qingdao, CREIS

Quanzhou

Economic Overview

Quanzhou is one of the regional hubs located in the southeast of the PRC, with Fuzhou to the north, Xiamento the south and the Taiwan Strait to the east. Quanzhou is known as the starting point of the Maritime Silk Road(海上絲綢之路) and well-recognized for its mechanical manufacturing industry in Fujian Province. The nominalGDP increased from RMB632.1 billion in 2015 to RMB1,015.9 billion in 2020 at a CAGR of 10.0%, ranking firstamong all cities in Fujian Province, and the GDP is estimated to grow at a CAGR of 7.8% from 2021 to 2025.Between 2015 and 2020, total retail sales of consumer goods grew from RMB335.9 billion to RMB522.9 billionwith a CAGR of 9.3%, and per capita disposable income of urban households rose from RMB37,275 toRMB50,968, indicating a steady growth of purchasing power. The table below sets out selected economicindicators of Quanzhou for the years indicated:

Selected economic indicators of Quanzhou (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR

Permanent Population (million) 8.5 8.6 8.7 8.7 8.7 8.8 0.6%Nominal GDP (RMB billion) 632.1 692.1 794.0 901.9 994.7 1,015.9 10.0%Real GDP growth rate (%) 8.8 8.0 8.4 8.9 8.0 2.9 N/ACPI*** 101.8 101.7 101.1 101.5 102.3 102.5 101.8*Total retail sales of consumer



(RMB billion) 347.8 374.8 412.4 470.9** 500.6** 488.6** 7.0%

Source: Quanzhou Statistical Yearbook (2016-2020), Bureau of Statistics of QuanzhouNote: * is the arithmetic mean. ** is calculated based on the growth rate. *** Preceding year = 100.


INDUSTRY OVERVIEW

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Estimation of selected economic indicators in Quanzhou (2021-2025)

2021 2022 2023 2024 20252021-2025

CAGR



households (RMB) 56,030 60,010 64,060 68,240 72,440 6.6%



Due to outstanding economic performance, Quanzhou commercial market has experienced positive

development in recent years. The real estate investment increased from RMB68.2 billion in 2015 to RMB96.3

billion in 2020 with a CAGR of 7.2%, while the investment in commercial properties witnessed a decline from

RMB10.8 billion in 2015 to RMB6.7 billion in 2020. Quanzhou’s plan of establishing the “National Culture and

Tourism Consumption Pilot” (國家文化和旅遊消費試點城市) will lay a strong foundation for the local

commercial development. In the next five years, the upward-trending market could propel rising average rent and

falling vacancy rate of commercial properties. The table below sets out selected commercial property market

indicators of Quanzhou for the years indicated:

Commercial property market indicators of Quanzhou (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR





GFA of commercial propertiescompleted (million sq.m.) 0.5 1.4 1.0 1.1 0.9 0.7 8.3%

Source: Quanzhou Statistical Yearbook (2016-2020), Bureau of Statistics of Quanzhou, CREIS


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Luoyang

Economic Overview

Luoyang is a prefecture-level city and sub-central city located in the west part of Henan Province, covering atotal land area of 15,200 sq.km. with a permanent population of 7.1 million by the end of 2020. The city is regardedas an important transportation hub in central and western China, and a “National-level Demonstration Area ofIndustrial Transfer” (國家級產業轉移升級示範區). The nominal GDP grew rapidly from RMB350.7 billion in2015 to RMB512.8 billion in 2020 with a CAGR of 7.9%, and the GDP is estimated to increase at a CAGR of 7.5%between 2021 and 2025. With sustained growth in the economy, total retail sales of consumer goods showed anupward trend, reaching RMB210.6 billion in 2020. The table below sets out selected economic indicators ofLuoyang for the years indicated:

Selected economic indicators of Luoyang (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR

Permanent Population (million) 6.7 6.8 6.8 6.9 6.9 7.1 0.9%Nominal GDP (RMB billion) 350.7 380.7 429.0 464.1 503.5 512.8 7.9%Real GDP growth rate (%) 9.2 8.6 8.7 7.9 7.8 3.0 N/ACPI*** 101.6 101.7 101.0 102.2 102.8 102.7 102.0*Total retail sales of consumer


urban households (RMB) 28,686 30,752 33,273 35,935 38,630 39,287 6.5%Fixed asset investment (RMB

billion) 357.7 412.0 460.0 506.0** 557.7** 590.6** 10.5%

Source: Luoyang Statistical Yearbook (2016-2020), Bureau of Statistics of Luoyang; Henan Statistical Yearbook (2016-2020), Bureau ofStatistics of Henan


Estimation of selected economic indicators in Luoyang (2021-2025)

2021 2022 2023 2024 20252021-2025

CAGR



households (RMB) 42,530 45,290 47,880 50,480 52,890 5.6%



Supported by the constant economic growth, the real estate market in Luoyang maintained an upward trendover the past years. The real estate investment grew from RMB33.4 billion to RMB44.8 billion, representing aCAGR of 6.1% from 2015 to 2020. Investment in commercial properties fluctuated smoothly and reached RMB4.4billion in 2020. Luoyang will continue to develop as a “Cross-border E-commerce Comprehensive Pilot Zone” (跨境電商綜合試驗區), attracting e-commerce investment and forming a positive commercial market. Under the


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healthy business climate, the average rent and vacancy rate of commercial properties could potentially headtowards a progressive trend in the following five years. The table below sets out selected commercial propertymarket indicators of Luoyang for the years indicated:

Commercial property market indicators of Luoyang (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR



GFA of commercial propertiesunder construction(million sq.m.) 5.0 5.0 5.0 4.8 4.8 5.1 0.2%



Source: Luoyang Statistical Yearbook (2016-2020), Bureau of Statistics of Luoyang, Henan Statistical Yearbook (2016-2020), Bureau ofStatistics of Henan, CREIS

Xinxiang

Economic Overview

Xinxiang is an important central city in northern Henan, bordering with Zhengzhou, Kaifeng to the south,Hebi to the north, Jiaozuo and Shanxi Province to the west, and Shandong Province to the east. It is an importantindustrial city in Central Plain as well as one of the core cities in the Central Henan Urban Agglomeration. Thenominal GDP of Xinxiang rose from RMB200.7 billion in 2015 to RMB301.5 billion in 2020 representing a CAGRof 8.5%, and the GDP is estimated to grow at a CAGR of 7.4% from 2021 to 2025. Between 2015 and 2020, totalretail sales of consumer goods increased rapidly from RMB70.9 billion to RMB96.7 billion with a CAGR of 6.4%.The table below sets out selected economic indicators of Xinxiang for the years indicated:

Selected economic indicators of Xinxiang (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR




(RMB billion) 196.5 204.2 224.1 246.7** 274.6** 292.2** 8.3%

Source: Xinxiang Statistical Yearbook (2016-2020), Bureau of Statistics of XinxiangNote: * is the arithmetic mean. ** is calculated based on the growth rate. *** Preceding year = 100.


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Estimation of selected economic indicators in Xinxiang (2021-2025)

2021 2022 2023 2024 20252021-2025

CAGR



households (RMB) 36,880 39,210 41,370 43,520 45,510 5.4%



Owing to the rapid economic growth, Xinxiang commercial market has experienced steady developmentduring the past few years. The real estate investment increased rapidly from RMB24.6 billion in 2015 to RMB36.0billion in 2020 at a CAGR of 7.9%, whereas the investment in commercial properties decreased to RMB1.2 billionin 2020 from RMB1.6 billion in 2019. Xinxiang targets to develop into one of the “Consumption Central Cities inNorth Henan” (豫北地區消費型中心城市), which could accelerate the consumption upgrade. In the next fiveyears, continuous growth in the commercial property market could possibly lead to a steady rise in average rentand a gradual decline in vacancy rate. The table below sets out selected commercial property market indicators ofXinxiang for the years indicated:

Commercial property market indicators of Xinxiang (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR






Source: Xinxiang Statistical Yearbook (2016-2020), Bureau of Statistics of Xinxiang, CREIS

COMPETITIVE LANDSCAPE AND MARKET POSITION

The Competitive Landscape of Real Estate Industry in PRC

Compared with the residential properties market, the commercial properties market in the PRC startedrelatively late. As many developers construct commercial properties in the first and second-tier cities with soundeconomic development and high consumption level, the competition in these areas are getting more intense.Nevertheless, third and fourth-tier cities in core urban agglomerations have also attracted developers who areseeking new development opportunities in recent years. Although the market competition has become increasinglyintense, the leading commercial real estate developers with capital advantages and sound operational managementcapability are expected to continue to expand their market shares.


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After several years of development, the Group has become one of the leading commercial real estate

developers in the PRC. According to Top 100 Commercial Real Estate Developers in 2021 (2021年中國商業地產百強企業) released by CREIS, the Group ranked fourth in terms of comprehensive strength, operating

capacity and growth potential. The Group competes with five leading national and regional real estate

developers in the aspects of land acquisition capabilities, financial investment, brand recognition, product

quality and customer services. The table below sets out the ranking of the Group in 2021:

The ranking of the Group in 2021

Ranking123456

CompanyCompany ACompany BCompany CThe GroupCompany DCompany E

Source: CREIS

Note: Company A was incorporated in 1988, with its headquarter located in Dalian. Company B was incorporated in 2007, with its

headquarter located in Shanghai, and specializes in certain industry that differentiates from other companies. Company C was

incorporated in 1983, with its headquarter located in Shenzhen. Company D was incorporated in 1993, with its headquarter

located in Shanghai. Company E was incorporated in 1990, with its headquarter located in Nanjing.

Compared with its competitors, the Group has various product lines consisting of high-end shopping malls,

mid-range shopping malls, and community-based commercial centers to cater to the demand of different

customers. Powerlong Plaza, as the largest mid-range product of the Group in terms of volume, provides

convenience for people’s daily consumption and contributes to the development of the local consumption market.

Besides, the Group has a concentrated deployment in Shanghai, Jiangsu and Zhejiang provinces, and manages

several projects in high-capacity cities such as Shanghai, Ningbo, Hangzhou and Nanjing.

Market Position of the Group

Powerlong Group was established in Macau in 1990, and after more than three decades of development, its

businesses have expanded into different sectors containing residential properties, commercial properties, hotels,

culture and arts. Powerlong Real Estate Holdings Ltd has specialized in the development and operation of

commercial properties since 2003, and by the end of 2020 it has constructed 193 projects in more than 40 cities in

the Yangtze River Delta, the Guangdong-Hong Kong-Macau Greater Bay Area, the Bohai Economic Rim, the

Western Taiwan Straits Economic Zone and other regions. Powerlong Commercial Management Group began to

provide commercial operation services in 2007. By the end of 2020, it provides management services to 121

projects, among which 86 projects are based in the Yangtze River Delta, accounting for 71% of the total projects.

According to EH Consulting (億瀚智庫), the Group was ranked 51st in 2020 in terms of contracted sales

(based on equity), and 44th in terms of the GFA sold of the real estate properties. Based on the 2020 Ranking of

Top 200 Real Estate Developers in the PRC (2020年中國房地產企業銷售榜TOP 200) issued by CRIC (克爾瑞),

the Group ascended to 51st in the aspect of contracted sales (based on equity). Additionally, the Group has honored

the China Top 100 Real Estate Developers (中國房地產開發企業100強) by CREIS for 15 consecutive years, and

the Top 10 Brands of China Commercial Real Estate Developers (中國商業地產企業品牌價值10強) by China Real

Estate Industry Association (中國房地產業協會) for 10 consecutive years.


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REORGANIZATION AND ASSET INJECTION

The below chart illustrates the shareholding and corporate structure in respect of the REIT Propertiesimmediately prior to the Reorganization:

100%

62.89%

82%

100%

100%

100%

89.72%

74.2%

25.8%

100%

100%

100% 100%

89.79% 70%30%


(Stock Code: 9909)

Shanghai PowerlongYingju(PRC)

Nanjing Powerlong(PRC)

10.28%

Welly Dragon(HK)

Lin’an ProjectCompany

(PRC)

Shanghai Longqian(PRC)

JiaozhouProject Company

(PRC)

XiamenHongbaorong(4)

(PRC)

Powerlong LandDevelopment

(HK)


(Stock Code: 1238)

Powerlong Real Estate (BVI) Holdings Limited(BVI)

Powerlong Real Estate (Hong Kong) Holdings Limited(HK)

100%

Suqian ProjectCompany

(PRC)

100%

100%

Qingdao Jiaozhou

Powerlong Plaza

100%

100%

LuoyangPowerlong

(PRC)

SuqianPowerlong

Plaza

100%

LuoyangPowerlong

Plaza

100%

XinxiangPowerlong

Plaza

100%

YanchengPowerlong

Plaza

100%

Quanzhou Anxi

PowerlongPlaza

100%

10.21%

XinxiangPowerlong

(PRC)

Yancheng Project

Company(PRC)

85% 15%

Anxi ProjectCompany

(PRC)

XiamenChengrui(5)

(PRC)

Shanghai Powerlong Industrial Development(Group) Co., Ltd.

(PRC)

Ms. Hoi Wa Fan

offshore

onshore

Other shareholders

Mr. Hoi Kin Hong

FuzhouPowerlong

(PRC)

ShanghaiRuilong(PRC)

100%

Fengxian ProjectCompany

(PRC)

ShanghaiFengxian

PowerlongPlaza


(BVI)


Ms. Shih Sze Ni

Cecilia(Note 3)


(BVI)


(HK)


(BVI)(Note 2)

Mr. Hoi Wa Fong

1.48%

100%100%

0.01%0.22%14.39%0.07%0.69%

100%

43.59%34.57% 0.41%4.57%

HangzhouLin’an

PowerlongPlaza

100%


Notes:


2. Sky Infinity Holdings Limited is wholly owned by Sky Infinity Family Limited, which is in turn wholly owned by Credit SuisseTrust Limited through its two wholly-owned subsidiaries and nominees: Serangoon Limited and Seletar Limited. Credit SuisseTrust Limited is the trustee of a discretionary trust established by Mr. Hoi Wa Fong, the settlor.


4. Xiamen Hongbaorong is owned as to 70% by Ms. Xu Jian Man and 30% by Mr. Cai Xiang Jiang. Ms. Xu Jian Man is the sister ofMr. Hoi Kin Hong. Mr. Cai Xiang Jiang is the spouse of Ms. Xu Jian Man.

5. Xiamen Chengrui is wholly owned by Mr. Cai Guo Liang, who is a relative of Mr. Hoi Wa Fong.


REORGANIZATION, STRUCTURE AND ORGANIZATION OF POWERLONG REIT

– 170 –

In preparation for the [REDACTED], the Powerlong Group undertook a series of Reorganization steps which

principally involved the following:

(a) the incorporation of the Target Company, the BVI Holdco, the BVI Intermediary Companies and the HK

Intermediary Companies;

(b) the transfer of the REIT Properties;

(c) the transfer of the entire equity interests in each of the Project Companies to each of the HK

Intermediary Companies;

(d) the establishment of the REIT Manager;

(e) the establishment of Powerlong REIT;

(f) the settlement of related party balances; and

(g) the transfer of the Predecessor Group to Powerlong REIT.

(a) Incorporation of the Target Company, the BVI Holdco, the BVI Intermediary Companies and the HKIntermediary Companies

The Target Company was incorporated in the BVI with limited liability on March 31, 2021 and is authorized

to issue a maximum of 50,000 shares of a single class of no par value, of which one fully paid ordinary share was

allotted and issued to Powerlong Holdings. Upon completion of such allotment and issue, the Target Company

became a direct wholly-owned subsidiary of Powerlong Holdings.

The BVI Holdco was incorporated in the BVI with limited liability on March 31, 2021 and is authorized to

issue a maximum of 50,000 shares of a single class of no par value, of which one fully paid ordinary share was

allotted and issued to the Target Company. Upon completion of such allotment and issue, the BVI Holdco became

an indirect wholly-owned subsidiary of Powerlong Holdings.

Each of Starlong (BVI) I, Starlong (BVI) II, Starlong (BVI) III, Starlong (BVI) V, Starlong (BVI) VI,

Starlong (BVI) VII, Starlong (BVI) VIII and Starlong (BVI) IX (the “BVI Intermediary Companies”) was

incorporated in the BVI with limited liability on April 1, 2021 and is authorized to issue a maximum of 50,000

shares of a single class of no par value, of which one fully paid ordinary share of each of the BVI Intermediary

Companies was allotted and issued to the BVI Holdco. Upon completion of such allotments and issues, each of the

BVI Intermediary Companies became an indirect wholly-owned subsidiary of Powerlong Holdings.

Each of Starlong (HK) 1, Starlong (HK) 2, Starlong (HK) 3, Starlong (HK) 5, Starlong (HK) 6, Starlong (HK)

7, Starlong (HK) 8 and Starlong (HK) 9 (the “HK Intermediary Companies”) was incorporated in Hong Kong

with limited liability on April 16, 2021. Upon incorporation, 100 fully paid shares of HK$1.00 each of Starlong

(HK) 1, Starlong (HK) 2, Starlong (HK) 3, Starlong (HK) 5, Starlong (HK) 6, Starlong (HK) 7, Starlong (HK) 8

and Starlong (HK) 9 were allotted and issued to Starlong (BVI) I, Starlong (BVI) II, Starlong (BVI) III, Starlong

(BVI) V, Starlong (BVI) VI, Starlong (BVI) VII, Starlong (BVI) VIII and Starlong (BVI) IX, respectively. Upon

completion of such allotments and issues, each of the HK Intermediary Companies became an indirect

wholly-owned subsidiary of Powerlong Holdings.



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(b) Transfer of the REIT Properties

Prior to the Reorganization, the REIT Properties had been held by certain holding companies which weresubsidiaries of Powerlong Holdings. Such holding companies had historically been engaged in propertydevelopment activities and had held properties including commodity houses which consisted of residentialproperties, commercial properties other than shopping malls such as shop units of shopping streets, apartments andoffice buildings, hotels and certain ancillary car parking spaces which would not form part of the REIT Properties(the “Non-REIT Properties”).

The REIT Properties have been injected to the Powerlong REIT Group through the following steps:

(i) three of the REIT Properties (i.e. Xinxiang Powerlong Plaza, Luoyang Powerlong Plaza and ShanghaiFengxian Powerlong Plaza) were transferred from the original holding companies to newly establishedwholly-owned project companies (i.e. Xinxiang Project Company, Luoyang Project Company andFengxian Project Company (the “New Project Companies”)), which would become members of thePowerlong REIT Group; and

(ii) five of the REIT Properties (i.e. Hangzhou Lin’an Powerlong Plaza, Yancheng Powerlong Plaza,Quanzhou Anxi Powerlong Plaza, Suqian Powerlong Plaza and Qingdao Jiaozhou Powerlong Plaza)would continue to be held by the original holding companies (i.e. Lin’an Project Company, YanchengProject Company, Anxi Project Company, Suqian Project Company and Jiaozhou Project Company (the“Existing Project Companies”)), which would dispose of the Non-REIT Properties held by them (ifany) and would become members of the Powerlong REIT Group.

The New Project Companies

The New Project Companies were established for the purpose of holding the relevant REIT Properties, detailsof which are set out below:

(i) Xinxiang Project Company was established in the PRC with limited liability on January 29, 2021 withan initial registered capital of RMB1,000,000. As of the date of its establishment, Xinxiang ProjectCompany was wholly owned by Xinxiang Powerlong. On May 8, 2021, the registered capital ofXinxiang Project Company was increased from RMB1,000,000 to RMB213,000,000 by way of non-cashcontribution, which was satisfied by the transfer of Xinxiang Powerlong Plaza from XinxiangPowerlong to Xinxiang Project Company on July 9, 2021.

(ii) Luoyang Project Company was established in the PRC with limited liability on March 23, 2021 with aninitial registered capital of RMB10,000,000. As of the date of its establishment, Luoyang ProjectCompany was wholly owned by Luoyang Powerlong. On May 7, 2021, the registered capital of LuoyangProject Company was increased from RMB10,000,000 to RMB197,000,000 by way of non-cashcontribution, which was satisfied by the transfer of Luoyang Powerlong Plaza from Luoyang Powerlongto Luoyang Project Company on July 16, 2021.

(iii) Fengxian Project Company was established in the PRC with limited liability on March 12, 2021 with aninitial registered capital of RMB1,000,000. As of the date of its establishment, Fengxian ProjectCompany was wholly owned by Shanghai Xiantong. On May 14, 2021, the registered capital ofFengxian Project Company was increased from RMB1,000,000 to RMB304,290,000 by way of non-cashcontribution, which was satisfied by the transfer of Fengxian Powerlong Plaza from Shanghai Xiantongto Fengxian Project Company on July 16, 2021.

As of the Latest Practicable Date, none of the New Project Companies held any Non-REIT Properties.



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The Existing Project Companies

Hangzhou Lin’an Powerlong Plaza, Yancheng Powerlong Plaza, Quanzhou Anxi Powerlong Plaza, SuqianPowerlong Plaza and Qingdao Jiaozhou Powerlong Plaza have been and will continue to be held by Lin’an ProjectCompany, Yancheng Project Company, Anxi Project Company, Suqian Project Company and Jiaozhou ProjectCompany (i.e. the Existing Project Companies), respectively.

The Existing Project Companies had historically been engaged in property development activities and hadheld various properties including commodity houses which consisted of residential properties, commercialproperties other than shopping malls such as shop units of shopping streets, apartments and office buildings, hotelsand certain ancillary car parking spaces, i.e. the Non-REIT Properties. In preparation for the [REDACTED], theExisting Project Companies disposed of such Non-REIT Properties which they were still holding. Although theExisting Project Companies are no longer carrying on such property development activities, they may remain to besubject to certain liabilities and obligations in relation to such Non-REIT Properties.

Non-REIT Properties held by the Existing Project Companies

Disposal and potential return of Non-REIT Properties

As of August 27, 2021, each of the Existing Project Companies had disposed of all the Non-REIT Propertieswhich it held, except for:

• one residential property held by Lin’an Project Company with an estimated value of RMB2.4 million,which is expected to be sold by around September 2021; and

• two display units held by Lin’an Project Company with an aggregate estimated value of RMB3.1million, which are expected to be sold as soon as possible in early 2022, as they could only be disposedof six months after the delivery of the relevant commodity houses by Lin’an Project Company (which isexpected to be completed in September 2021) pursuant to the local policies of Lin’an district.

Apart from Lin’an Project Company, none of the other Project Companies holds any commodity houses ordisplay units and they will not hold any such properties upon the [REDACTED]. Save for those disclosed above,all the commodity houses historically held by the Project Companies have already been sold.

In addition, pursuant to the sale and purchase agreements of the commodity houses sold by Lin’an ProjectCompany, the relevant purchasers or Lin’an Project Company is entitled to terminate the agreement and return (orrequest for the return of, as the case may be) the relevant commodity house if the other party is in breach of certainterms of the agreement. As such, Lin’an Project Company may hold some Non-REIT Properties after the[REDACTED] in the event any of them is returned by the relevant purchasers. The REIT Manager considers thateach return case of properties may have its own specific causes which may or may not be due to the ExistingProject Companies, and it would not be practicable to estimate the maximum liability or whether it would incurany liability at all until such return materializes. The REIT Manager considers the return of Non-REIT Propertiesis not common and is not expected to have any material adverse impact on Powerlong REIT. Pursuant to theReorganization Deed, among others: (i) the Retained Group shall be responsible for, and Powerlong REIT shall notparticipate in, the negotiation with the relevant purchasers in relation to any return of Non-REIT Properties; (ii)such Non-REIT Properties shall be transferred by Powerlong REIT to the Retained Group for nil consideration forits onward sales; (iii) the Retained Group shall reimburse Powerlong REIT any such amount that is returned to therelevant purchasers; and (iv) the Retained Group shall have the control over such returned Non-REIT Propertiesand shall be entitled to any rewards and bear any risks in relation thereto after any such return, and the RetainedGroup shall indemnify Powerlong REIT, among others, for any liabilities, losses, damages, fines, fees and costswhich it may suffer in respect of such returned Non-REIT Properties.



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Non-REIT Properties which have already been sold but whose registration of transfers with the relevant PRCauthorities had not yet been completed

As of June 30, 2021, there were approximately 1,900 units of commodity houses which have already beensold by the Existing Project Companies but whose registration of transfers with the relevant PRC authorities hadnot yet been completed.

As the delivery of the commodity houses sold by Lin’an Project Company will only be completed by aroundSeptember 2021, the registration of such transfers will then be commenced, where most of them is expected to becompleted prior to the [REDACTED]. For the other Existing Project Companies, although the sales and deliveryof the commodity houses had already been completed for a period of time, some of the registration of transferswith the relevant PRC authorities remained pending due to lack of cooperation from the purchasers, which isbeyond the control of the Existing Project Companies.

In such circumstances, the Existing Project Companies will continue to hold the legal title of such commodityhouses, despite they have already received all the consideration for their sales and delivered such properties to thepurchasers. While Powerlong REIT Group will continue to use its reasonable endeavors to procure for suchregistration to be completed after the [REDACTED], as advised by the PRC Legal Advisors, the non-registrationof transfers is extremely unlikely to cause or incur any liability, loss, damage, fine, fee or cost to Powerlong REITGroup because:

(i) all such disposed commodity houses have fulfilled the conditions of completing the registration oftransfer, and the failure to complete such registration does not constitute any breach of PRC laws orregulations or terms of the relevant sale and purchase agreements on the part of the Existing ProjectCompanies;

(ii) the registration of such transfers had not been completed due to lack of cooperation from the purchasers.The Existing Project Companies have already used their reasonable endeavors to procure for suchregistration, including to contact the relevant purchasers by phone and/or by post;

(iii) the Existing Project Companies have already received all the consideration for the sales of suchcommodity houses and delivered such properties to the purchasers, and therefore the sales havepractically completed, where the purchasers have no right to rescind the contract due to the absence ofregistration of transfer; and

(iv) Powerlong Holdings shall provide an irrevocable undertaking to indemnify Powerlong REIT, amongothers, for any liabilities, losses, damages, fines, fees and costs which it may suffer in respect of suchNon-REIT Properties in the aforementioned circumstances.

Accounting treatment

All the Non-REIT Properties do not form part of the portfolio of the Powerlong REIT and have not been takeninto account in the appraisal carried out by the Independent Property Valuer. Pursuant to the Reorganization Deed,all returns (e.g. the proceeds of the sales of the Non-REIT Properties and the returned Non-REIT Properties) andcosts (e.g. the cost incurred during the course of the sales of the Non-REIT Properties and the return of theNon-REIT Properties) arising from or in relation to such Non-REIT Properties shall be received or borne by theRetained Group. The Retained Group shall have the control over the unsold and returned Non-REIT Properties andshall be entitled to all rewards and bear all risks in relation thereto. Similarly, based on the above arrangement, allreceivables in relation to the Non-REIT Properties, such as government support funds for enterprises, subsidiesand deposits, are not part of the assets of the Powerlong REIT Group, which shall be transferred to the RetainedGroup once the Powerlong REIT Group has received such receivables from the relevant debtors. In suchcircumstances, Powerlong REIT (only acting as an agent of the Retained Group) will neither receive any returnsnor bear any costs in relation to the Non-REIT Properties. As such, the Non-REIT Properties are not included inthe financial information of Powerlong REIT.



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Indemnity

To further protect the interest of the Unitholders, pursuant to the Reorganization Deed, Powerlong Holdingshas unconditionally and irrevocably undertaken to indemnify Powerlong REIT, among others, to the fullest extentpermissible by law, for any liability, losses, damages, fines, fees and costs (on a full indemnity basis) which it maysuffer in respect of the sale and return of the Non-REIT Properties by the members of the Powerlong REIT Group.

Compliance with paragraph 7.8 of the REIT Code

Pursuant to paragraph 7.8 of the REIT Code, the scheme shall hold each property within the scheme for aperiod of at least two years, unless the scheme has clearly communicated to its holders the rationale for disposalprior to this minimum holding period and its holders have given their consent to such sale by way of a specialresolution at a general meeting. Nevertheless, pursuant to the arrangement between the Retained Group andPowerlong REIT Group and the accounting treatment of Powerlong REIT as disclosed above, such Non-REITProperties will not be included in the financial information of Powerlong REIT and are not treated as assets ownedby Powerlong REIT upon the completion of the Reorganization. As such, the REIT Manager considers that the saleof the Non-REIT Properties after [REDACTED] will not be subject to paragraph 7.8 of the REIT Code and willnot require Unitholders’ consent.

View of the REIT Manager and the Joint Listing Agents

The value of the Non-REIT Properties has been excluded when determining the consideration for injection ofthe REIT Properties into Powerlong REIT, where applicable. Given that (a) Powerlong REIT has not paid anyconsideration to acquire the Non-REIT Properties; (b) the Non-REIT Properties will not be included in thefinancial information of Powerlong REIT Group; (c) Powerlong REIT will neither be entitled to any rewards nor beresponsible for any costs in relation thereto; and (d) pursuant to paragraph 3.1 of the REIT Code, the aim ofPowerlong REIT is to provide returns to Unitholders derived from the rental income of the real estate (instead offrom their sales), the REIT Manager considers that the remaining of such Non-REIT Properties in the PowerlongREIT Group upon [REDACTED], and their disposals which are intended to be conducted as soon as practicableafterwards, would not have any material and adverse impact on the financial condition and business of PowerlongREIT, and the interest of the Unitholders will not be compromised and such arrangement is in the best interests ofthe Unitholders as a whole.

The REIT Manager considers and the Joint Listing Agents concur that the potential liabilities and obligations,if any, in relation to the remaining of the Non-REIT Properties in the Powerlong REIT Group, would not have anymaterial and adverse impact on the financial conditions and business of Powerlong REIT.

Certain liabilities and obligations which may subsist upon [REDACTED]

Contingent liabilities

As advised by the PRC Legal Advisors, the Existing Project Companies will remain to be subject to certaincontingent liabilities in relation to the property development business which they had historically been engaged in.In particular:

• the Existing Project Companies had provided warranties for the quality and maintenance of thecommodity houses which they had developed and sold to the purchasers, which were in accordance withindustry practice. While the warranties for certain subject matters such as electric wires and pipelines ofthe commodity houses shall only cover for a limited period, those for the foundation construction andmain body construction shall remain effective during the designed lifespan. Nevertheless, the relevantcontractors should in turn compensate the Existing Project Companies for any losses arising from suchwarranties if the quality and maintenance issues are caused by them.



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• the Existing Project Companies had provided provisional guarantee for mortgage loans taken by thepurchasers of their properties, which was in accordance with industry practice. The term of theprovisional guarantee commenced on the day the guarantee agreement becoming effective up to the dayon which the ownership certificates of the properties being obtained and the mortgage being registeredin favor of the mortgage banks. The release of such provisional guarantee is conditional upon thecompletion of the registration of transfer of the relevant properties, which is beyond the control of theExisting Project Companies. Moreover, as the last batch of Non-REIT Properties sold by Lin’an ProjectCompany will be delivered to the purchasers by September 2021, part of the registration of mortgageand release of guarantee may not be able to be completed prior to the [REDACTED]. As of June 30,2021, the aggregate provisional guarantee provided by the Existing Project Companies for mortgageloans taken by the purchasers amounted to approximately RMB1.3 billion, of which RMB1.2 billionwas provided by Lin’an Project Company.

Based on the best knowledge and judgment of current events and actions of the REIT Manager, theestimated exposure of provisional guarantee of the Existing Project Companies upon [REDACTED]will amount to approximately RMB540 million, the majority of which will be related to Lin’an ProjectCompany.

As advised by the PRC Legal Advisors, pursuant to the relevant sale and purchase agreements, Lin’anProject Company is entitled to take legal actions against the purchasers for breach of contract if theyrefuse to cooperate with the registration of mortgage and the release of guarantee. As such, the REITManager expects that the majority of such provisional guarantee will have been released by around early2022. As further advised by the PRC Legal Advisors, the Existing Project Companies may be required torepay the outstanding balance of the loan only if the relevant purchaser defaults in repayment of his/herloan and the mortgage bank enforces the provisional guarantee; in the event that an Existing ProjectCompany is claimed by the mortgage bank, such Existing Project Company will have legal recourseagainst the purchaser and may request for the return of the relevant properties. As advised by the PRCLegal Advisors, all the provisional guarantee was provided in respect of the Non-REIT Properties whichhad already been sold, and it is not related to and will not affect the transferability of the REITProperties by Powerlong REIT. As such, the REIT Manager considers that such provisional guaranteewill not have material and adverse impact on Powerlong REIT.

Save for the ongoing litigations in relation to a construction contract dispute of Suqian Project Company anda property damage dispute of Jiaozhou Project Company involving an aggregate amount of approximately RMB2.8million and those liabilities as disclosed in this Document, none of the Project Companies had other materialcontingent liabilities as of the Latest Practicable Date.

To further protect the interest of the Unitholders, pursuant to the Reorganization Deed, Powerlong Holdingshas unconditionally and irrevocably undertaken to indemnify Powerlong REIT, among others, to the fullest extentpermissible by law, for any liability, losses, damages, fines, fees and costs (on a full indemnity basis) which it maysuffer in respect of the aforementioned contingent liabilities.

Land Appreciation Tax

As advised by the PRC Legal Advisors, LAT is payable by a taxpayer on the capital gains from the transfer ofland use right, buildings or other facilities on such land after deducting certain “deductible items” pursuant to therelevant laws and regulations of the PRC. As the Existing Project Companies had historically been engaged inproperty development business and had capital gains from the sale of the relevant Non-REIT Properties, they havebeen subject to LAT arising from such business. As of the Latest Practicable Date, Yancheng Project Company,Suqian Project Company and Lin’an Project Company were subject to potential LAT, where they have not yetreached a consensus with the relevant local tax bureaus in relation to the amount involved. After consultingPowerlong REIT’s tax advisers (a China Certified Tax Agent (中國註冊稅務師)), the REIT Manager estimated that



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the maximum amount of the LAT payable by Yancheng Project Company, Suqian Project Company and Lin’anProject Company amounted to approximately RMB12.1 million, RMB7.5 million and RMB54.4 million,respectively, as of the Latest Practicable Date. Given that the amount had not yet been determined and thesettlement process will take longer time to complete, it is expected that the LAT may not be fully settled before[REDACTED].

To protect the interest of the Unitholders, pursuant to the Reorganization Deed, Powerlong Holdings hasunconditionally and irrevocably undertaken to indemnify Powerlong REIT, among others, to the fullest extentpermissible by law, for any liability, losses, damages, fines, fees and costs (on a full indemnity basis) which it maysuffer in respect of certain taxation or taxation claims (including the LAT mentioned above) in connection with theNon-REIT Properties to which any member of the Powerlong REIT Group may be subject to for an unlimitedperiod.

Payables in relation to the Non-REIT Properties

Certain payables to independent third parties in respect of the Non-REIT Properties may subsist in theExisting Project Companies upon [REDACTED], primarily including:

• Construction fees

Construction fees are payable by the Existing Project Companies to the independent third-partycontractors in respect of the construction services they provided. In particular, the development of certainNon-REIT Properties by Lin’an Project Company was only completed in early 2021, the construction fees ofwhich may not be fully settled prior to the [REDACTED] since some of them will only be due for paymentafter 2022 pursuant to the terms and conditions of the relevant construction agreements. As of the LatestPracticable Date, the construction fees payable by Jiaozhou Project Company and Lin’an Project Company inrelation to the Non-REIT Properties amounted to approximately RMB1.8 million and RMB174.2 million,respectively.

• Retention money

In line with industry practice, certain percentage of the payment in respect of the construction servicesprovided by the independent third-party contractors had been withheld by the relevant Existing ProjectCompanies as retention money for a warranty of the quality of the construction work. Such retention moneyis generally released at the end of the warranty period and upon the request of the contractors. In particular,in respect of the Non-REIT Properties developed by Lin’an Project Company, the retention money may onlybe released in full in around 2026 pursuant to the relevant construction agreements. As of the LatestPracticable Date, the retention money withheld by Yancheng Project Company, Suqian Project Company,Jiaozhou Project Company and Lin’an Project Company in relation to the Non-REIT Properties amounted toapproximately RMB1.3 million, RMB7.0 million, RMB6.1 million and RMB42.0 million, respectively.

As of the Latest Practicable Date, the payables of Yancheng Project Company, Suqian Project Company,Jiaozhou Project Company and Lin’an Project Company in relation to the Non-REIT Properties amounted toapproximately RMB1.3 million, RMB7.0 million, RMB8.1 million and RMB216.5 million, respectively. It isestimated that approximately RMB73.0 million will remain outstanding upon [REDACTED].

Compliance with paragraph 7.3 of the REIT Code

Pursuant to paragraph 7.3 of the REIT Code, a scheme shall not lend, assume, guarantee, endorse orotherwise become directly or contingently liable for or in connection with any obligation or indebtedness of anyperson nor shall it use any assets of the scheme to secure the indebtedness of any person nor shall it use any assetsof the scheme to secure any obligations, liabilities or indebtedness without the prior written consent of the trustee.A written consent in relation to the above liabilities and obligations will be obtained from the Trustee prior to the[REDACTED].



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To protect the interest of the Unitholders, pursuant to the Reorganization Deed, Powerlong Holdings hasunconditionally and irrevocably undertaken to indemnify Powerlong REIT, among others, to the fullest extentpermissible by law, for any liability, losses, damages, fines, fees and costs (on a full indemnity basis) which it maysuffer in respect of the repayment of the aforementioned payables by the members of the Powerlong REIT Group.Furthermore, Powerlong Holdings shall undertake that upon [REDACTED], it will prepay an amount equivalent tosuch outstanding payables of the Existing Project Companies (which was estimated to be approximately RMB73.0million as of the Latest Practicable Date) to Powerlong REIT. Powerlong Holdings shall reimburse PowerlongREIT if there is a shortfall between the prepaid amount and the actual sum paid by Powerlong REIT, andPowerlong REIT shall return any excess amount to Powerlong Holdings.

The REIT Manager considers that the above arrangements, in particular the provision of indemnity toPowerlong REIT, is sufficient to protect the interest of the Unitholders because:

(i) the aggregate maximum amount of exposure or amount involved in respect of such potential risks,liabilities or losses in relation to the Non-REIT Properties which was quantifiable as of the LatestPracticable Date amounted to approximately RMB689.1 million, among which RMB481.8 million isrelated to the provisional guarantee provided by Lin’an Project Company. Such provisional guaranteecould not be released in full prior to the [REDACTED] primarily because the sales of the relevantproperties were only completed recently and the last batch would be delivered by around September2021. As advised by the PRC Legal Advisors, and the Joint Listing Agents concur after consulting theirPRC legal advisers that, pursuant to the relevant sale and purchase agreements, Lin’an Project Companyis entitled to take legal actions against the purchasers for breach of contract if they refuse to cooperatewith the registration of mortgage and the release of guarantee. As such, the REIT Manager expects thatthe majority of such provisional guarantee would have been released by around early 2022;

(ii) although the maximum exposure for certain potential liabilities would not be estimated as of the LatestPracticable Date due to their nature (for example, the warranties provided to the purchasers in respect ofthe Non-REIT Properties), the REIT Manager considers that they are unlikely to materialize and even ifthey happen, the risk of the potential liabilities involving a significant amount is extremely low. Asconfirmed by the Powerlong Holdings, it has obtained the construction work completion inspectionacceptance certificate (房屋建築工程竣工驗收備案表) in connection with the construction of all theNon-REIT Properties (where applicable). Moreover, the relevant contractors should in turn compensatethe Existing Project Companies for any losses arising from the warranties if the quality and maintenanceissues are caused by them;

(iii) the Existing Project Companies are companies established in the PRC with limited liability. In theextremely unlikely event that certain events happen resulting in a catastrophic liability to be borne by anExisting Project Company, the maximum exposure would be limited to its net asset value and unpaidregistered capital (if any), where it will be liquidated if it becomes insolvent and would not affect theother members of the Powerlong REIT Group. In such case, Powerlong Holdings will fully indemnifythe Powerlong REIT Group for the loss it suffers, which will be the amount equivalent to the net assetvalue plus any unpaid registered capital of such Existing Project Company, and the Unitholders will notsuffer any loss in this regard; and

(iv) as of June 30, 2021, the appraised value of each of the Hangzhou Lin’an Powerlong Plaza, SuqianPowerlong Plaza, Yancheng Powerlong Plaza, Qingdao Jiaozhou Powerlong Plaza and Quanzhou AnxiPowerlong Plaza (i.e. the REIT Properties held by the Existing Project Companies) amounted toRMB926.1 million, RMB1,572.5 million, RMB1,544.9 million, RMB721.7 million and RMB900.0million, respectively, with a total of RMB5,665.2 million, which represented only approximately 2.6%of Powerlong Holdings’s total assets (being RMB217.4 billion) and 9.8% of its net assets (beingRMB57.7 billion) as of June 30, 2021. If the Powerlong REIT Group intends to acquire othercommercial and retail properties in the future, it will be conducted through other project companies andtherefore no additional properties will be held by the Existing Project Companies in the future. As such,the REIT Manager considers Powerlong Holdings has sufficient financial resources to fulfill itsobligation under the indemnities in respect of the Existing Project Companies.



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Upon completion of the reorganization of the Predecessor Group, the unsettled payables of the ExistingProject Companies in respect of the Non-REIT Properties are treated as amounts payable to the relevant thirdparties in the financial statements of Powerlong REIT; there is also an equivalent amount receivable from theRetained Group, as Powerlong Holdings has undertaken to indemnify Powerlong REIT for all such payables.

View of the REIT Manager and the Joint Listing Agents

In view of the foregoing, the REIT Manager considers and the Joint Listing Agents concur that the existenceof such liabilities and obligations which may subsist upon [REDACTED] would not have any material and adverseimpact on the financial condition and business of Powerlong REIT. The interest of the potential investors wouldnot be compromised given the indemnity provided by Powerlong Holdings.

(c) Transfer of the entire equity interests in each of the Project Companies or their holding companies toeach of the HK Intermediary Companies

(i) Xinxiang Powerlong transferred the entire equity interest in Xinxiang Project Company to Starlong(HK) 1 at the consideration of RMB213,000,000, which was determined after arm’s length negotiationwith reference to the valuation performed by an independent valuer in the PRC in accordance with theapplicable valuation principles generally adopted. The registration of the equity transfer was completedon July 14, 2021;

(ii) Luoyang Powerlong transferred the entire equity interest in Luoyang Project Company to Starlong (HK)2 at the consideration of RMB187,000,000, which was determined after arm’s length negotiation withreference to the valuation performed by an independent valuer in the PRC in accordance with theapplicable valuation principles generally adopted. The registration of the equity transfer was completedon July 20, 2021;

(iii) (a) Lin’an WFOE was established in the PRC with limited liability on May 27, 2021 with an initialregistered capital of RMB10,000,000. As of the date of its establishment, Lin’an WFOE waswholly owned by Shanghai Ruilong;

(b) Nanjing Powerlong and Welly Dragon (Hong Kong) Limited transferred 89.72% and 10.28% of theequity interest in Lin’an Project Company to Lin’an WFOE at the consideration ofRMB282,366,781 and RMB32,354,500, respectively, which was determined after arm’s lengthnegotiation with reference to the registered capital of Lin’an Project Company. The registration ofthe equity transfer was completed on July 9, 2021;

(c) Shanghai Ruilong transferred the entire equity interest in Lin’an WFOE (the sole shareholder ofLin’an Project Company) to Starlong (HK) 3 at the consideration of RMB893,200, which wasdetermined after arm’s length negotiation with reference to the valuation of Lin’an WFOEperformed by an independent valuer in the PRC in accordance with the applicable valuationprinciples generally adopted. The registration of the equity transfer was completed on July 20,2021;

(iv) Shanghai Ruilong and Fuzhou Powerlong transferred 70% and 30% of the equity interest in YanchengProject Company to Starlong (HK) 5 at the consideration of RMB54,721,800 and RMB23,452,200,respectively, which was determined after arm’s length negotiation with reference to the valuation ofYancheng Project Company performed by an independent valuer in the PRC in accordance with theapplicable valuation principles generally adopted. The registration of the equity transfer was completedon July 15, 2021;



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(v) Shanghai Xiantong transferred the entire equity interest in Fengxian Project Company to Starlong (HK) 6 atthe consideration of RMB384,360,000, which was determined after arm’s length negotiation with referenceto the valuation of Fengxian Project Company performed by an independent valuer in the PRC in accordancewith the applicable valuation principles generally adopted. The registration of the equity transfer wascompleted on July 22, 2021;

(vi) (a) Fuzhou Powerlong and Xiamen Chengrui transferred 85% and 15% of the equity interest in AnxiProject Company to Starlong (HK) 7 at the consideration of RMB39,591,242.55 andRMB6,986,689.86, respectively, which was determined after arm’s length negotiation withreference to the valuation of Anxi Project Company performed by an independent valuer in thePRC in accordance with the applicable valuation principles generally adopted. The registration ofthe equity transfer was completed on July 8, 2021;

(b) On August 6, 2021, Shanghai Ruilong contributed RMB1,050,000,000 to the registered capital ofAnxi Project Company, representing 97.22% of its entire equity interest after the increase ofcapital. Shanghai Ruilong transferred such 97.22% equity interest in Anxi Project Company toStarlong (HK) 7 at the consideration of RMB1,050,000,000, which is determined after arm’slength negotiation with reference to the registered capital of Anxi Project Company. Theregistration of the equity transfer was completed on August 19, 2021.

(vii) Fuzhou Powerlong transferred the entire equity interest in Suqian Project Company to Starlong (HK) 8at the consideration of RMB230,000,000, which was determined after arm’s length negotiation withreference to the valuation of Suqian Project Company performed by an independent valuer in the PRC inaccordance with the applicable valuation principles generally adopted. The registration of the equitytransfer was completed on July 9, 2021; and

(viii) (a) Jiaozhou WFOE was established in the PRC with limited liability on April 19, 2021 with an initialregistered capital of RMB10,000,000. As of the date of its establishment, Jiaozhou WFOE waswholly owned by Shanghai Ruilong;

(b) Shanghai Longqian and Xiamen Hongbaorong transferred 74.2% and 25.8% of the equity interestin Jiaozhou Project Company to Jiaozhou WFOE at the consideration of RMB46,000,000 andRMB16,000,000, respectively, which was determined after arm’s length negotiation with referenceto the registered capital of Jiaozhou Project Company. The registration of the equity transfer wascompleted on June 9, 2021;

(c) Shanghai Ruilong transferred the entire equity interest in Jiaozhou WFOE (the sole shareholder ofJiaozhou Project Company) to Starlong (HK) 9 at the consideration of RMB5,483,200, which wasdetermined after arm’s length negotiation with reference to the valuation of Jiaozhou WFOEperformed by an independent valuer in the PRC in accordance with the applicable valuationprinciples generally adopted. The registration of the equity transfer was completed on July 16,2021.

As of the Latest Practicable Date, the consideration for each of the abovementioned transfers had not beensettled and shall be fully settled prior to the [REDACTED]. The PRC Legal Advisors have confirmed that allregistrations in respect of the transfers of the entire equity interests in Xinxiang Project Company, LuoyangProject Company, Lin’an WFOE, Yancheng Project Company, Fengxian Project Company, Anxi Project Company,Suqian Project Company and Jiaozhou WFOE have been completed and such transfers were completed on July 14,July 20, July 20, July 15, July 22, August 19, July 9, and July 16, 2021, respectively in compliance with therelevant PRC laws and regulations, following which each of the Project Companies was directly or indirectlywholly owned by each of the relevant HK Intermediary Companies, respectively. Upon completion of theabovementioned equity transfers, each of the Project Companies and the REIT Properties is indirectly whollyowned by the Target Company.



– 180 –

The amount of the presently unsettled consideration for the abovementioned transfers is treated as a liability of the

relevant HK Intermediary Companies and will be settled using part of the Bank Loan Drawdown Amount before

the Asset Injection Completion Date.

The following diagram sets forth the ownership structure of the Predecessor Group upon completion of the above

steps:

100%

100%


(Stock Code: 1238)

Target Company(BVI)

BVI Holdco(BVI)

100%


100%

Starlong (HK) 1(HK)

100%


100%

Starlong (HK) 2(HK)

100%

100%100%

100%

HangzhouLin’an

PowerlongPlaza


100%

Starlong (HK) 3(HK)

100%100%

Lin’an WFOE(PRC)

100%

100%

Lin’anProject

Company(PRC) 100%

100%

SuqianPowerlong

Plaza


100%

Starlong (HK) 8(HK)

100%

SuqianProject

Company(PRC)

100%

100%

100%

100%

YanchengPowerlong

Plaza


Starlong (HK) 5(HK)

YanchengProject

Company(PRC)

100%

100%

QuanzhouAnxi

PowerlongPlaza


100%

Starlong (HK) 7(HK)

100%

Anxi ProjectCompany

(PRC)

100%

100%

ShanghaiFengxian

PowerlongPlaza


100%

Starlong (HK) 6(HK)

100%

FengxianProject

Company(PRC)

Ms. Hoi Wa Fan

Other shareholders

Mr. Hoi Kin Hong


(BVI)


Ms. Shih Sze Ni

Cecilia(Note 3)


(BVI)


(HK)


(BVI)(Note 2)

Mr. Hoi Wa Fong

1.48%

100%100%

0.01%0.22%14.39%0.07%0.69%

100%

43.59%34.57% 0.41%4.57%

XinxiangProject

Company(PRC)

LuoyangProject

Company(PRC)

XinxiangPowerlong

Plaza

LuoyangPowerlong

Plaza

100%


100%

Starlong (HK) 9(HK)

100%

100%

Jiaozhou WFOE(PRC)

JiaozhouProject

Company(PRC)

QingdaoJiaozhou Powlong

Plaza

offshore

onshore

REITProperties

(d) Establishment of the REIT Manager

Powerlong REIT Management (BVI) Limited was incorporated in the BVI with limited liability on March 31,

2021 and is authorized to issue a maximum of 50,000 shares of a single class of no par value, of which one fully

paid ordinary share was allotted and issued to Powerlong Holdings. Upon completion of such allotment and issue,

Powerlong REIT Management (BVI) Limited became a direct wholly-owned subsidiary of Powerlong Holdings.

The REIT Manager was incorporated in Hong Kong with limited liability on April 16, 2021 for the sole

purpose of managing the assets of Powerlong REIT. The REIT Manager [is licensed] for Type 9 regulated activity

by the SFC to conduct the regulated activity of asset management. The REIT Manager is an indirect wholly-owned

subsidiary of Powerlong Holdings.



– 181 –

(e) Establishment of Powerlong REIT

Powerlong REIT was constituted by the Trust Deed entered into on [●], 2021 between the REIT Manager and

the Trustee in their respective personal capacities. Powerlong REIT is organized and managed in a manner which

is consistent with the provisions and requirements of the REIT Code, except as set out in the section headed

“Modifications, Waivers and Licensing Conditions” in this Document. The Trustee of Powerlong REIT is DB

Trustees (Hong Kong) Limited, a company incorporated in Hong Kong with limited liability and registered as a

trust company under section 77 of the Trustee Ordinance. The Trustee is qualified to act as a trustee for collective

investment schemes authorized under the SFO pursuant to the REIT Code.

(f) Settlement of related party balances

Certain related party balances are expected to be settled in the following manner:

(i) the non-trade related party balances owing from members of the Retained Group to the Project

Companies shall be settled before the Asset Injection Completion Date (for illustrative purposes, such

balances amounted to RMB[1.4 billion] as of the Latest Practicable Date); and

(ii) the outstanding consideration for the transfer of the equity interests in the Project Companies amounting

to RMB[2.6 billion] as of the Latest Practicable Date, which is owing from the HK Intermediary

Companies to the members of the Retained Group or their associates, shall be settled using part of the

Bank Loan Drawdown Amount before the Asset Injection Completion Date.

ASSET INJECTION

(g) Transfer of the Predecessor Group to Powerlong REIT

On [●], 2021, the REIT Manager (in its capacity as manager of Powerlong REIT) and the Trustee entered into

the Reorganization Deed with Powerlong Holdings (as seller), pursuant to which Powerlong Holdings has


trustee of Powerlong REIT) in exchange for the issue of [REDACTED] Units by Powerlong REIT to Powerlong

Holdings or its nominees. Upon Asset Injection Completion, Powerlong REIT will own the REIT Properties

through the Target Company.

Asset Injection will take place on the Asset Injection Completion Date, which is expected to be [two]

Business Days before the [REDACTED]. For further details of the Reorganization Deed, please refer to the

section headed “Material Agreements and Other Documents—Reorganization Deed” in this Document.

Based on the legal advice received by the REIT Manager and its own due diligence, the REIT Manager

confirmed that (i) the necessary regulatory approvals required under the PRC laws and regulations for the

Reorganization have been obtained and that there are no regulatory approvals required under the Hong Kong and

BVI laws for the Reorganization and Asset Injection; and (ii) to the extent that any step of the Reorganization is

stated to have completed prior to the date of this Document, such step has been completed in accordance with the

relevant Hong Kong, BVI and PRC laws and regulations as of the date of this Document. As of the date of this

Document, the REIT Manager is of the view that nothing would prevent the Asset Injection from being completed

after the satisfaction of the conditions precedent (including signing of the International [REDACTED]) and

settled in accordance with the foregoing expected timeline.



– 182 –

OWNERSHIP STRUCTURE AND PRIMARY CONTRACTUAL RELATIONSHIPS

Immediately following completion of the [REDACTED], Powerlong Holdings will hold [REDACTED] of

all the issued Units of Powerlong REIT (assuming the [REDACTED] is not exercised) or [REDACTED] of all the

issued Units of Powerlong REIT (assuming the [REDACTED] is exercised in full).

The following diagram sets forth the ownership structure of Powerlong REIT and the REIT Properties

(assuming the [REDACTED] is not exercised), and the primary contractual relationships between Powerlong

REIT, the Unitholders, the REIT Manager, the Trustee, the Operations and Property Manager immediately after

completion of the Asset Injection and the [REDACTED].

[REDACTED]%

100%

100%

100%

100%

62.89%


(Stock Code: 9909)


(Stock Code: 1238)

Powerlong REIT

Management services

Trustee fee

Hold assets ofPowerlong REIT ontrust for Unitholders

Management fees(4)

Target Company(BVI)

OperationsManagement

Fee

Commercial Operational

Services as theOperations

and PropertyManager

BVI Holdco(BVI)

Powerlong REIT Management (BVI) Limited

(BVI)

REIT Manager

Trustee(HK)

100%


100%

Starlong (HK) 1(HK)

100%


100%

Starlong (HK) 2(HK)

100%

100%100%

100%

HangzhouLin’an

PowerlongPlaza


100%

Starlong (HK) 3(HK)

100%100%

Lin’an WFOE(PRC)

100%

100%

Lin’anProject

Company(PRC) 100%

100%

SuqianPowerlong

Plaza


100%

Starlong (HK) 8(HK)

100%

SuqianProject

Company(PRC)

100%

100%

100%

100%

YanchengPowerlong

Plaza


Starlong (HK) 5(HK)

YanchengProject

Company(PRC)

100%

100%

QuanzhouAnxi

PowerlongPlaza


100%

Starlong (HK) 7(HK)

100%

Anxi ProjectCompany

(PRC)

100%

100%

ShanghaiFengxian

PowerlongPlaza


100%

Starlong (HK) 6(HK)

100%

FengxianProject

Company(PRC)

Ms. Hoi Wa Fan

Other shareholders

Mr. Hoi Kin Hong


(BVI)


Ms. Shih Sze Ni

Cecilia(Note 3)


(BVI)


(HK)


(BVI)(Note 2)

Mr. Hoi Wa Fong

1.48%

100%100%

0.01%0.22%14.39%0.07%0.69%

100%

43.59%34.57% 0.41%4.57%

XinxiangProject

Company(PRC)

LuoyangProject

Company(PRC)

XinxiangPowerlong

Plaza

LuoyangPowerlong

Plaza

100%


100%

Starlong (HK) 9(HK)

100%

100%

Jiaozhou WFOE(PRC)

JiaozhouProject

Company(PRC)

QingdaoJiaozhou

PowerlongPlaza

offshore

onshore

REITProperties

[REDACTED]%

[REDACTED]




– 183 –

Notes:


2. Sky Infinity Holdings Limited is wholly owned by Sky Infinity Family Limited, which is in turn wholly owned by Credit Suisse Trust

Limited through its two wholly-owned subsidiaries and nominees: Serangoon Limited and Seletar Limited. Credit Suisse Trust Limited

is the trustee of a discretionary trust established by Mr. Hoi Wa Fong, the settlor.


4. Pursuant to the Trust Deed, the REIT Manager will manage Powerlong REIT and will receive management fees from Powerlong REIT.

Please refer to the section headed “The REIT Manager—Further Details Regarding the REIT Manager—Fees, Costs and Expenses of the

REIT Manager” in this Document for further details.

5. Pursuant to the Commercial Operational Services Framework Agreement, the Powerlong CM Group will provide Commercial

Operational Services in respect of the REIT Properties including, among other things, leasing services, marketing services and property

management services, and will receive Operations Management Fee from the Powerlong REIT Group. Please refer to “The Operations

and Property Managers—The Commercial Operational Services Framework Agreement” and “Connected Party

Transactions—Continuing Connected Party Transactions—Non-Exempt Continuing Connected Party Transactions with Connected

Persons—The Commercial Operational Services Framework Agreement” in this Document for further details.



– 184 –

OVERVIEW

Powerlong REIT is organized and managed in a manner which is consistent with the provisions andrequirements of the REIT Code, except as described in the section headed “Modifications, Waivers and LicensingConditions” in this Document. The REIT Manager is independent of the Trustee and possesses the skills andresources to discharge its functions in relation to Powerlong REIT effectively and responsibly. In discharging suchfunctions, the REIT Manager is required to observe high standards of corporate governance. The REIT Manager iscapable of performing, and shall perform, its duties in relation to Powerlong REIT independently and in the bestinterests of Powerlong REIT and its Unitholders. For details of the corporate governance policies and proceduresof the REIT Manager, please refer to the section headed “Corporate Governance” in this Document.

THE REIT MANAGER

The REIT Manager was incorporated in Hong Kong on April 16, 2021 for the sole purpose of managing theassets of Powerlong REIT. The REIT Manager is an indirect wholly-owned subsidiary of Powerlong Holdings,being a company incorporated in the Cayman Islands and listed on the Main Board of the Stock Exchange (stockcode: 01238). The REIT Manager has a paid-up share capital of HK$5,000,000. Its registered office is located atRoom 2A, 14/F, Chun Wo Commercial Centre, 23-29 Wing Wo Street, Central, Hong Kong. Further informationabout Powerlong Holdings is contained in the section headed “Information about and relationship with PowerlongHoldings” in this Document.

The following diagram sets forth the shareholding structure of the REIT Manager as of the Latest PracticableDate:


(Stock Code: 1238)

Powerlong REIT Management(BVI) Limited

(BVI)

REIT Manager(HK)

Ms. Hoi Wa Fan

Other shareholders

Mr. Hoi Kin Hong


(BVI)


Ms. Shih Sze Ni

Cecilia(Note 3)


(BVI)


(Hong Kong)


(BVI)(Note 2)

Mr. Hoi Wa Fong

1.48%

100%100%

0.01%0.22%

100%

100%

14.39%0.07%0.69%

100%

43.59%34.57% 0.41%4.57%

Notes:


2. Sky Infinity Holdings Limited is wholly owned by Sky Infinity Family Limited, which is in turn wholly owned by Credit SuisseTrust Limited through its two wholly-owned subsidiaries: Serangoon Limited and Seletar Limited. Credit Suisse Trust Limited isthe trustee of a discretionary trust established by Mr. Hoi Wa Fong, the settlor.



THE REIT MANAGER

– 185 –

The REIT Manager has the general power of management over the assets of Powerlong REIT and the REIT

Manager’s main responsibility is to manage the assets of Powerlong REIT for the benefit of Unitholders. The REIT

Manager does not manage any other REIT. The REIT Manager will set the strategic direction and risk management

policies of Powerlong REIT and give instructions to the Trustee with respect to the acquisition and divestment of

assets of Powerlong REIT in accordance with its stated investment strategy and with respect to borrowings and

guarantees for the account of Powerlong REIT. The REIT Manager will manage the assets of Powerlong REIT in

accordance with the REIT Manager’s investment strategy as stated in the section headed “Strategy” in this

Document and in accordance with the provisions of the Trust Deed and the compliance procedures set forth herein.

The REIT Manager is [REDACTED] by the SFC to conduct the regulated activity of asset management (Type 9),

as required by the REIT Code.

The REIT Manager will be responsible for appointing and reviewing the performance and eligibility of the

auditors of Powerlong REIT and the auditors for Special Purpose Vehicles, whom shall be the same auditors as

auditors of Powerlong REIT.

The REIT Manager will also be responsible for ensuring compliance with the applicable provisions of the

REIT Code, the SFO, the Listing Rules, the Trust Deed, all relevant contracts and all other relevant laws, rules and

regulations. The REIT Manager will be responsible for all regular communications with Unitholders.

Subject to the Trust Deed, and compliance with all applicable laws and regulation including the REIT Code,

the REIT Manager may, whenever it considers necessary or beneficial to Powerlong REIT require the Trustee

(including for the purposes of paying distribution to Unitholders) to borrow and raise monies on behalf of

Powerlong REIT: (a) arrange, negotiate and agree loan, financing and other relevant documentation by which the

Powerlong REIT shall borrow and give security for or guarantee such borrowing or money raising, and where

required to effect such transaction on behalf of the Powerlong REIT, shall instruct the Trustee in writing to do so

on behalf of the Powerlong REIT by the Trustee either directly or through one or more Special Purpose Vehicles

(upon such terms and conditions as the REIT Manager thinks fit); and/or (b) secure the repayment of such moneys

and interest costs and other charges and expenses and accord such priority or subordination for the payment

obligations in such manner and upon such terms and conditions in all respects as the REIT Manager may think fit

and in particular by charging or mortgaging all or any of the Investments. The Trustee shall give effect to such

written instruction (including, where requested, by way of giving a guarantee out of the Deposited Property),

provided that the Trustee shall not execute any guarantee, instrument, lien, charge, pledge, hypothecation,

mortgage or agreement in respect of the borrowing or raising of moneys which (in the opinion of the Trustee)

would render the Trustee’s personal liability to exceed the Deposited Property, and provided further that no

security granted by the Trustee out of Deposited Property shall contain any restriction on the distribution of

distribution entitlements to Unitholders prior to any default in respect of the obligations secured by such security.

The REIT Manager may, whenever it considers it necessary or beneficial to the Powerlong REIT (including

for the purposes of paying distributions to Unitholders) and in the interests of Unitholders to do so or considers it

necessary to enable the Powerlong REIT to meet any liabilities as aforesaid: (a) raise or borrow any sum or sums

of money on behalf of the Powerlong REIT either directly or through Special Purpose Vehicles (upon such terms

and conditions as the REIT Manager thinks fit); and/or (b) secure the repayment of such moneys and interest costs

and other charges and expenses and accord such priority or subordination for the payment obligations in such

manner and upon such terms and conditions in all respects as the REIT Manager may think fit and in particular by

charging or mortgaging all or any of the Investments, and provided further that no security granted by the Trustee

out of Deposited Property shall contain any restriction on the distribution of distribution entitlements to

Unitholders prior to any default in respect of the obligations secured by such security.


THE REIT MANAGER

– 186 –

No new borrowing or money raising shall be requisitioned by the REIT Manager or made by the REIT Managerunder the Trust Deed if upon the effecting of such borrowing or raising the amount thereof (excluding net assetsattributable to Unitholders) together with the aggregated amount of all other raisings or borrowings made by theTrustee at the instruction of the REIT Manager (in each case, whether directly or through one or more SpecialPurpose Vehicles, and still remaining to be repaid) would thereupon in the aggregate exceed 50% (or such otherhigher or lower percentage as may be permitted by the REIT Code or as may be specifically permitted by therelevant authorities) of the Gross Asset Value of the Deposited Property.

Pursuant to its general powers of delegation under the REIT Code, the REIT Manager has delegated certainoperations and property management functions to the Operations and Property Manager pursuant to theCommercial Operational Services Framework Agreement. In retaining the Operations and Property Manager, theREIT Manager is satisfied that they have sufficient financial resources, insurance coverage, internal controlsystems and competent staff with the requisite expertise and experience to engage in operations and propertymanagement in the PRC. The REIT Manager will maintain overall supervision and monitoring of theirperformance, which include inspecting the books and records kept by these delegates in relation to the functionsdelegated to them, and will remain ultimately responsible for the delegated functions they perform including theiracts and omissions. The REIT Manager shall continue to observe and comply with General Principle 4 andparagraph 5.7 of the REIT Code and paragraph 13 of the Practice Note on Overseas Investments bySFC-authorized REITs contained in the REIT Code, which require the REIT Manager to, among other things,remain fully responsible for proper performance of its delegates and ensure that they have the expertise, resourcesand systems to carry out their duties in relation to the functions being delegated and remain competent to undertakesuch functions.

ORGANIZATIONAL STRUCTURE OF THE REIT MANAGER

The following diagram sets forth the organizational and reporting structure of the REIT Manager:

Board of Directors

Nomination andRemuneration Committee

Investment Committee

Executive Director andChief Executive OfficerMr. Yong Jia Cherng*

Head of Risk ManagementMs. Tang Qiao*

Chief Financial Officerand Head of Compliance

Ms. Wen Haixia*Head of Operation

Mr. Qiu Peng

Audit Committee

Disclosures Committee

Executive Director and Chief Executive OfficerMr. Yong Jia Cherng*

Non-executive DirectorsMs. Hoi Wa FanMs. Hoi Wa Lam

Independent Non-executive DirectorsMr. Chen XiaoouMr. Allan Wu XiaojunMs. Liu Xiaolan

Chairman and Non-executive DirectorMr. Hoi Wa Fong

* [REDACTED] of the REIT Manager

Dotted lines represent ad hoc reporting on a case by case basis


THE REIT MANAGER

– 187 –

THE BOARD OF DIRECTORS OF THE REIT MANAGER

The Board is responsible for the overall governance of the REIT Manager, including establishing goals formanaging and monitoring the achievement of these goals. The Board has established a framework for themanagement of Powerlong REIT, including a system of internal control and business risk management processes.

The Board consists of seven Directors comprising one executive Director, three non-executive Directors andthree independent non-executive Directors. Mr. Yong Jia Cherng, Ms. Wen Haixia and Ms. Tang Qiao [arelicensed] by the SFC as [REDACTED] of the REIT Manager for the purposes of section 125 of the SFO andparagraph 5.4 of the REIT Code.

For further information on the Board and its committees, please refer to the section headed “CorporateGovernance” in this Document.

Directors

The Board is entrusted with the responsibility for the overall management of the REIT Manager. Thefollowing table sets forth information regarding the Directors as of the date of this Document:

Name Age Position

Mr. Hoi Wa Fong (許華芳) [43] Chairman and non-executive DirectorMr. Yong Jia Cherng (楊嘉誠) [40] Executive Director and chief executive officerMs. Hoi Wa Fan (許華芬) [45] Non-executive DirectorMs. Hoi Wa Lam (許華琳) [36] Non-executive DirectorMr. Chen Xiaoou (陳曉歐) [52] Independent non-executive DirectorMr. Allan Wu Xiaojun (吳曉軍) [48] Independent non-executive DirectorMs. Liu Xiaolan (劉曉蘭) [55] Independent non-executive Director

Information on the business and working experience of the Directors is set out below:

Chairman and Non-executive Director

Mr. Hoi Wa Fong (許華芳)

Mr. Hoi Wa Fong, aged [43], was appointed as a non-executive Director and the Chairman of the REITManager on August 23, 2021.

Mr. Hoi has over [20] years of experience in the real estate industry. From October 1999 to October 2001, Mr.Hoi worked as the deputy general manager of Xiamen Powerlong Decoration Design Works Co., Ltd. (廈門寶龍裝飾設計工程有限公司), an interior decoration and design company owned by Powerlong Holdings, where he wasprimarily responsible for human resources, financial management and cost control. From October 2001 toDecember 2003, Mr. Hoi worked as the deputy general manager of Xiamen Powerlong Real Estate DevelopmentCo., Ltd. (廈門寶龍房地產發展有限公司), a real estate development company controlled by Mr. Hoi Kin Hong,one of the controlling shareholders of Powerlong Holdings, where he was primarily responsible for financial anddaily operation. From December 2003 to August 2009, Mr. Hoi worked as the vice president and was subsequentlypromoted as the chief vice president of Powerlong Group Development, a real estate development companycontrolled by Mr. Hoi Kin Hong, where he was primarily responsible for the overall management of businessoperation. Since July 2007 and August 2009, he has been the executive director and chief executive officer ofPowerlong Holdings, respectively, where he is primarily responsible for the overall management of the businessoperation. Since August 2019, he has been the executive director and the chairman of the board of directors ofPowerlong CM, where he is responsible for overseeing its business development, formulation and implementationof business strategies, including acquisition plans and corporate finance. He was awarded various honors and


THE REIT MANAGER

– 188 –

awards, including Annual Leader in the Real Estate Industry in the PRC, Most Influential People in the Real Estate

Industry in the PRC, Outstanding Individual Among Returned Overseas Chinese and Family Members, Top 10

Gold-Medal CEO of China Real Estate Listed Companies (中國房地產上市公司十大金牌CEO), TOP 30 CEO in

the Real Estate Industry in China (中國地產年度CEO30強), China Commercial Real Estate Industry Outstanding

Contribution Award (中國商業地產行業傑出貢獻獎), China Real Estate Achiever (中國房地產功勛人物), China

Commercial Property Industry Leader (中國商業地產行業領軍人物), and Achiever in Fostering the Building of

Socialism with Chinese Characteristics (促進中國特色社會主義建設功勛人物).

Mr. Hoi is a member of the tenth All-China Federation of Returned Overseas Chinese, a director of China

Overseas Friendship Association, the vice chairman of Real Estate Chamber of Commerce of National Federation

of Industry and Commerce, a standing committee member of the Chinese People’s Political Consultative

Conference for the city of Shanghai and the vice-chairman of the Fujian Youth Federation. He graduated from the

school of management of Xiamen University (廈門大學) in the PRC, where he obtained a bachelor’s degree in

business management in July 2003. He obtained an executive master of business administration (EMBA) degree

from Cheung Kong Graduate School of Business (長江商學院) in the PRC in October 2007 and a doctor of

business association (DBA) degree from Singapore Management University (新加坡管理大學) in June 2021.

Mr. Hoi is the brother of Ms. Hoi Wa Fan and the cousin of Ms. Hoi Wa Lam, both are non-executive

Directors.

Chief Executive Officer and Executive Director

Mr. Yong Jia Cherng (楊嘉誠)

Mr. Yong Jia Cherng, aged [40], was appointed as a Director on August 16, 2021 and was redesignated as an

executive Director on August 23, 2021.

Since November 2020, Mr. Yong has been the general manager of fund management of the asset management

center of Powerlong Holdings and was responsible for asset management. Prior to joining Powerlong Holdings,

from December 2007 to September 2008, Mr. Yong worked at Allen & Gledhill LLP, a law firm in Singapore, where

he was primarily responsible for advising on initial public offerings and private property funds. From October

2008 to November 2012, Mr. Yong worked as a senior executive of CapitaRetail China Trust Management Limited,

a real estate company. From January 2013 to June 2015, Mr. Yong served as the associate director in the asset

management division in Guangzhou Mapletree Huaxin Enterprise Management Consultancy Co., Ltd., a real estate

investment and development company, where he was primarily responsible for asset management. From July 2015

to November 2018, Mr. Yong served as the deputy general manager of the asset management division in Powerlong

Holdings, a real estate company, where he was primarily responsible for asset management of retail and hotel

assets in China. From January 2019 to November 2020, Mr. Yong served as the deputy general manager in the

operations management and commercial management divisions in Ascendas Shanghai Co., Ltd. which was

subsequently acquired by CapitaLand Limited, where he was primarily responsible for overseeing operational

matters for a portfolio of property assets.

Mr. Yong obtained a bachelor’s degree in philosophy from the University of Warwick in July 2003 and a

master’s degree in law from the University College London in November 2006. He obtained a graduate diploma in

law from BPP Law School (London) in July 2004 and a post-graduate diploma in legal practice from BPP Law

School (London) in July 2005.


THE REIT MANAGER

– 189 –

Non-executive Directors

Ms. Hoi Wa Fan (許華芬)

Ms. Hoi Wa Fan, aged [45], was appointed as a non-executive Director on August 23, 2021.

Since 2000, Ms. Hoi Wa Fan has been the managing director of Nicole Boutique, a fashion brand concept

store in Macau. Since April 2007, she has been the managing director of Pou Long Construction and Land

Investment Company Limited (寶龍集團發展有限公司), a real estate development company controlled by Mr. Hoi

Kin Hong, one of the controlling shareholders of Powerlong Holdings, where she is primarily responsible for the

overall management and business development. Since September 2009, Ms. Hoi Wa Fan has been the

non-executive director of Powerlong Holdings, where she is primarily responsible for providing guidance and

formulation of development strategies for the overall development of Powerlong Holdings. Since December 2011,

she has held the position of managing director of Ultra City Co., Ltd., a fashion retail company, where she has been

primarily responsible for the overall management of business operation. Since August 2019, she has been a

non-executive director of Powerlong CM, where she is responsible for providing guidance and formulation of

strategies for its overall development. Since March 2020, she has been an executive director of Powerlong

Foundation (寶龍公益基金會), where she is responsible for its overall operation. Ms. Hoi Wa Fan is a member of

the Chinese People’s Political Consultative Conference for the city of Xiamen.

Ms. Hoi Wa Fan is the sister of Mr. Hoi Wa Fong, the non-executive Director and the chairman of the Board,

and the cousin of Ms. Hoi Wa Lam, a non-executive Director.

Ms. Hoi Wa Lam (許華琳)

Ms. Hoi Wa Lam, aged [36], was appointed as a non-executive Director on August 23, 2021.

From June 2007 to April 2009, Ms. Hoi Wa Lam was the deputy general manager of Nicole Boutique, a

fashion brand concept store in Macau, where she was primarily responsible for general administration and human

resources. From November 2010 to June 2017, Ms. Hoi Wa Lam worked as the general manager of Shanghai

Powerlong Huayun Art Development Co., Ltd. (上海寶龍華韻藝術發展有限公司), a cultural and art event

planning and marketing company controlled by Mr. Hoi Kin Hong, one of the Controlling Shareholders, where she

was primarily responsible for general management and business development. Since June 2017, she has been the

head of cultural sector of Powerlong Holdings, where she is primarily responsible for the overall management and

business development of the cultural sector of Powerlong Holdings. Since August 2019, she has been the

non-executive director of Powerlong CM and is responsible for providing guidance and formulation of

development strategies for its overall development. She was awarded various honors and awards, including Gold

Star of Annual Focus People in National Art (《國家美術》金星獎 • 年度焦點人物) and TOP 100 most influential

artist in the Art Power List in China for 2018 (2018年度中國藝術權力榜TOP100最具影響力藝術人物).

Ms. Hoi Wa Lam graduated from the University of Macau (澳門大學) in Macau, where she obtained a

bachelor’s degree in business administration in July 2008. She also obtained a master’s degree in business

administration from the University of Leicester in the United Kingdom in January 2011 and an executive master of

business administration (EMBA) degree from Shanghai Jiao Tong University (上海交通大學) in the PRC in June

2018.

Ms. Hoi Wa Lam is the cousin of Mr. Hoi Wa Fong, the non-executive Director and chairman of the Board,

and Ms. Hoi Wa Fan, a non-executive Director.


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Independent non-executive Directors

Mr. Chen Xiaoou (陳曉歐)

Mr. Chen Xiaoou, aged [52], was appointed as the independent non-executive Director on [●].

From April 2007 to April 2011, Mr. Chen served as director of planning and design and chief architect forNWCL Beijing project management center of New World China Land Limited (新世界中國地產有限公司), theChina property arm of New World Development Company Limited (新世界發展有限公司), a real estate developerwhose shares are listed on the Main Board of the Stock Exchange (stock code: 17), where he was primarilyresponsible for real estate development and operation management in China. Mr. Chen has been serving as thechairman of F.O.G. (Shanghai) Asset Management Company Ltd. (富尚（上海）資產管理有限公司) since February2014, a company mainly engaged in real estate investment and financing, where he is primarily responsible foroverall operation and management. Mr. Chen served as the vice president for development in China ofCDPQ-Ivanhoe Cambridge, a company mainly engaged in developing and investing in real estate properties, wherehe was primarily responsible for real estate investment, development and operation management in China. SinceOctober 2016, Mr. Chen has been serving as an independent non-executive director of Yuexiu REIT AssetManagement Ltd. (as manager of Yuexiu Real Estate Investment Trust, whose shares are listed on the Main Boardof the Stock Exchange (stock code: 405)).

Mr. Chen served as the expert and the deputy vice chairman of The Building Owners and ManagersAssociation China (“BOMA”) from 2012 to 2020 and has been serving as the fellow of BOMA since 2021. Heserved as a MBA Mentor for The School of Business of Renmin University of China (中國人民大學) fromFebruary 2012 to January 2014 and December 2015 to January 2017. Mr. Chen served as a visiting professor ofCheung Kong Graduate School of Business (長江商學院) in August 2012.

Mr. Chen obtained a bachelor’s degree in architecture from Northwestern Polytechnical University (西北工業大學) in the PRC in July 1992, a master’s degree in architecture from The University of New South Wales inAustralia in April 1999 and an Advanced Management Development Program in Real Estate certificate from theHarvard University Graduate School of Design in the United States in July 2010.

Mr. Allan Wu Xiaojun (吳曉軍)

Mr. Allan Wu Xiaojun (吳曉軍), age [48], was appointed as the independent non-executive Director on [●].

From September 1999 to June 2001, Mr. Wu served as a financial analyst at the commercial transaction groupof Enron Norther America, which was an American energy, commodities, and services company. From December2002 to September 2004, Mr. Wu served as the assistant manager at the business development of HutchisonWhampoa (Bejing Chaoyang) Property Ltd. (和記黃埔地產（北京朝陽）有限公司), a real estate developer, wherehe was primarily responsible for sourcing and underwriting commercial and residential development projects.From September 2004 to August 2012, Mr. Wu served as the vice president of the asset management division ofGIC Real Estate of the Government of Singapore Investment Corporation. Since December 2012, Mr. Wu has beenserving as the founder and chief executive officer of Bridge5 Asia Pte Ltd, an asset management technologicalcompany focusing on big data and digitalization solutions, where he is primarily responsible for management andproviding consultancy services.

Mr. Wu is a Certified Public Accountant (Texas Board of Accountancy) and Chartered Financial Analyst. Mr.Wu obtained a bachelor’s degree in diplomacy and English from Foreign Affairs College (外交學院) in the PRC inJuly 1996, a master’s degree in professional accounting from The University of Texas at Austin in the United Statesin August 1999 and a master’s degree in real estate development from Massachusetts Institute of Technology in theUnited States in September 2002.


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Ms. Liu Xiaolan (劉曉蘭)

Ms. Liu Xiaolan, aged [55], was appointed as the independent non-executive Director on [●].

From May 2002 to May 2005, Ms. Liu served as an assistant to the general manager and the head of thebranch management center at Xiamen Powerlong Information Industry Development Co., Ltd. (廈門寶龍信息產業發展有限公司), where she was primarily responsible for assisting the general manager in the daily matters of thecompany and its branches across China. From May 2005 to February 2012, Ms. Liu successively served as anassistant to the president, deputy general manager of the real estate management center, vice president, executivedirector and general manager of Powerlong Holdings, where she was primarily responsible for assisting thepresident with its daily operations, establishment of management system of the project companies and themanagement of commercial property management business. From March 2012 to November 2012, Ms. Liu servedas the general manager of Kunshan Stereo City Investment Management Co., Ltd. (昆山立體之城投資管理有限公司), a company principally engaged in investment management and consulting services, where she was primarilyresponsible for project investment management. From September 2013 to April 2020, Ms. Liu served as thechairman of the board of Shanghai Yizhen Investment Management Co., Ltd. (上海溢臻投資管理有限公司), acompany principally engaged in real estate consulting services and investment management, where she wasprimarily responsible for its investment decisions and strategy formulation. Since August 2017, Ms. Liu has beenserving the founder of Lanyu (Shanghai) Business Consulting Center (蘭毓（上海）商務諮詢中心), a companyprincipally engaged in providing strategic and business consulting services. Ms. Liu has been serving as anindependent non-executive director of Excellence Commercial Property & Facilities Management Group Ltd. (卓越商企服務集團有限公司) since September 28, 2020, a commercial property management service provider whoseshares are listed on the Main Board of the Stock Exchange (stock code: 6989). Since October 2020, Ms. Liu hasbeen serving as an independent non-executive director at KWG Living Group Holdings Limited (合景悠活集團控股有限公司), a property management service provider whose shares are listed on the Main Board of the StockExchange (stock code: 3913).

Ms. Liu has been serving as a mentor of Boya Zhixue (Beijing) Investment Consulting Co., Ltd. (博雅知學（北京）投資顧問有限公司) since May 2014, and Teaching Facilities (易居沃頓案例研究與教育基地) since June

2015, an economic counselor of Chengdu Skyscraper Economics Promotion Association (成都市樓宇經濟促進會)since September 2019 and a special consultant of Tianfu Institute of Building Economy (樓宇經濟天府學院) sinceJune 2019.

Ms. Liu obtained her bachelor’s degree in clinical medicine from Fujian University of Traditional ChineseMedicine (福建中醫藥大學) (formerly known as Fujian Chinese Traditional Medical College (福建中醫學院)) inthe PRC in July 1988. She completed the Executive Development Program (高級管理培訓) offered by XiamenUniversity (廈門大學) in the PRC in September 2009 and the China Advanced Management Program offered byWharton School of University of Pennsylvania in the United States in October 2019.

To the best of the knowledge, information and belief of the Directors having made all reasonable enquiries,there was no other matter with respect to the Directors that needs to be brought to the attention of the Unitholdersand that there was no information relating to the Directors that are required to be disclosed as of the LatestPracticable Date under Rule 13.51(2) of the Listing Rules (modified as appropriate pursuant to paragraph 2.26 ofthe REIT Code).

Board Committees

The Board has the power to delegate to committees consisting of such members of its body as it thinks fit. Thecommittees of the Board have been set up with clear terms of reference to review specific issues or items and thento submit their findings and recommendations to the full Board for consideration and endorsement. Unless thedecision-making power has been vested in the relevant committee by the Board, the ultimate responsibility formaking final decisions rests with the full Board and not the committees. The committees of the Board are currentlyas described in the section headed “Corporate Governance” in this Document.


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ROLES OF THE [REDACTED] AND OTHER OFFICERS OF THE REIT MANAGER

The Chief Executive Officer shall be responsible for: (i) supervising and participating in the day-to-daymanagement of the REIT Manager’s conduct of regulated activities in Hong Kong; (ii) exercising his ultimateauthority to make final investment decision; (iii) identifying and evaluating potential acquisitions or investmentsconsistent with Powerlong REIT’s investment strategy with a view to maximizing Powerlong REIT’s DPU ordivestments where a property fails to be yield accretive or fails to enhance the value of Powerlong REIT’sportfolio; (iv) formulating the business plans of Powerlong REIT’s properties with short, medium and long-termobjectives and with a view to maximizing the rental income of Powerlong REIT and DPU yield for the benefit ofUnitholders via active asset management; (v) setting targets for the performance of the REIT Manager andPowerlong REIT and working with other senior management to ensure achievement of the targets; (vi) formulatingasset enhancement strategies and plans; (vii) coordinating execution of any acquisition and/or divestmentdecisions in real estate transactions; (viii) formulating property and facilities management strategies andoverseeing the overall property management to sustain the asset quality, including reasonable capital expenditureand property expenses; (ix) formulating and monitoring leasing and marketing strategies to drive rental growth; (x)monitoring and supervising the performance of the Operations and Property Manager; (xi) ensuring that assets ofPowerlong REIT are regularly valued according to market practice and in accordance with regulatoryrequirements; (xii) continuously monitoring and keeping the Board updated of the Powerlong REIT’s riskmanagement and financial status; (xiii) monitoring employee regulated activities and approving and implementingthe REIT Manager’s policies and procedures set out in the compliance manual; (xiv) supervising and overseeingthe REIT Manager’s overall management oversight, key business operations, information technology anddelegated functions; and (xv) supervising and approval preparation of financial resources filings to the SFC.

The Chief Financial Officer shall be responsible for: (i) supervising and participating in the day-to-daymanagement of the REIT Manager’s conduct of regulated activities in Hong Kong; (ii) participating in makinginvestment decisions; (ii) coordinating execution of any acquisition and/or divestment decisions in real estatetransactions in the PRC; (iii) offering input and insight from financial perspective (including, without limitation,from liquidity risk management perspective) of the Powerlong REIT given experience in real estate asset andoperations management; (iv) the financial management of Powerlong REIT; (v) leading the financing andaccounting team to ensure effective and efficient financial management, including statutory reporting, financialand management accounting, taxation, and cash flow management; (vi) projecting rental returns, accounting forrental collections and operating expenses incurred in the course of managing and operating the properties ofPowerlong REIT; (vii) ensuring that accounting records are prepared, maintained and reported in accordance withinternational financial reporting standards; (viii) overseeing the preparation of budgets; (ix) recommending to theChief Executive Officer proposals relating to financial investments of Powerlong REIT; (x) continuouslymonitoring and keeping the Board updated of the Powerlong REIT’s financial status; (xi) monitoring employeeregulated activities and approving and implementing the REIT Manager’s policies and procedures set out in thecompliance manual; (xii) supervising and overseeing the REIT Manager’s finance and accounting, compliance,anti-money laundering and terrorist financing, as well as, other delegated functions; and (xiii) supervising andapproval preparation of financial resources filings to the SFC.

The Head of Risk Management shall be responsible for: (i) ensuring the proper management of risk includingany credit, market, liquidity and operational risks to which Powerlong REIT is exposed; (ii) identifying andquantifying the risks to which Powerlong REIT is exposed; (iii) providing timely and adequate information to thesenior management of the REIT Manager to contain and manage such risks; and (iv) supervising and overseeingthe REIT Manager’s risk management, operational control and review, as well as, other delegated functions.

The Head of Compliance shall be responsible for: (i) supervising and participating in the day-to-daymanagement of the REIT Manager’s conduct of regulated activities in Hong Kong; (ii) participating in makinginvestment decisions; (iii) coordinating execution of any acquisition and/or divestment decisions in real estatetransactions in the PRC; (iv) offering input and insight from risk management perspective (including, withoutlimitation, from liquidity risk management perspective) of the Powerlong REIT given experience in real estate


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asset and operations management; (v) ensuring that in managing the affairs of Powerlong REIT, the REIT Manager

shall, where applicable, comply with the Trust Deed, the REIT Code, the Listing Rules, the SFO, and other

applicable laws, regulations and rules; (vi) maintaining proper records in relation to Powerlong REIT in

compliance with applicable rules and regulations; (vii) ensuring that the REIT Manager is kept up-to-date with any

changes in the applicable rules and regulations that relate to compliance matters; (viii) conducting regular

compliance reviews; (ix) continuously monitoring and keeping the Board updated of the Powerlong REIT’s risk

management and financial status; and (x) monitoring employee regulated activities and approving and

implementing the REIT Manager’s policies and procedures set out in the compliance manual.

The Head of Operation is primarily responsible for: (i) overseeing the investor relations and communications

with Unitholders; (ii) establishing and maintaining effective management and organizational structure, policies,

procedures and monitoring measures to ensure that the business is carried out in an efficient and effective manner;

(iii) maintaining operational controls of Powerlong REIT; and (iv) matters in relation to corporate secretariat and

general administrative issues as well as the implementation of the REIT Manager’s human resources’ policies and

procedures.

[REDACTED] AND OTHER OFFICERS OF THE REIT MANAGER

Information on the working experience of the [REDACTED] and other officers of the REIT Manager is set

out below:

Mr. Yong Jia Cherng (楊嘉誠)

Mr. Yong Jia Cherng is the Chief Executive Officer and one of the [REDACTED] of the REIT Manager. He

is also the executive Director and information on his business and working experience has been set out in “The

Board of Directors of the REIT Manager—Chief Executive Officer and Executive Director” in this section.

Ms. Wen Haixia (温海霞)

Ms. Wen Haixia, aged [44], is the Chief Financial Officer, the Head of Compliance and one of the

[REDACTED] of the REIT Manager.

Since August 2021, Ms. Wen has been serving as the general manager of the real estate investment trust

department of Powerlong Holdings asset management center. From August 2018 to July 2021, Ms. Wen was the

general manager of the financial management center of Powerlong CM Group and was responsible for the financial

management, cost control and investment management of Powerlong CM Group. Prior to joining Powerlong CM

Group, from March 2006 to February 2009, Ms. Wen served in various subsidiaries of Parkson Retail Group

Limited (百盛商業集團), a department store company whose shares are listed on the Main Board of the Stock

Exchange (stock code: 3368), the Malaysia Stock Exchange (stock code: 5657) and the Singapore Stock Exchange

(stock code: O9E), with her last position as the deputy financial manager of Shanghai Hongqiao Parkson

Commercial Co., Ltd. (上海虹橋百盛商貿有限公司), where she was primarily responsible for financial analysis

and management. From January 2010 to April 2013, she was the assistant financial director of Shanghai Shimao

Co., Ltd. (上海世茂股份有限公司), a commercial property development and management company whose shares

are listed on the Shanghai Stock Exchange (stock code: 600823.SH), where she was primarily responsible for the

financial management of the commercial operation department. From April 2013 to April 2018, Ms. Wen served as

the chief financial officer at Shanghai Aegean Commercial Group Co., Ltd. (上海愛琴海商業集團), a commercial

operational service company focusing on shopping malls, where she was primarily responsible for the financial

management center.


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Ms. Wen obtained a diploma’s degree in investment economics from Zhejiang University of Finance &

Economics (浙江財經大學) in the PRC in July 1999. She obtained the qualification of intermediate accountant

granted by the MOF in September 2003 and Certified Public Accountant (non-practicing member) granted by the

Shanghai Institute of Certified Public Accountants (上海市註冊會計師協會) in December 2009. Ms. Wen also

obtained the board secretary certificate granted by the Shanghai Stock Exchange in January 2018 and the fund

qualification certificate granted by the Asset Management Association of China (中國證券投資基金業協會) in

January 2019.

Ms. Tang Qiao (唐喬)

Ms. Tang Qiao, aged [39], is the Head of Risk Management and one of the [REDACTED] of the REIT

Manager.

Ms. Tang joined Powerlong Holdings as the senior manager of asset management center in May 2013 and has

been the director of its asset management centre since April 2015. Ms. Tang was responsible for asset research and

planning, portfolio management, risk control and team management.

From February 2011 to May 2013, Ms. Tang served as the senior manager of planning and the assistant of vice

president of Powerlong CM, and where she was primarily responsible for the formulations and monitoring plans

and the preparation, operations and coordination of commercial projects of the Powerlong CM Group.

Ms. Tang obtained a bachelor’s degree in industrial design from the University of Shanghai for Science and

Technology (上海理工大學) in June 2004 and a master’s degree in business administration from Xiamen

University (廈門大學) in December 2009. She obtained the Certificate of funds professional(基金執業資格證)

granted by the Asset Management Association of China (中國證券投資基金業協會) in May 2019, the qualification

as a Certified Property Manager (資產管理師) granted by the Institute of Real Estate Management

(國際資產管理協會) in September 2018, and the qualification as the Economics Professional Qualification (中級經濟師) granted by Ministry of Human Resources and Social Security of the PRC (中華人民共和國人力資源和社會保障部) in November 2018.

Mr. Qiu Peng (邱鵬)

Mr. Qiu Peng, aged [40], is the Head of Operation of the REIT Manager.

Mr. Qiu joined Powerlong Holdings in June 2014 as a chief designer. Since May 2021, he was promoted as the

general manager of the general management department of asset management center of Powerlong Holdings and is

primarily responsible for asset management. Prior to joining Powerlong Holdings, from May 2007 to May 2014,

Mr. Qiu served as a partner cum senior architect of Shanghai Semi-Arch Architectural Design Company Ltd. (上海半間建築設計事務所), an architectural design company, where he was primarily responsible for architectural

design and project management.

Mr. Qiu graduated from the department of architecture of Suzhou University of Science and Technology (蘇州科技大學) in July 2005.


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FURTHER DETAILS REGARDING THE REIT MANAGER

Fees, Costs and Expenses of the REIT Manager

The REIT Manager is entitled to receive the following fees under the Trust Deed:

(i) on a semi-annual basis, a Base Fee not exceeding 0.25% per annum (and being 0.25% as of the[REDACTED]) of the Value of the Deposited Properties;

(ii) on an annual basis, a Variable Fee of 3.0% per annum of the Net Property Income (in respect of eachREIT Property, provided that the NAV per Unit exceeds the NAV Unit on which the Variable Fee was lastcalculated and paid);

(iii) an Acquisition Fee not exceeding 1.0% (and being 1.0% as of the [REDACTED]) of the acquisitionprice of each real estate asset in the form of land acquired, directly or indirectly, by Powerlong REIT(pro-rated if applicable to the proportion of Powerlong REIT’s interest in the real estate acquired); and

(iv) a Divestment Fee not exceeding 0.5% (and being 0.5% as of the [REDACTED]) of the sale price of eachreal estate asset in the form of land sold or divested, directly or indirectly, by Powerlong REIT(pro-rated if applicable to the proportion of Powerlong REIT’s interest in the real estate sold).

Base Fee

The REIT Manager shall be entitled to receive, commencing on and from and including the date immediatelyafter the [REDACTED], for its own account out of the Deposited Properties in arrears the amount of the Base Feeaccrued to it and remaining unpaid. The REIT Manager shall at the end of each June and December of a calendaryear compute the Base Fee for the six months ended June and December of that calendar year, based onmanagement accounts of Powerlong REIT and the Base Fee shall be paid to the REIT Manager semi-annually,subject to adjustment according to the Trust Deed. The Base Fee shall not exceed the rate of 0.25% (and being0.25% as of the [REDACTED]) per annum of the aggregated valuation value of the Deposited Properties. For thepurpose of calculating the Base Fee, the value of the Deposited Properties shall be taken as the value as of the latestpublished interim report (if any) of Powerlong REIT or the latest published audited annual accounts available atthe time that the calculation in question is made. If the aggregate of the Base Fee paid semi-annually to the REITManager exceeds the Base Fee due to the REIT Manager in respect of the relevant financial year calculated basedon the audited annual accounts for that financial year, then the REIT Manager shall pay Powerlong REIT thedifference in cash within 30 days after the publication of such audited annual accounts. If the aggregate of the BaseFee paid semi-annually to the REIT Manager is less than the Base Fee due to the REIT Manager in respect of therelevant financial year calculated based on the audited annual accounts for that financial year, then PowerlongREIT shall pay the REIT Manager the difference within 30 days after the publication of such audited annualaccounts in cash. An announcement will be made by the REIT Manager in relation to such adjustment (if any).

The Base Fee will be paid to the REIT Manager in cash or, at the election of the REIT Manager, entirely orpartly in the form of Units. The REIT Manager shall make elections for the payment of the Base Fee in cash and/orUnits, annually, on or before January 15, in each calendar year by way of notice in writing to the Trustee and anannouncement to Unitholders, such election to be irrevocable during the calendar year in which it was made. In theevent that the REIT Manager does not make such an election in any calendar year, the most recent valid electionmade by the REIT Manager in a prior calendar year (if any) shall apply and, if there is no such prior calendar yearelection by the REIT Manager, the Base Fee shall be paid in cash. When paid in the form of Units, the REITManager shall receive such number of Units as may be purchased for the relevant amount of the Base Fee at a priceequivalent to the price determined by the REIT Manager as being the average closing price of the Units during the10 trading days immediately preceding the date on which the relevant Units are issued to the REIT Manager.


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The REIT Manager shall be entitled to alter the rate of the Base Fee to some smaller percentage than thatprovided by notice to the Trustee in writing, provided that the REIT Manager shall give written notice of anyalteration of such rate to a higher percentage within the permitted limit to all Unitholders and the Trustee, not lessthan three months prior to the date of effect thereof.

Any increase in the rate of the Base Fee above the permitted limit or any change in the structure of the BaseFee shall not be implemented without the approval of a Special Resolution at a meeting of Unitholders, dulyconvened and held in accordance with the provisions of the Trust Deed. The REIT Manager may lower the rate ofthe Base Fee to some smaller percentage than the relevant permitted limit specified in the Trust Deed or, whererelevant such other maximum percentage as approved by a Special Resolution in the manner mentioned in the TrustDeed. The REIT Manager may increase the rate of the Base Fee to a higher percentage that the REIT Managerproposes to charge from time to time provided that it is within the relevant permitted limit specified in the TrustDeed or, where relevant, such other maximum percentage as approved by a Special Resolution by giving at leastone months’ prior written notice to all Unitholders and the Trustee.

Variable Fee

When the Base Fee is paid in the form of Units, the REIT Manager shall be entitled to receive such number ofUnits as may be purchased for the relevant amount of the Base Fee at a price equivalent to the price as determinedby the REIT Manager as being the average closing price of the Units during the 5 trading days immediatelypreceding the date on which the relevant Units are issued to the REIT Manager. If the relevant thresholds for issueof Units without Unitholders’ approval are exceeded and Unitholders’ approval is not obtained or any anythresholds for triggering a mandatory offer under the Takeovers Code will be reached as a result, then payment ofthat excess part of the Base Fee shall be paid to the REIT Manager in the form of cash.

With effect from and including the [REDACTED], the REIT Manager will be entitled to receive for its ownaccount out of the Deposited Properties the amount of the Variable Fee accrued to it on an annual basis. TheVariable Fee payable to the REIT Manager in respect of each REIT Property shall be an annual amount equal to3.0% per annum of the gross revenue less any operating expenses in respect of each REIT Property, provided thatthe NAV per Unit exceeds the NAV Unit on which the Variable Fee was last calculated and paid. Any increase in theVariable Fee payable to the REIT Manager above the rate aforesaid or any change in the structure of the VariableFee shall be subject to the approval of the Unitholders by a Special Resolution at a meeting of Unitholders, dulyconvened and held in accordance with the Trust Deed.

The Variable Fee will be paid to the REIT Manager in the form of cash or, at the election of the REITManager, be paid entirely or partly in the form of Units. The REIT Manager may make elections for the paymentof the Variable Fee in cash and/or Units, annually, on or before January 15, in each calendar year by way of noticein writing to the Trustee and an announcement to Unitholders, such election to be irrevocable during the calendaryear in which it was made. If the REIT Manager does not make such an election in any calendar year, the mostrecent valid election made by the REIT Manager in a prior calendar year (if any) shall apply and, if there is no suchprior calendar year election by the REIT Manager, the Variable Fee shall be paid in cash.

When paid in the form of Units, the REIT Manager shall be entitled to receive such number of Units as maybe purchased for the relevant amount of the Variable Fee at a price equivalent to the price as determined by theREIT Manager as being the average closing price of the Units during the 10 trading days immediately precedingthe date on which the relevant Units are issued to the REIT Manager.

If the relevant thresholds for issue of Units without Unitholders’ approval are exceeded and Unitholders’approval is not obtained, or any thresholds for triggering a mandatory offer under the Takeovers Code will bereached as a result then payment of that excess part of the Variable Fee will be paid to the REIT Manager in theform of cash.


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The REIT Manager shall submit an invoice with such computation of the Variable Fee to the Trustee within 15calendar days (or such later date as agreed by the REIT Manager and the Trustee) of the publication of the auditedfinancial statements of Powerlong REIT for the relevant financial year. Any invoice submitted shall be subject tothe review and clearance by the Trustee and the Trustee shall pay the Variable Fee to the REIT Manager within fivecalendar days of the Trustee’s receipt of the REIT Manager’s invoice.

Any increase in the Variable Fee or any change in the structure of the Variable Fee must be approved byUnitholders by way of a Special Resolution at a meeting of Unitholders, duly covered and held in accordance at theTrust Deed.

Acquisition Fee

The REIT Manager is entitled to an Acquisition Fee not exceeding the rate of 1.0% (and being 1.0% as of the[REDACTED]) of the acquisition price of each real estate asset in the form of land acquired, directly or indirectly,by Powerlong REIT (pro-rated if applicable to the proportion of Powerlong REIT’s interest in the real estateacquired). The Acquisition Fee is payable to the REIT Manager as soon as practicable after completion of theacquisition.

Any increase in the Acquisition Fee above the rate mentioned in the preceding paragraph or any change in thestructure of the Acquisition Fee must be approved by Unitholders by way of a Special Resolution. The REITManager shall give Unitholders at least one month’s prior written notice of any increase in the rate of theAcquisition Fee that the REIT Manager proposes to charge from time to time up to (but not exceeding) the ratementioned in the preceding paragraph. The Acquisition Fee will be paid to the REIT Manager in the form of cashor, at the election of the REIT Manager, entirely in the form of Units or partly in cash and partly in the form ofUnits, provided that when paid in the form of Units, Unitholders’ approval shall be obtained if required under theREIT Code. When paid in the form of Units, the REIT Manager shall be entitled to receive such number of Unitsas may be purchased for the relevant amount of the Acquisition Fee at the same issue price of the Units used tofinance or part finance the acquisition in respect of which the Acquisition Fee is payable or, where Units are notissued to finance or part finance such acquisition, at the issue price as determined by the REIT Manager as beingequal to the highest of:

(a) the volume weighted average price for all trades for a Unit on the Stock Exchange for the 10 tradingdays immediately prior to the date of entry into of the agreement for such acquisition;

(b) the volume weighted average price for all trades for a Unit on the Stock Exchange for the 10 tradingdays immediately prior to the date of the announcement in respect of such acquisition; and

(c) the volume weighted average price for all trades for a Unit on the Stock Exchange for the 10 tradingdays immediately prior to the date of completion of such acquisition;

in each case rounded down to the nearest whole number of the Units and with any remaining amount to bepaid in cash. No Acquisition Fee is payable in relation to the acquisition of the Special Purpose Vehicles for the[REDACTED]. If the relevant thresholds for issue of Units without Unitholders’ approval are exceeded and theUnitholders’ approval is not obtained, then payment of that part of the Acquisition Fee will be paid in the form ofcash.

Divestment Fee

The REIT Manager is entitled to a Divestment Fee not exceeding the rate of 0.5% (and being 0.5% as of the[REDACTED]) of the sale price of each real estate in the form of land asset sold or divested, directly or indirectly,by Powerlong REIT (pro-rated if applicable to the proportion of Powerlong REIT’s interest in the real estate sold).The Divestment Fee is payable as soon as practicable after completion of the divestment.


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Any increase in the Divestment Fee above the rate mentioned in the preceding paragraph or any changein the structure of the Divestment Fee must be approved by Unitholders by way of a Special Resolution of ameeting of Unitholders duly covered and held in accordance of the Trust Deed. The REIT Manager shall giveUnitholders at least one month’s prior written notice of any increase in the rate of the Divestment Fee that theREIT Manager proposes to charge from time to time up to (but not exceeding) the rate mentioned in thepreceding paragraph. The Divestment Fee will be paid to the REIT Manager in the form of cash or, at theelection of the REIT Manager, entirely in the form of the Units or partly in cash and partly in Units, providedthat when paid in the form of Units, Unitholders’ approval shall be obtained if required under the REIT Code.When paid in the form of Units, the REIT Manager shall be entitled to receive such number of Units as maybe purchased at the issue price as determined by the REIT Manager which is equal to the highest of:

(a) the volume weighted average price for all trades for a Unit on the Stock Exchange for the 10 tradingdays immediately prior to the date of entry into of the agreement for such divestment;

(b) the volume weighted average price for all trades for a Unit on the Stock Exchange for the 10 tradingdays immediately prior to the date of the announcement in respect of such divestment; and

(c) the volume weighted average price for all trades for a Unit on the Stock Exchange for the 10 tradingdays immediately prior to the date of completion of such divestment;

in each case rounded down to the nearest whole number of the Unit and with any remaining amount to be paidin cash. If the relevant thresholds for issue of Units without Unitholders’ approval are exceeded and theUnitholders’ approval is not obtained, then payment of that part of the Divestment Fee will be paid in the form ofcash.

REIT Manager’s Right to Reimbursement

The REIT Manager is entitled to apply, or to be reimbursed from, the Deposited Property (at such times andover such periods as the Trustee and the REIT Manager may determine in any particular case) for all liabilities,fees, costs, charges and expenses that may be properly suffered or incurred by the REIT Manager in theperformance of its obligations or the exercise of its powers under the Trust Deed, or otherwise arising out of or inconnection with the Trust Deed or other constitutive documents save where such actions, costs, claims, damages,expenses or demands are occasioned by the fraud, negligence, willful default, breach of trust, breach of the REITCode, applicable laws or regulations, or breach of the Trust Deed or other constitutive documents, by the REITManager or any employee, officer, director, servant, agent or delegate of the REIT Manager (including theOperations and Property Manager) of the REIT Code or other applicable laws or regulations, or breach of anyconstitutive documents of Powerlong REIT (including the Trust Deed), including, to the extent permitted by theREIT Code or any applicable law, costs and expenses for promotion advertising, roadshows, press conferencesluncheons, presentations, and public relations related fees, costs or expenses incurred in relation to any fundraising exercise by Powerlong REIT or otherwise in connection with Powerlong REIT, as permitted in the TrustDeed.

Retirement or Removal of the REIT Manager

The REIT Manager may retire as manager of Powerlong REIT at any time after giving 60 days’ writtennotice, or any other period of notice as agreed to by the Trustee, to the Trustee provided that, and subject to:

(a) the REIT Manager selecting a new manager of Powerlong REIT which is duly qualified under the REITCode, licensed under the SFO, and acceptable to the Trustee, the SFC and the Stock Exchange; and

(b) the requirement in the REIT Code that such retirement will not adversely affect the interests of theUnitholders in any material respect.


THE REIT MANAGER

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The retirement of the REIT Manager will not be effective until the appointment of a new manager is effectivepursuant to a deed of retirement and appointment among the Trustee, the REIT Manager and the new manager.

Also, the REIT Manager may be removed by prior notice given in writing by the Trustee if:

(a) the REIT Manager goes into liquidation (except a voluntary liquidation for the purpose ofreconstruction or amalgamation upon terms previously approved in writing by the Trustee) or if areceiver is appointed over any of its assets or a judicial manager is appointed in respect of the REITManager (or any analogous process occurs or any analogous person is appointed in respect of the REITManager);

(b) the REIT Manager ceases to carry on business;

(c) the REIT Manager fails or neglects after reasonable notice from the Trustee to carry out or satisfy anymaterial obligation imposed on the REIT Manager by the Trust Deed;

(d) the SFC withdraws its approval of the REIT Manager to act as the manager of Powerlong REIT;

(e) an Ordinary Resolution is passed by the Unitholders to remove the REIT Manager (All Unitholder,including the REIT Manager and its associates, are entitled to vote on the Ordinary Resolution toremove the REIT Manager and be counted in the quorum for the purpose of passing such OrdinaryResolution); or

(f) for good and sufficient reason(s), the Trustee states in writing that a change in the REIT Manager isdesirable in the interest of the Unitholders.

If the REIT Manager is removed by the Trustee in the circumstances mentioned above, the Trustee shall(with, for so long as Powerlong REIT is authorized by the SFC, the prior written consent of the SFC) appointanother corporation to be the new manager of Powerlong REIT.

In the event that the REIT Manager has given its written notice to retire, or an Ordinary Resolution to removethe REIT Manager is passed by the Unitholders, the REIT Manager undertakes to ensure the smooth and properfunctioning of Powerlong REIT during the time period (the “Termination Transition Period”) between the dateof its notice of resignation, or the passing of the relevant resolution for the removal of the REIT Manager (as thecase may be), and until a successor manager of Powerlong REIT (the “Successor REIT Manager”) has been dulyappointed in accordance with the terms of the Trust Deed and the REIT Code and the effective date of theretirement, or removal (as the case may be) of the REIT Manager as specified in a notice to be issued by theTrustee.

During the Transition Period, the REIT Manager undertakes to:

(i) continue to manage and operate Powerlong REIT and perform all customary day-to-day duties andobligations as the manager of Powerlong REIT acting at all times in accordance with this Trust Deed andthe REIT Code. The REIT Manager shall at all times during the Termination Transition Period besubject to the applicable provisions of the Trust Deed and the REIT Code. For the avoidance of doubt,during the Termination Transition Period, the REIT Manager will not be required to: (i) undertake anystrategic review of Powerlong REIT; (ii) make any material decision in relation to the strategies ofPowerlong REIT; (iii) initiate, propose, commit to or proceed with any investment or divestment,including but not limited to any disposals or acquisitions; or (iv) assist the Successor REIT Managerwith its licensing obligations; and

(ii) during the Termination Transition Period, fully cooperate and take all actions that the Trustee deemsreasonably necessary in transferring any and all duties, obligations and contracts to a Successor REITManager.


THE REIT MANAGER

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For the avoidance of doubt, upon the effective date of the retirement or removal of the REIT Manager as

specified in a notice to be issued by the Trustee, the REIT Manager shall be absolved and released from all duties,

obligations, contracts and undertakings and shall not be required or compel to do, or cause to be done, any act or

thing, or be responsible for any act or omission of the Successor REIT Manager or the Trustee (in its capacity as

trustee of Powerlong REIT) (but without prejudice to the rights of the Trustee or of any Unitholder, former

Unitholder or other person in respect of any act or omission prior to such retirement or removal).

Notwithstanding the foregoing, Powerlong REIT shall terminate if, for any reason, there is no manager of

Powerlong REIT for a period of more than 60 calendar days or such longer period as the Trustee considers

appropriate. Please refer to the section headed “The Trust Deed—Termination of Powerlong REIT” in this

Document for details in respect of the termination of Powerlong REIT.

Exclusion of Liability of the REIT Manager

In the absence of fraud, negligence, wilful default, breach of trust, breach of the REIT Code, applicable laws

or regulations, or breach of the Trust Deed or other constitutive documents (to which it is a party) by the REIT

Manager (or its subsidiaries) (including their respective employees, officers, directors, servants, agents and

delegates), the REIT Manager and its subsidiaries shall not incur any liability to Powerlong REIT, the Trustee, the

Unitholders or any person by reason of any error of judgment or any matter or thing done or suffered or omitted to

be done by it in good faith under the Trust Deed. In addition, the REIT Manager, its subsidiaries and their

employees, officers, directors, servants, agents and delegates shall be entitled, for the purpose of indemnity against

any action, cost, claim, damage, expense or demand to which the REIT Manager, its subsidiaries or any of their

respective directors, employees, servants, agents or delegates may be put, to have recourse to the assets of

Powerlong REIT or any part thereof, save where such action, cost, claim, damage, expense or demand is

occasioned by the fraud, negligence, wilful default, breach by the Manager, its subsidiaries or any of their

directors, employees, servants, agents or delegates of the REIT Code, applicable laws or regulations, the Trust

Deed or other constitutive documents.


THE REIT MANAGER

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The REIT Manager has the general power and responsibility to manage the assets of Powerlong REIT for thebenefit of the Unitholders. To ensure that the REIT Properties will continue to be managed properly andeffectively, pursuant to its general powers of delegation under the REIT Code, the REIT Manager has delegatedcertain property management functions to the Operations and Property Manager, who shall provide (by itself oroutsourcing) operations and property management services pursuant to the Commercial Operational ServicesFramework Agreement.


The Operations and Property Manager, Powerlong CM, is an indirect non-wholly owned subsidiary ofPowerlong Holdings which is a Substantial Unitholder, and therefore it is a connected person of Powerlong REIT.The Operations and Property Manager is a commercial operational service provider in the PRC and a companylisted on the Main Board of the Stock Exchange (stock code: 9909). It [has entered] into the CommercialOperational Services Framework Agreement with Powerlong REIT, pursuant to which the Operations and PropertyManager will provide (by themselves or outsourcing) Commercial Operational Services and Property ManagementServices to Powerlong REIT Group in respect of the REIT Properties, subject to the oversight and supervision ofthe REIT Manager (acting on behalf of Powerlong REIT) and in accordance with the principles set out therein.

The Commercial Operational Services Framework Agreement

Under the Commercial Operational Services Framework Agreement [entered] into among the REIT Manager(for itself and on behalf of Powerlong REIT Group) and the Operations and Property Manager (for itself and onbehalf of the Powerlong CM Group) on [●], 2021, the Powerlong CM Group [has agreed] to provide, among otherthings, the following commercial operational services with respect to the REIT Properties (being the“Commercial Operational Services”) for an initial term from the [REDACTED] to [December 31, 2023] (whichmay be renewed as the parties may mutually agree, subject to compliance with the requirement under the REITCode, the Listing Rules and all other applicable laws and regulation upon expiry of the initial term):

(a) leasing services, including managing the signing of new and renewed tenancy agreements and acting asthe leasing agent in participating in negotiation of terms with tenants;

(b) marketing services, including executing the marketing strategies approved by the REIT Manager andexecuting advertising, marketing and publicity programs in respect of the REIT Properties;

(c) tenancy development and management services, including finding potential tenants, tenant evaluation,monitoring the financial status of tenants, rent collection, tenant relationship management, handlingrenewals of tenancy agreements and providing value-added services to tenants;

(d) leasing advisory services, including advising on the rent level and other commercial terms of thetenancy agreements;

(e) engineering and remodeling plans implementation services in respect of the REIT Properties asapproved by the REIT Manager, including being responsible for matters relating to such plans, such asdesign, request for tender, construction and quality inspection, and supervising the day-to-daymaintenance and upkeep of the REIT Properties;

(f) performance evaluation services in respect of the REIT Properties and reporting to the REIT Manager;

(g) liaison services with the other professional service providers to maintain the income generatingcapability of the REIT Properties;

(h) account management and document support services, including bank account maintenance andarchiving of tenancy related documents and other contracts;



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(i) property management services, including maintenance and management of the premises and public facilities,cleaning and security, greening, decoration and renovation management, carpark management, culturalactivities management, fire safety and public order maintenance services. If the relevant Project Companyhas engaged a third party for the aforementioned property management services, the relevant ProjectCompany will authorize the Operations and Property Manager to manage such third party’s provision ofproperty management services;

(j) compliance services assisting the relevant Project Company in applying, maintaining and renewing allnecessary certificates, licenses and permits for the operation of the relevant REIT Property, and ensuringcompliance with applicable PRC laws and regulations;

(k) information technology support services; and

(l) other operation services which are assigned in writing to the Operations and Property Manager by thePowerlong REIT Group from time to time.

The Operations and Property Manager has agreed to establish an individual and designated team for thepurpose of performing the leasing and marketing services set out in (a) and (b) above. Such team will be dedicatedto the Relevant Property only and shall maintain strict confidentiality regarding all investment, lease terms andrent of the Relevant Property. The team shall be made up of personnel whose performance are measured byreference to certain metrics of Powerlong REIT or the REIT Properties, effectively aligning the interests of theOperations and Property Manager with those of Powerlong REIT and the Unitholders.

Under the Commercial Operational Services Framework Agreement, the Operations and Property Manager isentitled to receive from the Powerlong REIT Group an amount equivalent to 5% per annum of the rental income inrespect of each REIT Property (the “Operations Management Fee”). Such Operations Management Fee isdetermined based on arms’ length negotiation, and is no less favorable than the fees independent third-partyoperators would charge in comparison for provision of similar services. The Operations and Property Manager willbear its operating costs and expenses and be subject to the ongoing supervision of the REIT Manager.

The REIT Manager will maintain overall supervision and monitoring of the performance of the Operationsand Property Manager, which include inspecting the books and records kept by it. Under the CommercialOperational Services Framework Agreement, the Operations and Property Manager is required to submit to theREIT Manager monthly reports in respect of the REIT Properties as an internal control procedure.

The REIT Manager may terminate the appointment of the Operations and Property Manager in the event thatthe Operations and Property Manager ceases to carry on business or is no longer a subsidiary of PowerlongHoldings. The REIT Manager may also terminate the appointment of the Operations and Property Manager inrelation to the Relevant Property under the management of the Operations and Property Manager in the event of thesale of the relevant Project Company or Property.

The key personnel of the Operations and Property Manager have at least five years of experience in managingreal estate. As advised by the PRC Legal Advisors, save for the business license (企業法人營業執照) which hadbeen obtained by the relevant operating subsidiaries of the Operations and Property Manager at their respectivetime of establishment and updated following subsequent changes, the Operations and Property Manager and theirrelevant operating subsidiaries do not currently need any licenses to perform the arrangements under theCommercial Operational Services Framework Agreement according to the relevant PRC laws and regulations. TheREIT Manager is of the view that the Operations and Property Manager have sufficient experience and are fit andproper to provide the services pursuant to the Commercial Operational Services Framework Agreement. TheOperations and Property Manager is capable of performing, and shall perform, its duties in relation to PowerlongREIT independently and in the best interests of Powerlong REIT and the Unitholders.



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ARRANGEMENTS TO MITIGATE CONFLICTS OF INTEREST

The REIT Manager has the general power of management over the assets of Powerlong REIT and has

delegated the day-to-day property management functions to the Operations and Property Manager. Given the

Operations and Property Manager is an indirect non-wholly owned subsidiary of Powerlong Holdings and the

Operations and Property Manager also manages and provided services to other properties held by Powerlong

Holdings, the REIT Manager has put in place the following arrangements to mitigate potential conflicts of interest

in relation to the management of the REIT Properties:

Segregation of sensitive operational functions

As the Operations and Property Manager also provides services to properties and entities of Powerlong

Holdings, the REIT Manager in mitigating potential conflicts has segregated certain sensitive operational

functions, namely leasing and marketing functions, to be performed by an individual and designated team within

the Operations and Property Manager which shall be made up of personnel whose performance will be measured

by reference to their efforts in the management of the REIT Properties only, effectively aligning the interests of the

Operations and Property Manager with those of Powerlong REIT and the Unitholders.

For the non-sensitive day-to-day property management functions for the REIT Properties, such as daily

maintenance, cleaning and security, these will continue to be carried out by other teams at the Operations and

Property Manager and/or outsourced to third party property management service providers, who may provide

similar services to properties held by the Powerlong Holdings (if currently applicable) and outsource such services

to other service providers. Notwithstanding this, the Operations and Property Manager shall remain accountable to

the Powerlong REIT Group, and subject to the oversight and supervision of the REIT Manager in respect of these

outsourced or sub-delegated services. The Operations and Property Manager may provide similar day-to-day

property management services to the properties held by Powerlong Holdings, but the REIT Manager is of the view

that given the nature of such services, this arrangement is unlikely to give rise to material business conflict

concerns.

“Chinese Walls”, Information Technology System, Reporting Lines and Segregated Office Space

To protect sensitive and confidential information with respect to the REIT Properties, the Operations and

Property Manager will (i) implement measures such as “Chinese Walls”, information technology systems with

access rights control and clear reporting lines to protect sensitive property management information pertaining to

the REIT Properties, such as the details of leases, from being used by Powerlong Holdings entities to the detriment

of Powerlong REIT; and (ii) in respect of the REIT Manager and the individual and designated teams of the

Operations and Property Manager, operate out of an office space physically separated from the other companies of

the Powerlong Holdings Group to further preserve the confidentiality of such information.



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Contractual Protection

Contractual provisions have been included in the Commercial Operational Services Framework Agreement to

provide that:

(i) the Operations and Property Manager will at all times act in the best interests of the Powerlong REIT

and exercise a reasonable standard of care, skill, prudence and diligence under the circumstances then

prevailing that a reputable operations and property manager providing similar management services

would use in providing such management services for comparable commercial properties in the relevant

location of the PRC;

(ii) the Operations and Property Manager will strictly adhere to the reporting lines approved by the REIT

Manager in accordance with the provisions of the Commercial Operational Services Framework

Agreement, such that the Operations and Property Manager will act in accordance with the sole

directions of the REIT Manager;

(iii) the Operations and Property Manager will implement the annual business plan and budget approved by

the REIT Manager every year and use their respective best endeavors to achieve the revenue targets in

such approved annual business plan and budget; and

(iv) if leasing or marketing opportunities in relation to any of the REIT Properties become available, which

the Operations and Property Manager acting reasonably and in good faith consider are or are likely to be

in competition with Powerlong Holdings, the Operations and Property Manager will refer all such

opportunities to the REIT Manager for vetting and confirmation before the Operations and Property

Manager proceeds with such opportunities.

Notwithstanding that the Operations and Property Manager is an indirect non-wholly owned subsidiary of

Powerlong Holdings, which also has business presence and owns commercial and retail properties in the PRC, the

Operations and Property Manager has confirmed to the REIT Manager that it is capable of performing, and shall

perform, its duties to Powerlong REIT independently of Powerlong Holdings’ related businesses and in the best

interest of Powerlong REIT and the Unitholders.

The Common Area and Advertising Space Management Services Framework Agreement

On [●], 2021, the REIT Manager (for itself and on behalf of the Powerlong REIT Group) entered into a

Common Area and Advertising Space Management Services Framework Agreement with the Operations and

Property Manager (for itself and on behalf of the other members of the Powerlong CM Group), pursuant to which

the Powerlong CM Group [has agreed] to (i) lease certain common areas and advertising spaces from the

Powerlong REIT Group; and (ii) be responsible for managing such common areas and advertising spaces for an

initial term from the [REDACTED] to December 31, 2023, which may be renewed as the parties may mutually

agree, subject to compliance with the requirements under the REIT Code, the Listing Rules and all other applicable

laws and regulations. The Powerlong REIT Group will receive an annual rent from the Powerlong CM Group,

while the Powerlong CM Group will be entitled to retain all the fees generated from the common areas and

advertising spaces and received from their independent third-party customers. For details, see “Connected Party

Transactions—Continuing Connected Party Transactions—Non-Exempt Continuing Connected Party

Transactions—(2) Common Area and Advertising Space Management Services Framework Agreement” in this

Document.



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The Car Parking Lots Management Services Framework Agreement

On [●], 2021, the REIT Manager (for itself and on behalf of the Powerlong REIT Group) entered into a Car

Parking Lots Management Services Framework Agreement with the Operations and Property Manager (for itself

and on behalf of other members of the Powerlong CM Group), pursuant to which the Powerlong CM Group [has

agreed] to (i) lease certain car parking lots from the Powerlong REIT Group; and (ii) be responsible for managing

such car parking lots for an initial term from the [REDACTED] to December 31, 2023, which may be renewed as

the parties may mutually agree, subject to compliance with the requirements under the REIT Code, the Listing

Rules and all other applicable laws and regulations. The Powerlong REIT Group will receive an annual rent from

the Powerlong CM Group, while the Powerlong CM Group will be entitled to retain all the fees generated from the

car parking lots and received from their independent third-party customers. For details, see “Connected Party

Transactions—Continuing Connected Party Transactions—Non-Exempt Continuing Connected Party

Transactions—(3) Car Parking Lots Management Services Framework Agreement” in this Document.



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INFORMATION ABOUT POWERLONG HOLDINGS

Powerlong Holdings is an exempted company incorporated in the Cayman Islands with limited liability onJuly 18, 2007, whose shares are listed on the Main Board of the Stock Exchange (stock code: 1238). Based on theannual report of Powerlong Holdings for the year ended December 31, 2020, as of December 31, 2020, PowerlongHoldings had total assets of approximately RMB195,131.5 million and recorded total revenue of approximatelyRMB35,495.3 million for the year ended December 31, 2020. As of December 31, 2020, Powerlong Holdings andits subsidiaries had developed, owned and operated 193 real estate projects in the PRC. Powerlong Holdings is aninvestment holding company, and together with its subsidiaries, are dedicated to developing and operating highquality, large-scale and multi-functional commercial real estate projects.

As described in the section headed “Reorganization, Structure and Organization of Powerlong REIT” in thisDocument, the entire shareholding in the Target Company (which holds the REIT Properties and is indirect whollyowned by Powerlong Holdings) will be transferred to Powerlong REIT on the Asset Injection Completion Date.

Pursuant to the Listing Rules and in accordance with the corporate structure and ownership of PowerlongREIT, the [REDACTED] will constitute a spin-off from Powerlong Holdings. The board of directors of PowerlongHoldings considers that the Spin-off is commercially beneficial and in the interests of Powerlong Holdings and itsshareholders taken as a whole as the Spin-off is expected to create greater value for Powerlong Holdings and itsshareholders as a whole for the following reasons:

(a) the day-to-day property management functions for the REIT Properties will be delegated to theOperations and Property Manager, namely, Powerlong CM. The Spin-off will create synergies amongthe Retained Group, the Powerlong REIT Group and the Powerlong CM Group by establishing a fullyintegrated platform encompassing property development, property operation and management and assetmanagement which will enhance operational efficiency of Powerlong Holdings;

(b) the net [REDACTED] to be received by Powerlong Holdings from the Spin-off will provide theRetained Group with funds for its operations, thereby enabling the Retained Group to reduce its netborrowings, and hence improve its liquidity and gearing position. It would also provide the RetainedGroup with capital to fund new investment opportunity;

(c) the Spin-off will allow Powerlong Holdings to capitalize part of the REIT Properties in the form ofupfront cash [REDACTED] as well as enable its shareholders to benefit from Powerlong Holdings’continuing interest in Powerlong REIT;

(d) the Spin-off is a beneficial attempt to develop innovative financing channels for the Powerlong REITGroup and to connect with the international capital markets as a separate [REDACTED] entity byenabling the Powerlong REIT Group to have a separate funding platform and an enlarged shareholderbase thereby enhancing the fund raising capabilities of the Powerlong REIT Group;

(e) the Spin-off will enable the Powerlong REIT Group to provide the Unitholders with the potential forsustainable long-term growth in the distributions payable to them and the benefits which flow from theenhancement in the value of the portfolio of properties of Powerlong REIT;

(f) the Spin-off will enable the Retained Group and the Powerlong REIT Group to pursue a more targeteddevelopment, conduct strategic planning and better allocate resources. The Retained Group and thePowerlong REIT Group will both benefit from the decision-making process under the independentmanagement structure to seize emerging business opportunities, in particular the Powerlong REITGroup which has a dedicated management team focusing on its development; and


INFORMATION ABOUT AND RELATIONSHIP WITH POWERLONG HOLDINGS

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(g) the Spin-off will improve Powerlong Holdings’ image and reputation in the real estate industry, therebyenhancing the ability to attract strategic investors and partners. This may provide synergies for the RetainedGroup and the Powerlong REIT Group.

The Spin-off by Powerlong Holdings complies with the requirements of Practice Note 15 of the ListingRules.

DELINEATION OF BUSINESS

Upon completion of the Reorganization, Powerlong REIT’s portfolio shall comprise eight REIT Properties,all of which are shopping malls located in East China and Central China. The REIT Properties include XinxiangPowerlong Plaza, Luoyang Powerlong Plaza, Hangzhou Lin’an Powerlong Plaza, Yancheng Powerlong Plaza,Shanghai Fengxian Powerlong Plaza, Quanzhou Anxi Powerlong Plaza, Suqian Powerlong Plaza and QingdaoJiaozhou Powerlong Plaza. While all of the REIT Properties had been developed by Powerlong Group, thePowerlong REIT Group will continue to identify other acquisition opportunities (including any opportunitiesprovided by the Retained Group and independent third parties) as and when appropriate after the [REDACTED].

Powerlong REIT’s key objectives are to provide Unitholders with stable distributions, sustainable andlong-term distribution growth, and enhancement in the value of Powerlong REIT’s properties. The REIT Managerintends to achieve this through holding and investing in quality income-generating commercial properties locatedin the PRC. For details of the strategies of Powerlong REIT, please see the section headed “Strategy” in thisDocument.

The Retained Group is principally engaged in the real estate projects businesses, including residentialproperty development and sales, property investment and other property development related services.

Powerlong REIT will not engage in the property development business upon completion of the Spin-off andthere is no competition between the Retained Group and the Powerlong REIT. Accordingly, the REIT Managerconsiders that the businesses model and operational objective of the Retained Group and the Powerlong REIT areclearly delineated from each other.

Powerlong Holdings entered into a deed of favour of the Trustee (in its capacity as trustee of PowerlongREIT) and the REIT Manager (in its capacity as manager of Powerlong REIT) under which Powerlong REIT hasbeen granted, conditional upon [REDACTED], a right of first refusal, pursuant to which in the event thatPowerlong Holdings or Powerlong Holdings Relevant Subsidiaries propose to dispose of any majority ownershipor control of any commercial or retail property which satisfies the relevant criteria, Powerlong REIT shall have theROFR to acquire such qualifying property. For further details, please see “Material Agreements and OtherDocuments—Deed of Right of First Refusal” in this Document.

INDEPENDENCE FROM POWERLONG HOLDINGS

The REIT Manager believes that the Powerlong REIT is capable of carrying on its business in the bestinterests of the scheme and the Unitholders and in the best interests of Powerlong REIT and Unitholders andindependently of Powerlong Holdings and their respective associates (other than the Powerlong REIT Group) after[REDACTED] for the following reasons:

Management Independence

The Powerlong REIT Group will be managed independently of the Retained Group. Upon completion of theSpin-off, Units will be held by Powerlong Holdings and the [REDACTED], respectively. The management andoperation of the Powerlong REIT Group will be handled by the REIT Manager, the Operations and PropertyManager and the Trustee.



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The REIT Manager is an indirect wholly-owned subsidiary of Powerlong Holdings. It is primarily responsible

for, among others, the overall management of the assets of the Powerlong REIT in accordance with the REITManager’s investment strategy and the provisions of the Trust Deed and the compliance procedures. For details,please see the section headed “The REIT Manager” in this Document.

The Operations and Property Manager is an indirect non-wholly owned subsidiary of Powerlong Holdings. Itis primarily responsible for, among others, providing day-to-day Commercial Operational Services to the REITProperties, subject to the oversight and supervision of the REIT Manager. For details, please see the section headed“The Operations and Property Manager” in this Document.

The Trustee is a third party independent of Powerlong Holdings and its connected persons, which is primarilyresponsible for, among others, carrying out the instructions of the REIT Manager in respect of investments, andensuring that the properties deposited with the Trustee are properly segregated and held for the benefit of theUnitholders, in accordance with the provisions of the Trust Deed and any other relevant constitutive documents ofPowerlong REIT.

The Trustee, in its capacity as trustee of Powerlong REIT, is responsible under the Trust Deed for the safecustody of the assets of Powerlong REIT on behalf of Unitholders and for overseeing the activities of the REITManager for compliance with the relevant constitutive documents of, and regulatory requirements applicable to,Powerlong REIT. The REIT Manager’s role under the Trust Deed is to manage Powerlong REIT and its assets inaccordance with the Trust Deed in the sole interest of the Unitholders and to fulfill the duties imposed on it undergeneral law as the manager of Powerlong REIT, and in particular, to ensure that the financial and economic aspectsof Powerlong REIT’s assets are professionally managed in the sole interests of the Unitholders. For details, pleasesee the section headed “The Trust Deed” in this Document.

The Powerlong REIT Group does not rely on the Retained Group in terms of management, and the day-to-dayoperations and management functions of the Powerlong REIT Group are being managed independently of theRetained Group given that:

(i) Powerlong REIT is managed by the REIT Manager which possesses sufficient human, organizationaland technical resources for the proper performance of its duties, including three [REDACTED] each ofwhom shall have at least five years’ track record in investment management and/or property portfoliomanagement, and at least one [REDACTED] who shall be available at all times to supervise the REITManager’s business of regulated activity. Upon [REDACTED], the [REDACTED] include Mr. Yong JiaCherng, Ms. Wen Haixia and Ms. Tang Qiao. All of them shall hold no positions in the Retained Groupupon [REDACTED]. For details, please see the section headed “The REIT Manager—The[REDACTED] of the REIT Manager” in this Document;

(ii) the REIT Manager, whose main responsibility is to manage the assets of the Powerlong REIT for thebenefit of the Unitholders, will implement corporate governance measures to ensure that the Board willperform its duties properly, including but not limited to the decision-making mechanism to be set out inthe articles of association and compliance manual of the REIT Manager and mechanism to ensurecompliance of the REIT Code and the Listing Rules. For details, please see the section headed“Corporate Governance” in this Document;

(iii) the REIT Manager will give instructions to the Trustee with respect to the acquisition and divestment ofassets of the Powerlong REIT in accordance with its stated investment strategy and with respect toborrowings and guarantees for the account of the Powerlong REIT and have the general power ofmanagement over the assets of the Powerlong REIT;



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(iv) the non-executive Directors, namely Mr. Hoi Wa Fong (who is also an executive director of each ofPowerlong Holdings and Powerlong CM), Ms. Hoi Wa Fan (who is also a non-executive director of eachof Powerlong Holdings and Powerlong CM) and Ms. Hoi Wa Lam (who is also a non-executive directorof Powerlong CM) are not involved in the day-to-day management of the Powerlong REIT Group. Theyare primarily responsible for providing guidance for the overall operation of the Powerlong REITGroup;

(v) save as disclosed in paragraph (iv) above, there is no overlap in the other directors among the REITManager, Powerlong Holdings and Powerlong CM;

(vi) the Board comprises a balanced composition of one executive Director, three non-executive Directorsand three independent non-executive Directors, and the independent non-executive Directors willensure the independence of the Board and provide impartial and professional advice and bringindependent judgment to the decision making of the Board; and

(vii) all conflicts of interest (if any) shall be managed by the Board in accordance with the articles ofassociation of the REIT Manager and applicable laws, rules and regulations. The REIT Manager shallensure that all conflicts of interest relating to Powerlong REIT shall be managed and avoided. Fordetails of measures taken, please see the section headed “Corporate Governance—Conflicts” in thisDocument.

Operational Independence

The REIT Properties have been operated independently at project company level before the Spin-off.Although the Powerlong Group will remain to be a Substantial Unitholder after the [REDACTED], the REITManager shall have full rights to make all decisions on and to carry out the business of Powerlong REITindependently.

The REIT Manager will delegate the day-to-day commercial operation and property management functionsfor the REIT Properties to the Operations and Property Manager, namely, Powerlong CM. The Powerlong CMGroup is principally engaged in the provision of commercial operational services and residential propertymanagement services in the PRC and also provides commercial operational services and residential propertymanagement services to the Retained Group and is expected to continue to provide commercial operationalservices and residential property management services to the Retained Group upon completion of the Spin-off.

Whilst it is expected that both the Powerlong REIT Group and the Retained Group will receive commercialoperational services from the Powerlong CM Group, the REIT Manager considers that the Powerlong REIT Groupis able to operate independently of the Retained Group after [REDACTED] as certain arrangements are put inplace to mitigate potential conflicts of interest in relation to the management of the REIT Properties, including butnot limited to:

(i) the Operations and Property Manager will designate separate teams of personnel to perform keyfunctions, such as leasing and marketing functions, for the Powerlong REIT Group and the RetainedGroup to avoid any potential conflicts and the designated teams of personnel will strictly adhere to thepre-approved and separate reporting lines; and

(ii) measures such as Chinese Walls and clear reporting lines will be implemented to protect sensitiveproperty management information of the Powerlong REIT Group and the Retained Group, such asdetails of tenancy agreements, will not be used to the detriment of each other, and the designated teamsof personnel will maintain strict confidentiality.



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Other than the REIT Properties, the Powerlong REIT Group will continue to identify other acquisition

opportunities (including any opportunities provided by Retained Group and independent third parties) as and when

appropriate after the [REDACTED].

Connected party transactions

The section headed “Connected party transactions” in this Document sets out the continuing connected party

transactions between the Powerlong REIT Group and the Powerlong CM Group which will continue after the

completion of the [REDACTED]. All such transactions are determined after arm’s length negotiations and on

normal commercial terms. Accordingly, such continuing connected party transactions are not expected to affect

Powerlong REIT’s operational independence as a whole.

Trust Deed

The Trust Deed [has been entered] into between REIT Manager and the Trustee to constitute Powerlong REIT

and to set out terms to govern the management and operation of Powerlong REIT. The Trustee and the REIT

Manager are independent of each other. For details, please see the section headed “The Trust Deed” in this

Document.

Financial Independence

All loans, advances and balances due to or from members of the Retained Group which were not arising out

of the ordinary course of business will be fully settled or waived before [REDACTED] (save for those of the

Existing Project Companies in relation to certain Non-REIT Properties which may subsist. Please refer to the

section headed “Reorganization, Structure and Organization of Powerlong REIT—Reorganization and Asset

Injection—(b) Transfer of the REIT Properties—The Existing Project Companies) in this Document.

All share pledges and guarantees provided by or to members of the Retained Group on the borrowings of the

Powerlong REIT or the Retained Group will also be fully released before [REDACTED]. In addition, the

Powerlong REIT Group has established its own finance department with a team of financial staff which is

responsible for financial control, accounting, reporting, group credit and internal control of the Powerlong REIT

Group, which is independent from the Retained Group.

Accordingly, the REIT Manager believes that Powerlong REIT is able to maintain financial independence

from the Retained Group.



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With the objectives of establishing and maintaining high standards of corporate governance, certain policiesand procedures have been put in place to promote the operation of Powerlong REIT in a transparent manner andwith built-in checks and balances. The corporate governance policies of Powerlong REIT [have been adopted]having due regard to the requirements under Appendix 14 to the Listing Rules, with necessary changes as if thoserules were applicable to REITs. Set out below is a summary of the key components of the corporate governancepolicies that [have been adopted] and will be followed by the REIT Manager and Powerlong REIT. Such policiesmay be amended by a simple majority vote of the Board.

AUTHORIZATION STRUCTURE

Powerlong REIT is a collective investment scheme authorized by the SFC under section 104 of the SFO andregulated by certain laws, regulations and documents including the provisions of the REIT Code and the TakeoversCode. The SFC does not take any responsibility for the financial soundness of Powerlong REIT, or the correctnessof any statements made or opinions expressed in this Document and/or other documents relating to PowerlongREIT. SFC authorization is not a recommendation or endorsement of a scheme nor does it guarantee thecommercial merits of a scheme or its performance. It does not mean the scheme is suitable for all investors nor isit an endorsement of its suitability for any particular investor or class of investors. The REIT Manager [has beenauthorized] by the SFC under section 116 of the SFO to conduct the regulated activity of asset management (Type9). The REIT Manager has three persons who [were approved] by the SFC as [REDACTED] pursuant to therequirements of section 125 of the SFO and paragraph 5.4 of the REIT Code, at least one of whom is an executiveDirector of the REIT Manager pursuant to the requirements of section 125 of the SFO. At least one of the[REDACTED] shall be available at all times to supervise the REIT Manager’s business of regulated activity,including asset and property management. Mr. Yong Jia Cherng, the executive Director, [was] approved by the SFCas an approved person of the REIT Manager pursuant to sections 104(2) and 105(2) of the SFO.

The Trustee is registered as a trust company under section 77 of the Trustee Ordinance. The Trustee isqualified to act as a trustee for collective investment schemes authorized under the SFO pursuant to the REITCode.

ROLES OF THE TRUSTEE AND THE REIT MANAGER

The Trustee and the REIT Manager are independent of each other. The Trustee, in its capacity as trustee ofPowerlong REIT, is responsible under the Trust Deed for the safe custody of the assets of Powerlong REIT onbehalf of Unitholders and for overseeing the activities of the REIT Manager for compliance with the relevantconstitutive documents of, and regulatory requirements applicable to, Powerlong REIT. The REIT Manager’s roleunder the Trust Deed is to manage Powerlong REIT and its assets in accordance with the Trust Deed in the soleinterest of the Unitholders and to fulfill the duties imposed on it under general law as the manager of PowerlongREIT, and in particular, to ensure that the financial and economic aspects of Powerlong REIT’s assets areprofessionally managed in the sole interests of the Unitholders.

FUNCTIONS OF THE BOARD OF DIRECTORS OF THE REIT MANAGER

The Board comprises seven members including one executive Directors, three non-executive Directors andthree independent non-executive Directors. The Board oversees the management of the REIT Manager’s affairsand the conduct of its business and is responsible for the overall governance of the REIT Manager. The Boardexercises its general powers within the limits defined by its constitutional documents, with a view to ensuring thatthe management discharges its duties and is compensated appropriately, and that sound internal control policiesand risk management systems are maintained. The Board will also review major financial decisions and theperformance of the REIT Manager. In accordance with the REIT Code, the REIT Manager is required to act in thebest interests of Unitholders, to whom it owes a fiduciary duty.



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BOARD COMPOSITION

Pursuant to the REIT Manager’s articles of association and corporate governance policy, independentnon-executive Directors must be individuals who fulfill the independence criteria set out in the compliance manualadopted by the REIT Manager. Please refer to the section headed “The REIT Manager—The Board of Directors ofthe REIT Manager” in this Document.

The composition of the Board is determined using the following principles:

• the Chairman should be a non-executive Director;

• the Board should have a balance of skill, experience and diversity of perspectives appropriate for therequirements of Powerlong REIT’s business and should ensure that changes to its composition can bemanaged without undue disruption;

• the Board should have a balanced composition of executive, non-executive and independentnon-executive Directors so that there is a strong independent element on the Board which can effectivelyexercise independent judgment;

• the Board should have a policy concerning diversity of the board members which is appropriate for therequirements of Powerlong REIT’s business, and shall disclose the policy on diversity or a summary ofthe policy in the corporate governance report;

• at least one-third of the Board and a minimum of three members of the Board should be independentnon-executive Directors and at least one independent non-executive Director must have appropriateprofessional qualifications or accounting or related financial management expertise;

• the re-election and further appointment of any independent non-executive Director serving on the Boardfor nine years shall be subject to a separate Unitholders’ resolution;

• any person appointed to be an independent non-executive Director either to fill casual vacancy or as anadditional Director shall hold office only until the next general meeting of Powerlong REIT and shallthen be eligible for re-election at that meeting. The re-election of any independent non-executiveDirector shall be approved by Unitholders by way of Ordinary Resolution; and

• every independent non-executive Director shall be subject to retirement by rotation at least once everythree years. If any independent non-executive Director will have served as an independentnon-executive Director for more than three years from time of his appointment or re-election until thenext annual general meeting of Powerlong REIT, without having been subject to retirement by rotation,such independent non-executive Director will be subject to retirement by rotation at such annual generalmeeting.

The positions of Chairman and the Chief Executive Officer are held by separate persons in order to maintainan effective segregation of duties. The Chairman shall lead the Board discussions and deliberations and isresponsible for setting the meeting agenda of Board meetings. He shall ensure that Board meetings are held whennecessary. He shall promote high standards of corporate governance and maintenance of effective communicationswith Unitholders. The Chief Executive Officer is responsible for the day-to-day management of the REIT Managerand Powerlong REIT. The Chief Executive Officer shall execute the strategic plans set out by the Board and ensurethat the Directors are kept updated and informed of Powerlong REIT’s business through management reports.

The Board composition will be reviewed regularly to ensure that the Board has the appropriate mix ofexpertise and experience and that the Directors being appointed have the relevant expertise and experience indischarging their duties.



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Board Committees

The Board has the power to delegate to committees consisting of such numbers of its body as it thinks fit.Various committees [have been established] to assist the Board in discharging its responsibilities. The committeesof the Board have been set up with clear terms of reference to review specific issues or items and then to submittheir findings and recommendations to the full Board for consideration and endorsement. Unless the decisionmaking power has been vested in the relevant committee by the Board, the ultimate responsibility for making finaldecisions vests with the full Board and not the committees. The committees of the Board are currently as follows:

Investment Committee

The Investment Committee comprises at least three members appointed by the Board among the Directorswho must include the Chief Executive Officer and at least one independent non-executive Director. Upon[REDACTED], the members of the Investment Committee will be Mr. Hoi Wa Fong, Mr. Yong Jia Cherng, Mr.Chen Xiaoou, Mr. Allan Wu Xiaojun and Ms. Liu Xiaolan. Mr. Hoi Wa Fong will be the initial chairman of theInvestment Committee. The Investment Committee is responsible for, among other matters, assessing and makingrecommendations on investment opportunities (including proposed acquisitions and disposals of investments),approving financial budgets, reviewing expenses on all key expenditures and reviewing the quarterly financialperformance, forecasts and annual financial plan of the REIT Manager and Powerlong REIT. The InvestmentCommittee also reviews and recommends changes to financial authorities, policies or procedures in areas such asaccounting, taxation, treasury, distribution payout, investment appraisal, management and statutory reporting.

Audit Committee

The Audit Committee comprises at least three members appointed by the Board who must be non-executiveDirectors (including the independent non-executive Directors). A majority of the members of the Audit Committeeshall be independent non-executive Directors and at least one of them shall have appropriate professionalqualifications or accounting or related financial management expertise. The Audit Committee must be chaired byan independent non-executive Director. Upon [REDACTED], the members of the Audit Committee will be Mr.Hoi Wa Fong, Mr. Allan Wu Xiaojun and Ms. Liu Xiaolan. Mr. Allan Wu Xiaojun, who has the appropriateprofessional qualifications or accounting or related financial management expertise, will be the initial chairman ofthe Audit Committee.

The Audit Committee is responsible for establishing and maintaining an adequate internal control structure,effective financial reporting and risk management systems and ensuring the quality and integrity of financialstatements. The Audit Committee is also responsible for the nomination of independent external auditors andreviewing the adequacy of external audits in respect of cost, scope and performance. The Audit Committee alsoensures the existence and operation of an effective system of internal control and risk management, in respect ofboth the REIT Manager and Powerlong REIT.

The Audit Committee’s responsibilities also include, among other matters:

(a) monitoring dealings of the Directors in accordance with any securities dealing policy adopted by theREIT Manager;

(b) reviewing all financial statements and all external audit reports and developing and implementing apolicy on the engagement of external auditors to supply non-audit services;

(c) ensuring the internal audit function is adequately resourced and guiding the management to takeappropriate actions to remedy any faults or deficiencies in internal controls which may be identified;

(d) assisting the Board in its monitoring of the entity’s overall risk management profile and settingguidelines and policies to govern risk assessment and risk management;



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(e) periodically reviewing and monitoring all connected party transactions and related party transactions;

(f) reviewing the compliance of the REIT Manager and Powerlong REIT with legal and regulatory requirementson a regular basis; and

(g) reviewing and recommending to the Board on the REIT Manager’s corporate governance policies andpractices.

Nomination and Remuneration Committee

The Nomination and Remuneration Committee comprises at least three members appointed by the Boardfrom among the Directors. A majority of the members of the Nomination and Remuneration Committee shall beindependent non-executive Directors. The chairman of the Nomination and Remuneration Committee shall be theChairman or an independent non-executive Director. Upon [REDACTED], the members of the Nomination andRemuneration Committee will be Mr. Hoi Wa Fong, Mr. Chen Xiaoou, Mr. Allan Wu Xiaojun and Ms. Liu Xiaolan.Mr. Hoi Wa Fong will be the initial chairman of the Nomination and Remuneration Committee.

The Nomination and Remuneration Committee’s responsibilities include, among other matters:

(a) reviewing the structure, size and composition (including skills, knowledge and experience) of the Boardand its committees at least annually and making recommendations on any proposed changes to theBoard to complement the REIT Manager’s corporate strategy;

(b) developing the criteria for identifying and assessing the qualifications of and evaluating candidates fordirectorship;

(c) identifying individuals who are qualified/suitable to become a member of the Board and selecting ormaking recommendations to the Board on the selection of individuals nominated for directorships;

(d) reviewing the terms and conditions of employment of all staff and Directors and recommend themanpower deployment plan (including the succession plan for the management and the Board),remuneration and retirement policies and packages;

(e) assessing the independence of independent non-executive Directors to determine their eligibility;

(f) reviewing, monitoring and reporting on the REIT Manager’s board diversity policy;

(g) making recommendations to the Board on the appointment, re-appointment or removal of Directors andsuccession planning for Directors; and

(h) making recommendations to the Board on the remuneration and retirement policies and packages forDirectors and ensuring that no Director is involved in deciding his own remuneration.

Disclosures Committee

The Disclosures Committee comprises at least three members appointed by the Board from among theDirectors, with one of whom shall be an independent non-executive Director. Upon [REDACTED], the membersof the Disclosures Committee will be Mr. Hoi Wa Fong, Mr. Yong Jia Cherng and Ms. Liu Xiaolan. Mr. Yong JiaCherng will be the initial chairman of the Disclosures Committee. The role of the Disclosures Committee includesreviewing matters relating to the disclosure of information to Unitholders and public announcements. TheDisclosures Committee also works with the management of the REIT Manager to ensure that the disclosure ofinformation is accurate, complete and not misleading.



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The Disclosures Committee’s responsibilities include, among other matters:

(a) regularly reviewing and making recommendations to the Board on matters of corporate disclosure issuesand announcements, circulars and other corporate communications regarding (without limitation)financial reporting, connected party transactions, and potential areas of conflicts of interest;

(b) overseeing compliance with applicable legal requirements and the continuity, accuracy, clarity,completeness and currency of information disseminated by or on behalf of Powerlong REIT to thepublic and applicable regulatory agencies;

(c) reviewing and approving all material non-public information and all public regulatory filings of or onbehalf of Powerlong REIT prior to such information being disseminated to the public or filed withapplicable regulatory agencies, as applicable;

(d) reviewing periodic and current reports, proxy statements, information statements, registrationstatements and any other information filed with regulatory agencies;

(e) reviewing press releases containing financial information, information about material acquisitions ordispositions or other information material to the Unitholders;

(f) reviewing correspondence containing financial information disseminated to the Unitholders; and

(g) reviewing and approving any announcement to be issued pursuant to paragraph 10.3 of the REIT Code.

CONFLICTS

All conflicts of interest shall be managed by the Board in accordance with the articles of association of theREIT Manager and applicable laws, rules and regulations. The REIT Manager shall ensure that all conflicts ofinterest relating to Powerlong REIT shall be managed and avoided. The following measures are taken in thatregard:

• the REIT Manager will be a dedicated manager to Powerlong REIT and, unless with the approval of theSFC, the REIT Manager will not manage any REIT other than Powerlong REIT nor manage other realestate assets other than those in which Powerlong REIT has an ownership interest or investment;

• the REIT Manager will ensure that it will be able to function independently from its shareholders and allsenior executives and officers will be employed by the REIT Manager or the Onshore ManagerSubsidiary on a full time basis and solely be dedicated to the operations of Powerlong REIT;

• the REIT Manager has established procedures to deal with conflicts of interest under its compliancemanual;

• the REIT Manager has established internal control systems to ensure that connected party transactionsbetween Powerlong REIT and its connected persons are monitored and undertaken according toprocedures and/or on terms in compliance with the REIT Code (or where applicable, in compliance withthe waiver conditions imposed by the SFC) and that other potential conflicts of interest that may ariseare monitored;

• all conflicts of interest involving a Substantial Unitholder or a Director, or a Powerlong REIT connectedperson through such entities, will be required to be managed by a physical Board meeting rather than awritten resolution and all independent non-executive Directors who, and whose associates, have nomaterial interest in the matter should be present at such Board meeting; and



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• a Director who has material interests in a matter which is the subject of a resolution proposed at a Boardmeeting of the REIT Manager shall abstain from voting on the resolution concerned and shall not be countedin the quorum at the Board meeting at which such resolution is proposed.

The REIT Manager has established an internal control system intended to ensure that connected partytransactions between Powerlong REIT and its connected persons are monitored and are undertaken on terms incompliance with the REIT Code. All connected party transactions must be:

(a) carried out at arm’s length, on normal commercial terms and in an open and transparent manner;

(b) valued, in relation to a property transaction, by an independent property valuer;

(c) consistent with Powerlong REIT’s investment objectives and strategy;

(d) on terms that are fair and reasonable and in the best interests of Unitholders;

(e) properly disclosed to Unitholders; and

(f) approved by the independent non-executive Directors of the REIT Manager (or a committee thereof)and, where the prior approval of Unitholders is required, the independent non-executive Directors of theREIT Manager (or a committee thereof) shall confirm, in a letter set out in the circular to Unitholders,whether the terms and conditions of the transaction are fair and reasonable and in the best interests ofUnitholders and whether Unitholders should vote in favor of the resolution.

The REIT Manager must demonstrate to the independent non-executive Directors and the Audit Committeethat all connected party transactions satisfy the foregoing criteria, which may entail (where practicable) obtainingquotations from independent third parties, or obtaining one or more valuation letters from independentprofessional valuers. Prior approval of Unitholders is required for connected party transactions where requiredunder the REIT Code, subject to any waivers granted by the SFC. Save for the appointment or removal of themanager of Powerlong REIT, a Unitholder is prohibited from voting its Units at, or being part of a quorum for, anymeeting of Unitholders convened to approve any matter in which the Unitholder has a material interest in thebusiness to be conducted and that interest is different from the interest of other Unitholders.

Under the Trust Deed, any Unitholder shall be prohibited from voting its own Units at, or being counted in thequorum for, a meeting at which it has a material interest in the business to be conducted and that interest isdifferent from the interests of other Unitholders (as determined by: (a) the REIT Manager, where the Unitholderconcerned is not a connected person related to the REIT Manager; or (b) the Trustee, where the Unitholderconcerned is a connected person related to the REIT Manager, if appropriate, in its absolute opinion) including anissue of new Units where a Unitholder may increase its holdings of Units by more than its pro rata share. After the[REDACTED], where required under the REIT Code, the Takeovers Code or the applicable provisions of theListing Rules, the REIT Manager and its connected persons shall abstain from voting in relation to the relevantissuance of new Units. The REIT Manager and its connected persons shall also abstain from voting in relation toany proposal on the termination or merger of Powerlong REIT if such proposal is recommended by the REITManager, and the REIT Manager and connected persons related to it hold interests in the Units and their interest (atthe sole determination of the Trustee) in the termination or merger of Powerlong REIT is different from that of allother Unitholders.

It is also provided in the Trust Deed that, as and to the extent required by the REIT Code or any conditions ofwaivers and exemptions from the operation of the REIT Code granted by the SFC from time to time or upon requestin writing by the REIT Manager, the Trustee shall take actions or commence proceedings on behalf of PowerlongREIT as necessary, including against any connected persons of the Trustee in relation to any transactions oragreements entered into by the Trustee for and on behalf of Powerlong REIT with such persons provided that in the



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event of any action against the connected persons of the Trustee, the Trustee shall act upon the REIT Manager’srequest and instructions. Notwithstanding the foregoing, the REIT Manager shall inform the Trustee as soon as itbecomes aware of any breach by a connected person of the Trustee of any agreement or transaction entered into byPowerlong REIT (or by the Trustee or the REIT Manager for and on behalf of Powerlong REIT) with suchconnected person and the REIT Manager may take such action as it deems necessary to protect the rights ofUnitholders and/or which is in the interests of the Unitholders.

MANAGEMENT OF BUSINESS RISK

To mitigate the business risk, the Board (by itself or acting through the Audit Committee) will meetsemi-annually to review the risks to the assets and business of Powerlong REIT and will consider and, ifappropriate, act upon any comments from the auditors of Powerlong REIT. The management of the REIT Managerwill also meet semi-annually to review the operations of Powerlong REIT and discuss continuous disclosureissues.

GENERAL MEETINGS

Powerlong REIT will in each calendar year hold an annual general meeting in addition to any other generalmeetings in that year. The Trustee or the REIT Manager may at any time convene a meeting of Unitholders. TheREIT Manager will also convene a meeting of Unitholders if requested in writing by not less than two Unitholdersregistered as holding together not less than 10% of the Units for the time being in issue and outstanding. Notice of14 days or 10 clear business days (whichever is longer) at the least of the meeting will be given to Unitholders,except that notice of 20 clear business day at the least, will be given to Unitholders for an annual general meetingor where a Special Resolution is proposed for consideration at such meeting, and the notice will specify the timeand place of the meeting and the terms of any resolutions to be proposed.

Two or more Unitholders present in person or by proxy registered as holding together not less than 10% of theUnits for the time being in issue and outstanding will form a quorum for the transaction of all business, except forthe purpose of passing a Special Resolution. The quorum for passing a Special Resolution will be two or moreUnitholders present in person or by proxy registered as holding together not less than 25% of the Units for the timebeing in issue and outstanding. The quorum for an adjourned meeting shall be such number of Unitholders who arepresent in person or by proxy, regardless of the number of Units held by them.

REPORTING AND TRANSPARENCY

Powerlong REIT will prepare its accounts in accordance with IFRS with a financial year end of December 31and a financial half-year end of June 30. In accordance with the REIT Code, the annual report and accounts forPowerlong REIT will be published and sent to the Unitholders and filed with the SFC no later than four monthsfollowing each financial year-end of Powerlong REIT and the semi-annual reports no later than two monthsfollowing the end of the period it covers.

The REIT Manager shall ensure that a full valuation of each of Powerlong REIT’s real estate (whether helddirectly by the Trustee or indirectly through a Special Purpose Vehicle) shall be conducted by a principal valuerappointed in accordance with the Trust Deed at least once a year, and may require the principal valuer to carry outadditional valuations or inspections at such other dates as the REIT Manager may determine in its sole discretion,except that the next valuation of Powerlong REIT’s real estate following the establishment of Powerlong REIT willbe effected no later than or as of the end of the relevant financial year (the first valuation to be effected at the endof the financial year in which the [REDACTED] is completed). The REIT Manager shall also ensure that theprincipal valuer shall produce a valuation report: (i) on real estate to be acquired or sold by Powerlong REIT; (ii)on non-cash consideration in the nature of real estate which is to be received for the issue of Units in accordancewith the Trust Deed; or (iii) in any other circumstance prescribed by the REIT Code, subject to any waivers grantedby the SFC.



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The REIT Manager shall keep the Unitholders informed of any material information pertaining to PowerlongREIT in a timely and transparent manner as required by the REIT Code and the provisions of Part XIVA of the SFOshall have effect, mutatis mutandis, as if Powerlong REIT is a “[REDACTED] corporation” and if the board ofdirectors of the REIT Manager are the board of directors of a “[REDACTED] corporation”.

As required by the REIT Code, the REIT Manager will inform Unitholders as soon as reasonably practicableany information or transaction concerning Powerlong REIT which: (a) is necessary to enable Unitholders toappraise the position of Powerlong REIT; or (b) is necessary to avoid a false market in the Units; or (c) might bereasonably expected to materially affect market activity in Powerlong REIT or affect the price of the Units; or (d)requires Unitholders’ approval.

The REIT Manager will also issue circulars to Unitholders in respect of transactions that, pursuant to theREIT Code (or in the reasonable opinion of the Trustee or the REIT Manager), require Unitholders’ approval orcirculars in respect of material information in relation to Powerlong REIT, in accordance with the Trust Deed.

INTERESTS OF, AND DEALINGS IN UNITS BY DIRECTORS, THE REIT MANAGER OR THESIGNIFICANT UNITHOLDERS

To monitor and supervise any dealings of Units, the REIT Manager has adopted a code containing rules ondealings by the Directors and the REIT Manager equivalent to the Model Code for Securities Transactions byDirectors of [REDACTED] Issuers contained in the Listing Rules. Pursuant to this code, all Directors andemployees of the REIT Manager, subsidiaries of the REIT Manager or the Special Purpose Vehicles who, becauseof his/her office or employment in the REIT Manager, the relevant subsidiaries of the REIT Manager or therelevant Special Purpose Vehicles, is likely to be in possession of unpublished inside information in relation to thesecurities of Powerlong REIT (“Management Persons”) wishing to deal in the Units must first have regard toprovisions in Parts XIII and XIV of the SFO with respect to insider dealing and market misconduct as if thoseprovisions applied to the securities of Powerlong REIT. In addition, a Management Person must not make anyunauthorized disclosure of confidential information, whether to co-trustees or to any other person (even those towhom he/she owes a fiduciary duty) or make any use of such information for the advantage of himself/herself orothers.

Management Persons who are aware of or privy to any negotiations or agreements related to intendedacquisitions or disposals which are notifiable transactions under Chapter 14 of the Listing Rules as if applicable toPowerlong REIT or any connected party transactions under the REIT Code or any inside information must refrainfrom dealing in the Units as soon as they become aware of them or privy to them until proper disclosure of theinformation in accordance with the REIT Code and any. Management Persons who are privy to relevantnegotiations or agreements or any inside information should caution those Management Persons who are not soprivy that there may be inside information and that they must not deal in Powerlong REIT’s securities for a similarperiod.

A Management Person must not deal in any of the securities of Powerlong REIT on any day on whichPowerlong REIT’s financial results are published and: (a) during the period of 60 days immediately preceding thepublication date of the annual results or, if shorter, the period from the end of the relevant financial year up to thepublication date of the results; and (b) during the period of 30 days immediately preceding the publication date ofthe quarterly results (if any) or half-yearly results or, if shorter, the period from the end of the relevant quarterly orhalf-year period up to the publication date of the results, unless the circumstances are exceptional. In any event, inthe case of dealings by a Management Person, the Management Person must comply with the procedures set out inthe code containing rules on dealings by the Management Person adopted by the REIT Manager.

The REIT Manager is subject to the same dealing requirements as the Directors under the code, mutatismutandis. The REIT Manager has also adopted procedures for monitoring of disclosure of interests by Directorsand the chief executive of the REIT Manager, and the REIT Manager. The provisions of Part XV of the SFO aredeemed to apply to the REIT Manager, the Directors and the chief executive of the REIT Manager and eachUnitholder and all persons claiming through or under him.



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Under the Trust Deed, Unitholders with a holding of 5% or more of the Units in issue, and the Directors and

the chief executive of the REIT Manager with an interest in the Units, will have a notifiable interest and will be

required to notify the Stock Exchange and the REIT Manager of their holdings in Powerlong REIT. The REIT

Manager shall keep a register for these purposes and it shall record in the register, against a person’s name, the

particulars provided pursuant to the notification and the date of entry of such record. The said register shall be

available for inspection by the Trustee and any Unitholder at any time during business hours upon reasonable

notice to the REIT Manager. For further details of the Trust Deed, see the section headed “The Trust Deed” in this

Document.

Subject to the provisions of the Trust Deed and without in any way affecting the generality of the provisions

of the Trust Deed, where the Trustee or the REIT Manager believes that a Unitholder may be a Substantial

Unitholder, the Trustee (on the instructions of the REIT Manager in writing) has the power to require the

Unitholder to promptly disclose to the Trustee and the REIT Manager all of the legal, beneficial and equitable

interests in Units held by the Unitholder and such other persons whose holdings of Units would be taken into

account in determining whether the Unitholder is a Substantial Unitholder. Without prejudice to the above, the

Trustee shall have the power to require any Unitholder to promptly disclose to the Trustee all of the Unitholder’s

beneficial interests in Units.

MATTERS TO BE DECIDED BY UNITHOLDERS BY SPECIAL RESOLUTION

Pursuant to the Trust Deed, decisions with respect to certain matters require specific prior approval of

Unitholders by way of Special Resolution. For further information, please refer to the section headed “The Trust

Deed—Meetings of Unitholders” in this Document.



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The Trust Deed is a complex document and the following is a summary only of the provisions of the TrustDeed, in addition to related information. A copy of the Trust Deed is available for inspection at the registeredoffice of the REIT Manager at Room 2A, 14/F, Chun Wo Commercial Centre, 23-29 Wing Wo Street, Central,Hong Kong.

The Trustee of Powerlong REIT is DB Trustees (Hong Kong) Limited, a company incorporated in Hong Kongand registered as a trust company under section 77 of the Trustee Ordinance. The Trustee is qualified to act as atrustee for collective investment schemes authorized under the SFO pursuant to the REIT Code.

THE TRUST DEED

Powerlong REIT is a REIT constituted and governed by the Trust Deed entered into between the REITManager and the Trustee, dated [●], 2021, as amended and restated. Following the [REDACTED], PowerlongREIT will be regulated by the Applicable Rules.

The relevant provisions of the Trust Deed shall be binding on the Trustee, the REIT Manager and eachUnitholder (and persons claiming through such Unitholder) as if such Unitholder had been a party to the TrustDeed. The Trust Deed shall contain covenants to be observed by each Unitholder to observe, provisions binding oneach Unitholder and an authorization by each Unitholder to require the REIT Manager and/or the Trustee to do orrefrain from doing such acts and things, as may be required in the Trust Deed.

The provisions of the Applicable Rules prescribe certain rights, duties and obligations of the REIT Manager,the Trustee and the Unitholders that have been included in the Trust Deed.

REIT STRUCTURE

Powerlong REIT is established in the form of a unit trust under Hong Kong law to invest primarily in realestate (either directly or indirectly through special purpose vehicles or joint venture entity). The REIT Managermust manage Powerlong REIT so that at least 75% of the Gross Asset Value of the Deposited Property is investedin real estate that generates recurrent rental income at all times, as required under the REIT Code. For furtherdetails of the investment objectives and policies of the REIT Manager, please refer to the section headed“Strategy” in this Document. The assets of Powerlong REIT and income arising from those assets will be held bythe Trustee on trust for the benefit of the REIT Manager initially and, upon issuance of Units, for the benefit of theUnitholders pari passu according to the number of Units held by each Unitholder, subject to the terms andconditions of the Trust Deed.

THE UNITS AND UNITHOLDERS

The rights and interests of Unitholders are contained in the Trust Deed. Under the Trust Deed, the Trusteemust exercise all due diligence and vigilance in carrying out its functions and duties and in protecting the rightsand interests of Unitholders.

Each Unit represents an undivided share in Powerlong REIT. A Unitholder has no equitable or proprietaryinterest in the underlying assets of Powerlong REIT and is not entitled to the transfer to him of any asset (or anypart thereof) or any estate or interest in any asset (or any part thereof) of Powerlong REIT.

Unless otherwise expressly provided in the Trust Deed, a Unitholder may not interfere or seek to interferewith the rights, powers, obligations, authority or discretion of the REIT Manager or the Trustee to the extent thoserights, powers, obligations, authority or discretion are properly exercised or performed under the Trust Deed,claim or exercise any right in respect of the Deposited Property or any part thereof or lodge any caveat or othernotice affecting the Deposited Property or any part thereof, or require that all or any part of the Deposited Propertybe transferred to such Unitholder.


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ISSUE OF UNITS AND/OR CONVERTIBLE INSTRUMENTS AND ISSUE PRICE

The Units will be [REDACTED] and quoted in Hong Kong Dollars. The following is a summary of theprovisions of the Trust Deed relating to the issue of Units.

The REIT Manager has the exclusive right to effect, for the account of Powerlong REIT, the creation andissue of Units and/or Convertible Instruments in accordance with the Trust Deed and subject to the provisions ofthe REIT Code and any other applicable laws and regulations. The issue of Units on the [REDACTED] for thepurpose of the [REDACTED] shall be at an issue price determined on the basis disclosed in this Document.

After the [REDACTED], new Units and/or Convertible Instruments may be offered on a pro rata basis as arights issue without the prior approval of Unitholders other than where any such issue together with suchConvertible Instruments (assuming full conversion) would increase the market capitalisation of Powerlong REITby more than 50.0% (on its own or when aggregated with any other pro rata issue of Units under the Trust Deed or[REDACTED] announced by Powerlong REIT, within the 12-month period immediately preceding theannouncement of the proposed rights issue; or (b) prior to such 12-month period where dealing in respect of Unitsissued pursuant thereto commenced within such 12-month period, together with any Convertible Instruments(assuming full conversion) granted or to be granted to Unitholders as part of such pro rata issues or[REDACTED]), in which case such issue shall require the prior approval of Unitholders by Ordinary Resolution.

Subject to certain restrictions in the Trust Deed regarding the issue of new Units to a connected person andthe REIT Code, after the [REDACTED], Units may be issued, or agreed (conditionally or unconditionally) to beissued, in any financial year (whether directly or pursuant to any Convertible Instruments), otherwise than on a prorata basis to all existing Unitholders, without the approval of Unitholders, if:

(a) the total number of new Units issued, or agreed (conditionally or unconditionally) to be issued, in thatfinancial year pursuant to this paragraph, without taking into account:

(i) any new Units issued or issuable in that financial year pursuant to any Convertible Instrumentsissued (whether in that or any prior financial year) pursuant to and in compliance with thisparagraph, to the extent that such new Units are covered by the aggregate number of new Unitscontemplated under paragraph (b) below at the Relevant Date applicable to the relevantConvertible Instruments;

(ii) such number of new Units issued or issuable pursuant to any such Convertible Instruments or anyagreement referred to in sub-paragraph (a)(iii) below, in each case as a result of adjustmentsarising from the consolidation or sub-division or re-designation of Units;

(iii) any new Units issued in that financial year pursuant to any agreement for the issuance of Units andto the extent that such new Units were previously taken into account in the calculation made underthis sub-paragraph (a) (whether in that or any prior financial year) at the Relevant Date applicableto that agreement;

(iv) any new Units issued or issuable (whether directly or pursuant to any Convertible Instruments) inthat financial year pursuant to any pro rata offer made in that financial year in accordance with theTrust Deed;

(v) any new Units issued, or agreed (conditionally or unconditionally) to be issued, otherwise than ona pro rata basis to all existing Unitholders and in respect of which, the specific prior approval ofUnitholders, in accordance with the relevant requirements hereunder and under applicable lawsand regulations (including the REIT Code), has been obtained; and/or

(vi) any new Units issued or issuable in that financial year pursuant to any reinvestment of distributionmade in accordance with the Trust Deed;


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plus:

(b) (i) the maximum number of new Units issuable at the initial issue price pursuant to any ConvertibleInstruments issued, or agreed (conditionally or unconditionally) to be issued otherwise than on apro rata basis to all existing Unitholders; and

(ii) the maximum number of any other new Units which may be issuable pursuant to any suchConvertible Instruments as of the Relevant Date thereof as estimated or determinable by the REITManager in good faith, using its best endeavors based on such assumptions as may be consideredappropriate by the REIT Manager having been confirmed in writing by the Trustee and the SFC, aswell as, having regard to the relevant terms and conditions of such Convertible Instruments(including any additional new Units issuable under any adjustment mechanism thereunder, otherthan adjustments arising from the consolidation or sub-division or re-designation of Units);

does not increase the number of Units that were outstanding at the end of the previous financial year (or, in the caseof an issue of, or an agreement (whether conditional or unconditional) to issue, Units or Convertible Instrumentsduring the first financial year, the number of Units that were outstanding as of the [REDACTED]) by more than20.0% (or such other percentage of outstanding Units as may be prescribed by the SFC) (the “PercentageThreshold”), provided that such Percentage Threshold in terms of number of Units shall, in the event of anyconsolidation or sub-division or re-designation of Units during that financial year, be proportionally adjusted togive effect to such consolidation, sub-division or re-designation of Units.

Any issue of, or any agreement (whether conditional or unconditional) to issue, new Units exceeding thePercentage Threshold will require specific prior approval of Unitholders by Ordinary Resolution at a meeting to beconvened by the REIT Manager in accordance with the provisions of the Trust Deed.

Any issue, grant or offer of Units or Convertible Instruments to a connected person will, where specifiedunder the REIT Code, require specific prior approval of Unitholders by Ordinary Resolution at a meeting to beconvened by the REIT Manager in accordance with the provisions of the Trust Deed.

The REIT Manager may, in its discretion, elect not to extend an [REDACTED] of Units under a[REDACTED] to those Unitholders whose addresses are outside Hong Kong if the REIT Manager considers suchexclusion to be necessary or expedient having regard to the relevant legal restrictions or requirements. In suchevent, the rights or entitlement to the Units of such overseas Unitholders will be offered for sale by the REITManager as the nominee and authorized agent of each such relevant Unitholder in such manner and at such price,as the REIT Manager may determine. Where necessary, the Trustee shall have the discretion to impose such otherterms and conditions in connection with such sale. The proceeds of any such sale, if any, will be paid to thesuccessful Unitholders.

BUY-BACK AND REDEMPTION OF UNITS

Unitholders have no right to demand for the buy back or redemption of their Units. The REIT Manager mustnot buy back or redeem any Units unless it is permitted to do so by the relevant codes and guidelines issued by theSFC (including, but not limited to, the Takeovers Code and the circular to management companies ofSFC-authorized REITs titled “On-market Unit Repurchases by SFC-authorized REITs” dated January 31, 2008).Any buy-back or redemption of Units by the REIT Manager during such time must be effected in accordance withsuch codes and guidelines.

[REDACTED]


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[REDACTED]

RIGHTS AND LIABILITIES OF UNITHOLDERS

The key rights of Unitholders include the right to:

(a) receive income and other distributions attributable to the Units held;

(b) receive audited accounts and the annual reports and semi-annual reports of Powerlong REIT; and

(c) participate in the termination of Powerlong REIT by receiving a share of all net cash proceeds derived

from the realization of the assets of Powerlong REIT, in accordance with their proportionate interests in

Powerlong REIT.

No Unitholder has a right to require that any of the Deposited Property or any part of the Deposited Property

be transferred to him.

Unitholders shall not give any directions to the REIT Manager or the Trustee (whether at a meeting of

Unitholders convened pursuant to the Trust Deed or otherwise) if it would require the Trustee or the REIT Manager

to do or omit doing anything which may result in:

(a) the exercise of any discretion expressly conferred on the Trustee or the REIT Manager by the Trust Deed

or the determination of any matter which, under the Trust Deed, requires the agreement of either or both

of the Trustee and the REIT Manager; provided that nothing in this paragraph shall limit the right of a

Unitholder to require the proper operation of Powerlong REIT in accordance with the Trust Deed or the

compliance by the Trustee or the REIT Manager with their respective obligations under the Trust Deed;

or

(b) Powerlong REIT ceasing to comply with the REIT Code or the Listing Rules or the Trust Deed or any

applicable rules to Powerlong REIT.

A Unitholder shall not be liable to the REIT Manager or the Trustee to make any further payments to

Powerlong REIT after he has fully paid the consideration to subscribe for or acquire his Units or to accept any

liability in respect of his Units. These provisions seek to ensure that if the [REDACTED] of the Units held by a

Unitholder has been fully paid, no such Unitholder, by the sole reason of being a Unitholder, be personally liable

to indemnify the Trustee or any creditor of Powerlong REIT if the liabilities of Powerlong REIT exceed its assets.

INVESTMENT RESTRICTIONS

Subject to the requirements and exceptions under the REIT Code, the REIT Manager shall ensure that the

following investment restrictions are complied with:

(a) subject as provided in the Trust Deed, no investment shall be made by Powerlong REIT which would

result in non-compliance with the REIT Code (unless waived by the SFC), the Trust Deed, applicable

investment restrictions in the Listing Rules (if any) and applicable laws and regulations;

(b) Powerlong REIT may only invest in Authorized Investments and other investments permitted by the

REIT Code and/or published guidelines, policies, practice statements or other guidance issued by the

SFC from time to time;


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(c) Powerlong REIT shall not invest in vacant land unless such investment is part-and-parcel of property

development which may be undertaken in accordance with the REIT Code and within the investment

objective or policy of Powerlong REIT;

(d) Powerlong REIT shall not lend, assume, guarantee, endorse or otherwise become directly or contingently

liable for or in connection with any obligation or indebtedness of any person nor shall any part of the

Deposited Property be used to secure the indebtedness of any person or any obligations, liabilities or

indebtedness, without the prior written consent of the Trustee;

(e) Powerlong REIT shall not acquire any investment which involves the assumption of any liability that is

unlimited;

(f) save as may be permitted under the REIT Code and/or other published guidelines, policies, practice

statements, guidance issued by the SFC:

(i) Powerlong REIT shall hold each investment (which is in the nature of a particular piece of realestate or shares in any Special Purpose Vehicle or Joint Venture Entity holding interest in aparticular piece of real estate, other than a Non-qualified Minority-owned Property) for a period ofat least two years from the date of the completion of its acquisition, unless the REIT Manager hasclearly communicated to the Unitholders the rationale for disposal prior to the expiry of suchperiod and the Unitholders approve the disposal of such investment by Special Resolution at ameeting to be duly convened and held in accordance with the Trust Deed, or in any other cases aspermitted from time to time under The REIT Code and/or any published guidelines, policies,practice statements or other guidance listed by the SFC;

(ii) subject to sub-paragraph (vi) below, the value of Powerlong REIT’s holding of the RelevantInvestments issued by any single group of companies shall not exceed 10% of the Gross AssetValue of the Deposited Property at any time;

(iii) subject to sub-paragraph (vi) below, the value of Powerlong REIT’s holding of any Non-qualifiedMinority-owned Property shall not exceed 10% of the Gross Asset Value of the Deposited Propertyat any time;

(iv) subject to sub-paragraph (vi) below, the value of Powerlong REIT’s holding of all other ancillaryinvestments (as defined in the REIT Code and/or other published guidelines, policies, practicestatements, guidance issued by the SFC) shall not exceed 10% of the Gross Asset Value of theDeposited Property at any time;

(v) subject to sub-paragraph (vi) below, the REIT Manager, on behalf of Powerlong REIT, may engageor participate in Property Development and Related Activities only if the Aggregate DevelopmentCosts of all Property Development and Related Activities shall not exceed the maximum limit of25% of the Gross Asset Value of the Deposited Property (“Property Development Cap”); and

(vi) the combined value of: (a) all Relevant Investments of Powerlong REIT; (b) all Non-qualifiedMinority-owned Properties of Powerlong REIT; (c) other ancillary investments of PowerlongREIT; and (d) all of the Aggregate Development Costs of Powerlong REIT, shall not exceed 25%(or such other higher or lower percentage as may be permitted by the REIT Code or as may bespecifically permitted by the relevant authorities) of the Gross Asset Value of the DepositedProperty (“Maximum Cap”) at any time.


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“Authorized Investments” comprise: (i) real estate (including Minority-owned Properties) as permittedunder the REIT Code; (ii) any improvement or extension of or addition to or reconstruction or renovation or otherdevelopment of any real estate (including Property Development and Related Activities); (iii) RelevantInvestments; (iv) assets incidental to the ownership of real estate including, without limitation, furniture, carpets,furnishings, machinery and plant and equipment installed or used or to be installed or used in or in association withany real estate; (v) cash and cash equivalents; (vi) shares in the issued share capital of, and loans to, any SpecialPurpose Vehicle or Joint Venture Entity and any goodwill and other intangible assets acquired in relation to theacquisition of such shares in the Special Purpose Vehicle or Joint Venture Entity (as the case may be); (vii)investments in relation to arrangements for the purposes of enhancing the return on, or reducing the risksassociated with; and (viii) any other assets or investments as permitted by the REIT Code, the AuthorizedInvestments contemplated above or of other Investments, or in respect of the Trust generally, and includinginvestments in the form of derivative instruments for hedging purposes. In each case whether held directly by theTrustee, or indirectly through a Special Purpose Vehicle or, where applicable Joint Venture Entity or otherwisepursuant to the Trust Deed.

The REIT Manager shall ensure that each Special Purpose Vehicle and/or Joint Venture Entity shall complywith the requirements set out in the Trust Deed. Notwithstanding any provision in the Trust Deed, in respect ofNon-qualified Minority-owned Properties, the REIT Manager and the Trustee shall exercise due care and skill tocomply with the general requirements under the REIT Code, unless such matters are not within their control.

VALUATION OF INVESTMENTS

The REIT Manager shall ensure that all valuations made by Approved Valuers pursuant to the Trust Deedshall be carried out in good faith in accordance with market practice on such basis as the Approved Valuersrespectively may determine to be appropriate, subject to the terms of the Trust Deed and the provisions of the REITCode. The valuation methodology for valuation of real estate shall follow the “Valuation Standards on Properties”published from time to time by the Hong Kong Institute of Surveyors or the International Valuation Standardsissued from time to time by the International Valuation Standards Council. Once adopted, the same valuationstandards shall be applied consistently to all valuations of the real estate.

In relation to any investment which is not in the nature of real estate, the REIT Manager when making anyrecommendation to the Trustee as to the valuer thereof shall have regard to the particular nature of such investmentwhich is the subject of the valuation, recommendation or report.

The REIT Manager shall determine the NAV of the Deposited Property based upon the Approved Valuer’s or,where applicable, JV Valuer’s valuation of real estate and the value of other Deposited Property (in accordancewith the methodology stated in the Trust Deed), less the liabilities of Powerlong REIT.

The Trustee shall take all reasonable care to ensure that the NAV of the Deposited Property and NAV of theDeposited Property per Unit (being the NAV of the Deposited Property divided by the number of Units then inissue) is calculated by the REIT Manager in accordance with the Trust Deed as and when an annual valuationreport of Powerlong REIT’s real estate is issued by an Approved Valuer or, where applicable, the JV Valuer for therelevant period, and that such NAV of the Deposited Property and NAV of the Deposited Property per Unit shall bepublished in the annual report for Powerlong REIT.

JOINT VENTURE ENTITIES AND MINORITY-OWNED PROPERTIES

The REIT Manager may, where it considers it to be in the best interests of Unitholders, invest the assets ofPowerlong REIT in real estate where Powerlong REIT has less than 100% ownership and control. Powerlong REITmay invest in jointly owned real estate (including Minority-owned Properties) via a Joint Venture Entity aspermitted by and subject to the REIT Code.


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Powerlong REIT may invest in jointly owned real estate in which Powerlong REIT will not have majorityownership and control (a “Minority-owned Property”), as defined in the REIT Code and/or other publishedguidelines, policies, practice statements, guidance issued by the SFC, provided that the combined value of: (i) allMinori ty-owned Propert ies, other than Qualified Minority-owned Propert ies (the “Non-qualifiedMinority-owned Properties”); (ii) all Relevant Investments; (iii) other ancillary investments of Powerlong REIT;and (iv) all of the Property Development Costs together with the aggregate contract value of all uncompleted unitsof real estate acquired by Powerlong REIT as permitted by the REIT Code, shall not exceed the Maximum Cap atany time.

Pursuant to paragraph 7.7C of the REIT Code, where a Minority-owned Property can satisfy, among otherthings, the following principles (subject to any waiver or exemption given by the SFC) (a “QualifiedMinority-owned Property”), it may, subject to the SFC’s approval, be excluded from the calculation of theMaximum Cap:

(i) the investment in such Minority-owned Property is in line with the REIT Manager’s investment strategyand objective as set out in the section headed “Strategy” in this Document and in the best interests ofUnitholders;

(ii) subject to customary pre-emptive rights and item (f) in the paragraph headed “Investment Restrictions”above, Powerlong REIT has freedom to dispose of such investment;

(iii) at least 75% (or such other higher or lower percentage as may be permitted by the REIT Code or as maybe specifically permitted by the relevant authorities) of the Gross Asset Value of the Deposited Propertyshall be invested in real estate that generates recurrent rental income at all times; and

(iv) there are proper safeguards or measures in place to increase the autonomy and influence of the REITManager over matters relating to the management of such Minority-owned Property to the extentallowed under applicable laws and regulations.

AMENDMENT OF THE TRUST DEED

The Trustee and the REIT Manager shall be entitled by supplemental deed and with the prior approval of theSFC to modify, alter or add to the provisions of the Trust Deed in such manner and to such extent as they mayconsider expedient for any purpose provided that:

(a) unless the Trustee certifies in writing that in its opinion such modification, amendment, variation,alteration or addition:

(i) does not materially prejudice the interests of Unitholders, does not to any material extent releasethe Trustee or the REIT Manager or any other person from any liability to the Unitholders and doesnot increase the costs and charges payable from the Deposited Property (other than the costs,charges, fees and expenses incurred in connection with the supplemental deed); or

(ii) is necessary in order to comply with applicable fiscal, statutory or official requirements (whetheror not having the force of law) including, without limitation, requirements under any ApplicableRules; or

(iii) is necessary to correct a manifest error,

no such modification, amendment, variation, alteration or addition shall be made without the sanction of a SpecialResolution; and


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(b) no such modification, amendment, variation, alteration or addition to the Trust Deed shall impose uponany Unitholder any obligation to make any further payments in respect of his Units after he has fullypaid the consideration to subscribe for or acquire his Units or to accept any liability in respect of hisUnits.

MEETINGS OF UNITHOLDERS

The REIT Manager shall at least once in every calendar year convene a general meeting of the Unitholders asthe annual general meeting thereof in addition to any other meetings in that year and shall specify the meeting assuch in the notice calling it. The annual general meeting shall be held at such time and place as the REIT Managershall appoint and not less than 20 clear Business Days’ notice in writing thereof shall be given to the Unitholders.

The Trustee or the REIT Manager may respectively (and the REIT Manager shall at the request in writing ofnot less than two Unitholders registered as holding together not less than 10.0% of the Units for the time being inissue and outstanding) at any time convene a meeting of Unitholders at such time or place in Hong Kong (subjectas hereinafter provided) as the party convening the meeting may think fit and propose resolutions for considerationat such meeting. The REIT Manager shall determine the classification of the business of such meeting as special orordinary in accordance with the REIT Code and the following provisions of the Trust Deed shall apply thereto.

At any meeting of Unitholders, the REIT Manager or a person nominated by the REIT Manager shall be thechairman of the meeting.

Except as otherwise provided for in the Trust Deed, 14 days’ or 10 clear Business Days’ notice (whichever isthe longer) at the least (exclusive of the day on which the notice is served or deemed to be served and of the day forwhich the notice is given) of every meeting to be held shall be given to the Unitholders in the manner provided inthis Deed. The notice shall specify the place, day and hour of meeting and the terms of the resolutions to beproposed thereat. A copy of the notice shall be sent by post to the Trustee unless the meeting shall be convened bythe Trustee in which case a copy of the notice shall be sent by post to the REIT Manager. The accidental omissionto give notice to or the non-receipt of notice by any of the Unitholders shall not invalidate the proceedings at anymeeting.

At any meeting of Unitholders, two or more Unitholders present in person or by proxy registered as holdingtogether not less than 10.0% of the Units for the time being in issue and outstanding shall form a quorum for thetransaction of business, except for the purpose of passing a Special Resolution. The quorum for passing a SpecialResolution shall be two or more Unitholders present in person or by proxy registered as holding together not lessthan 25.0% of the Units in issue and outstanding. No business shall be transacted at any meeting unless therequisite quorum is present at the commencement of business. Split proxies shall be permitted.

Any Unitholder shall be prohibited from voting his own Units at, or being counted in the quorum for, ameeting at which he has a material interest in the business to be conducted and that interest is different from theinterests of other Unitholders as determined by the REIT Manager. For example, where the Unitholder(s)concerned is (are) not connected persons of the REIT Manager under the REIT Code or the Trustee (where theUnitholder(s) concerned is (are) connected persons of the REIT Manager, if appropriate, in its absolute opinion)including an issue of new Units where a Unitholder may increase his holdings of Units by more than his pro ratashare, but excluding the appointment or removal of the REIT Manager.

At any meeting, a resolution put to the meeting shall be decided on a poll and the result of the poll shall bedeemed to be the resolution of the meeting. On a poll, every Unitholder who is present in person or by proxy shallhave one vote for every Unit of which it is the Unitholder, provided such Units are fully paid up. Votes passed bya Unitholder in contravention of the REIT Code or Listing Rules shall not be counted. Where any Unitholder is,under the REIT Code, required to abstain from voting on any particular resolution or restricted to voting only foror only against any particular resolution, any votes cast by or on behalf of Unitholders in contravention of such


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requirement or restriction shall not be counted. An instrument of proxy may be in the usual common form or in anyother form which the Trustee shall approve. The instrument appointing a proxy and the power of attorney or otherauthority (if any) under which it is signed or a notarially certified copy of such power of attorney or authority shallbe deposited at such place as the REIT Manager or the Trustee may in the notice convening the meeting direct, orif no such place is appointed then at the registered office of the [REDACTED], not less than 48 hours before thetime appointed for holding the meeting or adjourned meeting at which the person named in the instrumentproposes to vote, and in default the instrument of proxy shall not be treated as valid. No instrument appointing aproxy shall be valid after the expiration of 12 months from the date stated in it as the date of its execution. Deliveryof an instrument appointing a proxy shall not preclude a Unitholder from attending and voting at the meeting orpoll concerned and, in such event, the instrument appointing the proxy shall be deemed to be revoked. A personappointed to act as a proxy need not be a Unitholder.

Any Unitholder being a corporation may by resolution of its directors (or other governing body) authorizeany person to act as its representative at any meeting of Unitholders and a person so authorized shall at suchmeeting be entitled to exercise the same powers on behalf of the corporation so represented as the corporationcould exercise if it were an individual Unitholder.

HKSCC Nominees (or any successor thereto) may appoint more than one proxy or corporate representative toattend and vote at Unitholders’ meetings as if they were individual Unitholders and such representatives shall notbe required to produce any documents of title or notarised authorisation in respect of such appointment. Where aUnitholder is a recognized clearing house (within the meaning of the SFO) or its nominee(s), it may authorize suchperson or persons as it thinks fit to act as its representative(s) or proxy(ies) at any Unitholders’ meeting or anyclass of Unitholders provided that, if more than one person is so authorized, the authorisation or proxy form mustspecify the number and class of Units in respect of which each such person is so authorized. Each person soauthorized will be entitled to exercise the same power on behalf of the recognized clearing house as that clearinghouse or its nominee(s) could exercise if it were an individual Unitholder.

Under the Trust Deed, decisions with respect to certain matters require specific prior approval of Unitholdersby way of Special Resolution. Such matters include: (a) changes in the REIT Manager’s investment policies orstrategies for Powerlong REIT; (b) disposal of any of Powerlong REIT’s investment (which is in the nature of realestate or shares in any Special Purpose Vehicle holding interest in real estate) prior to the expiry of two years fromthe time of Powerlong REIT’s holding of such investment; (c) any increase in the rate above the permitted limit orchange in structure of the REIT Manager’s fees; (d) any increase in the rate above the permitted limit or change instructure of the Trustee’s fees; (e) certain modifications of the Trust Deed; (f) termination of Powerlong REIT; and(g) merger of Powerlong REIT. Unitholders may also, by way of a Special Resolution, (i) remove PowerlongREIT’s auditors and appoint other auditors; or (ii) remove the Trustee.

Any decisions to be made by resolution of the Unitholders other than Special Resolutions or as specifiedotherwise in the Trust Deed or Applicable Rules, shall be made by Ordinary Resolution. Such matters to be madeby Ordinary Resolution include, without limitation: (a) any issue of Units after the [REDACTED] which willrequire the approval of Unitholders pursuant to the Trust Deed and/or the Applicable Rules (please refer to thesection headed “The Trust Deed—Issue of Units and/or Convertible Instruments and Issue Price” in this Documentfor details); (b) the appointment or removal of the REIT Manager; (c) the removal of the principal valuer ofPowerlong REIT; and (d) any connected party transaction entered into between any connected person and withPowerlong REIT or any Special Purpose Vehicle.

POWERS, DUTIES AND OBLIGATIONS OF THE TRUSTEE

The Trustee’s powers, duties and obligations are set out in the Trust Deed. These powers and duties include,but are not limited to:

(1) carrying out the instructions of the REIT Manager in respect of investments unless they are in conflictwith this Document, the Trust Deed or other constitutive documents of Powerlong REIT, the REIT Codeor under other applicable law;


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(2) ensuring that the Deposited Property is properly segregated and held for the benefit of the Unitholders in

accordance with the provisions of the Trust Deed and any other relevant constitutive documents of

Powerlong REIT;

(3) overseeing the activities of the REIT Manager in accordance with and for compliance with the Trust

Deed, other relevant constitutive documents of Powerlong REIT and the regulatory requirements

applicable to Powerlong REIT; and

(4) ensuring that all the investment activities carried out by the REIT Manager are in line with the

investment objective and policy of Powerlong REIT and the constitutive documents of Powerlong REIT

and are in the interests of the Unitholders.

The Trustee shall exercise all due diligence and vigilance in carrying out its functions and duties and in

protecting the rights and interests of Unitholders. In the exercise of its powers, the Trustee may (on the instruction

of the REIT Manager in writing) and subject to the provisions of the Trust Deed, acquire and dispose of any

Authorized Investments, borrow moneys and issue guarantees for the account of Powerlong REIT and encumber

any asset. However, the Trustee shall take all reasonable care to ensure that Powerlong REIT (including, where

relevant, a Special Purpose Vehicle or Joint Venture Entity) has good marketable legal and beneficial title to any

real estate owned by Powerlong REIT (including where relevant, a Special Purpose Vehicle or Joint Venture Entity)

and that each of the contracts (such as property contracts, rental agreements, joint venture or joint arrangement

agreements and any other agreements) entered into by the Trustee on behalf of Powerlong REIT or as otherwise

notified to the Trustee by the REIT Manager (including, where relevant, agreements entered into by a Special

Purpose Vehicle or Joint Venture Entity) with respect to the investments is legal, valid and binding and enforceable

by or on behalf of Powerlong REIT (including, where relevant, a Special Purpose Vehicle or Joint Venture Entity)

in accordance with its terms. It shall not acquire any investment which conflicts with the Trust Deed, the REIT

Code or any applicable law or otherwise involves the assumption of any liability that is unlimited.

The Trustee shall be responsible for the appointment of the board of directors of all Special Purpose Vehicles

and Joint Venture Entities but shall not be responsible for finding any suitable individuals or providing any person

as such candidate or nominee director or directors. In appointing suitable nominees of the REIT Manager as

directors of the Special Purpose Vehicle or the Joint Venture Entity, as the case may be, the Trustee may exercise

discretion in refusing to appoint any nominee which the Trustee considers to be insufficiently qualified or in

respect of whose integrity the Trustee is not satisfied.

The Trustee has the power but except for the purpose of complying with the REIT Code, shall not be under

any obligation, to institute, acknowledge service of, appear in, prosecute or defend any action, suit, proceedings or

claim in respect of the provisions of the Trust Deed or in respect of the Deposited Property or any part thereof, or

in respect of any entitlement or interest of Powerlong REIT or any corporate or Unitholders’ action (which in its

opinion would or might involve it in expense or liability), unless the REIT Manager shall so request in writing. As

and to the extent required by the REIT Code or any conditions of waivers and exemptions from the operation of the

REIT Code granted by the SFC or upon request in writing by the REIT Manager, the Trustee shall take actions or

commence proceedings in its capacity as trustee of Powerlong REIT as necessary including but not limited to

action against any connected persons through the Trustee in relation to any transactions or agreements entered into

by the Trustee in its capacity as trustee of Powerlong REIT with such persons provided that the Trustee shall have

discretion to refrain from taking actions or commencing proceedings after consultation with the REIT Manager if

it considers in its absolute discretion that such action is not in the best interests of the Unitholders.


THE TRUST DEED

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Powerlong REIT may legally and beneficially acquire and own the issued share capital of any Special

Purpose Vehicles in accordance with the REIT Code if the REIT Manager considers it necessary or desirable for

Powerlong REIT to do so, in which event the REIT Manager shall instruct the Trustee to, and the Trustee shall

accordingly establish, subscribe for or acquire by transfer, or otherwise invest in its capacity as trustee of

Powerlong REIT a Special Purpose Vehicle provided that: (i) the Special Purpose Vehicle is wholly-owned by

Powerlong REIT; or there are sufficient and proper safeguards to address the risks arising from the non-wholly

owned structure in the case where such Special Purpose Vehicle is not wholly-owned by Powerlong REIT; (ii) such

Special Purpose Vehicle is established for the sole purpose of holding real estate for Powerlong REIT and/or

arranging financing for Powerlong REIT; and (iii) such investment is not in conflict with the Trust Deed, the REIT

Code and other applicable laws and regulations, and to the extent required by the REIT Code, and unless otherwise

generally or specifically permitted by the SFC, such Special Purpose Vehicle shall be incorporated or redomiciled

in a jurisdiction which, in the opinion of the REIT Manager, has established laws and corporate governance

standards which are commensurate with those observed by companies incorporated in Hong Kong.

Powerlong REIT shall hold each investment (which is in the nature of real estate or shares in any Special

Purpose Vehicle or Joint Venture Entity holding interest in a particular piece of real estate, other than a

Non-qualified Minority-owned Property) for a period of at least two years from the date of the completion of its

acquisition (or if Powerlong REIT engages in Property Development and Related Activities, from the date that

such Property Development and Related Activities in respect of that investment is completed), unless the REIT

Manager has clearly communicated to the Unitholders the rationale for disposal prior to the expiry of such period

and the Unitholders approve the disposal of such investment by Special Resolution at a meeting to be duly

convened and held in accordance with the Trust Deed.

The Trustee may, subject to the provisions of the Trust Deed and for the purpose of carrying out and

performing the duties and obligations on its part as trustee of the Trust, employ or engage any bankers,

accountants, brokers, financial advisers, lawyers, tax advisers, Approved Valuers, computer experts and such other

persons as may be necessary, usual or desirable for the purpose of exercising its powers and performing its

obligations and all fees, charges and moneys payable to any such persons and all disbursements, expenses, duties

and outgoings properly chargeable in respect thereof shall be paid out of the Deposited Property.

Although the Trustee may borrow money for the purpose of Powerlong REIT, the Trustee shall take all

reasonable care to ensure that the investment and borrowing provisions set out in the Trust Deed and the conditions

under which Powerlong REIT was authorized by the SFC pursuant to the SFO and the conditions under which the

REIT Manager was licensed by the SFC to manage the Trust and notified to the Trustee are complied with. All

borrowings shall be conducted at arm’s length and the terms shall be commensurate with those transactions of

similar size and nature. No new borrowing or money raising shall be requisitioned or made by the REIT Manager

under the Trust Deed if such borrowing or raising, together with the aggregate of all other borrowings or raisings

made by the Trustee at the instruction of or made by the REIT Manager under the Trust Deed (in each case, whether

directly or through Special Purpose Vehicles, and still remaining to be repaid), would in aggregate, exceed: (A)

50% (or such other percentages as may be permitted by the REIT Code or as may be specifically permitted by the

relevant authorities) of the Gross Asset Value of the Deposited Property; or (B) such lower threshold as may be

contractually agreed under any facilities agreement.

Powerlong REIT shall not lend, assume, guarantee, endorse or otherwise become directly or contingently

liable for or in connection with any obligation or indebtedness of any person nor shall any part of the Deposited

Property be used to secure the indebtedness of any person or any obligations, liabilities or indebtedness, without

the prior consent of the Trustee.


THE TRUST DEED

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Neither the REIT Manager nor the Trustee shall be liable to account to any Unitholder for any such payment

made or suffered by the REIT Manager or the Trustee (as the case may be) in good faith and in the absence of fraud,

negligence, wilful default, a breach of the Trust Deed or a breach of trust (in the case of the Trustee) to any duly

empowered fiscal authority of Hong Kong or elsewhere for taxes or other charges in any way arising out of or

relating to any transaction or whatsoever nature under the Trust Deed notwithstanding that any such payments

ought not to be, or need not have been, made or suffered. Any liability incurred and any indemnity to be given by

the Trustee shall be limited to the assets of Powerlong REIT over which the Trustee has recourse provided that the

Trustee has acted without fraud, negligence, or wilful default, breach of trust, breach of the Trust Deed, or breach

of any of the other constitutive documents to which the Trustee is a party, the REIT Code or applicable laws and

regulations. The Trust Deed contains certain indemnities in favor of the Trustee under which it will be indemnified

out of the assets of Powerlong REIT for liability incurred, provided that the Trustee has acted without fraud,

negligence, wilful default, breaches of the Trust Deed, breach of trust, breach of the constitutive documents (to

which it is a party) or breach of the Applicable Rules.

RETIREMENT AND REMOVAL OF THE TRUSTEE

The Trustee may retire or be removed under the following circumstances:

(a) The Trustee shall not be entitled to retire voluntarily except upon the appointment of a new trustee

whose appointment is subject to the prior approval of the SFC. The retirement of the Trustee shall take

effect at the same time as the new trustee takes up office as the trustee of Powerlong REIT.

(b) The Trustee may be removed by prior notice in writing to the Trustee by the REIT Manager in any of the

following events:

(i) if the Trustee goes into liquidation (except a voluntary liquidation for the purpose of

reconstruction or amalgamation upon terms previously approved in writing by the REIT Manager)

or if a receiver is appointed over any of its assets or if a judicial manager is appointed in respect of

the Trustee (or any such analogous process occurs or any analogous person is appointed in respect

of the Trustee);

(ii) if the Trustee ceases to carry on business; or

(iii) if the Unitholders by Special Resolution duly passed at a meeting of Unitholders held in

accordance with the provisions contained in the Trust Deed.


THE TRUST DEED

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TRUSTEE’S FEE

The remuneration of the Trustee shall comprise:

(i) a one-off acceptance fee as agreed between the Trustee and the REIT Manager of RMB180,000; and

(ii) (in each financial year, an ongoing fee, the rate of which will be determined in accordance with thethresholds set out below, subject to a minimum amount of RMB56,000 per month:

Value of Deposited Property Fee Rate per Annum

(aa) where the value of the Deposited Property is less thanRMB4 billion 0.0250% per annum of the value ofthe Deposited Property (which may be increasedfrom time to time to a maximum percentage of0.06% per annum of the value of the DepositedProperty)

0.0250% per annum of the value of theDeposited Property (which may beincreased from time to time to a maximumpercentage of 0.06% per annum of thevalue of the Deposited Property)

(bb) where the value of the Deposited Property is, or isgreater than, RMB4 billion but less than RMB7.5billion 0.0200% per annum of the value of theDeposited Property (which may be increased fromtime to time to a maximum percentage of 0.06% perannum of the value of the Deposited Property)


(cc) where the value of the Deposited Property is, or isgreater than, RMB7.5 billion but not exceedingRMB11.5 billion 0.0175% per annum of the valueof the Deposited Property (which may be increasedfrom time to time to a maximum percentage of0.06% per annum of the value of the DepositedProperty)


(dd) where the value of the Deposited Property is, or isgreater than RMB11.5 billion but not exceedingRMB15.5 billion 0.0160% per annum of the valueof the Deposited Property (which may be increasedfrom time to time to a maximum percentage of0.06% per annum of the value of the DepositedProperty)


(ee) where the value of the Deposited Property is, or isgreater than RMB15.5 billion 0.0150% per annumof the value of the Deposited Property (which maybe increased from time to time to a maximumpercentage of 0.06% per annum of the value of theDeposited Property)


Where there is an increase in the percentage rate applicable to any of (aa), (bb), (cc), (dd) or (ee), the otherpercentage rates may also be increased. Where a threshold for the value of the Deposited Property set out in thefirst column above is exceeded, the fee rate at the next level shall be applied to the entire value of the DepositedProperty (and shall not be applied only to the amount by which such threshold is exceeded).


THE TRUST DEED

– 233 –

The Trustee shall give at least one month’s prior written notice to the REIT Manager and the Unitholders of

any increase in the rate of the remuneration of the Trustee up to and including the maximum rate of the ongoing fee

that the Trustee proposes to charge pursuant to the Trust Deed. Any such increase must be approved by the REIT

Manager. Any increase in the maximum rate, or any change to the structure of the Trustee’s remuneration, shall be

subject to the passing of a Special Resolution.

The remuneration of the Trustee shall be payable out of the Deposited Property semi-annually in arrears

(within 30 days of the end of every six calendar months) and will be calculated by reference to the unaudited

management accounts of Powerlong REIT prepared by the REIT Manager for the relevant six months. The

remuneration of the Trustee shall be payable out of the Deposited Property in cash. The remuneration payable to

the Trustee for a broken period shall be pro-rated on a time basis. For the avoidance of doubt, the remuneration of

the Trustee for the first financial year shall be pro-rated according to the number of days between the

[REDACTED] and ending on December 31, 2021.

The ongoing fees calculated in accordance with the above are subject to adjustment after the publication of

the audited financial statements of Powerlong REIT for the financial year, as follows:

Adjustment = (RPF% x DP) – SF

Where:

RPF = the relevant percentage figure determined in accordance with the table above;

DP = the value of the Deposited Property as published in the audited financial statements ofPowerlong REIT for the relevant financial year; and

SF = the sum of the semi-annually ongoing fees received by the Trustee in respect of therelevant financial year.

Where the above adjustment is positive, Powerlong REIT shall pay the difference to the Trustee within 30

days after the publication of the audited accounts of Powerlong REIT. Where the adjustment is negative, the

Trustee shall pay the difference to Powerlong REIT within 30 days after publication of the audited financial

statements of Powerlong REIT for the relevant financial year. For the avoidance of doubt, the above adjustment

shall not affect the minimum fee of RMB56,000 per month.

The amount of remuneration payable to the Trustee shall be before any deduction of any applicable sales tax,

government impositions, duties and levies whatsoever imposed thereon by the relevant authorities in Hong Kong.

The remuneration of the Trustee shall be paid in full, free of any restriction or condition, without set-off or

counterclaim and free and clear of any deduction or withholding for or on account of any tax, local or otherwise.

If any payments of trustee fee due under the Trust Deed are subject to any deductions or withholdings for any

present or future taxes, duties, fees, liabilities or other charges imposed by any competent governmental authority,

then an additional amount shall be paid or reimbursed to the Trustee as is necessary so that the amount actually

received by the Trustee equals the full amount of trustee fee payable or reimbursable under the Trust Deed.

If the Trustee finds it expedient, necessary or is requested by the REIT Manager to undertake duties which are

of an exceptional nature or otherwise outside the scope of the Trustee’s normal duties in the ordinary course ofnormal day-to-day business operations of Powerlong REIT including the acquisition of or divestment or disposalof any Authorized Investment by Powerlong REIT after the [REDACTED], the Trustee is entitled to charge and bepaid, out of the Deposited Property, such fees and expenses on a time cost basis at a rate to be agreed with the REITManager.


THE TRUST DEED

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TERMINATION OF POWERLONG REIT

Under the Trust Deed, Powerlong REIT shall be terminated as follows:

Termination if Powerlong REIT is wound up by a court order or the operation of law

Powerlong REIT will be terminated if it is wound up by a court order or is otherwise terminated by theoperation of law. Powerlong REIT will also be terminated if for any reason, there is no manager under the Trust fora period of more than 60 calendar days or such longer period as the Trustee considers appropriate. OtherwisePowerlong REIT shall continue until the expiration of 80 years less one day from the date of commencement ofPowerlong REIT as provided in the Trust Deed, or until Powerlong REIT is terminated or merged in the mannerdescribed below or as set out in the sub-section headed “Merger of Powerlong REIT” below.

Termination with the specific prior approval by Special Resolution

Save as described above, the termination of Powerlong REIT shall require specific prior approval by SpecialResolution at a meeting to be convened in accordance with the provisions contained in the Trust Deed by the REITManager. Where the proposal to terminate Powerlong REIT is recommended by the REIT Manager, the REITManager and any connected persons of the REIT Manager shall abstain from voting if (i) they hold interests in theUnits; and (ii) their interest (at the sole determination of the Trustee) in terminating Powerlong REIT is differentfrom that of all other Unitholders. The Trustee shall have no liability for any consequence arising out of suchtermination recommended by the REIT Manager and approved by Special Resolution in the absence of fraud, badfaith, negligence or wilful default, breach of any constitutive documents to which the Trustee is a party, breach ofthe REIT Code or other applicable laws and regulations or a breach of trust.

An announcement on the termination of Powerlong REIT shall be made by the REIT Manager to theUnitholders as soon as reasonably practicable in accordance with the provisions of the Trust Deed. The REITManager shall also serve on Unitholders, within 15 business days of the announcement, a circular convening anextraordinary general meeting containing the following information: (a) the rationale for the termination ofPowerlong REIT; (b) the effective date of the termination; (c) the manner in which the Deposited Property are to bedealt with; (d) the procedures and timing for the distribution of the proceeds of the termination; (e) a valuationreport of Powerlong REIT prepared by an Approved Valuer which is dated not more than three months before thedate of the circular; (f) the alternatives available to the Unitholders (including, if possible, a right to switchwithout charge into another authorized scheme); (g) the estimated costs of the termination and who is expected tobear such costs; and (h) such other material information of which the Unitholders should be notified as the REITManager determines.

Upon the Unitholders’ approval of the termination of Powerlong REIT, no further Units shall be created,issued, canceled or sold. No transfer of Units may be registered and no other change to the register of Unitholdersmay be made without the sanction of the Trustee following the announcement referred to above. No furtherinvestments may be made by Powerlong REIT upon its termination and the obligations of the Trustee, the REITManager and the Approved Valuer shall continue until the completion of the liquidation of the assets andtermination of Powerlong REIT.

Generally, upon approval of the termination of Powerlong REIT, the Trustee shall oversee the realization ofthe investments by the REIT Manager (which the REIT Manager shall effect as soon as practicable) and shall useits reasonable endeavors to ensure that the REIT Manager shall repay out of the Deposited Property anyoutstanding borrowings effected by or for the account of Powerlong REIT (together with any interest thereon butremaining unpaid) and shall ensure the proper discharge of all other obligations and liabilities of Powerlong REIT.The manner of disposal of the Deposited Property is specified in the Trust Deed, with such manner being subjectto the relevant provisions of the REIT Code.


THE TRUST DEED

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All investments shall be disposed of through public auction or any form of open tender or by such othermeans as the SFC may permit. The disposal shall be conducted at arm’s length and conducted in the bestinterests of the Unitholders. The disposal price shall be the best available price obtained through publicauction or open tender or such other means as the SFC may permit. Subject as aforesaid, such sale andrepayment shall be carried out and completed in such manner and within such period after the termination ofPowerlong REIT as the REIT Manager in its absolute discretion deems advisable provided that, unlessotherwise permitted by the SFC, such period may not exceed 24 months and where it exceeds 12 months, itmust be in the interests of Unitholders and Unitholders shall be informed by way of announcement.

Subject to the provisions of the Trust Deed, any net cash proceeds derived from the sale or realization ofsuch investments shall (at such time or times as the Trustee shall deem appropriate) be distributed to theUnitholders pro rata to the number of Units held or deemed to be held by them respectively at the date of thetermination of Powerlong REIT provided that if the liquidation of Powerlong REIT exceeds six months fromthe date of termination of Powerlong REIT, an interim distribution shall be made in respect of any netproceeds derived from the sale or realization of investments by the end of each six month period (exceptwhere no sales were made during such period). Upon completion of the liquidation of the assets of PowerlongREIT, the following shall be prepared:

(a) a REIT Manager’s review and comment on the performance of Powerlong REIT and an explanation as tohow the investments have been disposed of and the transaction prices and major terms of disposal;

(b) a Trustee’s report that the REIT Manager has managed and liquidated the assets of Powerlong REIT inaccordance with the REIT Code and the provisions of the Trust Deed;

(c) financial statements of Powerlong REIT which shall be distributed to the Unitholders by the REITManager within three months of completion of the liquidation of the assets of Powerlong REIT and acopy filed with the SFC; and

(d) an auditors’ report.

Following the disposal of the Deposited Property and the distribution of the net proceeds derived from thesale or realization of the Deposited Property (if any), Powerlong REIT will terminate.

MERGER OF POWERLONG REIT

The merger of Powerlong REIT shall require specific prior approval by Special Resolution. Where theproposal to merge Powerlong REIT is recommended by the REIT Manager, the REIT Manager and any connectedpersons of the REIT Manager shall abstain from voting if they hold interests in the Units and if their interest (at thesole determination of the Trustee) in merging Powerlong REIT is different from that of all other Unitholders (savefor the mere fact that the REIT Manager is the manager of Powerlong REIT). Where upon any such merger theTrustee retires, any deed effecting the merger by which the Deposited Property and liabilities of Powerlong REITare so merged shall include indemnification of the Trustee to its satisfaction. The Trustee shall cease to be liablefor obligations and liabilities of Powerlong REIT subsisting at the time of merger to the extent such obligationsand liabilities are subsequently discharged from and out of any merger of the Trust recommended by the REITManager and approved by Special Resolution other than any liability arising from the fraud, bad faith, negligenceor wilful default, breach of any constitutive documents to which the Trustee is a party, breach of the REIT Code orother applicable laws and regulations or a breach of trust by the Trustee.

Any merger of Powerlong REIT may only take effect upon the successor entity assuming responsibility forthe performance and discharge of all obligations and liabilities of Powerlong REIT subsisting at the time of themerger. Where Powerlong REIT is involved in any form of merger, takeover, amalgamation or restructuring, theTakeovers Code must be complied with and the Trustee and the REIT Manager shall as soon as practicable consultwith the SFC on the manner in which such activities could be carried out so that it is fair and equitable to allUnitholders.


THE TRUST DEED

– 236 –

An announcement on the intention to merge of Powerlong REIT shall be made by the REIT Manager to the

Unitholders as soon as reasonably practicable in accordance with the provisions of the Trust Deed. The REIT

Manager shall also serve on Unitholders, within 15 Business Days of the announcement, a circular convening an

extraordinary general meeting containing the following information: (a) the rationale for the merger of Powerlong

REIT; (b) the effective date of the merger; (c) the manner in which the Deposited Property is to be dealt with; (d)

the procedures and timing for the issuance or exchange of new Units arising from the merger; (e) a valuation report

of Powerlong REIT prepared by an Approved Valuer which is dated not more than three months before the date of

the circular; (f) the alternatives available to the Unitholders; (g) the estimated costs of the merger and who is

expected to bear costs; and (h) such other material information of which the Unitholders should be notified as the

REIT Manager determines.

Any merger pursuant to the provisions of the Trust Deed may only take effect upon the successor entity

assuming responsibility for the performance and discharge of all obligations and liabilities of Powerlong REIT

subsisting at the time of merger. Upon the completion of the merger of Powerlong REIT, the following shall be

prepared:

(i) the REIT Manager’s review and comment on the performance of Powerlong REIT and an explanation as

to how the investments have been accounted for in the merged scheme;

(ii) the Trustee’s report that the REIT Manager has managed and merged Powerlong REIT in accordance

with the REIT Code and the provisions of the Trust Deed;

(iii) financial statements of Powerlong REIT which shall be distributed to Unitholders by the REIT Manager

within three months of the completion of the merger and a copy filed with the SFC; and

(iv) an auditors’ report.

Upon the Unitholders’ approval of the merger of Powerlong REIT: (a) no further Units shall be created,

issued, canceled or sold; and (b) no transfer of Units may be registered and no other change to the unit registers

may be made without the sanction of the Trustee.

DEEMED APPLICATION OF [REDACTED]

[REDACTED]


THE TRUST DEED

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[REDACTED]

If a person who has a duty of disclosure under the Trust Deed fails to make notification in accordance with the

provisions of the Trust Deed, irrespective of whether that person is a Unitholder or not, the Units in which that

person is (or is deemed to be) interested in (the “Affected Units”) shall be subject to the relevant provisions of the

Trust Deed. When the person interested in the Affected Units is a person other than the REIT Manager, the REIT

Manager may, in its absolute discretion, take any or all of the following actions in respect of any or all of the

Affected Units:


THE TRUST DEED

– 238 –

(a) declare that the voting rights attached to any or all of the Affected Units to be suspended (and, upon such

declaration, such voting rights shall be suspended for all purposes in connection with Powerlong REIT);

(b) suspend the payment of any distributions in respect of any or all of the Affected Units (and, upon such

suspension, any such distributions shall be retained in a trust account in the name of the REIT Manager

pending the application of such distributions);

(c) impose an administrative fee of up to HK$0.10 per Affected Unit for each day of non-compliance from

the date on which disclosure is due to be made by the person; and/or

(d) suspend registration and/or decline to register any transfer of part or all of the Affected Units,

until the relevant notification requirements are fully complied with to the satisfaction of the REIT Manager.

Irrespective of whether any Unitholder is in default of the code for disclosure of interests in the Units adopted

by the REIT Manager and the relevant provisions in the Trust Deed, each Unitholder shall be bound by the decision

of the REIT Manager and each Unitholders’ Units shall be bound by such decision if the REIT Manager declares

(in its absolute discretion) that any or all of such Units are (or are deemed to be) Affected Units.

Where the person interested in the Affected Units is the REIT Manager:

(a) the Trustee may exercise the powers of the REIT Manager in respect of any or all of the Affected Units

(and for the avoidance of doubt, any suspension of payment of distribution shall be retained in a trust

account in the name of the Trustee);

(b) the Trustee may exercise the powers of the REIT Manager to retain the administrative fee for the benefit

of Powerlong REIT and to take action if the fee is not paid; and

(c) irrespective of whether the REIT Manager is in default of the provisions of the Trust Deed, the REIT

Manager shall be bound by the decision of the Trustee and its Units shall be bound by such decision if

the Trustee declares (in its absolute discretion) that any or all of such Units are (or are deemed to be)

Affected Units.

GOVERNING LAW AND JURISDICTION

The Trust Deed shall in all respects be governed by, and construed in accordance with, the laws of Hong

Kong. The REIT Manager, the Trustee and each Unitholder submit to the non-exclusive jurisdiction of the courts

of Hong Kong.


THE TRUST DEED

– 239 –

The agreements described in this section are complex documents and only a summary of the agreementsis set out herein. Investors should refer to the agreements themselves to confirm specific information or for adetailed understanding of Powerlong REIT. The agreements were executed prior to the date of this Documentand are available for inspection at the registered office of the REIT Manager at Room 2A, 14/F, Chun WoCommercial Centre, 23-29 Wing Wo Street, Central, during normal business hours and up to the[REDACTED].

REORGANIZATION DEED

On [●], 2021, the REIT Manager (in its capacity as manager of Powerlong REIT) and the Trustee entered into

the Reorganization Deed with Powerlong Holdings (as seller), pursuant to which Powerlong Holdings has


trustee of Powerlong REIT) in exchange for the issue of [REDACTED] Units (which represents 100% of the

issued Units upon completion of the Reorganization) to Powerlong Holdings or its nominees. The transfer is

conditional upon the following conditions being satisfied:

(a) the entering into of the International [REDACTED];

(b) there being no pending or written order by a government agency in effect, or any change in applicable

laws, in either case arising between the date of the Reorganization Deed and Asset Injection

Completion, that prohibits Asset Injection Completion from taking place;

(c) there being no material damage to any REIT Property, no compulsory acquisition or resumption of any

Property and no notice of such intention received from any governmental authority; and

(d) no material breach of the warranties of Powerlong Holdings which, in the opinion of the REIT Manager

(in its capacity as manager of Powerlong REIT) and/or the Trustee (in its capacity as trustee of

Powerlong REIT), will have a material adverse effect on the financial condition, prospects, earnings,

business, undertaking or assets of Powerlong REIT or on the REIT Properties, in each case taken as a

whole.

Powerlong Holdings will use all reasonable commercial endeavors to procure that the above conditions are

satisfied as soon as possible and in any event on or before the second Business Day immediately preceding the

[REDACTED]. If the above conditions are not all satisfied or, if applicable, waived by the Trustee on or before the

second Business Day immediately preceding the [REDACTED], the Trustee shall not be obliged to complete the

Reorganization. Asset Injection Completion will take place on or before the second Business Day immediately

preceding the [REDACTED]. Upon Asset Injection Completion, Powerlong REIT will own the REIT Properties

through the Target Company.


MATERIAL AGREEMENTS AND OTHER DOCUMENTS

– 240 –

Representations and warranties

The Reorganization Deed contains customary representations and warranties given by Powerlong Holdings in

respect of the Predecessor Group. It also sets out certain limitations on the liability of Powerlong Holdings in

respect of any breach of the warranties, including, a limitation period of three years from the Asset Injection

Completion Date for all claims made under the Reorganization (other than claims relating to fundamental

warranties and tax, in which case the limitation period is seven years from the Asset Injection Completion Date),

and a limitation amount of the appraised value of the REIT Properties as of the date of the Valuation Report for all

such claims.

Indemnities

Furthermore, the Reorganization Deed contains customary indemnities and, in particular, Powerlong

Holdings has irrevocably undertaken to indemnify Powerlong REIT, the REIT Manager and the Predecessor Group

for an unlimited period, to the fullest extent permissible by law, for any liability, losses, damages, fines, fees and

costs (on a full indemnity basis) which any one of them may suffer in respect of the Non-REIT Properties

historically held by the Existing Project Companies (see “Reorganization, Structure and Organization of

Powerlong REIT—(b) Transfer of the REIT Properties—The Existing Project Companies—Non-REIT Properties

held by the Existing Project Companies” in this Document for details), including but not limited to any liability,

losses, damages, fines, fees and costs suffered or incurred in connection with:

(a) the sale and return and non-registration of the Non-REIT Properties by the Existing Project Companies;

(b) the contingent liabilities and obligations relating to the Non-REIT Properties historically held by the

Existing Project Companies;

(c) taxation or taxation claims resulting from income, profits or gains earned, accrued or received as well as

any property claim or estate duty to which any member of the Powerlong REIT Group may be subject to

and payable on or before the date of [REDACTED] (including the LAT in relation to the Non-REIT

Properties historically held by the Existing Project Companies); and

(d) payables relating to the Non-REIT Properties historically held by the Existing Project Companies,

In addition, Powerlong Holdings has provided an irrevocable undertaking to indemnify Powerlong REIT, the

REIT Manager and the Predecessor Group, to the fullest extent permissible by law, for any liability, losses,

damages, fines, fees and costs (on a full indemnity basis) which they may suffer in respect of the Lin’an Transfer

Condition, details of which are set out in “The REIT Properties and Business—The REIT Properties—2.

Hangzhou Lin’an Powerlong Plaza—Ownership and Five Year Transaction History—Transfer Condition of Lin’an

Powerlong Plaza” in this Document.

The aggregate liability of Powerlong Holdings for all claims (including the aforementioned indemnities)

shall not exceed the amount of the appraised value of the REIT Properties as of the date of the Valuation Report.

Following the [REDACTED], any material change to the terms of the Reorganization Deed shall require the

approval of the independent Unitholders at a duly convened general meeting, unless such approval is not required

pursuant to REIT Code.



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Arrangements in relation to the Non-REIT Properties which may be held by the Existing Project Companies

Pursuant to the Reorganization Deed:

(a) all the Non-REIT Properties do not form part of the portfolio of the Powerlong REIT;

(b) all returns (e.g. the proceeds of the sales of the Non-REIT Properties and the Non-REIT Propertiesreturned by the purchasers) and costs (e.g. the cost incurred during the course of the sales of theNon-REIT Properties and the return) arising from or in relation to such Non-REIT Properties shall bereceived or borne by the Retained Group;

(c) the Retained Group shall have the control over the unsold and returned Non-REIT Properties and shallbe entitled to or bear all the relevant rewards or risks in relation thereto. In such circumstances,Powerlong REIT (only acting as an agent of the Retained Group) will neither receive any returns norbear any costs in relation to the Non-REIT Properties;

(d) in respect of the returned Non-REIT Properties:

(i) the Retained Group shall be responsible for, and Powerlong REIT shall not participate in, thenegotiation with the relevant purchasers in relation to any return of Non-REIT Properties;

(ii) such Non-REIT Properties shall be transferred by Powerlong REIT to the Retained Group for nilconsideration for its onward sales;

(iii) the Retained Group shall reimburse Powerlong REIT any such amount that is returned to therelevant purchasers; and

(iv) the Retained Group shall have the control over such returned Non-REIT Properties and shall beentitle to any return or bear any risks in relation thereto after any such return.

For details of the Non-REIT Properties, see “Reorganization, Structure and Organization of Powerlong REIT—(b) Transfer of the REIT Properties—The Existing Project Companies—Non-REIT Properties held by theExisting Project Companies”.

COMMERCIAL OPERATIONAL SERVICES FRAMEWORK AGREEMENT

Please refer to “The Operations and Property Managers – The Commercial Operational Services FrameworkAgreement” and “Connected Party Transactions—Continuing Connected Party Transactions—Non-ExemptContinuing Connected Party Transactions—(1) Commercial Operational Services Framework Agreement” in thisDocument for details of the Commercial Operational Services Framework Agreement.

COMMON AREA AND ADVERTISING SPACE MANAGEMENT SERVICES FRAMEWORKAGREEMENT

Please refer to “Connected Party Transactions—Continuing Connected Party Transactions—Non-ExemptContinuing Connected Party Transactions—(2) Common Area and Advertising Space Management ServicesFramework Agreement” in this Document for details of the Common Area and Advertising Space ManagementServices Framework Agreement.

CAR PARKING LOTS MANAGEMENT SERVICES FRAMEWORK AGREEMENT

Please refer to “Connected Party Transactions—Continuing Connected Party Transactions—Non-ExemptContinuing Connected Party Transactions—(3) Car Parking Lots Management Services Framework Agreement” inthis Document for details of the Car Parking Lots Management Services Framework Agreement.



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DEED OF RIGHT OF FIRST REFUSAL

On [●], 2021, Powerlong Holdings entered into a deed in favor of the Trustee (in its capacity as trustee of

Powerlong REIT) and the REIT Manager (in its capacity as manager of Powerlong REIT) under which Powerlong

REIT has been granted, conditional upon [REDACTED], a right of first refusal (“ROFR”) on the following terms

and conditions:

Scope of Coverage

In the event that Powerlong Holdings or Powerlong Holdings Relevant Subsidiaries propose to dispose of any

majority ownership or control of any commercial or retail property (other than such property that will be disposed

of: (i) pursuant to an internal reorganization exercise; or (ii) by public auction as required under the applicable

laws and regulations) that:

(a) fulfills (or would reasonably be regarded as fulfilling) the investment criteria and property

characteristics, and is consistent (or would reasonably be regarded as being consistent) with the

investment strategy of the REIT Manager for property investments by Powerlong REIT;

(b) a commercial or retail property completed by Powerlong Holdings or Powerlong Holdings Relevant

Subsidiaries; and

(c) is owned or developed by Powerlong Holdings or Powerlong Holdings Relevant Subsidiaries and in

which Powerlong Holdings or Powerlong Holdings Relevant Subsidiaries has an ownership interest of

95% or more,

Powerlong REIT shall have the ROFR to acquire such qualifying property (the “Relevant Property”).

For the purposes of the ROFR, “Powerlong Holdings Relevant Subsidiaries” includes any entity which is:

(i) accounted for and consolidated in the audited consolidated accounts of Powerlong Holdings pursuant to PRC

GAAP; or (ii) held directly or indirectly by Powerlong Holdings as to more than 50%.

Term

The ROFR will commence on the [REDACTED] until the earliest of the following occurring:

(a) five years after the [REDACTED];

(b) the Units ceasing to be [REDACTED] on the Stock Exchange; or

(c) the REIT Manager ceasing to be a subsidiary of Powerlong Holdings.

Sale Notice

Powerlong Holdings will give written notice to the REIT Manager (in its capacity as manager of Powerlong

REIT) and the Trustee (in its capacity as trustee of Powerlong REIT) of any proposed disposal of a Relevant

Property by the Retained Group pursuant to the ROFR (the “Sale Notice”).



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Exercise of Right of First Refusal

If the REIT Manager (in its capacity as manager of Powerlong REIT) elects to exercise the ROFR to acquirethe Relevant Property, completion of the sale and purchase of the same shall be conditional upon:

(a) the attainment by Powerlong Holdings and/or the relevant Powerlong Holdings Relevant Subsidiaries ofall requisite approvals and consents required under the applicable laws and regulations to which they aresubject;

(b) the attainment by Powerlong REIT of all requisite approvals and consents required under the REITCode, the Trust Deed and all other relevant laws and regulations to which Powerlong REIT is subject;

(c) satisfactory results on the completion of the due diligence review of the Relevant Property by PowerlongREIT; and

(d) such other conditions as may be set out in the relevant sale and purchase agreement of the RelevantProperty.

Failure to Exercise the Right of First Refusal

In the event that, for any reason other than due to the default Powerlong Holdings, the sale and purchase ofthe Relevant Property pursuant to an exercise of the ROFR is not completed within the pre-agreed period of timeor the REIT Manager (in its capacity as manager of Powerlong REIT) does not elect to exercise the ROFR within10 calendar days after the date of the Sale Notice (the “Lapse Event”), the Retained Group shall, at its election,have the right to sell the Relevant Property within 12 calendar months after the Lapse Event, without requiringPowerlong Holdings to deliver another Sale Notice provided such sale is at a price and on such terms that are nomore favorable than those set out in the Sale Notice (from the perspective of Powerlong REIT).

FACILITIES AGREEMENTS

On [●], 2021: (a) [●] (as lender) and the Target Company (as borrower) (the “Offshore Borrower”) enteredinto a term loan facilities for a principal amount up to the HK$/USD equivalent of RMB2,700 million (the“Offshore Facilities”); and (b) [●] (as lender) and the Project Companies (as borrowers) (the “OnshoreBorrowers”) entered into a term loan facilities for a principal amount up to RMB100 million (the “OnshoreFacilities”, together with the Offshore Borrower the “Borrowers” , and together with the Offshore Facilities, the“Facilities”). The term of each Facilities is 36 months from the first drawdown date. The proceeds from thedrawdown of the Offshore Facilities will primarily be used (a) to fund the settlement of the outstandingconsideration for the transfer of the equity interests in the Project Companies; (b) as interest reserve; and (c) tofund the settlement of fee and expenses in relation to the Offshore Facilities. The proceeds from the drawdown ofthe Onshore Facilities will be used to [(a) refinance the existing onshore indebtedness secured by the REITProperties; and (b) to finance operating expenses of the Onshore Borrowers.

The interest rate in respect of the Offshore Facilities is 2.65% plus Hong Kong Interbank Offered Rate orUSD London Interbank Offered Rate. The interest rate in respect of the Onshore Facilities is 115% of the base rateof the People’s Bank of China.

The Offshore Facility is secured by (a) unconditional and irrevocable guarantee provided by the Trustee in itscapacity as trustee for Powerlong REIT; (b) first priority charge over 100% of the shares of the Offshore Borrowerand the Offshore Property Holding Companies; (c) fixed and floating charge over all assets of the OffshoreBorrower and the Offshore Property Holding Companies; (d) first priority pledge over 100% equity interest in theOnshore Borrowers; (e) charge over the relevant offshore income accounts of the Offshore Borrower and theOffshore Property Holding Companies; (f) charge over the relevant interest reserve account (with credit balancenot less than three months’ upcoming interest); (g) assignment of present and future rights and interest of theOffshore Borrower and Offshore Property Holding Companies in relation to inter-company loans and shareholderloans made by the Offshore Borrower/Offshore Property Holding Companies; and (h) subordination ofinter-company debts made to the Offshore Borrower.



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The Onshore Facility is secured by (a) first priority mortgage over the REIT Properties; (b) pledge over allincome arising from the REIT Properties, including but not limited to rental incomes; (c) charge and/or escrowarrangement over the relevant revenue accounts of the Onshore Borrowers; (d) assignment of insurance policiesrelating to the REIT Properties; (e) assignment of material contracts including major leases, asset managementcontracts, property management contracts; and (f) cross guarantee from the Offshore Borrower.

The facilities agreements contain customary covenants for transactions of this nature. In particular, theBorrowers undertake: (a) they shall have no change of ownership (except for the purpose of the [REDACTED]);(b) the Offshore Borrower shall remain as wholly-owned subsidiary of Powerlong REIT; (c) Powerlong Holdingsshall remain as the single largest Unitholder; (d) the Offshore Borrower shall directly or indirectly own and control100% interest in the Onshore Borrowers and the REIT Properties; (d) they shall incur no further indebtedness byany member of the Power REIT Group save for certain facilities as stipulated in the facilities agreement; (e) theyshall not have any negative pledge on assets of the Powerlong REIT Group save for certain encumbrances asstipulated in the facilities agreements; (f) they shall have no loans, guarantees or other indemnity to other parties;(g) they shall not conduct acquisition or investment other than those in compliance with investment policies ofPowerlong REIT, the REIT Code and all relevant regulatory requirements and they shall be subject to no materialadverse impact; (h) the REIT Manager and the Operations and Property Manager shall remain the subsidiaries ofand controlled by Powerlong Holdings; and (i) Powerlong REIT shall maintain the [REDACTED] status on theStock Exchange after the [REDACTED] and shall not suspend the trading of its Units for more than 10consecutive trading days.

The facilities agreements contain customary events of default which include, among others: (a) non-payment;(b) breach of financial covenants; (c) breach of other obligations; (d) misrepresentation; (e) cross-default; (f)insolvency and analogous events; (g) unlawfulness; (h) repudiation; (i) expropriation; (j) security and/orguarantees cease to be in full force and effect; and (k) material adverse change.

The availability of the Facilities is conditional on certain conditions precedent being satisfied.

TRADEMARK LICENSING AGREEMENT

By a trademark licensing agreement dated [●], 2021 (“Trademark Licensing Agreement”) [entered] intobetween Powerlong Group Development and the REIT Manager, Powerlong Group Development agreed toirrevocably and unconditionally grant to the REIT Manager the non-exclusive right and license to use certain“Powerlong” trademarks (the “Licensed Trademarks”) in its company names and in connection with the businessand for the benefit of Powerlong REIT for a perpetual term from the date of the Trademark Licensing Agreementon a royalty-free basis. For details of the Licensed Trademarks, please refer to the list set out in “GeneralInformation – 2. Intellectual Property Rights” in Appendix VIII to this Document. The Trademark LicensingAgreement will terminate upon: (i) mutual consent of Powerlong Group Development and the REIT Manager; or(ii) the REIT Manager ceasing to act as the manager of Powerlong REIT or the REIT Manager ceasing to be asubsidiary of Powerlong Holdings; or (iii) Powerlong Group Development no longer maintaining its respectiveownership over all the Licensed Trademarks. Powerlong Group Development shall renew registration of theLicensed Trademarks at its own costs.

Without Powerlong Group Development’s prior consent, the REIT Manager may not sub-license or grant theright to use the Licensed Trademarks to third parties. The REIT Manager has also given certain further customaryundertakings to Powerlong Group Development regarding the use of the Licensed Trademarks and other matters.

[REDACTED]

The Hong Kong [REDACTED] was entered into on [●], 2021. For a summary of the key terms andprovisions of the Hong Kong [REDACTED], please refer to the section headed “[REDACTED]” in thisDocument.



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INTRODUCTION

Following completion of the [REDACTED], there will be continuing transactions between the PowerlongREIT Group on the one hand and connected persons of Powerlong REIT on the other hand which will constituteconnected party transactions of Powerlong REIT within the meaning of the REIT Code.

The REIT Code contains rules (the “connected party rules”) governing transactions between PowerlongREIT and certain defined categories of “connected persons” within the meaning given in the REIT Code. Suchtransactions will constitute “connected party transactions” for the purposes of the REIT Code.

Powerlong REIT’s “connected persons” will include, among others:

(a) the REIT Manager;

(b) the Trustee;

(c) a Substantial Unitholder;

(d) a director or chief executive of the REIT Manager or the Trustee or any of the subsidiaries of PowerlongREIT;

(e) an associate of the persons or entities in (a), (b), (c) or (d) above (“associate” being defined in Chapter14A of the Listing Rules, modified as appropriate pursuant to paragraph 2.26 of the REIT Code);

(f) a “connected subsidiary” as defined in Chapter 14A of the Listing Rules (modified as appropriatepursuant to paragraph 2.26 of the REIT Code); or

(g) a person deemed to be connected by the SFC.

The REIT Manager has applied for certain waivers from strict compliance with the REIT Code with respect tocertain continuing connected party transactions as set out in the section headed “Connected PartyTransactions—Waivers in respect of Non-Exempt Powerlong Continuing CPTs” below.

INTERNAL CONTROL

The REIT Manager has established an internal control system intended to ensure that connected partytransactions between the Powerlong REIT Group and its “connected persons” are monitored and that these areundertaken on terms in compliance with the REIT Code. As required by the REIT Code, among other things, allconnected party transactions must be carried out at arm’s length, on normal commercial terms, on terms that arefair and reasonable and in the best interests of Unitholders.

As a general rule, the REIT Manager is required to demonstrate to the independent non-executive Directorsand the Audit Committee that all connected party transactions satisfy the requirements below, which may entail(where practicable) obtaining quotations from parties unrelated to the REIT Manager, or obtaining one or morevaluations from independent professional valuers. These requirements include:

(a) all connected party transactions must be carried out at arm’s length on normal commercial terms and inan open and transparent manner;

(b) all connected party transactions must be valued, in relation to a property transaction, by an independentproperty valuer;

(c) all connected party transactions must be consistent with Powerlong REIT’s investment objectives andstrategy;


CONNECTED PARTY TRANSACTIONS

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(d) all connected party transactions must be on terms that are fair and reasonable and in the best interests of

Unitholders;

(e) (where required) all connected party transactions must be properly disclosed to Unitholders;

(f) all connected party transactions must be approved by the independent non-executive Directors of the REIT

Manager (or a committee thereof); and

(g) where the prior approval of Unitholders is required, the independent non-executive Directors of the REIT

Manager (or a committee thereof) shall confirm, in a letter set out in the circular to Unitholders whether the

terms and conditions of the transaction are fair and reasonable and in the best interests of Unitholders and

whether Unitholders should vote in favor of the resolution. An independent financial advisor shall also be

appointed to advise the independent non-executive Directors of the REIT Manager (or a committee thereof)

in this regard.

The REIT Manager is also required to investigate and monitor all transactions of the Powerlong REIT Group

in order to determine whether such transactions are connected party transactions. Furthermore, the REIT Manager

is required to maintain a register to record all connected party transactions which are entered into by members of

the Powerlong REIT Group and the bases, including any quotations from independent third parties and

independent valuations obtained to support such bases, on which they are entered into. The REIT Manager is also

required to incorporate into its internal audit plan a review of all connected party transactions entered into by

members of the Powerlong REIT Group.

ONE-OFF CONNECTED PARTY TRANSACTIONS

Powerlong REIT Group entered into the following one-off connected party transactions in connection with

the establishment of Powerlong REIT and the [REDACTED]:

(1) Reorganization Deed

The REIT Manager (in its capacity as manager of Powerlong REIT) and the Trustee [entered into] the

Reorganization Deed with Powerlong Holdings (as seller), pursuant to which Powerlong Holdings has


trustee of Powerlong REIT) in exchange for the issue of [REDACTED] Units (which represents 100% of the

issued Units upon completion of the Reorganization) to Powerlong Holdings or its nominees.

In addition, Powerlong Holdings has irrevocably undertaken to indemnify Powerlong REIT, the REIT

Manager and the Predecessor Group, among others, to the fullest extent permissible by law, for any liability,losses, damages, fines, fees and costs (on a full indemnity basis) which any one of them may suffer in respect of theNon-REIT Properties historically held by the Existing Project Companies. See “Material Agreement and OtherDocuments — Reorganization Deed” in this Document.

(2) Deed of Right of First Refusal

Powerlong Holdings [executed] a deed in favor of the Trustee (in its capacity as trustee of Powerlong REIT)and the REIT Manager (in its capacity as manager of Powerlong REIT) under which Powerlong REIT has beengranted a ROFR in respect of commercial or retail properties completed by Powerlong Holdings or PowerlongHoldings Relevant Subsidiaries subject to the terms and conditions contained therein. For further details, see thesection headed “Material Agreements and Other Documents — Deed of Right of First Refusal” in this Document.



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CONTINUING CONNECTED PARTY TRANSACTIONS

Powerlong REIT Group has entered into the following continuing connected party transactions in relation tothe ordinary and usual course of Powerlong REIT’s business (collectively, the “Powerlong Continuing CPTs”):

Nature of transactions Waiver sought

Fully exempt continuing connected partytransaction

• Trademark Licensing Agreement N/A

Non-exempt continuing connected partytransactions

• Commercial Operational Services FrameworkAgreement

• Announcement, circular and independentUnitholders’ approval requirements

• Common Area and Advertising SpaceManagement Services FrameworkAgreement

• Announcement, circular and independentUnitholders’ approval requirements

• Car Parking Lots Management ServicesFramework Agreement

• Announcement requirement

Fully Exempt Continuing Connected Party Transaction with Powerlong Connected Persons

Powerlong REIT Group [has entered] into the following continuing connected party transaction which isfully exempt from the reporting, annual review, announcement and independent Unitholders’ approvalrequirements under the REIT Code and Chapter 14A of the Listing Rules (modified as appropriate pursuant toparagraph 2.26 of the REIT Code) (the “Exempt Powerlong Continuing CPT”):

Trademark Licensing Agreement

On [●], 2021, Powerlong Group Development and the REIT Manager [entered] into the Trademark LicensingAgreement pursuant to which Powerlong Group Development as licensor [agreed] to irrevocably andunconditionally grant to the REIT Manager the non-exclusive right and license to use certain “Powerlong”trademarks in its company names and in connection with the business and for the benefit of Powerlong REIT for aperpetual term from the date of the Trademark Licensing Agreement on a royalty-free basis. The TrademarkLicensing Agreement will terminate upon: (i) mutual consent of Powerlong Group Development and the REITManager; or (ii) the REIT Manager ceasing to act as the manager of Powerlong REIT or the REIT Manager ceasingto be a subsidiary of Powerlong Holdings; or (iii) Powerlong Group Development no longer maintaining itsrespective ownership over all the Licensed Trademarks. Powerlong Group Development shall renew registration ofthe Licensed Trademarks at its own costs. The REIT Manager considers that the “Powerlong” brand is a highlyrecognizable brand in the PRC, and that such existing brand image allows Powerlong REIT to resonate with itstenants and facilitate the market and business expansion of Powerlong REIT. The REIT Manager believes that theentering into of the Trademark Licensing Agreement with a duration of over three years is in line with the normalbusiness practice for agreements of this type as comparable contractual arrangements have similar long-termarrangements, and the granting of the Licensed Trademarks for such long duration on a royalty-free basis willpromote the stability of operations and is beneficial to Powerlong REIT and the Unitholders as a whole. The JointListing Agents are of the view that the duration of over three years is in line with the normal business practice foragreements of this type, and the granting of the Licensed Trademarks for such long duration on a royalty-free basisis beneficial to Powerlong REIT and the Unitholders as a whole.



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For further details of the Trademark Licensing Agreement, please refer to the section headed “MaterialAgreements and Other Documents—Trademark Licensing Agreement” in this Document.

Application of the REIT Code and the Listing Rules

Powerlong Group Development is owned as to 88.9% by Mr. Hoi Kin Hong, a Substantial Unitholder.Accordingly, Powerlong Group Development is an associate of the REIT Manager and a Substantial Unitholderand therefore a connected person of Powerlong REIT, and the transactions under the Trademark LicensingAgreement constitute a continuing connected party transaction of Powerlong REIT in accordance with the REITCode.

As the right to use the licensed trademarks is granted to the REIT Manager for the benefit of the REITManager and Powerlong REIT on a royalty-free basis, the transactions under the Trademark Licensing Agreementwill be within the de minimis threshold under Rule 14A.76(1) of the Listing Rules (modified as appropriatepursuant to paragraph 2.26 of the REIT Code) and will be fully exempt from the reporting, annual review,announcement and independent Unitholders’ approval requirements under Chapter 14A of the Listing Rules(modified as appropriate pursuant to paragraph 2.26 of the REIT Code).

Non-Exempt Continuing Connected Party Transactions

Powerlong REIT Group [has entered] into the following continuing connected party transactions whichwould ordinarily be subject to the reporting, announcement, and, as the case may be, circular and independentUnitholders’ approval requirements under the REIT Code and Chapter 14A of the Listing Rules (modified asappropriate pursuant to paragraph 2.26 of the REIT Code) (the “Non-Exempt Powerlong Continuing CPTs”):

(1) Commercial Operational Services Framework Agreement

On [●], 2021, the REIT Manager (for itself and on behalf of Powerlong REIT Group) and the Operations andProperty Manager (for itself and on behalf of other members of the Powerlong CM Group) [entered] into theCommercial Operational Services Framework Agreement, pursuant to which the Powerlong CM Group [hasagreed] to provide the Commercial Operational Services (including, among others, leasing services, marketingservices, tenancy development and management services and property management services) for an initial termfrom the [REDACTED] to [December 31, 2023], which may be renewed as the parties may mutually agree, subjectto compliance with the requirements under the REIT Code, the Listing Rules and all other applicable laws andregulations. For details of the terms of the Commercial Operational Services Framework Agreement, see “TheOperations and Property Manager—The Operations and Property Manager—The Commercial OperationalServices Framework Agreement” in this Document.

Historical Amounts

The service fees paid by the Powerlong REIT Group to Powerlong CM Group for the CommercialOperational Services amounted to RMB30.5 million, RMB17.5 million, RMB16.6 million and 10.8 millionfor the years ended December 31, 2018, 2019 and 2020 and the six months ended June 30, 2021, respectively.

Annual Caps

The service fee for the Commercial Operational Services has been agreed to be an amount equivalent to5% per annum of the rental income in respect of each REIT Property which has been determined after arm’slength negotiations with reference to (i) the location and size of the properties; (ii) the anticipated operationalcost (including labor costs) for providing such services; and (iii) the price offered by the Powerlong CMGroup to independent third parties for similar services.



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It is expected that the annual maximum i.e. the Operations Management Fee payable by the PowerlongREIT Group to the Powerlong CM Group under the Commercial Operational Services Framework Agreementwill not exceed RMB20.0 million, RMB24.0 million and RMB26.0 million for the three years endingDecember 31, 2023. These annual caps have been determined with reference to (i) the historical transactionamounts and trend for the three years ended December 31, 2020 and the fees paid by the Powerlong REITGroup for the year ended December 31, 2020; (ii) the expected aggregate area of properties to be rented bythe Powerlong REIT Group for the three years ending 31 December 2023, estimated based on the subsistingleases of the REIT Properties and the number of Properties owned and/or to be owned by the Powerlong REITGroup; (iii) the annual rent receivable under the subsisting leases of the REIT Properties; and (iv) theexpected expiry of leases in any particular year and the expected rental increment upon expiry of such leases.

The annual caps set out above should not be taken as the anticipated growth projections or indicators ofthe future performance of Powerlong REIT.

Reasons for, and benefits of, the Commercial Operational Services Framework Agreement

The REIT Manager believes that the Operations and Property Manager is well-positioned to provide theCommercial Operational Services given its established business relationship with the Powerlong REIT Groupand understanding of the operations, standards and specific needs in respect of the Powerlong REIT Group.Accordingly, it is expected that the arrangements under the Commercial Operational Services FrameworkAgreements would be cost-efficient, expedient and beneficial to the business operations of Powerlong REIT.


As the Powerlong CM Group is indirectly controlled by Mr. Hoi Kin Hong, a Substantial Unitholder andtherefore a connected person of Powerlong REIT. The transactions under the Commercial OperationalServices Framework Agreement therefore constitute continuing connected party transactions of PowerlongREIT in accordance with the REIT Code.

As one of the applicable percentage ratio (other than the profits ratio) of the transactions contemplatedunder the Commercial Operational Services Framework Agreement is, on an annual basis, expected to be 5%or more, these transactions will, upon [REDACTED], and in the absence of the grant of a waiver by the SFC,be subject to the reporting, annual review, announcement, circular (including the opinion andrecommendations from an independent financial adviser) and the independent Unitholders’ approvalrequirements under Chapter 14A of the Listing Rules (modified as appropriate pursuant to paragraph 2.26 ofthe REIT Code) and each of the transactions contemplated under the Commercial Operational ServicesFramework Agreement would be required to be subject to maximum annual caps expressed in monetaryterms.

(2) Common Area and Advertising Space Management Services Framework Agreement

On [●], 2021, the REIT Manager (for itself and on behalf of the Powerlong REIT Group) [entered] into aCommon Area and Advertising Space Management Services Framework Agreement with the Operation andProperty Manager (for itself and on behalf of the other members of the Powerlong CM Group), pursuant to whichthe Powerlong CM Group [has agreed] to (i) lease certain common areas and advertising spaces from thePowerlong REIT Group; and (ii) manage such common areas and advertising spaces for an initial term from the[REDACTED] to December 31, 2023, which may be renewed as the parties may mutually agree, subject tocompliance with the requirements under the REIT Code, the Listing Rules and all other applicable laws andregulations. The Powerlong REIT Group will receive an annual rent from the Powerlong CM Group, while thePowerlong CM Group will be entitled to retain all the fees generated from the common areas and advertisingspaces and received from their independent third-party customers.



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Historical Amounts

The Powerlong CM Group started to lease certain common areas and advertising spaces from thePowerlong REIT Group in 2019. The leasing fees paid by the Powerlong CM Group to the Powerlong REITGroup for leasing the common areas and advertising spaces were RMB22.1 million, RMB23.9 million andRMB18.3 million for the years ended December 31, 2019 and 2020 and the six months ended June 30, 2021,respectively.

Annual Caps

The fees to be received by the Powerlong REIT Group under the Common Area and Advertising SpaceManagement Services Agreement shall be an annual rent which is determined on arm’s length basis withreference to, among others, (i) the market rent of the common areas and advertising spaces in similarlocations and similar properties; and (ii) the occupancy rate of the common areas and advertising spacesleased by the Powerlong CM Group from the Powerlong REIT Group.

It is expected that the annual maximum amount of fee payable by the Powerlong CM Group to thePowerlong REIT Group under the Common Area and Advertising Space Management Services FrameworkAgreement will not exceed RMB37.0 million, RMB49.0 million and RMB51.0 million for the three yearsending December 31, 2023. These annual caps has been determined after taking into account (i) the estimatedtransaction amounts for the year ending December 31, 2021 having considered (a) the existing GFA ofcommon areas and advertising spaces under management by the Powerlong CM Group; and (b) the feespayable by the Powerlong CM Group for the year ending December 31, 2021; and (ii) the estimated increasein the transaction amounts for the year ending December 31, 2022 having considered the estimated incrementof rental fees on the commercial negotiation with the Powerlong CM Group.

Jones Lang LaSalle Corporate Appraisal and Advisory Limited (the “CPT Property Valuer”), anindependent property valuer, was engaged to review the terms of the Common Area and Advertising SpaceManagement Services Framework Agreement and confirmed that such terms are on normal commercial termsunder the prevailing market condition, and the agreed annual rent under the current leasing agreements is fairand reasonable.


Reasons for, and benefits of, the Common Area and Advertising Space Management Services FrameworkAgreement

The REIT Manager is of the view that that the arrangements under the Common Area and AdvertisingSpace Management Services Framework Agreement would be cost-efficient, expedient and beneficial to thebusiness operations of Powerlong REIT because (i) the annual fee payable by the Powerlong CM Groupprovides a stable rental income to the Powerlong REIT Group which is fair and reasonable; (ii) the PowerlongCM Group is well-positioned to manage the common areas and advertising spaces given its establishedbusiness relationship with the Powerlong REIT Group and understanding of the operations, standards andspecific needs in respect of the Powerlong REIT Group.


As the Powerlong CM Group is indirectly controlled by Mr. Hoi Kin Hong, a Substantial Unitholder andtherefore a connected person of Powerlong REIT. The transactions under the Commercial OperationalServices Framework Agreement therefore constitute continuing connected party transactions of PowerlongREIT in accordance with the REIT Code.



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As all of the applicable percentage ratios (other than the profits ratio) of the transactions contemplated underthe Common Area and Advertising Space Management Services Framework Agreement are, on an annual basis,expected to be 5% or more, these transactions will, upon [REDACTED], and in the absence of the grant of awaiver by the SFC, be subject to the reporting, annual review, announcement, circular (including the opinion andrecommendations from an independent financial adviser) and the independent Unitholders’ approval requirementsunder Chapter 14A of the Listing Rules (modified as appropriate pursuant to paragraph 2.26 of the REIT Code) andeach of the transactions contemplated under the Common Area and Advertising Space Management ServicesFramework Agreement would be required to be subject to maximum annual caps expressed in monetary terms.

(3) Car Parking Lots Management Services Framework Agreement

On [●], 2021, the REIT Manager (for itself and on behalf of the Powerlong REIT Group) [entered] into a CarParking Lots Management Services Framework Agreement with the Operations and Property Manager (for itselfand on behalf of other members of the Powerlong CM Group), pursuant to which the Powerlong CM Group [hasagreed] to (i) lease certain car parking lots from the Powerlong REIT Group; and (ii) manage such car parking lotsfor an initial term from the [REDACTED] to December 31, 2023, which may be renewed as the parties maymutually agree, subject to compliance with the requirements under the REIT Code, the Listing Rules and all otherapplicable laws and regulations. The Powerlong REIT Group will receive an annual rent from the Powerlong CMGroup, while the Powerlong CM Group will be entitled to retain all the fees generated from the car parking lots andreceived from their independent third-party customers.

Historical Amounts

The Powerlong CM Group started to lease certain car parking lots from the assets under PowerlongREIT Group in 2019. The leasing fees paid by the Powerlong CM Group to the Powerlong REIT Group forleasing the car parking lots were RMB1.2 million, RMB0.8 million and RMB0.9 million for the years endedDecember 31, 2019 and 2020 and the six months ended June 30, 2021, respectively.

Annual Caps

The fees to be received by the Powerlong REIT Group under the Car Parking Lots Management ServicesFramework Agreement shall be an annual rent which is determined on arm’s length basis with reference to,among others, (i) the market rental fee per car parking lot in similar locations and similar properties; and (ii)the occupancy rate of car parking lots leased by the Powerlong CM Group from the Powerlong REIT Group.

It is expected that the annual maximum amount of fee payable by the Powerlong CM Group to thePowerlong REIT Group under the Car Parking Lots Management Services Framework Agreement will notexceed RMB1.9 million, RMB3.1 million and RMB3.8 million for the three years ending December 31, 2023.These annual caps have been determined after taking into account (i) the estimated transaction amounts forthe year ending December 31, 2021 pursuant to the existing number of car parking lots under the PowerlongCM Group’s management; (ii) the estimated increase in the transaction amounts for the year endingDecember 31, 2022 having considered the estimated increment of rental fee on car parking lots based on thecommercial negotiation with the Powerlong CM Group; (iii) the estimated transaction amounts for the yearending December 31, 2023 being similar to that of the previous year assuming a similar number of carparking lots under management in 2023 as compared with the previous year.

The CPT Property Valuer was engaged to review the terms of the Car Parking Lots ManagementServices Framework Agreement and confirmed that such terms are on normal commercial terms under theprevailing market condition and the agreed annual rent under the current leasing agreements is fair andreasonable.




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Reasons for, and benefits of, the Car Parking Lots Management Services Framework Agreement

The REIT Manager is of the view that that the arrangements under the Car Parking Lots Management

Services Framework Agreement would be cost-efficient, expedient and beneficial to the business operations

of Powerlong REIT because (i) the annual fee payable by the Powerlong CM Group provides a stable rental

income to the Powerlong REIT Group which is fair and reasonable; (ii) the Powerlong CM Group is

well-positioned to manage the car parking lots given its established business relationship with the Powerlong

REIT Group and understanding of the operations, standards and specific needs in respect of the Powerlong

REIT Group.


As the Powerlong CM Group is indirectly controlled by Mr. Hoi Kin Hong, a Substantial Unitholder and

therefore a connected person of Powerlong REIT. The transactions under the Commercial Operational

Services Framework Agreement therefore constitute continuing connected party transactions of Powerlong

REIT in accordance with the REIT Code.

As some of the applicable percentage ratios (other than the profits ratio) of the transactions

contemplated under the Car Parking Lots Management Services Framework Agreement are, on an annual

basis, expected to be 0.1% or more but less than 5%, these transactions will be exempt from the circular

(including the opinion and recommendations from an independent financial adviser) and the independent

Unitholders’ approval requirements, but would, upon [REDACTED], and in the absence of the grant of a

waiver by the SFC, be subject to the reporting, annual review and announcement requirements under Chapter

14A of the Listing Rules (modified as appropriate pursuant to paragraph 2.26 of the REIT Code) and each of

the transactions contemplated under the Car Parking Lots Management Services Framework Agreement

would be required to be subject to maximum annual caps expressed in monetary terms.

Waivers in respect of Non-Exempt Powerlong Continuing CPTs

As one of the applicable percentage ratios (other than the profits ratio) of the transactions contemplated under

the Commercial Operational Services Framework Agreement as calculated with reference to the proposed annual

caps each year is expected to be 5% or more, these transactions would normally be subject to the reporting, annual

review, announcement, circular and independent Unitholders’ approval requirements under Chapter 14A of the

Listing Rules (modified as appropriate pursuant to paragraph 2.26 of the REIT Code).

As all of the applicable percentage ratios (other than the profits ratio) of the transactions contemplated under

the Common Area and Advertising Space Management Services Framework Agreement as calculated with

reference to the proposed annual caps each year are expected to be 5% or more, these transactions would normally

be subject to the reporting, annual review, announcement, circular and independent Unitholders approval

requirements under Chapter 14A of the Listing Rules (modified as appropriate pursuant to paragraph 2.26 of the

REIT Code).

As some of the applicable percentage ratios (other than the profits ratio) of the transactions contemplated

under the Car Parking Lots Management Services Framework Agreement as calculated with reference to the

proposed annual caps each year are expected to be 0.1% or more but less than 5%, these transactions would

normally be subject to the reporting, annual review and announcement requirements under Chapter 14A of the

Listing Rules (modified as appropriate pursuant to paragraph 2.26 of the REIT Code).



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As the transactions contemplated under the Commercial Operational Services Framework Agreement,

the Common Area and Advertising Space Management Services Framework Agreement and the Car Parking

Lots Management Services Framework Agreement will be carried out on a continuing basis and are to be

extended over a period of time, the REIT Manager considers that strict compliance with the with the

announcement, circular and independent Unitholders’ approval (as applicable) requirements under the

Listing Rules (modified as appropriate pursuant to paragraph 2.26 of the REIT Code) would be unduly

burdensome and impose unnecessary administrative costs upon Powerlong REIT.

Pursuant to paragraph 8.7C of the REIT Code and Rule 14A.105 of the Listing Rules, the REIT Manager

have applied for, and the SFC [has granted], a waiver (the “Powerlong Continuing CPTs Waiver”)

exempting Powerlong REIT from strict compliance with:

(a) in respect of the Commercial Operational Services Framework Agreement, the announcement, circular

and independent Unitholders’ approval requirements under Chapter 14A of the Listing Rules (modified

as appropriate pursuant to paragraph 2.26 of REIT Code);

(b) in respect of the Common Area and Advertising Space Management Services Framework Agreement,

the announcement, circular and independent Unitholders’ approval requirements under Chapter 14A of

the Listing Rules (modified as appropriate pursuant to paragraph 2.26 of REIT Code); and

(c) in respect of the Car Parking Lots Management Services Framework Agreement, the announcement

requirement under Chapter 14A of the Listing Rules (modified as appropriate pursuant to paragraph

2.26 of REIT Code).

The Powerlong Continuing CPTs Waiver in respect of the transactions under the Commercial Operational

Services Framework Agreement shall be subject to the conditions that:

(i) the Joint Listing Agents and the Directors (including the independent non-executive Directors) are of

the view that the transactions under the Commercial Operational Services Framework Agreement have

been and will be entered into in the ordinary and usual course of business of the Powerlong REIT Group,

on normal commercial terms that are fair and reasonable and in the interests of the Unitholders as a

whole;

(ii) the Directors (including the independent non-executive Directors) confirm that the proposed annual

caps of the transactions under the Commercial Operational Services Framework Agreement are fair and

reasonable and in the interests of the Unitholders as a whole; and

(iii) the aggregate transaction value of the transactions under the Commercial Operational Services

Framework Agreement for each of the three years ending December 31, 2023 shall not exceed the annual

caps of RMB20.0 million, RMB24.0 million and RMB26.0 million, respectively.



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The Powerlong Continuing CPTs Waiver in respect of the transactions under the Common Area and

Advertising Space Management Services Framework Agreement shall be subject to the conditions that:


the view that the transactions under the Common Area and Advertising Space Management Services

Framework Agreement have been and will be entered into in the ordinary and usual course of business of

the Powerlong REIT Group, on normal commercial terms that are fair and reasonable and in the interests

of the Unitholders as a whole;


caps of the transactions under the Common Area and Advertising Space Management Services

Framework Agreement are fair and reasonable and in the interests of the Unitholders as a whole; and

(iii) the aggregate transaction value of the transactions under the Common Area and Advertising Space

Management Services Framework Agreement for each of the three years ending December 31, 2023

shall not exceed the annual caps of RMB37.0 million, RMB49.0 million and RMB51.0 million,

respectively.

The Powerlong Continuing CPTs Waiver in respect of the transactions under the Car Parking Lots

Management Services Framework Agreement shall be subject to the conditions that:


the view that the transactions under the Car Parking Lots Management Services Framework Agreement

have been and will be entered into in the ordinary and usual course of business of the Powerlong REIT

Group, on normal commercial terms that are fair and reasonable and in the interests of the Unitholders

as a whole;


caps of the transactions under the Car Parking Lots Management Services Framework Agreement are

fair and reasonable and in the interests of the Unitholders as a whole; and

(iii) the aggregate transaction value of the transactions under the Car Parking Lots Management Services

Framework Agreement for each of the three years ending December 31, 2023 shall not exceed the annual

caps of RMB1.9 million, RMB3.1 million and RMB3.8 million, respectively.

Apart from the Powerlong Continuing CPTs Waiver from strict compliance with the requirements stated

above, Powerlong REIT will comply with all applicable requirements under the REIT Code and Chapter 14A of the

Listing Rules (modified as appropriate pursuant to paragraph 2.26 of the REIT Code), including any future

amendments thereto.

If there is any material change to the terms of the Commercial Operational Services Framework Agreement,

the Common Area and Advertising Space Management Services Framework Agreement and the Car Parking Lots

Management Services Framework Agreement or if such agreements are proposed to be renewed or if the annual cap

is exceeded, the REIT Manager will re-comply with the applicable requirements under the REIT Code and Chapter

14A of the Listing Rules (modified as appropriate pursuant to paragraph 2.26 of the REIT Code).



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Opinion of the Board

The Board (with the approval of all of the independent non-executive Directors) confirms that in its opinion:

(i) the Powerlong Continuing CPTs waiver is in the interests of the Unitholders as a whole;

(ii) the annual cap amounts for each of the Non-Exempt Powerlong Continuing CPTs, and the basis for suchannual cap amounts, are fair and reasonable having regard to the interests of Powerlong REIT and theUnitholders as a whole;

(iii) for the Non-Exempt Powerlong Continuing CPTs which will be subsisting as of the [REDACTED],each such transaction was entered into: (i) in the ordinary and usual course of business of thePredecessor Group; and (ii) on terms which are normal commercial terms and are fair and reasonableand in the interests of Powerlong REIT and the Unitholders as a whole; and

(iv) for the Non-Exempt Powerlong Continuing CPTs which will be entered into after the [REDACTED],each such transaction shall be entered into: (a) in the ordinary and usual course of business of PowerlongREIT Group; and (b) on terms which are normal commercial terms, are fair and reasonable and in theinterests of Powerlong REIT and the Unitholders as a whole.

Opinion of the Joint Listing Agents

CLSA Capital Markets Limited and BOCI Asia Limited, in their capacity as the joint listing agents ofPowerlong REIT for the purposes of the authorization of Powerlong REIT under Part IV of the SFO and the[REDACTED] of the Units on the Stock Exchange, has confirmed that in their opinion, the Non-ExemptPowerlong Continuing CPTs as subsisting as of the Latest Practicable Date are in the ordinary and usual course ofbusiness of Powerlong REIT Group, on terms which are normal commercial terms, are fair and reasonable and inthe interests of the Unitholders as a whole.

Opinion of the CPT Property Valuer

The CPT Property Valuer has confirmed that, in its opinion, the rent in respect of the leases under theCommon Area and Advertising Space Management Services Framework Agreement and the Car Parking LotsManagement Services Framework Agreement which will be subsisting as of the [REDACTED] are at marketlevels as of their respective agreement dates, and the other commercial terms in those leases such as tenure, rentaldeposits, termination clauses are normal commercial terms and are fair and reasonable. The CPT Property Valueris also of the opinion that the Commercial Operational Services Framework Agreements is fair and reasonable andconducted on normal commercial terms at arm’s length and consistent with normal business practice for contractsof the relevant types.

ROLE OF AUDIT COMMITTEE FOR CONNECTED PARTY TRANSACTIONS

The Audit Committee will periodically review (and the executive Directors or the management team of theREIT Manager will periodically produce reports to the Audit Committee for review of) all connected partytransactions to ensure compliance with the REIT Manager’s internal control systems and with the relevantprovisions of the REIT Code. The review will include the examination of the nature of the transaction and itssupporting documents or such other data deemed necessary by the Audit Committee.

If a member of the Audit Committee has an interest in a transaction, he or she is to abstain from participatingin the review and approval process in relation to that transaction.



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In connection with the authorization of Powerlong REIT by the SFC, the REIT Manager has applied to, and

[has received] approval from, the SFC in relation to the modifications of, and waivers from, strict compliance with

certain requirements of the REIT Code. A summary of such modifications and waivers is set out below.

CONNECTED PARTY TRANSACTIONS – CHAPTER 8 OF THE REIT CODE

Powerlong REIT has applied to the SFC for, and the SFC [has granted], waivers from strict compliance with

certain provisions in Chapter 8 of the REIT Code in relation to certain connected party transactions of Powerlong

REIT within the meaning of the REIT Code. Details of the waivers received are set out in the section headed

“Connected Party Transactions—Waivers for Certain Connected Party Transactions and Connected Persons” in

this Document.

PAYMENT OF REIT MANAGER’S REMUNERATION BY WAY OF UNITS – CHAPTER 12 OF THE REITCODE

As noted in the section headed “The REIT Manager—Further Details Regarding the REIT Manager—Fees,

Costs and Expenses of the REIT Manager” in this Document, the REIT Manager’s Base Fee, Variable Fee,

Acquisition Fee and Divestment Fee (collectively, “REIT Manager’s Remuneration”) payable to the REIT

Manager may be in the form of Units. The REIT Manager has applied to the SFC for, and the SFC [has granted], a

waiver from strict compliance with certain requirements under Chapter 12 of the REIT Code in respect of the issue

of Units to the REIT Manager as payment of the REIT Manager’s Remuneration, subject to the following

conditions:

(a) for the purposes of the REIT Code, the number of Units issued to the REIT Manager by way of payment

of the REIT Manager’s Remuneration for each financial year of Powerlong REIT shall be counted as

part of the 20.0% (or such lower percentage as permitted by the REIT Code from time to time) of

outstanding Units that the REIT Manager may issue in each financial year without Unitholders’

approval pursuant to paragraph 12.2 of the REIT Code;

(b) in respect of each financial year, the maximum number of Units that may be issued to the REIT Manager

as payment of all or part of the REIT Manager’s Remuneration for that financial year shall, in the

aggregate, be limited to such number of Units as represents 3.0% of the total number of Units

outstanding as of the last day of the immediately preceding financial year plus the number of Units, if

any, issued in that financial year for the purpose of financing any acquisition of real estate by Powerlong

REIT;

(c) any issue of Units to the REIT Manager as payment of all or part of the REIT Manager’s Remuneration

shall be made strictly in accordance with the requirements of the Trust Deed and the Applicable Rules;

and

(d) in the event that any payment of all or part of the REIT Manager’s Remuneration in the form of Units

exceeds the relevant thresholds set out in paragraph 12.2 of the REIT Code and paragraph (b) above, and

Unitholders’ approval is not obtained for the issue of Units for such purpose, then payment of that

excess part of the REIT Manager’s Remuneration shall be made by Powerlong REIT to the REIT

Manager in cash.


MODIFICATIONS, WAIVERS AND LICENSING CONDITIONS

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PAYMENT OF PROMOTIONAL EXPENSES FROM THE PROPERTIES OF POWERLONG REIT –PARAGRAPH 9.13(B) OF THE REIT CODE

Under paragraph 9.13(b) of the REIT Code, expenses arising out of any advertising or promotional activitiesin connection with a REIT shall not be paid from the property of the REIT. Powerlong REIT has applied to the SFCfor, and the SFC [has granted], a waiver from strict compliance with the requirements of paragraph 9.13(b) of theREIT Code to allow payment or reimbursement out of assets of Powerlong REIT costs and expenses for marketing,promotion, advertising, roadshows, press conferences, luncheons, presentations and other public relations-relatedfees, costs or expenses incurred in relation to any fund raising exercise by Powerlong REIT or otherwise inconnection with Powerlong REIT (collectively, “Promotional Expenses”), but only if and to the extent that suchis permitted by the REIT Code and any applicable law, subject to the following conditions:

(i) the Audit Committee shall verify periodically the amounts of Promotional Expenses incurred by theREIT Manager and shall confirm in the annual report of Powerlong REIT that the Promotional Expensesare incurred: (a) in accordance with the internal control procedures of the REIT Manager; and (b) solelyfor the purposes as set out in the relevant clauses of the Trust Deed, and review such supporting evidencethat it may reasonably deem necessary;

(ii) the aggregate amount of the Promotional Expenses shall be disclosed in the relevant annual report ofPowerlong REIT; and

(iii) payment or reimbursement to the Trustee and/or the REIT Manager of such expenses shall be madestrictly in accordance with the requirements of the Trust Deed.

USE OF SPECIAL PURPOSE VEHICLES — PARAGRAPH 7.5(C) OF THE REIT CODE

Paragraph 7.5(c) of the REIT Code states that the special purpose vehicles established by the real estateinvestment trust (“SPVs”) for the purpose of holding real estate shall only be established for the sole purpose ofholding real estate for the scheme and/or arranging financing for the scheme.

Certain members of the Powerlong REIT Group, namely the Existing Project Companies had historicallyconducted property development activities and had held and disposed of various properties including commodityhouses consisting of residential properties, commercial properties other than shopping malls such as shop units ofshopping streets, apartments and office buildings, hotels and certain ancillary car parking spaces, i.e. theNon-REIT Properties. See “Reorganization, Structure and Organization of Powerlong REIT — Reorganization andAsset Injection — (b) Transfer of the REIT Properties — Certain liabilities and obligations which may subsistupon [REDACTED]” for details. As such, despite the fact that the Existing Project Companies have already ceasedto carry out property development activities, they had not been initially established solely for holding real estatefor the scheme and/or arranging financing for the scheme.

The REIT Manager has applied to the SFC for, and the SFC [has granted], a waiver from strict compliancewith the requirements of paragraph 7.5(c) of the REIT Code to allow Powerlong REIT to hold real estate throughthe Existing Project Companies.

For all modifications and waivers from strict compliance with certain requirements of the REIT Code asreferred to in this section and the section headed “Connected Party Transactions” in this Document,notwithstanding any of the foregoing, the SFC reserves the right to review or revise any of the conditions relatingto the waivers if there is any subsequent change of circumstances that affects any of them. In the event of futureamendments to the REIT Code imposing more stringent requirements than those applicable at the date of thewaivers granted by the SFC on transactions on the kind to which the transaction belong (including, but not limitedto, a requirement that such transaction be made conditional on approval by the independent Unitholders), the REITManager shall take immediate steps to ensure compliance with such requirements within a reasonable period.



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LICENSING CONDITIONS ON THE REIT MANAGER

In addition to the statutory conditions set out in the SFO, the SFC has imposed the following licensing

conditions upon the REIT Manager:

(a) the REIT Manager’s license shall lapse and cease to have effect as and when:

(i) Powerlong REIT is de-authorized; or

(ii) the REIT Manager ceases to act as the management company of Powerlong REIT; and

(b) for Type 9 regulated activity, the REIT Manager shall only engage in managing Powerlong REIT.



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The following statements are by way of a general guide to investors only and do not constitute tax advice.Investors are therefore advised to consult their professional advisors concerning possible taxation or otherconsequences of purchasing, holding, selling or otherwise disposing of the Units under the laws of theircountry of incorporation, establishment, citizenship, residence or domicile.

Investors should note that the following statements are based on advice received by the REIT Managerregarding taxation law, regulation and practice in force as of the date of this Document and may be subject tochange.

PRC TAXATION OF POWERLONG REIT

Enterprise Income Tax (“EIT”)

Under the EIT Law that became effective on January 1, 2008 and was revised successively in 2017 and 2018,foreign-invested enterprises and PRC domestic companies are generally subject to the standard income tax rate of25.0% on their taxable profits. In general, subject to certain limitations and specific allowances, all necessary andreasonable expenses incurred in carrying out a business with sufficient supporting documents are deductible forthe purpose of computing EIT taxable profits. Tax losses can be carried forward for five consecutive years to offsetagainst the future taxable profits.

In addition, under EIT Law, an enterprise incorporated outside the PRC with its “place of effectivemanagement” within the PRC is considered a “resident enterprise” for EIT purposes and will be subject to EIT atthe standard income tax rate of 25.0% on its worldwide income. The “place of effective management” is defined asthe place where substantive and overall management and control over production and business operations,personnel, finance and accounting, and properties, etc., of the enterprise is conducted.

At present, the only published, interpretative guidance in force on the meaning of the term “place of effectivemanagement” can be found in Circular 82. In this context, a Chinese controlled offshore-incorporated enterpriserefers to an enterprise incorporated under the laws of a foreign country or territory and having a Chinese enterpriseor enterprise group as its primary controlling shareholder.

Under Circular 82, all of the following conditions must be met in order for a Chinese-controlledoffshore-incorporated company to be considered a PRC TRE:

• The senior management team who conduct the daily operation of the enterprise are based in China, andthe senior management departments are situated in China to perform their duties;

• Finance-related decisions and human resource-related decisions are made within China or suchdecisions need final approval by the management in China;

• The main assets, accounting books, financial and board meeting records, company chops, shareholdermeeting records of the enterprise are located or maintained in China; and

• At least half of the directors or senior decision makers with voting power reside in China.

Circular 82 technically only applies to Chinese-controlled offshore-incorporated enterprises, but notforeign-controlled offshore-incorporated enterprises. In the absence of specific guidance on the application of thePRC TRE concept to foreign-controlled offshore incorporated enterprises, the PRC tax authorities mayanalogously apply the conditions set out in Circular 82 to foreign-controlled offshore-incorporated enterprises.Nevertheless, uncertainty remains as to how the PRC tax authorities will interpret and apply the PRC TRE conceptto a foreign-controlled offshore-incorporated enterprise.


TAXATION

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As of the Latest Practicable Date, none of the offshore entities of Powerlong REIT has been notified or informedby the PRC tax authorities that it is considered a PRC TRE for EIT purposes. If the PRC tax authoritiessubsequently determine that Powerlong REIT or its Offshore Property Holding Companies are deemed to be orshould be classified as PRC TREs, such offshore entities may be subject to EIT at 25.0% on their worldwideincome.

According to the EIT Law, dividends paid by PRC foreign-invested enterprises to their non-PRC parent companieswill generally be subject to withholding income tax of 10.0%. However, the withholding income tax of 10.0% maybe reduced under an applicable tax treaty between the PRC and the jurisdiction in which the overseas parentcompany is incorporated containing a provision that specifically reduces such withholding income tax, and theoverseas parent company satisfies the qualifying conditions for the reduced dividend withholding income tax rateunder the relevant tax treaty. For example, pursuant to the avoidance of double taxation arrangement betweenHong Kong and the PRC, if the non-PRC parent company is a Hong Kong tax resident and directly holds a 25.0%or more interest in a PRC enterprise, the withholding income tax rate on the dividends distributed by the PRCenterprise may be lowered to 5.0% if the Hong Kong parent company is the “beneficial owner” of the dividendsdistributed by the PRC enterprise.

The dividend recipient’s “beneficial owner” status is typically a necessary condition for the recipient to qualify forthe reduced dividend withholding tax rate under an applicable tax treaty. The PRC State Taxation Administrationpromulgated rules concerning the determination of a recipient’s beneficial owner status under tax treaties. In thatregard, the currently applicable rules are principally set out in Bulletin 9. Bulletin 9 provides that a “beneficialowner” is a person who has the ownership and control over the relevant income or the rights or properties thatgenerate the relevant income. A beneficial ownership analysis will be made based on a totality of facts of each caseand the “substance-over-form” principle to determine whether a recipient is entitled to tax treaty benefits.Generally speaking, a conduit or shell company without substantial business activities will not be recognized as a“beneficial owner”.

In general, dividends paid by the Project Companies to their respective parent HK Intermediary Companies will besubject to withholding income tax of 10.0% and the withholding obligation will arise at the date when dividendsare actually paid. However, as stated above, the withholding income tax rate may be lowered to 5.0% if the relevantHK Intermediary Companies is the “beneficial owner” of the dividends distributed by the Project Company held byit and holds a 25% or more interest in that Project Company pursuant to the avoidance of double taxationarrangement between Hong Kong and the PRC.

For the uncertainties regarding the HK (PRC Property) Holding Companies being regarded as the “beneficialowner”, please refer to the section headed “Risk Factors – Risks relating to the Real Estate Industry and OverseasInvestments into the PRC – There are significant uncertainties under the EIT Law relating to the withholding taxliabilities of the Project Companies” in this Document.

Value-added Tax (“VAT”)

The Provisional Regulations of the PRC Concerning VAT promulgated by the State Council came into effecton January 1, 1994, which was revised in 2008, 2016 and 2017, respectively. Under these regulations and theImplementing Rules of the Provisional Regulations of the PRC Concerning VAT, VAT is imposed on goods sold inor imported into the PRC and on processing, repair and replacement services provided within the PRC. At present,a VAT rate of 13.0% is applicable on taxable items encompassing the sale of most tangible goods and the provisionof certain labor in respect of processing goods, repair and replacement services undertaken in the PRC.

A turnover tax reform launched on August 1, 2013 gradually brought all services that were previously subjectto business tax, a legacy turnover tax that used to run in parallel with VAT, into the VAT regime. The turnover taxreform was completed in May 1, 2016, upon which all services that were subject to business tax prior to the reformbecame subject to VAT instead.


TAXATION

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At present, where the service provider is a general VAT taxpayer, income from construction services, thesale and lease of immoveable properties is generally subject to VAT at 9.0% (the taxpayer may elect thesimplified tax calculation method with a VAT collection rate at 5.0% for the sale and leasing of immoveableproperties acquired prior to May 1, 2016), while the applicable VAT rate is 6.0% for financial services andmost other modern services.

Real Estate Tax (“RET”)

PRC Properties owned by an enterprise will be subject to RET at variable rates depending on locality. Incertain localities, RET is applicable at a rate of 1.2% of the original value of the building less a standard deductionwhich ranges from 10.0% to 30.0% of the original value for self-used part of properties and at a rate of 12.0% ofthe rental income for rent-out part of properties.

China Indirect Transfer Tax

On February 3, 2015, the State Taxation Administration issued the Bulletin on Certain Issues relating toEnterprise Income Tax on Indirect Transfers of Properties by Non-resident Enterprises (“Bulletin 7”). Bulletin 7 isthe principal set of currently applicable regulations regarding the PRC tax treatment of “indirect” transfers of PRCtaxable properties undertaken by non-resident enterprises (“Offshore Investors”). PRC taxable properties includeequity interests in enterprises resident in the PRC, PRC immovable properties and “establishments or places” ofnon-resident enterprises in the PRC.

Under Bulletin 7, the PRC tax authorities can apply a 10.0% EIT on gains derived by the Offshore Investor onan indirect transfer of PRC taxable property if the arrangement is considered to lack “reasonable commercialpurpose” and the transferor has avoided payment of EIT.

There are three specific safe harbor provisions under Bulletin 7, namely the intragroup restructuring safeharbor, the public trading safe harbor and the treaty safe harbor:

• Intragroup restructuring safe harbor – Three conditions have to be met for an indirect transfer to qualifyfor the intragroup restructuring safe harbor. The conditions are: (i) there is 80.0% (or 100.0%, if morethan 50.0% of the offshore target company’s equity value is derived from PRC immovable properties) ofcommon shareholding relationship between the transferor and the transferee; (ii) the actual Chineseincome tax burden on any future indirect transfer of the underlying PRC taxable property will not be lessthan the Chinese income tax burden on the same or a similar indirect transfer that can be conductedbefore the subject indirect transfer; and (iii) consideration for the indirect transfer must be in non-listedshares in the transferee or its controlled enterprise.

• Public trading safe harbor – This safe harbor applies to a sale of listed shares of an offshore listedcompany that directly or indirectly owns PRC taxable property, provided that both the buying andselling of the listed shares are conducted in the public securities market.

• Treaty safe harbor – This safe harbor applies to a sale of shares in an offshore company that directly orindirectly owns PRC taxable properties where the Offshore Investor could be exempted from EITaccording to an applicable tax treaty had it directly held and transferred the underlying PRC taxableproperty.

An indirect transfer of PRC taxable property that qualifies for a safe harbor will be deemed to havereasonable commercial purpose, such that a qualifying indirect transfer of PRC taxable property will not betaxable under Bulletin 7. The “blacklist” test applies to an indirect transfer of PRC taxable property that does notqualify for any safe harbor. If an indirect transfer of PRC taxable property meets all four conditions (i.e., (i) 75.0%or more of the equity value of the offshore target company is directly or indirectly derived from PRC taxableproperties; (ii) 90.0% or more of the total assets of the offshore target company are attributed to PRC taxable


TAXATION

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properties at any time during the one year period prior to the subject indirect transfer or 90.0% or more of the

revenue of the offshore target company in the one year period prior to the subject indirect transfer is PRC-sourced;

(iii) the offshore target company and its underlying affiliates that directly or indirectly hold PRC taxable property

have only completed the formality of registration in their countries or regions and fulfilled legal organizational

requirements, but the actual functions they performed and the risks they assumed are too limited to prove that they

have economic substance; and (iv) the foreign income tax payable on the indirect transfer of PRC taxable property

is lower than the possible China taxes payable on the direct transfer of China taxable property) under the

“blacklist” test, that indirect transfer will be deemed to lack reasonable commercial purpose and will thus be

taxable under Bulletin 7.

For an indirect transfer of PRC taxable property that neither qualifies for any safe harbor nor is deemed as lack of

reasonable commercial purpose under the “blacklist” test, the PRC tax authorities should apply the comprehensive

reasonable commercial purpose test to determine that indirect transfer’s taxability under Bulletin 7. While the PRC

tax authorities are required to take into account all relevant facts and circumstances when applying the

comprehensive reasonable commercial purpose test, the relevant provision in Bulletin 7 specifically lists eight

factors that have to be considered:

1. whether the equity value of the offshore target company is mainly directly or indirectly derived from

PRC taxable property;

2. whether the assets of the offshore target company mainly comprise direct or indirect investments

situated in China, or whether the revenue of the offshore target company is mainly sourced directly or

indirectly from China;

3. whether the actual functions performed by or actual risks assumed by the offshore target company and

its underlying affiliates that directly or indirectly hold PRC taxable property are able to prove that the

enterprise structure has economic substance;

4. the duration of the shareholders of the offshore target company, business model and relevant

organization structures that are in existence;

5. the foreign taxes payable on the indirect transfer;

6. the substitutability of indirect investment, indirect transfer of PRC taxable property and direct

investment, direct transfer of PRC taxable property;

7. the applicable tax treaties or arrangements in China with respect to the income derived from the indirect

transfer of PRC taxable property; and

8. other relevant factors.

Under Bulletin 7, where a non-resident enterprise conducts an indirect transfer of PRC taxable property, the

transferor, the transferee and/or the PRC resident enterprise being indirectly transferred (if any) may report the

indirect transfer to the relevant PRC tax authorities. There is no mandatory reporting obligation. The transferee has

the obligation to withhold EIT (where applicable) and fail of withholding may lead to a potential penalty if such

EIT is not settled by the transferor. However, Bulletin 7 does not provide for clear guidance on various issues, for

instance, the tax basis, the allocation of transfer price to various PRC enterprises and the timeline for the formal

binding decision of the tax authorities on a Bulletin 7 transaction.


TAXATION

– 263 –

Land Appreciation Tax (“LAT”)

According to the PRC Interim Regulation on LAT implemented in January 1994, its implementation rules of1995 and subsequent supplemental regulations related thereto, the LAT applies to both domestic and foreigninvestors in real properties in the PRC. The tax is payable by a taxpayer on the gains from the transfer of land useright, buildings or other facilities on such land, after deducting “deductible items” that include the following:

• payments made to acquire land use right;

• costs and charges incurred in connection with land development;

• construction costs and charges in the case of newly constructed buildings and facilities;

• assessed value in the case of old buildings and facilities;

• taxes paid or payable in connection with the transfer of the land use right, buildings or other facilities onsuch land; and

• other items allowed by the Ministry of Finance of the PRC.

Where the taxpayer is developing a project, the applicable tax is payable on provisional basis. At the end ofthe project or upon satisfaction of other statutory conditions, taxpayers should file LAT clearance return for thewhole project.

The tax rate is progressive and ranges from 30% to 60% of the gain, as follows:

Appreciation Value Tax Rate

Portion not exceeding 50% of deductible items 30%Portion over 50% but not more than 100% of deductible items 40%Portion over 100% but not more than 200% of deductible items 50%Portion over 200% of deductible items 60%

Urban Land Use Tax

According to the PRC Interim Regulations on Land Use Tax in respect of Urban Land promulgated by theState Council in September 1988 and subsequent supplemental regulations related thereto, the land use tax inrespect of urban land is levied according to the area of relevant land. At present, the annual tax rate ranges betweenRMB0.6 and RMB30 per sq.m. of urban land.

Deed Tax

According to the PRC Deed Tax Law promulgated in August 2020, deed tax is levied on the transfer of realproperty. The transferee/assignee is the taxpayer. Generally, the rates range from 3% to 5% of the transfer price,depending upon the locality where the transferred real property is located.

Stamp Duty

According to the new SD Law (Order of the President of the People’s Republic of China No. 89), whichwould be effective on July 1, 2022, promulgated by the State Council in June 2021, stamp duty is payable on alldutiable documents executed or used in the PRC. Property transfer instruments, including those in respect ofproperty ownership transfers, are subject to stamp duty at a rate of 0.05% of the amount stated therein. Stamp dutyat 0.1% of the rental applies to leasing contracts.


TAXATION

– 264 –

Urban Construction and Maintenance Tax

According to the PRC Interim Regulations on Urban Construction and Maintenance Tax promulgated inAugust 2020, a taxpayer of consumption tax, VAT or business tax (which has been replaced by VAT uponcompletion of the Turnover Tax Reform as of May 1, 2016) is required to pay urban construction and maintenancetax calculated on the basis of consumption tax, VAT and business tax. Generally, the tax rate is 7.0% for a taxpayerin an urban area, 5.0% in a county or a town, and 1.0% for a taxpayer not in any urban area or county or town.

Education Surcharge and Local Education Surcharge

According to the Interim Provisions on Imposition of Education Surcharge promulgated by the State Councilin April 1986 and amended in 1990, 2005 and 2011, any taxpayer of VAT, business tax (which has been replaced byVAT upon completion of the Turnover Tax Reform as of May 1, 2016) or consumption tax is liable for an educationsurcharge, unless such taxpayer is required to pay a rural area education surcharge as provided by the Notice of theState Council on Raising Funds for Schools in Rural Areas. The Education Surcharge rate is generally 3%calculated on the basis of VAT business tax and consumption tax.

In addition, on November 7, 2010, the Ministry of Finance published the Notice on Issues ConcerningPolicies on Unifying Local Education Surcharge that provides a general rate of 2.0% for the local educationsurcharge on the basis of VAT, business tax or consumption tax.

PRC TAXATION OF THE UNITHOLDERS

Regarding the distributions from Powerlong REIT and gains from disposal of Units, if a Unitholder is a PRCtax resident or is deemed to be a PRC tax resident, a Unitholder will be subject to PRC tax on distributions fromPowerlong REIT and gains from disposal of units.

However, special exemptions apply to certain individual PRC tax resident who are not domiciled in the PRC.Pursuant to the PRC Implementing Regulations of the Individual Income Tax Law revised in 2018, an individualwho has no domicile in China but has resided in China for not more than six consecutive years in each of which heresided for 183 days or more accumulatively shall be exempted from individual income tax on his income derivedoutside the territory of China and paid by any overseas entity or individual, subject to record-filing with the taxauthority.

If a Unitholder is neither a PRC tax resident nor deemed to be a PRC tax resident, such Unitholder shouldgenerally not be subject to PRC tax on distributions from Powerlong REIT and gains from disposal of Units unlessPowerlong REIT is a deemed to be a PRC TRE. However, for individual Unitholders who are not tax residents ofthe PRC, income derived from the transfer of equity assets formed from investment in enterprises and otherorganizations outside the territory of China shall be domestic-sourced income and is therefore subject to PRC taxif at any time within the three years (36 consecutive calendar months) before the equity assets are transferred, 50%or more of the fair value of the assets of the invested enterprises or other organizations is derived directly orindirectly from real estate located in the territory of China, pursuant to the Public Notice Regarding the IndividualIncome Tax Treatment on Foreign Income published on January 17, 2020.

Further, regardless of whether Powerlong REIT is deemed to be a PRC TRE, if any non-PRC tax residentcorporate Unitholder has indirectly transferred PRC taxable property through the disposal of Units, such disposalmay trigger the application of Bulletin 7. However, pursuant to the safe harbor provision in Bulletin 7 for the saleof listed shares of an offshore listed company (see the section headed “Taxation – PRC Taxation of PowerlongREIT – China Indirect Transfer Tax” in this Document for details), gains from disposal of Units on the StockExchange, subject to meeting certain requirements, may qualify for the public trading safe harbor, and be exemptfrom EIT.


TAXATION

– 265 –

HONG KONG TAXATION OF POWERLONG REIT

Profits Tax

Powerlong REIT, as a collective investment scheme constituted as a unit trust and authorized under Section

104 of the SFO, is exempt from Hong Kong profits tax.

If the Special Purpose Vehicles are regarded as carrying on a trade, profession or business in Hong Kong

either on their own account or through another person (e.g. the REIT Manager) acting on their behalf in Hong

Kong, a liability to Hong Kong profits tax will arise in respect of profits arising from Hong Kong from that trade,

profession or business carried on in Hong Kong and which do not relate to profits from a sale of capital assets. The

current Hong Kong profits tax rate is 16.5% for corporations. A two-tiered profits tax rates regime applies in Hong

Kong commencing from the 2018/19 year of assessment. Under such regime, the rate of tax for the first HK$2

million of assessable profits of a nominated entity within the group will be reduced by half from 16.5% to 8.25%

on a self-election basis, with certain exceptions, while the remaining profits will continue to be taxed at the normal

rate of 16.5%. However, only one entity of each group of “connected entities” (as defined in the relevant tax

legislation) can elect to apply the two-tiered rates.

Withholding Tax

Distributions made by Powerlong REIT to the Unitholders are not subject to any withholding tax in Hong

Kong.

Stamp Duty

No Hong Kong stamp duty is payable by Powerlong REIT on the issue of new Units. Subsequent

[REDACTED] by the Unitholders in Units will be subject to Hong Kong stamp duty. For details, please refer to the

sub-section headed “Hong Kong Taxation of the Unitholders” below.

HONG KONG TAXATION OF THE UNITHOLDERS

Profits Tax

Where the Unitholders do not carry on a trade, profession or business in Hong Kong or the Units in the

Powerlong REIT are held by the Unitholders as capital assets for Hong Kong profits tax purposes, gains arising

from the sale or disposal or redemption of the Units in the Powerlong REIT should not be taxable. For Unitholders

carrying on a trade, profession or business in Hong Kong, such gains may be subject to Hong Kong profits tax

(which is currently charged at the rate of 16.5% in the case of corporations, and 15% in the case of individuals and

unincorporated business, subject to the election of two-tiered rates as explained above) if the gains in question

arise in or are derived from such trade, profession or business carried on in Hong Kong and are of a revenue nature.

Under the Hong Kong Inland Revenue Department’s current practice (as of the Latest Practicable Date),

Hong Kong profits tax will generally not be payable by any Unitholder on the distributions made by Powerlong

REIT. The Unitholders should take advice from their own professional advisors as to their particular tax position.

Stamp Duty

No Hong Kong stamp duty is payable by the Unitholders in relation to the issue of the new Units to them by

Powerlong REIT.


TAXATION

– 266 –

Hong Kong stamp duty will be payable by the purchaser on every purchase and by the seller on every

sale of the Units, whether or not the purchase or sale is on or off the Stock Exchange. The duty is currently

charged at the rate of 0.26% of the higher of the consideration paid or the value of the Units transferred (the

buyer and seller each being liable for one-half of the amount of Hong Kong stamp duty payable upon such

transfer). In addition, a fixed duty of HK$5 is currently payable on any instrument of transfer of the Units.

BVI TAXATION OF POWERLONG REIT

The Target Company, Starlong (BVI) Second Limited, Starlong (BVI) Third Limited and the BVI

Intermediary Companies (together, the “BVI Companies”) and all dividends, interest, rents, royalties,

compensation and other amounts paid by the BVI Companies to persons who are not resident in the BVI and any

capital gains realized with respect to any shares, debt obligations, or other securities of the BVI Companies by

persons who are not resident in the BVI are exempt from all provisions of the Income Tax Act in the BVI.

No estate, inheritance, succession or gift tax, rate, duty, levy or other charge is payable by persons who are

not resident in the BVI with respect to any shares, debt obligation or other securities of the BVI Companies.

All instruments relating to transfers of property to or by the BVI Companies and all instruments relating to

transactions in respect of the shares, debt obligations or other securities of the BVI Companies and all instruments

relating to other transactions relating to the business of the BVI Companies are exempt from payment of stamp

duty in the BVI. This assumes that the BVI Companies do not hold an interest in real estate in the BVI.

There are currently no withholding taxes or exchange control regulations in the BVI applicable to the BVI

Companies or its members.

THE DISCUSSION ABOVE IS A GENERAL SUMMARY. IT DOES NOT COVER ALL TAXMATTERS THAT MAY BE OF IMPORTANCE TO A PARTICULAR INVESTOR.

EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT ITS OWN TAX ADVISER ABOUT THETAX CONSEQUENCES TO IT OF AN INVESTMENT IN THE UNITS IN LIGHT OF THE INVESTOR’SOWN CIRCUMSTANCES.


TAXATION

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– 313 –

Various experts have issued reports and/or letters and/or certificates for inclusion in this Document. TheREIT Manager has reviewed the reports, letters and certificates prepared by these experts.

The Independent Property Valuer, PricewaterhouseCoopers, the Building Surveyor, the MarketConsultant, the PRC legal advisors and the Joint Listing Agents have each given and have not withdrawn theirrespective written consents to the issue of this Document with the inclusion of their reports and/or lettersand/or valuation certificates and/or summary thereof (as the case may be) and/or references to their namesincluded herein in the form and context in which they are respectively included.

The Independent Property Valuer was responsible for: (i) conducting a valuation of the REIT Properties and

preparing the Valuation Report; and (ii) reviewing the forecasts of rental income for the REIT Properties and

assumptions used by the REIT Manager for the purposes of the profit forecast of Powerlong for the period from the

[REDACTED] to December 31, 2021 as set out in the section headed “Profit Forecast for the Profit Forecast

Period” in this Document.

PricewaterhouseCoopers is a firm of certified public accountants and are the reporting accountants and

auditors for the Predecessor Group.

Zhong Lun Law Firm is a firm of PRC lawyers and is the legal advisor to the REIT Manager as to PRC law.

The Market Consultant was responsible for carrying out a comprehensive study of the property market of

various cities in the PRC and preparing the Market Research Report".

The Building Surveyor was responsible for carrying out a building condition and property condition survey of

the Properties and preparing the Building Survey Report.

The Independent Property Valuer in respect of the Connected Party Transactions of Powerlong REIT was

responsible for reviewing the terms of certain agreements to be entered into between the Operations and Property

Manager and the REIT Manager (for itself and on behalf of the Powerlong REIT Group) relating to certain

connected party transactions of Powerlong REIT.

The Joint Listing Agents were responsible for considering whether the profit forecast set out in the section

headed “Profit Forecast for the Profit Forecast Period” in this Document was made by the REIT Manager after due

and careful enquiry.


EXPERTS

– 314 –

The following is the text of a report set out on pages I-1 to I-3, received from the Company’s reporting

accountant, PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, for the purpose of incorporation

in this document. It is prepared and addressed to the directors of the REIT Manager and to the Joint Listing Agents

pursuant to the requirements of HKSIR 200 Accountants’ Reports on Historical Financial Information in

Investment Circulars issued by the Hong Kong Institute of Certified Public Accountants.

[Letterhead of PricewaterhouseCoopers] [DRAFT]

ACCOUNTANT’S REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE DIRECTORS OFPOWERLONG REIT MANAGEMENT LIMITED (AS MANAGER OF POWERLONG COMMERCIALREAL ESTATE INVESTMENT TRUST]), CLSA CAPITAL MARKETS LIMITED AND BOCI ASIALIMITED

Introduction

We report on the historical financial information of Starlong (BVI) Second Limited (the “Company”) and its

subsidiaries (together, the “Group”) which will be acquired by Powerlong Commercial Real Estate Investment

Trust (“Powerlong REIT”) upon completion of the proposed reorganisation as set out in Note 1.2 to the Historical

Financial Information (as defined below), set out on pages I-4 to I-60, which comprises the combined balance

sheets as at 31 December 2018, 2019 and 2020 and 30 June 2021 and the combined statements of comprehensive

income, the combined statements of changes in equity and the combined statements of cash flows for each of the

years ended 31 December 2018, 2019 and 2020 and the six months ended 30 June 2021 (the “Track RecordPeriod”) and a summary of significant accounting policies and other explanatory information (together, the

“Historical Financial Information”). The Historical Financial Information set out on pages I-4 to I-60 forms an

integral part of this report, which has been prepared for inclusion in the document of Powerlong REIT dated [●]

(the “Document”) in connection with the initial [REDACTED] of units of Powerlong REIT on the Main Board of

The Stock Exchange of Hong Kong Limited.

Directors’ responsibility for the Historical Financial Information

The directors of the Company and the directors of Powerlong REIT Management Limited (as manager of

Powerlong REIT) (the “REIT Manager”) are responsible for the preparation of Historical Financial Information

that gives a true and fair view in accordance with the basis of presentation and preparation set out in Notes 1.3 and

2.1 to the Historical Financial Information, and for such internal control as the directors of the Company and the

directors of the REIT Manager determine is necessary to enable the preparation of Historical Financial

Information that is free from material misstatement, whether due to fraud or error.

Reporting accountant’s responsibility

Our responsibility is to express an opinion on the 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.


APPENDIX I ACCOUNTANT’S REPORT

– I-1 –

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 accountant’s 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 accountant considers internal control relevant to the

entity’s preparation of Historical Financial Information that gives a true and fair view in accordance with the basis

of presentation and preparation set out in Notes 1.3 and 2.1 to the Historical Financial Information 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 of the Company and the

directors of the REIT Manager, 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 accountant’s report, a true

and fair view of the combined financial position of the Group as at 31 December 2018, 2019 and 2020 and 30 June

2021 and of its combined financial performance and its combined cash flows for the Track Record Period in

accordance with the basis of presentation and preparation set out in Notes 1.3 and 2.1 to the Historical Financial

Information.

Review of stub period comparative financial information

We have reviewed the stub period comparative financial information of the Group which comprises the

combined statement of comprehensive income, the combined statement of changes in equity and the combined

statement of cash flows for the six months ended 30 June 2020 and other explanatory information (the “StubPeriod Comparative Financial Information”). The directors of the Company and the directors of the REIT

Manager are responsible for the presentation and preparation of the Stub Period Comparative Financial

Information in accordance with the basis of presentation and preparation set out in Notes 1.3 and 2.1 to the

Historical Financial Information. Our responsibility is to express a conclusion on the Stub Period Comparative

Financial Information based on our review. We conducted our review in accordance with Hong Kong Standard on

Review Engagements 2410, Review of Interim Financial Information Performed by the Independent Auditor of the

Entity issued by the HKICPA. A review 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 Stub Period Comparative Financial Information, for the purposes of the accountant’s

report, is not prepared, in all material respects, in accordance with the basis of presentation and preparation set out

in Notes 1.3 and 2.1 to the Historical Financial Information.



– I-2 –

Report on matters under the Rules Governing the Listing of Securities on The Stock Exchange of Hong KongLimited and the Companies (Winding Up and Miscellaneous Provisions) Ordinance

Adjustments

In preparing the Historical Financial Information, no adjustments to the Underlying Financial Statements as

defined on page I-4 have been made.

Dividends

We refer to Note 13 to the Historical Financial Information which states that no dividends have been paid by

the Company in respect of the Track Record Period.

No statutory financial statements for the Company

No statutory financial statements have been prepared for the Company since its date of incorporation.

[PricewaterhouseCoopers]Certified Public Accountants

Hong Kong

[Date]



– I-3 –

I HISTORICAL FINANCIAL INFORMATION OF THE GROUP

Preparation of Historical Financial Information

Set out below is the Historical Financial Information which forms an integral part of this accountant’s

report.

The combined balance sheets as at 31 December 2018, 2019 and 2020 and 30 June 2021 and the

combined statements of comprehensive income, the combined statements of changes in equity and the

combined statements of cash flows for each of the years ended 31 December 2018, 2019 and 2020 and the six

months ended 30 June 2021 (the “Track Record Period”) and a summary of significant accounting policies

and other explanatory information (together, the “Historical Financial Information”) set out below form an

integral part of this accountant’s report.

The financial statements of the Group for the Track Record Period, on which the Historical Financial

Information is based, were audited by PricewaterhouseCoopers Zhong Tian LLP (普華永道中天會計師事務所（特殊普通合夥）) 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.



– I-4 –

Combined statements of comprehensive income

Year ended 31 DecemberSix months ended

30 June

Note 2018 2019 2020 2020 2021


Revenue 6 323,977 335,849 358,445 178,509 203,615Property operating expenses 7 (82,803) (90,411) (89,524) (39,438) (51,199)

Net property income 241,174 245,438 268,921 139,071 152,416Administrative expenses 7 (442) (501) (634) (316) (286)Fair value changes on investment

properties 14 646,475 411,119 60,735 28,966 17,137Net impairment losses on financial

assets 3.1.2 (329) (444) (869) (2,964) 844Other gains – net 9 2,680 1,269 2,947 994 811

Operating Profit 889,558 656,881 331,100 165,751 170,922Finance costs – net 10 (15,770) (15,801) (22,619) (11,458) (10,800)Share of profit/(losses) of

investment accounted for usingthe equity method 15 90,196 (473) (7,879) 10,092 (670)

Profit before income tax 963,984 640,607 300,602 164,385 159,452Income tax expense 11 (218,414) (160,444) (77,300) (38,665) (43,202)


Profit and total comprehensiveincome attributable to:

– Owners of the Company 702,113 470,680 219,207 122,500 112,427– Non-controlling interests 43,457 9,483 4,095 3,220 3,823

745,570 480,163 223,302 125,720 116,250

Earnings per share– Basic and diluted 12 N/A N/A N/A N/A N/A



– I-5 –

Combined balance sheets

As at 31 DecemberAs at

30 June

Note 2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

AssetsNon-current assetsInvestment properties 14 7,526,257 8,060,236 8,120,971 8,138,108Investment accounted for using

the equity method 15 501,731 501,258 493,379 –

8,027,988 8,561,494 8,614,350 8,138,108

Current assetsRental receivables 17 92,373 85,804 101,410 93,088Prepayments and other

receivables 18 4,626 3,935 3,034 40,927Amounts due from related

parties 28 1,646,562 1,193,248 559,291 304,128Restricted cash 20 6,695 2,705 – –Cash and cash equivalents 19 71,847 52,748 73,178 154,478

1,822,103 1,338,440 736,913 592,621

Total assets 9,850,091 9,899,934 9,351,263 8,730,729

EquityEquity attributable to owners

of the CompanyShare capital 21 – – – –Reserves 21 1,967,136 1,512,052 1,151,252 577,484Retained earnings 22 3,630,388 4,101,068 4,320,275 4,432,702

5,597,524 5,613,120 5,471,527 5,010,186Non-controlling interests 296,929 258,242 262,337 –

Total equity 5,894,453 5,871,362 5,733,864 5,010,186

LiabilitiesNon-current liabilitiesBorrowings 23 550,000 350,000 330,000 319,000Deferred tax liabilities 24 1,223,432 1,356,887 1,412,969 1,423,682

1,773,432 1,706,887 1,742,969 1,742,682



– I-6 –


30 June

Note 2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Current liabilitiesTrade and other payables 25 121,674 242,274 244,352 197,220Amounts due to related parties 28 1,251,820 1,486,158 1,247,008 1,366,262Advances from lessees 45,101 53,362 53,823 67,722Current income tax liabilities 132,644 201,194 308,584 325,013Borrowings 23 630,967 338,697 20,663 21,644

2,182,206 2,321,685 1,874,430 1,977,861

Total liabilities 3,955,638 4,028,572 3,617,399 3,720,543

Total equity and liabilities 9,850,091 9,899,934 9,351,263 8,730,729

Net current liabilities (360,103) (983,245) (1,137,517) (1,385,240)

Total assets less currentliabilities 7,667,885 7,578,249 7,476,833 6,752,868



– I-7 –

Combined statements of changes in equity

Attributable to owners of the Company

Note

Sharecapital and

ReservesRetainedearnings Subtotal

Non-controlling

interests Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000(Note 21)

Balance at 1 January 2018 1,381,496 2,928,275 4,309,771 253,472 4,563,243

Comprehensive incomeProfit for the year – 702,113 702,113 43,457 745,570

Transactions with owners ofthe Company

Capital injection from the then shareholders ofthe Group 585,640 – 585,640 – 585,640

Balance at 31 December 2018 1,967,136 3,630,388 5,597,524 296,929 5,894,453



Transactions with owners of the CompanyCapital withdrawn by the then shareholders of

the Group 21(a) (455,084) – (455,084) (48,170) (503,254)




Transactions with owners of the CompanyCapital withdrawn by the then shareholders of

the Group 21(a) (360,800) – (360,800) – (360,800)




– I-8 –

Attributable to owners of the Company

Note

Sharecapital and

ReservesRetainedearnings Subtotal

Non-controlling

interests Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000(Note 21)


Comprehensive incomeProfit for the period – 112,427 112,427 3,823 116,250

Transactions with owners of the CompanyDeemed distribution to the then shareholders of

the Group 21(b) (737,447) – (737,447) (59,494) (796,941)Capital withdrawn by the then shareholders of

the Group 21(a) (17,000) – (17,000) (3,000) (20,000)Changes in ownership interests in subsidiaries

without change of control 21(c) 180,679 – 180,679 (203,666) (22,987)

Balance at 30 June 2021 577,484 4,432,702 5,010,186 – 5,010,186

(Unaudited)Balance at 1 January 2020 1,512,052 4,101,068 5,613,120 258,242 5,871,362

Comprehensive incomeProfit for the period – 122,500 122,500 3,220 125,720

Balance at 30 June 2020 1,512,052 4,223,568 5,735,620 261,462 5,997,082



– I-9 –

Combined statements of cash flows


30 June

Note 2018 2019 2020 2020 2021


Cash flows of operating activitiesCash generated from operations 26(a) 271,432 280,554 265,142 89,691 129,842PRC corporate income tax paid (20,393) (49,946) (47,157) (26,921) (32,914)Interest paid (44,107) (49,267) (22,653) (11,475) (10,819)

Net cash generated from operating activities 206,932 181,341 195,332 51,295 86,109

Cash flows of investing activitiesRestricted cash pledged as guarantee deposits for

related parties (6,695) (2,705) (36,195) (36,195) –Restricted cash released from guarantee deposits

for related parties – 6,695 38,900 – –Interest received 2,906 – – – –Cash advances made to related parities (1,214,833) (137,999) (75,282) – (62,153)Repayments from related parties 19,590 695,573 842,433 463,213 341,016Payments for additions of investment properties (205,070) (45,110) (12,331) (5,801) (20,145)

Net cash (used in)/generated from investingactivities (1,404,102) 516,454 757,525 421,217 258,718

Cash flows of financing activitiesProceeds from borrowings 910,000 368,000 – – –Repayments of borrowings (47,171) (860,488) (338,000) (9,800) (10,000)Cash advances from related parties 7,245 – 72,948 67,448 205,171Repayments of cash advances to related parties (298,089) (224,406) (350,754) (189,277) (97,898)Capital injection from the then shareholders of

the Group 585,640 – – – –Capital withdrawn by the then shareholders of

the Group – – (316,621) (316,621) (360,800)

Net cash generated from/ (used in) financingactivities 1,157,625 (716,894) (932,427) (448,250) (263,527)

Net (decrease)/increase in cash and cashequivalents (39,545) (19,099) 20,430 24,262 81,300

Cash and cash equivalents at beginning ofyear/period 111,392 71,847 52,748 52,748 73,178




– I-10 –

II NOTES TO THE HISTORICAL FINANCIAL INFORMATION

1 General information, reorganisation and basis of presentation

1.1 General information

Starlong (BVI) Second Limited (the “Company”) was incorporated in the British Virgin Islands (the “BVI”) on 31 March 2021 as alimited liability company under the Companies Law of the British Virgin Islands. The address of the Company’s registered office is atKingston Chambers, PO Box 173, Road Town, Tortola, British Virgin Islands.

The Company is an investment holding company, the Company and its subsidiaries (collectively referred as the “Group”) are principallyengaged in owning and operating eight commercial properties (“REIT Properties”) in the People’s Republic of China (the “PRC”) (the“[REDACTED] Business”).

The Company’s parent company is Powerlong Real Estate Holdings Limited (“Powerlong Holdings”), an exempted companyincorporated in the Cayman Islands with limited liability, and its shares are listed on the Stock Exchange of Hong Kong Limited (the“Stock Exchange”) since 14 October 2009, and the ultimate controlling shareholder is Mr Hoi Kin Hong (“Controlling Shareholder”).

Powerlong Commercial Real Estate Investment Trust (“Powerlong REIT”) was established under a trust deed dated on [●] 2021between the REIT Manager and DB Trustees (Hong Kong) Limited (the “Trustee” of Powerlong REIT), pursuant to the Code on RealEstate Investment Trusts issued by the Securities and Futures Commission. Powerlong REIT will acquire the entire issued shares of theCompany by issuance of [REDACTED] units to Powerlong Holdings. Upon completion, Powerlong REIT will wholly own the REITProperties through the Company.

The [REDACTED] of the Powerlong REIT on the Main Board of the Stock Exchange of Hong Kong Limited constitutes a spin-off of the[REDACTED] Business from Powerlong Holdings (the “Proposed [REDACTED]”). Powerlong Holdings and its subsidiaries, otherthan the entities now comprising the Group, are collectively referred to the Remaining Group.

1.2 Reorganisation

Immediately prior to the incorporation of the Company and the completion of the reorganisation as described below (the“Reorganisation”), the [REDACTED] Business was carried out by eight entities indirectly held and controlled by Powerlong Holdings,which comprised of Anxi Powerlong Assets Operation and Management Company Limited (安溪寶龍資產經營管理有限公司, “AnxiPowerlong”), Xinxiang Powerlong Property Development Company Limited (新鄉寶龍置業發展有限公司, “Xinxiang Powerlong”),Shanghai Xiantong Property Development Company Limited (上海賢通置業有限公司, “Fengxian Powerlong”), Luoyang PowerlongProperty Development Company Limited (洛陽寶龍置業發展有限公司, “Luoyang Powerlong”), Suqian Powerlong PropertyDevelopment Company Limited (宿遷寶龍置業發展有限公司, “Suqian Powerlong”), Yancheng Powerlong Property DevelopmentCompany Limited (鹽城寶龍置業發展有限公司, “Yancheng Powerlong”), Qingdao Powerlong Yingju Property Development CompanyLimited (青島寶龍英聚置地發展有限公司, “Jiaozhou Powerlong”) and Hangzhou Longyao Industrial Company Limited (杭州龍耀實業有限公司, “Lin’an Powerlong”). Other than Anxi Powerlong, the other seven entities had also carried out the business ofdevelopment and sales of residential properties (the “Excluded Business”) during the Track Record Period.

In preparation for the Proposed [REDACTED], the Reorganisation was undertaken and the [REDACTED] Business were transferred tothe Company. The Reorganisation mainly involved the following steps:

Onshore restructuring

(a) Xinxaing Powerlong, Fengxina Powerlong and Luoyang Powerlong

(i) On 29 January 2021, Xinxiang Powerlong established Xinxiang Longqian Enterprise Management Company Limited (新鄉龍潛企業管理有限公司, “Xinxiang Longqian”), (ii) On 12 March 2021, Fengxian Powerlong established Shanghai XiantongEnterprise Development Company Limited (上海賢通企業發展有限公司, “Shanghai Xiantong”) and (iii) On 23 March 2021,Luoyang Powerlong established Luoyang Longqian Commercial Management Company Limited (洛陽龍潛商業管理有限公司,“Luoyang Longqian”), these three newly set up subsidiaries are collectively referred to as the “New Project Companies”. In July2021, Xinxiang Powerlong, Fengxian Powerlong and Luoyang Powerlong respectively injected their [REDACTED] Business tothe New Project Companies.

(b) Anxi Powerlong

On 28 February 2021, Anxi Powerlong transferred its 49% equity interest in an associate, Shanghai Powerlong Kangjun RealEstate Development Company Limited (上海寶龍康駿房地產開發有限公司, “Shanghai Kangjun”), to the Remaining Group fora consideration of RMB96 million.



– I-11 –

On 6 August 2021, Shanghai Ruilong Investment Management Company Limited (上海瑞龍投資管理有限公司, “Shanghai Ruilong”),a wholly owned subsidiary of Powerlong Holdings, subscribed for RMB1,050 million registered capital of Anxi Powerlong, representing97.22% of its entire equity interest after the increase of capital.

(c) Suqian Powerlong, Yancheng Powerlong, Jiaozhou Powerlong and Lin’an Powerlong

In April and May, Shanghai Ruilong established Shanghai Ruijiao Enterprise Management Company Limited (上海瑞膠企業管理有限公司, “Jiaozhou WFOE”) and Shanghai Ruicui Enterprise Management Company Limited (上海瑞璀企業管理有限公司,“Lin’an WFOE”). In June 2021, Jiaozhou WFOE acquired the equity interest in Jiaozhou Powerlong from the Remaining Groupand the non-controlling interests at the consideration of RMB46 million and RMB16 million respectively and Lin’an WFOEacquired the equity interest in Lin’an Powerlong from the Remaining Group at the consideration of RMB315 million. JiaozhouWFOE and Lin’an WFOE have not paid these considerations when they were subsequently acquired by the HK IntermediateCompanies in July 2021 (Note 1.2(f)).

In July and August 2021, Suqian Powerlong, Yancheng Powerlong, Jiaozhou Powerlong and Lin’an Powerlong (collectivelyreferred to as the “Retained Project Companies”) disposed of the Excluded Business to the Remaining Group.

Offshore restructuring

(d) On 31 March 2021, the Company was incorporated in the BVI as a limited liability company and one share was allotted and issuedto Powerlong Holdings.

On 31 March 2021, Starlong (BVI) Third Limited was incorporated in the BVI as a limited liability company and one share wasallotted and issued to the Company.

On 1 April 2021, each of the Starlong (BVI) I Limited, Starlong (BVI) II Limited, Starlong (BVI) III Limited, Starlong (BVI)VLimited, Starlong (BVI) VI Limited, Starlong (BVI) VII Limited, Starlong (BVI) VIII Limited and Starlong (BVI) IX Limited (the“BVI Intermediate Companies”) was incorporated in the BVI with limited liability and is authorized to issue a maximum of50,000 shares of a single class of no par value, of which one ordinary share of each of the BVI Intermediate Companies wereallotted and issued to the Starlong (BVI) Third Limited.

On 16 April 2021, each of Starlong (HK) 1 Limited, Starlong (HK) 2 Limited, Starlong (HK) 3 Limited, Starlong (HK) 5 Limited,Starlong (HK) 6 Limited, Starlong (HK) 7 Limited, Starlong (HK) 8 Limited and Starlong (HK) 9 Limited (the “HK IntermediateCompanies”) were incorporated in Hong Kong with limited liability. Upon incorporation, 100 shares of each of the HKIntermediate Companies were allotted and issued to the BVI Intermediate Companies, respectively.

Upon completion of such allotments and issues, Starlong (BVI) Third Limited, each of the BVI Intermediary Companies and eachof HK Intermediary Companies became indirect wholly-owned subsidiaries of Powerlong Holdings.

(e) In June 2021, Starlong (HK) 7 Limited acquired the equity interest in Anxi Powerlong from the Remaining Group and thenon-controlling interests at the consideration of RMB40 million and RMB7 million respectively.

In August 2021, Starlong (HK) 7 Limited further acquired the equity interest in Anxi Powerlong from Shanghai Ruilong at theconsideration of RMB1,050 million.

(f) In July 2021, HK Intermediate Companies acquired 100% equity interests in the New Project Companies, Jiaozhou WFOE, Lin’anWFOE, Suqian Powerlong and Yancheng Powerlong from Remaining Group at the considerations in aggregate of RMB1,099million.

Upon completion of the above Reorganisation steps, the Company became the holding company of the companies now comprisingthe Group.

(g) Non-trade balances due from/to the related parties and the outstanding considerations for the above transfer of the equity interests,shall be settled before Proposed [REDACTED].

1.3 Basis of presentation

Prior to and following the Reorganisation, the [REDACTED] Business was controlled by Powerlong Holdings. Accordingly, theReorganisation is regarded as business combinations under common control, and for the purpose of this report, the Historical FinancialInformation has been prepared on a combined basis.

The Historical Financial Information has been prepared by combining the historical financial information of the companies engaging inthe [REDACTED] Business as if the current group structure had been in existence throughout the periods presented, or since the datewhen the combining companies first came under common control of Powerlong Holdings, whichever is the shorter period.



– I-12 –

The net assets of the combining companies were combined using the existing book values from Powerlong Holdings’ perspective.

No amount is recognised in consideration for goodwill or excess of acquirer’s interest in the net fair value of acquiree’s

identifiable assets, liabilities and contingent liabilities over cost at the time of business combinations under common control, to

the extent of the continuation of the controlling party’s interest.

Prior to completion of the Reorganisation, as disclosed in the section 1.2 certain entities have also operated the Excluded

Business. The financial information of the Excluded Business has not been included in the Historical Financial Information,

because: (i) such business had been operated and managed by separate management team from that of the [REDACTED]

Business; (ii) such business was dissimilar from the [REDACTED] Business in terms of business risks and rewards, customer

bases and content; and (iii) such business has been keeping separate books and records.

The [REDACTED] Business was allocated and recorded in the Historical Financial Information for the Track Record Period in

the following manner:

(i) Transactions and balances of New Project Companies and Retained Project Companies specifically identified as relating to the

[REDACTED] Business were included in the Historical Financial Information, while those specifically identified as relating to

the Excluded Business were not included in the financial information.

(ii) Certain cash and cash equivalents and restricted cash of the Retained Project Companies are not specifically identifiable as

relating to [REDACTED] Business or Excluded Business and were included in the Historical Financial Information.

(iii) Certain borrowings of the Retained Project Companies not specifically identifiable as relating to [REDACTED] Business or

Excluded Business are included in the Historical Financial Information. The related finance costs were allocated based on the

occupation of borrowing between [REDACTED] Business and Excluded Business.

(iv) Current and deferred income taxes on profit attributable to the [REDACTED] Business are calculated using applicable tax rate in

accordance with Group’s accounting policies during the Track Record Period.

(v) Current income tax liabilities of the Retained Project Companies are included in the Historical Financial Information as they are

not specifically identifiable as relating to which [REDACTED] Business or Excluded Business.

(vi) The expenses incurred in headquarter related to the [REDACTED] Business (such as staff costs, travel, office and transportation

expenses etc.) were allocated to the Historical Financial Information based on the numbers of shopping malls of the

[REDACTED] Business and the total number of shopping malls of Powerlong Holdings.

(vii) Inter-company transactions, balances and unrealised gains/losses on transactions between group companies are eliminated on

combination.

2 Summary of significant accounting policies

This note provides a list of the significant accounting policies adopted in the preparation of these combined financial statements. These

policies have been consistently applied to all the years presented, unless otherwise stated. HKFRS 9 “Financial Instruments” and

HKFRS 15 “Revenue from Contracts with Customers” which are effective for the accounting period beginning on 1 January 2018 and

HKFRS 16 “Leases” which is effective for the accounting period beginning on 1 January 2019, have been consistently applied by the

Group throughout the Track Record Period.

2.1 Basis of preparation

The Historical Financial Information has been prepared in accordance with the Hong Kong Financial Reporting Standards (“HKFRS”)

issued by the Hong Kong Institute of Certified Public Accountants. The Historical Financial Information has been prepared under the

historical cost convention, except for investment properties, which are carried at fair value.

The preparation of Historical Financial Information in conformity with HKFRS requires the use of certain critical accounting estimates.

It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a

higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Historical Financial

Information are disclosed in Note 4.



– I-13 –

(a) New standards, amendments, interpretation and accounting guideline that have been issued but are not effective

Standards, amendments, interpretation and accounting guideline that have been issued but not yet effective for the Track Record

Period and not been early adopted by the Group are as follows:

Effective forannual periods

beginning on or after

Amendments to HKFRS 16 Covid-19-Related Rent Concessions beyond 30 June2021

1 April 2021

Amendments to HKAS 16 Property, Plant and Equipment: Proceeds beforeintended use

1 January 2022

Amendments to HKFRS 3 Reference to the Conceptual Framework 1 January 2022

Amendments to HKAS 37 Onerous Contracts – Cost of Fulfilling a Contract 1 January 2022

Annual Improvements Annual Improvements to HKFRS Standards 2018-2020Cycle

1 January 2022

Revised Accounting Guideline 5 Merger Accounting for Common Control Combination 1 January 2022

Amendment to HKFRS 17 Insurance Contracts 1 January 2023

Amendments to HKAS 1 Classification of Liabilities as Current or Non-current 1 January 2023

Hong Kong Interpretation 5 (2020) Presentation of Financial Statements – Classification bythe Borrower of a Term Loan that Contains aRepayment on Demand Clause

1 January 2023

Amendments to HKAS 1, HKFRSPractice Statement 2 and HKAS 8

Disclosure of Accounting Policies 1 January 2023

Amendment to HKAS 12 Deferred Tax Related to Assets and Liabilities Arisingfrom a Single Transaction

1 January 2023

Amendments to HKFRS 10 andHKAS 28

Sale or Contribution of Assets between an Investor andits Associate or Joint Venture

To be determined

The Group has already commenced an assessment of the impact of these new or revised standards and amendments. According to

the preliminary assessment made by the Group, no significant impact on the financial performance and position of the Group is

expected when they become effective.

2.2 Subsidiaries

Subsidiaries are all entities (including a structured entity) over which the Group has control. The Group controls an entity when the

Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns

through its power over the entity. Subsidiaries are consolidated from the date on which control is transferred to the Group. They are

deconsolidated from the date that control ceases.

Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses

are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of

subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Non-controlling interests in the results and equity of subsidiaries are shown separately in the combined statements of comprehensive

income, combined statements of changes in equity and combined balance sheet respectively.

2.2.1 Business combination

Except for the Reorganisation as described in Note 1.2 which is accounted for on the basis set out in Note 1.3, the acquisition method of

accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The

consideration transferred for the acquisition of a subsidiary comprises the:

• fair values of the assets transferred

• liabilities incurred to the former owners of the acquired business

• equity interests issued by the Group, if any

• fair value of any asset or liability resulting from a contingent consideration arrangement, and

• fair value of any pre-existing equity interest in the subsidiary.



– I-14 –

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions,measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquired entity onan acquisition-by-acquisition basis either at fair value or at the non-controlling interest’s proportionate share of the acquired entity’s netidentifiable assets.

Acquisition-related costs are expensed as incurred.

The excess of the consideration transferred, the amount of any non-controlling interest in the acquired entity, and the acquisition datefair value of any previous equity interest in the acquired entity over the fair value of the net identifiable assets acquired is recorded asgoodwill. If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recogniseddirectly in profit or loss as a bargain purchase.

Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value asat the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowingcould be obtained from an independent financier under comparable terms and conditions. Contingent consideration is classified either asequity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fairvalue recognised in profit or loss.

If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest inthe acquiree is remeasured to fair value at the acquisition date. Any gains or losses arising from such remeasurement are recognised inprofit or loss.

2.2.2 Business combination under common control

The net assets of the combining entities are combined using the existing book values from the controlling party’s perspective. No amountis recognised with respect to goodwill or any excess of an acquirer’s interest in the net fair value of the acquiree’s identifiable assets,liabilities and contingent liabilities over its cost at the time of common control combination, to the extent of the contribution of thecontrolling party’s interest.

The combined income statements include the results of each of the combining entities from the earliest date presented or since the datewhen combining entities or businesses first came under common control, where this is a shorter period, regardless of the date of commoncontrol combination.

Transaction costs, including professional fees, registration fees, costs of furnishing information to shareholders, costs or losses incurredin combining operations of the previously separate businesses, incurred in relation to the common control combination that is to beaccounted for by using merger accounting are recognised as an expense in the period in which they are incurred.

2.2.3 Changes in ownership interests in subsidiaries without change of control

The Group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners ofthe Group. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and non-controllinginterests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controllinginterests and any consideration paid or received is recognised in a separate reserve within equity attributable to owners of the Group.

2.3 Separate financial statements

Investments in subsidiaries are accounted for at cost less impairment. Cost includes direct attributable costs of investment. The results ofsubsidiaries are accounted for by the Company on the basis of dividend received and receivable.

Impairment testing of the investments in subsidiaries is required upon receiving a dividend from these investments if the dividendexceeds the total comprehensive income of the subsidiary in the period the dividend is declared or if the carrying amount of theinvestment in the separate financial statements exceeds the carrying amount in the combined financial statements of the investee’s netassets including goodwill.

2.4 Associates

An associate is an entity over which the Group has significant influence but not control, generally accompanying a shareholding ofbetween 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting afterinitially being recognised at cost. Under the equity method, the investment is initially recognised at cost, and the carrying amount isincreased or decreased to recognise the investor’s share of the profit or loss of the investee after the date of acquisition. The Group’sinvestment in associates includes goodwill identified on acquisition. Upon the acquisition of the ownership interest in an associate, anydifference between the cost of the associate and the Group’s share of the net fair value of the associate’s identifiable assets and liabilitiesis accounted for as goodwill.



– I-15 –

If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amountspreviously recognised in other comprehensive income is reclassified to profit or loss where appropriate.

The Group’s share of post-acquisition profit or loss is recognised in the profit or loss, and its share of post-acquisition movements inother comprehensive income is recognised in other comprehensive income with a corresponding adjustment to the carrying amount ofthe investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any otherunsecured receivables, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or madepayments on behalf of the associate.

The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. Ifthis is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and itscarrying value and recognises the amount adjacent to ‘share of profit of investments accounted for using equity method’ in the statementof comprehensive income.

Profits and losses resulting from upstream and downstream transactions between the Group and its associate are recognised in theGroup’s financial statements only to the extent of unrelated investor’s interests in the associates. Unrealised losses are eliminated unlessthe transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed wherenecessary to ensure consistency with the policies adopted by the Group. Gain or losses on dilution of equity interest in associates arerecognised in the statement of profit or loss.

2.5 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker(“CODM”). The CODM who is responsible for allocating resources and assessing performance of the operating segments, has beenidentified as the executive directors that makes strategic decisions.

2.6 Foreign currency translation

2.6.1 Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economicenvironment in which the entity operates (“the functional currency”). The combined financial statements are presented in RMB, whichis the Company’s functional currency and the Group’s presentation currency.

2.6.2 Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreignexchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilitiesdenominated in foreign currencies at year end exchange rates are generally recognised in the combined statements of comprehensiveincome.

Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the combined statements ofcomprehensive income, within “finance costs-net” All other foreign exchange gains and losses are presented in the combined statementsof comprehensive income on a net basis within “other gains — net”.

2.7 Investment property

Investment property, principally comprising leasehold land and buildings, is held for long-term rental yields or for capital appreciationor both. Land and commercial buildings held under operating leases are accounted for as investment properties when the rest of thedefinition of an investment property is met. Investment property is initially measured at cost, including related transaction costs andwhere applicable borrowing costs.

After initial recognition, investment property is carried at fair value, representing open market value determined at each balance sheetdate by external valuer. Changes in fair values of investment property are recognised as ‘Fair value changes on investment properties’ inthe combined statement of comprehensive income.

Subsequent expenditure is charged to the asset’s carrying amount only when it is probable that future economic benefits associated withthe item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensedin the profit or loss during the financial period in which they are incurred. When part of an investment property is replaced, the carryingamount of the replaced part is derecognised.

An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from used and nofuture economic benefits are expected from its disposal. Any gain or loss arising on derecognition of the property (calculated as thedifference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the period in which theproperty is derecognised.



– I-16 –

2.8 Financial instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of

another entity. A financial asset or a financial liability is recognised when the Group becomes a party to the contractual provisions of the

instrument.

2.8.1 Financial assets

(a) Classification

The Group classifies its financial assets in the following measurement categories:

• those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and

• those to be measured at amortised cost.

The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows.

For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive income. For

investments in debt instruments, this will depend on the business model in which the investment is held. For investments in equity

instruments, this will depend on whether the Group has made an irrevocable election at the time of initial recognition to account for the

equity investment at fair value through other comprehensive income.

The Group reclassifies debt investments when and only when its business model for managing those assets changes.

(b) Recognition and derecognition

Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the Group commits to purchase or

sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been

transferred and the Group has transferred substantially all the risks and rewards of ownership.

(c) Measurement

At initial recognition, the Group 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 that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets

carried at fair value through profit or loss are expensed in profit or loss.

Debt instruments

Subsequent measurement of debt instruments depends on the Group’s business model for managing the asset and the cash flow

characteristics of the asset. The Group only held debt instruments classified as financial assets at amortised costs.

Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest

are measured at amortised cost. A gain or loss on a debt investment that is subsequently measured at amortised cost and is not part of a

hedging relationship is recognised in the combined statement of comprehensive income when the asset is derecognised or impaired.

Interest income from these financial assets is included in finance income using the effective interest rate method.

(d) Impairment

The Group assesses on a forward-looking basis the expected credit losses associated with its debt instruments carried at amortised cost.

The impairment methodology applied depends on whether there has been a significant increase in credit risk.

Expected credit losses are a probability-weighted estimate of credit losses (i.e. the present value of all cash shortfalls) over the expected

life of the financial assets.

For rental receivables, the Group applies the simplified approach permitted by HKFRS 9, which requires expected lifetime losses to be

recognised from initial recognition of the assets. The provision matrix is determined based on historical observed default rates over the

expected life of the rental receivables with similar credit risk characteristics and is adjusted for forward-looking estimates. At every

reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed.



– I-17 –

Impairment of other receivables are measured as either 12-month expected credit losses or lifetime expected credit losses, depending onwhether there has been a significant increase in credit risk since initial recognition. If a significant increase in credit risk of a receivablehas occurred since initial recognition, then impairment is measured as lifetime expected credit losses.

2.8.2 Financial liabilities

Financial liabilities of the Group are financial liabilities at amortised cost, which mainly comprise trade and other payables, amounts dueto related parties and borrowings. Such financial liabilities are initially recognised at fair value, net of transaction costs incurred, andsubsequently measured using the effective interest method. Financial liabilities that are due within one year (inclusive) are classified ascurrent liabilities; those with maturities over one year but are due within one year (inclusive) from the balance sheet date are classifiedas current portion of non-current liabilities. Others are classified as non-current liabilities.

A financial liability is derecognised or partly derecognised when the underlying present obligation is discharged or partly discharged.The difference between the carrying amount of the derecognised part of the financial liability and the consideration paid is recognised inthe combine statements of comprehensive income for the current period.

2.9 Offsetting financial instruments

Financial assets and liabilities are offset and the net amount is reported in the combined balance sheets when there is a legallyenforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the assets and settle theliabilities simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normalcourse of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty.

2.10 Rental and other receivables

Rental receivables are amounts due from tenants for properties leased in the ordinary course of business. If collection of rental and otherreceivables is expected in one year or less (or in the normal operating cycle of business if longer), they are classified as current assets.If not, they are presented as non-current assets.

Rental and other receivables are recognised initially at the amount of consideration that is unconditional unless they contain significantfinancing components, when they are recognised at fair value. The Group holds rental and other receivables with the objective ofcollecting the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method.

2.11 Cash and cash equivalents

For the purpose of presentation in the statement of cash flows, cash and cash equivalents include cash on hand and at banks.

2.12 Share capital

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from theproceeds.

2.13 Financial guarantee contracts

Financial guarantee contracts are recognised as a financial liability at the time the guarantee is issued. The liability is initially measuredat fair value and subsequently at the higher of:

• the amount determined in accordance with the expected credit loss model under HKFRS 9 Financial Instruments and• the amount initially recognised less, where appropriate, the cumulative amount of income recognised in accordance with the

principles of HKFRS 15 Revenue from Contracts with Customers.

The fair value of financial guarantees is determined based on the present value of the difference in cash flows between the contractualpayments required under the debt instrument and the payments that would be required without the guarantee, or the estimated amountthat would be payable to a third party for assuming the obligations.

Where guarantees in relation to loans or other payables of associates are provided for no compensation, the fair values are accounted foras contributions and recognised as part of the cost of the investment.

2.14 Trade and other payables

Trade and other payables represent liabilities for goods or services that have been acquired in the ordinary course of business fromsuppliers and amounts to be repaid from the Group to its counterparties. These amounts are classified as current liabilities if payment isdue within 12 months or less. If not, they are presented as non-current liabilities.



– I-18 –

Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interestmethod.

2.15 Borrowings and borrowing costs

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortisedcost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over theperiod of the borrowings using the effective interest method. Fees paid to the establishment of loan facilities are recognised astransaction costs of the loan to the extent that it is probable that part or all of the facilities will be drawn down. In this case, the fee isdeferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facilities will be drawndown, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facilities to which it relates.

Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. Thedifference between the carrying amount of a financial liability that has been extinguished or transferred to another party and theconsideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss as finance costs.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least12 months after the reporting period.

All borrowing costs are recognised in profit or loss in the period in which they are incurred.

2.16 Current and deferred income tax

The tax expense for the period comprises current and deferred tax. Tax is recognised as “income tax expense” in the combined statementsof comprehensive income, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. Inthis case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

(a) Current income tax

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in thecountries where the Company’s subsidiaries operate and generate taxable income. Management periodically evaluates positions taken intax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions whereappropriate on the basis of amounts expected to be paid to the tax authorities.

(b) Deferred income tax

Inside basis differences

Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets andliabilities and their carrying amounts in the combined financial statements. However, deferred tax liabilities are not recognised if theyarise from the initial recognition of goodwill. The deferred income tax is not accounted for if it arises from initial recognition of an assetor liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxableprofit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by thebalance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability issettled.

Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against whichthe temporary differences can be utilised.

Outside basis differences

Deferred income tax liabilities are provided on taxable temporary differences arising from investments in subsidiaries, except fordeferred income tax liability where the timing of the reversal of the temporary difference is controlled by the Group and it is probablethat the temporary difference will not reverse in the foreseeable future.

Deferred income tax assets are recognised on deductible temporary differences arising from investments in subsidiaries only to theextent that it is probable the temporary difference will reverse in the future and there is sufficient taxable profit available against whichthe temporary difference can be utilised.

(c) Offsetting

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against currenttax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority oneither the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.



– I-19 –

2.17 Employee benefits

(a) Pension obligations

The Group only operates defined contribution pension plans. In accordance with the rules and regulations in the PRC, the PRC based

employees of the Group participate in various defined contribution retirement benefit plans organised by the relevant municipal and

provincial governments in the PRC under which the Group and the PRC based employees are required to make monthly contributions to

these plans calculated as a percentage of the employees’ salaries. The municipal and provincial governments undertake to assume the

retirement benefit obligations of all existing and future retired PRC based employees’ payable under the plans described above. Other

than the monthly contributions, the Group has no further obligation for the payment of retirement and other post-retirement benefits of

its employees. The assets of these plans are held separately from those of the Group in independently administrated funds managed by

the governments.

The Group’s contributions to the defined contribution retirement scheme are expensed as incurred.

(b) Housing funds, medical insurances and other social insurances

Employees of the Group in the PRC are entitled to participate in various government-supervised housing funds, medical insurances and

other social insurance plan. The Group contributes on a monthly basis to these funds based on certain percentages of the salaries of the

employees, subject to certain ceiling. The Group’s liability in respect of these funds is limited to the contributions payable in each year.

Contributions to the housing funds, medical insurances and other social insurances are expensed as incurred.

(c) Termination benefits

Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an

employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits at the earlier of the

following dates: (a) when the Group can no longer withdraw the offer of those benefits; and (b) when the entity recognises costs for a

restructuring that is within the scope of HKAS 37 and involves the payment of termination benefits. In the case of an offer made to

encourage voluntary redundancy, the termination benefits are measured based on the number of employees expected to accept the offer.

Benefits falling due more than 12 months after the end of the reporting period are discounted to their present value.

(d) Short-term obligations

Liabilities for wages and salaries, including non-monetary benefits and accumulating sick leave that are expected to be settled wholly

within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees’

services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The

liabilities are presented as current employee benefit obligations in the statement of financial position.

2.18 Provisions

Provisions for legal claims, service warranties and make good obligations are recognised when the Group has a present legal or

constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and

the amount can be reliably estimated. Provisions are not recognised for future operating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by

considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one

item included in the same class of obligations may be small.

Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation

at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market

assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is

recognised as interest expense.

2.19 Rental income and other income

(a) Rental income

Rental income from operating leases where the Group is a lessor is recognised in revenue on a straight-line basis over the lease term.

Initial direct costs incurred in obtaining an operating lease are added to the carrying amount of the underlying asset and recognised as an

expense over the lease term on the same basis as rental income.



– I-20 –

Variable lease income of the Group, which represents rental income depending on tenants’ turnover pursuant to the terms and

conditions as set out in the respective rental agreements, is recognised as income in the accounting period on an accured basis. No

variable lease payments are recognised if there are uncertainties due to the possible return of amounts received.

(b) Other income

Other income primarily comprises compensation income from early lease termination and others. Compensation income from early lease

termination and others represents the compensation received from the tenants for the early termination of the tenancies, default of the

tenants or others. Compensation income is recognised at fair value when the Company has the right to collect the relevant compensation.

2.20 Government grants

Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the

Group will comply with all attached conditions.

Government grants relating to expenses are deferred and recognised in the combined statements of comprehensive income over the

period necessary to match them with the expenses that they are intended to compensate.

Government grants relating to the purchase of property and equipment are included in non-current liabilities as deferred income and are

credited to profit or loss on a straight-line basis over the expected lives of the related assets.

2.21 Dividend distribution

Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity,

on or before the end of the reporting period but not distributed at the end of the reporting period.

3 Financial risk management

The Group’s activities expose it to a variety of financial risks: cash flow and fair value interest rate risk, credit risk and liquidity risk. The

Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential

adverse effects on the Group’s financial performance.

3.1 Financial risk factors

3.1.1 Cash flow and fair value interest rate risk

The Group’s interest-rate risk arises from its borrowings. Borrowings at variable rates expose the Group to cash flow interest-rate risk.

Borrowings at fixed rates expose the Group to fair value interest-rate risk. The Group currently has not entered into any interest rate swap

contract and will only consider hedging if there is significant interest rate risk. As at 31 December 2018, the Group’s non-current bank

loans of RMB320,000,000 (31 December 2019 and 2020 and 30 June 2021: nil) bore interest at variable rate. If the interest rate for

variable rate long-term borrowings had been 100 basis points higher/lower with all other factors remain unchanged and without taking

into account interest capitalisation, the Group’s profit before tax for the year ended 31 December 2018 would have been lower/higher by

RMB3,200,000.

3.1. 2 Credit risk

Credit risk arises from cash and cash equivalents, rental and other receivables from third parties and related parties and financial

guarantee contracts. The Group’s maximum exposure to credit risk in the event of the counterparties’ failure to perform their obligations

at the end of each reporting period in relation to each class of recognised financial assets is the carrying amount of these assets and

financial guarantee contracts as stated in the combined balance sheet. The Group has no significant concentration of credit risk arising

from third parties, with exposure spread over certain counterparties and customers.

The Group has three types of financial assets that are subject to the expected credit loss model:

• Rental receivables

• Other financial assets carried at amortised cost

• Financial guarantee contracts

While cash and cash equivalents are also subject to the impairment requirement of HKFRS 9, the identified impairment loss was

minimal, as the cash and cash equivalents were deposited at reputable financial institutions with no historical credit losses experienced.



– I-21 –

Rental receivables from third parties

In order to minimise the credit risk of rental receivables, the management of the Group established policies in place to ensure that the

leases and sales of services are made to customers with an appropriate credit history and the Group assesses the credit worthiness and financial

strength of its customers as well as considering prior dealing history with the customers. The compliance of credit limits by the customers is

regularly monitored by the management of the Group. The Group also has policies in place to ensure that rental security deposits are required

prior to commencement of leases. In this regard, the management of the Group considers that the Group’s credit risk of rental receivables is

significantly reduced.

The Group applies the HKFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance

for all rental receivables. To measure the expected credit losses, rental receivables have been grouped based on shared credit risk characteristics

and the ageing analysis.

The expected loss rates are based on the Group’s past loss experiences, existing market conditions as well as forward looking

information at the end of each reporting periods. The historical loss rates are adjusted to reflect current and forward-looking information on

macroeconomic factors affecting the ability of the tenants to settle the receivables. The Group has identified the Gross Domestic Product and

Consumer Price Index in which it operates the properties to be the most relevant macroeconomic factor, and accordingly adjusts the historical

loss rates based on expected changes in these factors.

Rental receivables are written off where there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation

of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the Group, and the ageing of the rental

receivables is greater than two years.

Current

Up to90 days

past due

More than90 days

past due

More than180 dayspast due

More thanone yearpast due Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Rental receivables

31 December 2018Expected loss rate 2.0% 20.5% 36.1% 58.4% 100.0%

Gross carrying amount 89,143 5,402 1,124 – 100 95,769

Loss allowance 1,783 1,107 406 – 100 3,396


Gross carrying amount 83,561 3,795 1,385 538 258 89,537

Loss allowance 1,838 808 511 318 258 3,733



Loss allowance 2,173 1,012 494 330 471 4,480

31 June 2021Expected loss rate 2.2% 21.3% 36.8% 60.2% 100.0%


Loss allowance 2,049 301 374 289 623 3,636



– I-22 –

The impairment loss allowances for rental receivables as at each period end date reconcile to the opening loss allowances were as

follows:


30 June

2018 2019 2020 2020 2021


(unaudited)

Opening loss allowance 3,188 3,396 3,733 3,733 4,480

Provision/(reversal) for loss allowancerecognised inprofit or loss 329 444 869 2,964 (844)

Receivables written off during the yearas uncollectible (121) (107) (122) – –

Closing loss allowance 3,396 3,733 4,480 6,697 3,636

Rental receivables from related parties

In respect of amounts due from related parties with gross carrying value of approximately RMB326,000, RMB3,491,000,

RMB1,760,000 and RMB1,623,000 respectively as at 31 December 2018, 2019 and 2020 and 30 June 2021, given the strong financial

capability of Powerlong Holdings and its subsidiaries, management of the Group does not consider there is a risk of default and does not

expect any losses from non-performance by these related parties, and accordingly, the impairment loss allowance in respect of the

amounts due from related parties was immaterial.

Other financial assets carried at amortised cost

The Group’s other financial assets carried at amortised cost include other receivables from third parties and related parties. The

impairment loss of other financial assets carried at amortised cost is measured based on the twelve months expected credit loss. The

twelve months expected credit loss is the portion of lifetime expected credit loss that results from default events on a financial instrument

that are possible within twelve months after the reporting date. However, when there has been a significant increase in credit risk since

origination, the allowance will be based on the lifetime expected credit loss.

As at 31 December 2018, 2019 and 2020 and 30 June 2021, management considered the credit risk of other receivables from third parties

and related parties to be low as counterparties have a strong capacity to meet their contractual cash flow obligations in the near term. The

Group has assessed that the expected credit losses for these other receivables from third parties and related parties were minimal under

twelve months expected losses method. Therefore, the impairment loss allowance required for these balances was immaterial.

Financial guarantee contracts

The Group is also exposed to credit risk in relation to providing financial guarantee for borrowings of related parties. The maximum

exposure at 31 December 2018, 2019 and 2020 and 30 June 2021 is the carrying amount of the borrowing (Note 28(b)). The director of

the Company expects that no material liabilities will arise from the financial guarantee contracts.

3.1. 3 Liquidity risk

To manage the liquidity risk, the Group monitors and maintains a level of cash and cash equivalents deemed adequate by the management

to finance the Group’s operations. As at 30 June 2021, the Group recorded net current liabilities of RMB1,385,240,000. Taking into

account the internal resources and investment properties that available to pledge to obtain additional financing from financial

institutions, the Group will be able to meet its financial obligation when they fall due.



– I-23 –

The table below analyses the Group’s financial liabilities into relevant maturity grouping based on the remaining period at the end of

each reporting period to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

Less than1 year

Between 1and

2 years

Between 2and

5 yearsOver

5 years Total


31 December 2018Borrowings 684,676 372,556 140,489 91,353 1,289,074

Amounts due to related parties 1,251,820 – – – 1,251,820

Trade and other payables (a) 108,972 – – – 108,972

2,045,468 372,556 140,489 91,353 2,649,866

31 December 2019Borrowings 370,751 41,132 127,118 325,565 864,566



2,079,277 41,132 127,118 325,565 2,573,092

31 December 2020Borrowings 41,795 41,835 128,484 282,364 494,478



1,508,122 41,835 128,484 282,364 1,960,805

30 June 2021Borrowings 42,143 42,140 129,027 260,428 473,738



1,579,441 42,140 129,027 260,428 2,011,036

(a) The balances excluded other taxes payables.

The Group also provides guarantees to secure repayment obligation of the principal of borrowings of certain related parties, which will

have contractual cash flows only if the related parties default the repayment (Note 28(b)).

3.2 Capital management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide

returns for shareholders and to maintain an optimal capital structure to reduce the cost of capital. The Group’s overall strategy remains

unchanged throughout the Track Record Period.

In order to maintain or adjust the capital structure, the Group may adjust the tenure of debt to accomplish adequate liquidity position as

well as adjust the amount of debt over capital structure.

Consistent with others in the industry, the Group monitors capital on basis of the net debt to total equity. The ratio is calculated as net

debt divided by total equity as shown in the combined balance sheet. The management of the Group will balance its overall capital

structure through the payment of dividends or issuance of new shares as well as the issuance of new debts or the redemption of existing

debts.



– I-24 –

The net debt to total equity as at 31 December 2018, 2019 and 2020 and 30 June 2021 were as follows:

As at 31 December30 June

20212018 2019 2020

RMB’000 RMB’000 RMB’000 RMB’000

Net debt (Note 26(b)) 2,352,687 2,110,194 1,518,103 1,545,659

Total equity 5,894,453 5,871,362 5,733,864 5,010,186

Net debt to total equity 40% 36% 26% 31%

The decrease in the net debt to total equity from 40% as at 31 December 2018 to 31% as at 30 June 2021 was mainly due to the decrease

in borrowings and total equity.

3.3 Fair value estimation

The Group’s financial instruments carried at fair value as at 31 December 2018, 2019 and 2020 and 30 June 2021 were categorised into

three levels by level of inputs adopted in the valuation techniques used for measuring fair value. Such inputs are categorised into three

levels within a fair value hierarchy as follows:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is,as prices) or indirectly (that is, derived from prices); and

Level 3: Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).

As at 31 December 2018, 2019 and 2020 and 30 June 2021, the Group did not have any financial assets or financial liabilities in the

combined balance sheet which were measured at fair value.

The carrying amounts of the Group’s financial assets and financial liabilities with a maturity of less than one year approximated their fair

values due to their short maturities during the Track Record Period.

The fair value of non-current borrowings is estimated by discounting the future cash flows at the current market rate available to the

Group for similar financial instruments.

4 Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of

future events that are believed to be reasonable under the circumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal

the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying

amounts of assets and liabilities within the next financial year are addressed below.

(a) Estimates of fair value of investment properties

The best evidence of fair value of each investment property is current prices in an active market for the properties with similar lease

contracts. In the absence of such information, the Group determines the amount within a range of reasonable fair value estimates. In

making its judgement, the Group considers information from a variety of sources including:

• current prices in an active market for properties of different nature, condition or location (or subject to different lease or other

contracts), adjusted to reflect those differences;

• recent prices of similar properties in less active markets, with adjustments to reflect any changes in economic conditions since the

date of the transactions that occurred at those prices; or

• discounted cash flows projections based on reliable estimates of future cash flows, derived from the terms of any existing lease

and other contracts and (where possible) from external evidence such as current market rents for similar properties in the same

location and condition, and using discount rates that reflect current market assessments of the uncertainty in the amount and

timing of the cash flows.



– I-25 –

Investment properties are stated at fair value at the end of the reporting period based on the valuation performed by an independent

professional valuer. In determining the fair value, the valuer used a method of valuation which involves certain estimates as described in

Note 14.

(b) Current and deferred income tax

The Group is subject to corporate income taxes in the PRC. Judgement is required in determining the amount of the provision for

taxation and the timing of payment of the related taxations. There are many transactions and calculations for which the ultimate tax

determination is uncertain during the ordinary course of business. Where the final tax outcome of these matters is different from the

amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such

determination is made.

Deferred tax assets relating to certain temporary differences and tax losses are recognised when management considers to be probable

that future taxable profit will be available against which the temporary differences or tax losses can be utilised. The outcome of their

actual utilisation may be different.

5 Segment information

Management has determined the operating segments based on the reports reviewed by the chief operating decision-maker. The CODM,

who is responsible for allocating resources and assessing performance of the operating segment, has been identified as the executive

directors of the Company.

The Group held 8 shopping malls in the PRC as at 30 June 2021. No revenue is generated from other countries and the non-currents assets

are all located in the PRC. The accounting policies of the operating segments are the same as the Group’s accounting policies.

Management considers that all existing shopping malls held by the Group have similar economic characteristics and have similar nature

of operating income. In addition, the cost structure and the economic environment in which they operate are similar. Therefore,

management concluded that the shopping malls are aggregated into a single reportable segment and no further analysis for segment

information is presented.

6 Revenue

Revenue mainly comprises of proceeds from rental income. An analysis of the Group’s revenue by category for the years ended 31

December 2018, 2019 and 2020 and the six months ended 30 June 2020 and 2021 is as follows:


30 June

2018 2019 2020 2020 2021


(unaudited)

Rental income

– Shopping malls (a) 287,200 312,502 333,721 167,306 184,414

– Car parks, common areas and advertising space 36,777 23,347 24,724 11,203 19,201

323,977 335,849 358,445 178,509 203,615

(a) The Group’s investment properties are leased to tenants under operating leases with rental payable monthly, quarterly,

semi-annually or annually. The gross rental income includes variable lease payments based on tenants’ turnover pursuant to the

terms and conditions as set out in the respective rental agreements. The variable lease payments amounted to RMB20,588,000,

RMB25,080,000, RMB24,430,000, RMB11,016,000 (unaudited) and RMB13,053,000 for the years ended 31 December 2018,

2019 and 2020 and the six months ended 30 June 2020 and 2021, respectively.



– I-26 –

As at 31 December 2018, 2019 and 2020 and 30 June 2021, the minimum lease payment receivables on lease of shopping malls of

the Group are as follows:


30 June20212018 2019 2020

RMB’000 RMB’000 RMB’000 RMB’000

Within 1 year 294,199 321,757 319,982 337,5411-2 year 214,253 216,557 209,432 207,7342-3 year 125,310 139,301 135,375 142,3363-4 year 92,347 99,629 107,503 112,4404-5 year 81,020 88,553 90,420 89,856More than 5 year 509,059 508,086 457,249 418,615

1,316,188 1,373,883 1,319,961 1,308,522

7 Expense by nature

Year ended 31 December Six months ended 30 June

2018 2019 2020 2020 2021


Commercial operational services fees 30,489 17,480 16,607 5,807 10,842Promotion and advertising expenses 2,441 4,208 13,797 6,675 7,752Repairs and maintenance 8,684 8,446 11,083 2,824 6,011Property tax and other taxes 40,522 43,126 46,377 23,294 26,150Employee benefit expenses

(Note 8) 735 755 763 388 470Charges for market positioning,

tenant sourcing and openingpreparation services – 14,565 – – –

Charges for trademark licensing – 1,888 943 472 –Auditors’ remuneration (audit services) 65 85 50 – –Others (Note a) 309 359 538 294 260

83,245 90,912 90,158 39,754 51,485

(a) Amounts include mainly insurance expenses and legal and consultancy fees.



– I-27 –

8 Employee benefit expenses


2018 2019 2020 2020 2021


(unaudited)

Wages, salaries and bonuses 561 593 608 308 369

Welfare, medical, housing andother expenses 87 82 63 33 51

Pension costs – statutory pension 87 80 92 47 50

735 755 763 388 470

(a) Five highest paid individuals

During the Track Record Period, the directors received nil remuneration from the Group. The emoluments payable to the five

individuals whose emoluments were the highest in the Group for each of the years ended 31 December 2018, 2019 and 2020 and

the six months ended 30 June 2020 and 2021 are as follows:


2018 2019 2020 2020 2021


(unaudited)

Wages, salaries and bonuses 409 390 341 199 183

Welfare, medical and other expenses 51 42 26 15 19

Other staff welfare and benefits 62 51 48 30 24

522 483 415 244 226

The emoluments fell within the following bands:


2018 2019 2020 2020 2021

(unaudited)

Emolument bands

HK$1 – HK$1,000,000 5 5 5 5 5

(b) Employees in the Group’s PRC subsidiaries are required to participate in a defined contribution retirement scheme administrated

and operated by the local municipal government. The Group’s PRC subsidiaries contribute funds, which are calculated on certain

percentage of the average employee salary as agreed by local municipal government, to the scheme to fund the retirement benefits

of the employees.



– I-28 –

9 Other gains-net


2018 2019 2020 2020 2021


(unaudited)

Compensation income from early leasetermination (a) 1,957 1,338 2,946 993 811

Government grant and subsidies (b) 791 – – – –

Others (68) (69) 1 1 –

2,680 1,269 2,947 994 811

(a) Amounts represent mainly the compensation received from the tenants for early termination of the tenancies or default of the

tenants.

(b) Amounts represent mainly the refund of property tax and value added tax.

10 Finance costs – net


2018 2019 2020 2020 2021


(unaudited)

Interest expense:

Borrowings 44,061 49,485 22,619 11,458 10,800

Less: capitalised to investmentproperties (25,748) (33,684) – – –

18,313 15,801 22,619 11,458 10,800

Interest income (2,543) – – – –

Finance costs – net 15,770 15,801 22,619 11,458 10,800

11 Income tax expense


2018 2019 2020 2020 2021


(unaudited)

Current income tax 24,600 26,989 21,218 12,185 32,489

Deferred income tax 193,814 133,455 56,082 26,480 10,713

218,414 160,444 77,300 38,665 43,202

The Company was incorporated in the BVI as a limited liability company under the International Business Companies Act of the BVI and

accordingly, is exempted from payment of British Virgin Island income tax.

Hong Kong profits tax should be provided for at the rate of 16.5% on the estimated assessable profit for the current period in respect of

operations in Hong Kong. No Hong Kong profits tax has been provided for as the Group’s subsidiaries incorporated in Hong Kong did

not have assessable profit in Hong Kong during the Track Record Period.



– I-29 –

Income tax provision of the Group in respect of operations in the PRC has been calculated at the applicable tax rate on the estimated

assessable profits for the years/periods, based on the existing legislation, interpretations and practices in respect thereof. The statutory

tax rate is 25% for the Track Record Period.

According to the applicable PRC tax regulations, dividends distributed by a company established in the PRC to an overseas investor with

respect to profits derived after 1 January 2008 are generally subject to withholding tax at a rate of 10%. If an investor incorporated in

Hong Kong meets the conditions and requirements under the double taxation treaty arrangement for Hong Kong and the criteria of

beneficial owner, the relevant withholding tax rate will be reduced from 10% to 5%.

The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the weighted average tax rate

applicable to profits of the Group entities as follows:


2018 2019 2020 2020 2021


(unaudited)

Profit before income tax 963,984 640,607 300,602 164,385 159,452

Tax calculated at applicable corporateincome tax rate of 25% 240,996 160,152 75,151 41,096 39,863

Tax effects of:

– Share of (profit)/losses of investmentaccounted for using the equitymethod (22,549) 118 1,970 (2,523) 168

– Expenses not deductible for taxpurposes 165 174 179 92 109

– Effect of income not subject to tax (198) – – – –

– Deferred tax on earnings of theGroup’s PRC subsidiaries – – – – 3,062

218,414 160,444 77,300 38,665 43,202

12 Earnings per share

No earnings per share information is presented as its inclusion, for the purpose of this report, is not considered meaningful due to the

Reorganisation and the preparation of the results for the Track Record Period on a combined basis as disclosed in Note 1.3.

13 Dividends

No dividend has been declared or paid by the Company or the companies now comprising the Group during each of the years ended 31

December 2018, 2019 and 2020 and the six months ended 30 June 2021.



– I-30 –

14 Investment properties


2018 2019 2020 2020 2021


(unaudited)

At the beginning of the year/period 6,616,309 7,526,257 8,060,236 8,060,236 8,120,971

Additions 263,473 122,860 – – –

Fair value changes 646,475 411,119 60,735 28,966 17,137

At the end of the year/period 7,526,257 8,060,236 8,120,971 8,089,202 8,138,108

Direct operating expenses from propertythat generated rental income 42,281 32,720 43,147 16,144 25,049

As at 31 December 2018, 2019 and 2020 and 30 June 2021, investment properties with carrying amount of RMB4,837,266,000,

RMB5,264,936,000, RMB5,905,101,000 and RMB5,275,064,000 were pledged as collateral for borrowings of the Group’s related

parties (Note 28(b)) and the Group’s borrowings (Note 23).

The fair value of investment properties as at 31 December 2018, 2019 and 2020 and 30 June 2021 is based on the valuation conducted by

Savills Valuation and Professional Services Limited, an independent professional valuer with appropriate professional qualifications and

experiences in the valuation of similar properties in the relevant locations.

Fair value of completed investment properties was generally derived using the income capitalisation method, taking into account the net

rental income of a property derived from its existing tenancies with due allowance for the reversionary income potential of the property

upon expiry of the existing leases, which was then capitalised to determine the fair value at an appropriate capitalisation rate.

Fair value of the investment properties under development is generally derived using the residual method (taking into consideration of

construction costs incurred). Residual method involves the assessment of the estimated capital value of the proposed development

assuming completed as at valuation date, with allowances for the outstanding development costs together with developer’s profit and

risk.

The following table gives the information about how the fair values of these investment properties are determined (in particular, the

valuation techniques and inputs used), as well as the fair value hierarchy into which the fair value measurements are categorised (Level

1 to 3) based on the degree to which the inputs to the fair value measurements is observable.



– I-31 –

The

rew

ere

notr

ansf

ers

into

orou

tof

Lev

el3

duri

ngth

eT

rack

Rec

ord

Per

iod.

Inve

stm

ent

prop

erti

eshe

ldby

the

Gro

upin

the

bala

nce

shee

t

Fai

rva

lue

hier

arch

yV

alua

tion

Val

uati

onte

chni

que

and

key

inpu

t(s)

Sign

ific

ant

unob

serv

able

inpu

t(s)

Rel

atio

nshi

pof

unob

serv

able

inpu

tsto

fair

valu

e

(RM

B’0

00)

Yan

chen

gP

ower

long

Pla

zaL

evel

331

Dec

2018

:1,

488,

417

31D

ec20

19:

1,53

2,35

031

Dec

2020

:1,

533,

578

30Ju

ne20

21:

1,53

5,92

5

Term

and

reve

rsio

nary

met

hod

The

key

inpu

tsar

e

(1)

Term

yiel

dTe

rmyi

eld,

taki

ngin

toac

coun

tof

yiel

dge

nera

ted

bym

arke

tav

erag

ese

llin

gpr

ice

and

the

mar

ket

aver

age

rent

alfr

omco

mpa

rabl

epr

oper

ties

and

adju

stm

ent

tore

flec

tth

eco

ndit

ions

ofth

esu

bjec

tpr

oper

ty,w

as5.

00%

,5.0

0%,5

.00%

and

5.00

%re

spec

tive

lyas

at31

Dec

embe

r20

18,2

019

and

2020

and

30Ju

ne20

21.

The

high

erth

ete

rmyi

eld,

the

low

erth

efa

irva

lue.

(2)

Rev

ersi

onar

yyi

eld

Rev

ersi

onar

yyi

eld,

taki

ngin

toac

coun

tof

yiel

dge

nera

ted

bym

arke

tav

erag

ese

llin

gpr

ice

and

the

mar

ket

aver

age

rent

alfr

omco

mpa

rabl

epr

oper

ties

and

adju

stm

ent

tore

flec

tth

eri

skas

soci

ated

wit

hth

efu

ture

rent

al,w

as5.

50%

,5.5

0%,5

.50%

and

5.50

%re

spec

tive

lyas

at31

Dec

embe

r20

18,2

019

and

2020

and

30Ju

ne20

21.

The

high

erth

ere

vers

iona

ryyi

eld,

the

low

erth

efa

irva

lue.

(3)

Mon

thly

mar

ket

rent

Mar

ket

rent

was

dete

rmin

edby

the

esti

mat

edam

ount

for

whi

chal

lin

tere

sts

inre

alpr

oper

tysh

ould

bele

ased

onth

eva

luat

ion

date

betw

een

aw

illi

ngle

ssor

and

aw

illi

ngle

ssee

onap

prop

riat

ele

ase

term

sin

anar

m’s

leng

thtr

ansa

ctio

n,af

ter

prop

erm

arke

ting

and

whe

reth

epa

rtie

sha

dea

chac

ted

know

ledg

eabl

y,pr

uden

tly,

and

wit

hout

com

puls

ion,

the

amou

nts

ofw

hich

wer

eR

MB

69/s

q.m

./m

onth

,RM

B73

/sq.

m./

mon

th,R

MB

73/s

q.m

./m

onth

and

RM

B74

/sq.

m./

mon

thre

spec

tive

lyas

at31

Dec

embe

r20

18,

2019

and

2020

and

30Ju

ne20

21.

The

high

erth

em

onth

lym

arke

tre

nt,t

hehi

gher

the

fair

valu

e.



– I-32 –

Inve

stm

ent

prop

erti

eshe

ldby

the

Gro

upin

the

bala

nce

shee

t

Fai

rva

lue

hier

arch

yV

alua

tion

Val

uati

onte

chni

que

and

key

inpu

t(s)

Sign

ific

ant

unob

serv

able

inpu

t(s)

Rel

atio

nshi

pof

unob

serv

able

inpu

tsto

fair

valu

e

(RM

B’0

00)

Xin

xian

gP

ower

long

Pla

zaL

evel

331

Dec

2018

:84

5,45

831

Dec

2019

:89

2,03

231

Dec

2020

:88

7,74

330

June

2021

:888

,965

Term

and

reve

rsio

nary

met

hod

The

key

inpu

tsar

e

(1)

Term

yiel

dTe

rmyi

eld,

taki

ngin

toac

coun

tof

yiel

dge

nera

ted

bym

arke

tav

erag

ese

llin

gpr

ice

and

the

mar

ket

aver

age

rent

alfr

omco

mpa

rabl

epr

oper

ties

and

adju

stm

ent

tore

flec

tth

eco

ndit

ions

ofth

esu

bjec

tpr

oper

ty,w

as4.

50%

,4.5

0%,4

.50%

and

4.50

%re

spec

tive

lyas

at31

Dec

embe

r20

18,2

019

and

2020

and

30Ju

ne20

21.

The

high

erth

ete

rmyi

eld,

the

low

erth

efa

irva

lue.

(2)

Rev

ersi

onar

yyi

eld

Rev

ersi

onar

yyi

eld,

taki

ngin

toac

coun

tof

yiel

dge

nera

ted

bym

arke

tav

erag

ese

llin

gpr

ice

and

the

mar

ket

aver

age

rent

alfr

omco

mpa

rabl

epr

oper

ties

and

adju

stm

ent

tore

flec

tth

eri

skas

soci

ated

wit

hth

efu

ture

rent

al,w

as5.

00%

,5.0

0%,5

.00%

and

5.00

%re

spec

tive

lyas

at31

Dec

embe

r20

18,2

019

and

2020

and

30Ju

ne20

21.

The

high

erth

ere

vers

iona

ryyi

eld,

the

low

erth

efa

irva

lue.

(3)

Mon

thly

mar

ket

rent

Mar

ket

rent

was

dete

rmin

edby

the

esti

mat

edam

ount

for

whi

chal

lin

tere

sts

inre

alpr

oper

tysh

ould

bele

ased

onth

eva

luat

ion

date

betw

een

aw

illi

ngle

ssor

and

aw

illi

ngle

ssee

onap

prop

riat

ele

ase

term

sin

anar

m’s

leng

thtr

ansa

ctio

n,af

ter

prop

erm

arke

ting

and

whe

reth

epa

rtie

sha

dea

chac

ted

know

ledg

eabl

y,pr

uden

tly,

and

wit

hout

com

puls

ion,

the

amou

nts

ofw

hich

wer

eR

MB

57/s

q.m

./m

onth

,RM

B66

/sq.

m./

mon

th,R

MB

65/s

q.m

./m

onth

and

RM

B67

/sq.

m./

mon

thre

spec

tive

lyas

at31

Dec

embe

r20

18,

2019

and

2020

and

30Ju

ne20

21.

The

high

erth

em

onth

lym

arke

tre

nt,t

hehi

gher

the

fair

valu

e.



– I-33 –

Inve

stm

ent

prop

erti

eshe

ldby

the

Gro

upin

the

bala

nce

shee

t

Fai

rva

lue

hier

arch

yV

alua

tion

Val

uati

onte

chni

que

and

key

inpu

t(s)

Sign

ific

ant

unob

serv

able

inpu

t(s)

Rel

atio

nshi

pof

unob

serv

able

inpu

tsto

fair

valu

e

(RM

B’0

00)

Suq

ian

Pow

erlo

ngP

laza

Lev

el3

31D

ec20

18:

1,43

9,03

631

Dec

2019

:1,

516,

607

31D

ec20

20:

1,52

0,49

630

June

2021

:1,

524,

283

Term

and

reve

rsio

nary

met

hod

The

key

inpu

tsar

e

(1)

Term

yiel

dTe

rmyi

eld,

taki

ngin

toac

coun

tof

yiel

dge

nera

ted

bym

arke

tav

erag

ese

llin

gpr

ice

and

the

mar

ket

aver

age

rent

alfr

omco

mpa

rabl

epr

oper

ties

and

adju

stm

ent

tore

flec

tth

eco

ndit

ions

ofth

esu

bjec

tpr

oper

ty,w

as5.

00%

,5.0

0%,5

.00%

and

5.00

%re

spec

tive

lyas

at31

Dec

embe

r20

18,2

019

and

2020

and

30Ju

ne20

21.

The

high

erth

ete

rmyi

eld,

the

low

erth

efa

irva

lue.

(2)

Rev

ersi

onar

yyi

eld

Rev

ersi

onar

yyi

eld,

taki

ngin

toac

coun

tof

yiel

dge

nera

ted

bym

arke

tav

erag

ese

llin

gpr

ice

and

the

mar

ket

aver

age

rent

alfr

omco

mpa

rabl

epr

oper

ties

and

adju

stm

ent

tore

flec

tth

eri

skas

soci

ated

wit

hth

efu

ture

rent

al,w

as5.

50%

,5.5

0%,5

.50%

and

5.50

%re

spec

tive

lyas

at31

Dec

embe

r20

18,2

019

and

2020

and

30Ju

ne20

21.

The

high

erth

ere

vers

iona

ryyi

eld,

the

low

erth

efa

irva

lue.

(3)

Mon

thly

mar

ket

rent

Mar

ket

rent

was

dete

rmin

edby

the

esti

mat

edam

ount

for

whi

chal

lin

tere

sts

inre

alpr

oper

tysh

ould

bele

ased

onth

eva

luat

ion

date

betw

een

aw

illi

ngle

ssor

and

aw

illi

ngle

ssee

onap

prop

riat

ele

ase

term

sin

anar

m’s

leng

thtr

ansa

ctio

n,af

ter

prop

erm

arke

ting

and

whe

reth

epa

rtie

sha

dea

chac

ted

know

ledg

eabl

y,pr

uden

tly,

and

wit

hout

com

puls

ion,

the

amou

nts

ofw

hich

wer

eR

MB

78/s

q.m

./m

onth

,RM

B84

/sq.

m./

mon

th,R

MB

86/s

q.m

./m

onth

and

RM

B92

/sq.

m./

mon

thre

spec

tive

lyas

at31

Dec

embe

r20

18,

2019

and

2020

and

30Ju

ne20

21.

The

high

erth

em

onth

lym

arke

tre

nt,t

hehi

gher

the

fair

valu

e.



– I-34 –

Inve

stm

ent

prop

erti

eshe

ldby

the

Gro

upin

the

bala

nce

shee

t

Fai

rva

lue

hier

arch

yV

alua

tion

Val

uati

onte

chni

que

and

key

inpu

t(s)

Sign

ific

ant

unob

serv

able

inpu

t(s)

Rel

atio

nshi

pof

unob

serv

able

inpu

tsto

fair

valu

e

(RM

B’0

00)

Sha

ngha

iF

engx

ian

Pow

erlo

ngP

laza

Lev

el3

31D

ec20

18:

889,

688

31D

ec20

19:

929,

225

31D

ec20

20:

974,

462

30Ju

ne20

21:

978,

207

Term

and

reve

rsio

nary

met

hod

The

key

inpu

tsar

e

(1)

Term

yiel

dTe

rmyi

eld,

taki

ngin

toac

coun

tof

yiel

dge

nera

ted

bym

arke

tav

erag

ese

llin

gpr

ice

and

the

mar

ket

aver

age

rent

alfr

omco

mpa

rabl

epr

oper

ties

and

adju

stm

ent

tore

flec

tth

eco

ndit

ions

ofth

esu

bjec

tpr

oper

ty,w

as5.

50%

,5.5

0%,5

.50%

and

5.50

%re

spec

tive

lyas

at31

Dec

embe

r20

18,2

019

and

2020

and

30Ju

ne20

21.

The

high

erth

ete

rmyi

eld,

the

low

erth

efa

irva

lue.

(2)

Rev

ersi

onar

yyi

eld

Rev

ersi

onar

yyi

eld,

taki

ngin

toac

coun

tof

yiel

dge

nera

ted

bym

arke

tav

erag

ese

llin

gpr

ice

and

the

mar

ket

aver

age

rent

alfr

omco

mpa

rabl

epr

oper

ties

and

adju

stm

ent

tore

flec

tth

eri

skas

soci

ated

wit

hth

efu

ture

rent

al,w

as6.

00%

,6.0

0%,6

.00%

and

6.00

%re

spec

tive

lyas

at31

Dec

embe

r20

18,2

019

and

2020

and

30Ju

ne20

21.

The

high

erth

ere

vers

iona

ryyi

eld,

the

low

erth

efa

irva

lue.

(3)

Mon

thly

mar

ket

rent

Mar

ket

rent

was

dete

rmin

edby

the

esti

mat

edam

ount

for

whi

chal

lin

tere

sts

inre

alpr

oper

tysh

ould

bele

ased

onth

eva

luat

ion

date

betw

een

aw

illi

ngle

ssor

and

aw

illi

ngle

ssee

onap

prop

riat

ele

ase

term

sin

anar

m’s

leng

thtr

ansa

ctio

n,af

ter

prop

erm

arke

ting

and

whe

reth

epa

rtie

sha

dea

chac

ted

know

ledg

eabl

y,pr

uden

tly,

and

wit

hout

com

puls

ion,

the

amou

nts

ofw

hich

wer

eR

MB

144/

sq.m

./m

onth

,RM

B15

2/sq

.m./

mon

th,

RM

B16

1/sq

.m./

mon

than

dR

MB

162/

sq.m

./m

onth

resp

ecti

vely

asat

31D

ecem

ber

2018

,201

9an

d20

20an

d30

June

2021

.

The

high

erth

em

onth

lym

arke

tre

nt,t

hehi

gher

the

fair

valu

e.



– I-35 –

Inve

stm

ent

prop

erti

eshe

ldby

the

Gro

upin

the

bala

nce

shee

t

Fai

rva

lue

hier

arch

yV

alua

tion

Val

uati

onte

chni

que

and

key

inpu

t(s)

Sign

ific

ant

unob

serv

able

inpu

t(s)

Rel

atio

nshi

pof

unob

serv

able

inpu

tsto

fair

valu

e

(RM

B’0

00)

Qin

gdao

Jiao

zhou

Pow

erlo

ngP

laza

;L

evel

331

Dec

2018

:71

2,16

331

Dec

2019

:71

5,11

531

Dec

2020

:71

7,54

930

June

2021

:71

9,08

2

Term

and

reve

rsio

nary

met

hod

The

key

inpu

tsar

e

(1)

Term

yiel

dTe

rmyi

eld,

taki

ngin

toac

coun

tof

yiel

dge

nera

ted

bym

arke

tav

erag

ese

llin

gpr

ice

and

the

mar

ket

aver

age

rent

alfr

omco

mpa

rabl

epr

oper

ties

and

adju

stm

ent

tore

flec

tth

eco

ndit

ions

ofth

esu

bjec

tpr

oper

ty,w

as4.

50%

,4.5

0%,4

.50%

and

4.50

%re

spec

tive

lyas

at31

Dec

embe

r20

18,2

019

and

2020

and

30Ju

ne20

21.

The

high

erth

ete

rmyi

eld,

the

low

erth

efa

irva

lue.

(2)

Rev

ersi

onar

yyi

eld

Rev

ersi

onar

yyi

eld,

taki

ngin

toac

coun

tof

yiel

dge

nera

ted

bym

arke

tav

erag

ese

llin

gpr

ice

and

the

mar

ket

aver

age

rent

alfr

omco

mpa

rabl

epr

oper

ties

and

adju

stm

ent

tore

flec

tth

eri

skas

soci

ated

wit

hth

efu

ture

rent

al,w

as5.

00%

,5.0

0%,5

.00%

and

5.00

%re

spec

tive

lyas

at31

Dec

embe

r20

18,2

019

and

2020

and

30Ju

ne20

21.

The

high

erth

ere

vers

iona

ryyi

eld,

the

low

erth

efa

irva

lue.

(3)

Mon

thly

mar

ket

rent

Mar

ket

rent

was

dete

rmin

edby

the

esti

mat

edam

ount

for

whi

chal

lin

tere

sts

inre

alpr

oper

tysh

ould

bele

ased

onth

eva

luat

ion

date

betw

een

aw

illi

ngle

ssor

and

aw

illi

ngle

ssee

onap

prop

riat

ele

ase

term

sin

anar

m’s

leng

thtr

ansa

ctio

n,af

ter

prop

erm

arke

ting

and

whe

reth

epa

rtie

sha

dea

chac

ted

know

ledg

eabl

y,pr

uden

tly,

and

wit

hout

com

puls

ion,

the

amou

nts

ofw

hich

wer

eR

MB

56/s

q.m

./m

onth

,RM

B56

/sq.

m./

mon

th,R

MB

56/s

q.m

./m

onth

and

RM

B57

/sq.

m./

mon

thre

spec

tive

lyas

at31

Dec

embe

r20

18,

2019

and

2020

and

30Ju

ne20

21.

The

high

erth

em

onth

lym

arke

tre

nt,t

hehi

gher

the

fair

valu

e.



– I-36 –

Inve

stm

ent

prop

erti

eshe

ldby

the

Gro

upin

the

bala

nce

shee

t

Fai

rva

lue

hier

arch

yV

alua

tion

Val

uati

onte

chni

que

and

key

inpu

t(s)

Sign

ific

ant

unob

serv

able

inpu

t(s)

Rel

atio

nshi

pof

unob

serv

able

inpu

tsto

fair

valu

e

(RM

B’0

00)

Han

gzho

uL

in’a

nP

ower

long

Pla

za(N

ote

(a))

Lev

el3

31D

ec20

18:

664,

400

Res

idua

lm

etho

d

The

key

inpu

tsar

e

(1)

Mon

thly

mar

ket

rent

Mar

ket

rent

was

dete

rmin

edby

the

esti

mat

edam

ount

for

whi

chal

lin

tere

sts

inre

alpr

oper

tysh

ould

bele

ased

onth

eva

luat

ion

date

betw

een

aw

illi

ngle

ssor

and

aw

illi

ngle

ssee

onap

prop

riat

ele

ase

term

sin

anar

m’s

leng

thtr

ansa

ctio

n,af

ter

prop

erm

arke

ting

and

whe

reth

epa

rtie

sha

dea

chac

ted

know

ledg

eabl

y,pr

uden

tly,

and

wit

hout

com

puls

ion,

the

amou

nts

ofw

hich

wer

eR

MB

74/s

q.m

./m

onth

asat

31D

ecem

ber

2018

.

The

high

erth

em

onth

lym

arke

tre

nt,t

hehi

gher

the

fair

valu

e.

(2)

Est

imat

edde

velo

per’

sP

rofi

tE

stim

ated

Dev

elop

er’s

prof

it,t

akin

gin

toac

coun

tof

the

esti

mat

edca

pita

lva

lue

ofth

epr

opos

edde

velo

pmen

tas

sum

ing

com

plet

edas

atth

eda

teof

valu

atio

n,w

as3.

00%

asat

31D

ecem

ber

2018

.

The

high

erth

ere

vers

iona

ryyi

eld,

the

low

erth

efa

irva

lue.



– I-37 –

Inve

stm

ent

prop

erti

eshe

ldby

the

Gro

upin

the

bala

nce

shee

t

Fai

rva

lue

hier

arch

yV

alua

tion

Val

uati

onte

chni

que

and

key

inpu

t(s)

Sign

ific

ant

unob

serv

able

inpu

t(s)

Rel

atio

nshi

pof

unob

serv

able

inpu

tsto

fair

valu

e

(RM

B’0

00)

Han

gzho

uL

in’a

nP

ower

long

Pla

za(N

ote

(a))

Lev

el3

31D

ec20

19:

938,

370

31D

ec20

20:

920,

141

30Ju

ne20

21:

919,

319

Term

and

reve

rsio

nary

met

hod

The

key

inpu

tsar

e

(1)

Term

yiel

dTe

rmyi

eld,

taki

ngin

toac

coun

tof

yiel

dge

nera

ted

bym

arke

tav

erag

ese

llin

gpr

ice

and

the

mar

ket

aver

age

rent

alfr

omco

mpa

rabl

epr

oper

ties

and

adju

stm

ent

tore

flec

tth

eco

ndit

ions

ofth

esu

bjec

tpr

oper

ty,w

as5.

00%

,5.0

0%an

d5.

00%

resp

ecti

vely

asat

31D

ecem

ber

2019

,202

0an

d30

June

2021

.

The

high

erth

ete

rmyi

eld,

the

low

erth

efa

irva

lue.

(2)

Rev

ersi

onar

yyi

eld

Rev

ersi

onar

yyi

eld,

taki

ngin

toac

coun

tof

yiel

dge

nera

ted

bym

arke

tav

erag

ese

llin

gpr

ice

and

the

mar

ket

aver

age

rent

alfr

omco

mpa

rabl

epr

oper

ties

and

adju

stm

ent

tore

flec

tth

eri

skas

soci

ated

wit

hth

efu

ture

rent

al,w

as5.

50%

,5.5

0%an

d5.

50%

resp

ecti

vely

asat

31D

ecem

ber

2019

,202

0an

d30

June

2021

.

The

high

erth

ere

vers

iona

ryyi

eld,

the

low

erth

efa

irva

lue.

(3)

Mon

thly

mar

ket

rent

Mar

ket

rent

was

dete

rmin

edby

the

esti

mat

edam

ount

for

whi

chal

lin

tere

sts

inre

alpr

oper

tysh

ould

bele

ased

onth

eva

luat

ion

date

betw

een

aw

illi

ngle

ssor

and

aw

illi

ngle

ssee

onap

prop

riat

ele

ase

term

sin

anar

m’s

leng

thtr

ansa

ctio

n,af

ter

prop

erm

arke

ting

and

whe

reth

epa

rtie

sha

dea

chac

ted

know

ledg

eabl

y,pr

uden

tly,

and

wit

hout

com

puls

ion,

the

amou

nts

ofw

hich

wer

eR

MB

87/s

q.m

./m

onth

,RM

B84

/sq.

m./

mon

than

dR

MB

82/s

q.m

./m

onth

resp

ecti

vely

asat

31D

ecem

ber

2019

,202

0an

d30

June

2021

.

The

high

erth

em

onth

lym

arke

tre

nt,t

hehi

gher

the

fair

valu

e.



– I-38 –

Inve

stm

ent

prop

erti

eshe

ldby

the

Gro

upin

the

bala

nce

shee

t

Fai

rva

lue

hier

arch

yV

alua

tion

Val

uati

onte

chni

que

and

key

inpu

t(s)

Sign

ific

ant

unob

serv

able

inpu

t(s)

Rel

atio

nshi

pof

unob

serv

able

inpu

tsto

fair

valu

e

(RM

B’0

00)

Qua

nzho

uA

nxi

Pow

erlo

ngP

laza

Lev

el3

31D

ec20

18:

870,

501

31D

ec20

19:

893,

704

31D

ec20

20:

892,

403

30Ju

ne20

21:

896,

113

Term

and

reve

rsio

nary

met

hod

The

key

inpu

tsar

e

(1)

Term

yiel

dTe

rmyi

eld,

taki

ngin

toac

coun

tof

yiel

dge

nera

ted

bym

arke

tav

erag

ese

llin

gpr

ice

and

the

mar

ket

aver

age

rent

alfr

omco

mpa

rabl

epr

oper

ties

and

adju

stm

ent

tore

flec

tth

eco

ndit

ions

ofth

esu

bjec

tpr

oper

ty,w

as5.

00%

,5.0

0%,5

.00%

and

5.00

%re

spec

tive

lyas

at31

Dec

embe

r20

18,2

019

and

2020

and

30Ju

ne20

21.

The

high

erth

ete

rmyi

eld,

the

low

erth

efa

irva

lue.

(2)

Rev

ersi

onar

yyi

eld

Rev

ersi

onar

yyi

eld,

taki

ngin

toac

coun

tof

yiel

dge

nera

ted

bym

arke

tav

erag

ese

llin

gpr

ice

and

the

mar

ket

aver

age

rent

alfr

omco

mpa

rabl

epr

oper

ties

and

adju

stm

ent

tore

flec

tth

eri

skas

soci

ated

wit

hth

efu

ture

rent

al,w

as5.

50%

,5.5

0%,5

.50%

and

5.50

%re

spec

tive

lyas

at31

Dec

embe

r20

18,2

019

and

2020

and

30Ju

ne20

21.

The

high

erth

ere

vers

iona

ryyi

eld,

the

low

erth

efa

irva

lue.

(3)

Mon

thly

mar

ket

rent

Mar

ket

rent

was

dete

rmin

edby

the

esti

mat

edam

ount

for

whi

chal

lin

tere

sts

inre

alpr

oper

tysh

ould

bele

ased

onth

eva

luat

ion

date

betw

een

aw

illi

ngle

ssor

and

aw

illi

ngle

ssee

onap

prop

riat

ele

ase

term

sin

anar

m’s

leng

thtr

ansa

ctio

n,af

ter

prop

erm

arke

ting

and

whe

reth

epa

rtie

sha

dea

chac

ted

know

ledg

eabl

y,pr

uden

tly,

and

wit

hout

com

puls

ion,

the

amou

nts

ofw

hich

wer

eR

MB

112/

sq.m

./m

onth

,RM

B11

5/sq

.m./

mon

th,

RM

B11

5/sq

.m./

mon

than

dR

MB

116/

sq.m

./m

onth

resp

ecti

vely

asat

31D

ecem

ber

2018

,201

9an

d20

20an

d30

June

2021

.

The

high

erth

em

onth

lym

arke

tre

nt,t

hehi

gher

the

fair

valu

e.



– I-39 –

Inve

stm

ent

prop

erti

eshe

ldby

the

Gro

upin

the

bala

nce

shee

t

Fai

rva

lue

hier

arch

yV

alua

tion

Val

uati

onte

chni

que

and

key

inpu

t(s)

Sign

ific

ant

unob

serv

able

inpu

t(s)

Rel

atio

nshi

pof

unob

serv

able

inpu

tsto

fair

valu

e

(RM

B’0

00)

Luo

yang

Pow

erlo

ngP

laza

Lev

el3

31D

ec20

18:

616,

594

31D

ec20

19:

642,

833

31D

ec20

20:

674,

599

30Ju

ne20

21:

676,

214

Term

and

reve

rsio

nary

met

hod

The

key

inpu

tsar

e

(1)

Term

yiel

dTe

rmyi

eld,

taki

ngin

toac

coun

tof

yiel

dge

nera

ted

bym

arke

tav

erag

ese

llin

gpr

ice

and

the

mar

ket

aver

age

rent

alfr

omco

mpa

rabl

epr

oper

ties

and

adju

stm

ent

tore

flec

tth

eco

ndit

ions

ofth

esu

bjec

tpr

oper

ty,w

as5.

50%

,5.5

0%,5

.50%

and

5.50

%re

spec

tive

lyas

at31

Dec

embe

r20

18,2

019

and

2020

and

30Ju

ne20

21.

The

high

erth

ete

rmyi

eld,

the

low

erth

efa

irva

lue.

(2)

Rev

ersi

onar

yyi

eld

Rev

ersi

onar

yyi

eld,

taki

ngin

toac

coun

tof

yiel

dge

nera

ted

bym

arke

tav

erag

ese

llin

gpr

ice

and

the

mar

ket

aver

age

rent

alfr

omco

mpa

rabl

epr

oper

ties

and

adju

stm

ent

tore

flec

tth

eri

skas

soci

ated

wit

hth

efu

ture

rent

al,w

as6.

00%

,6.0

0%,6

.00%

and

6.00

%re

spec

tive

lyas

at31

Dec

embe

r20

18,2

019

and

2020

and

30Ju

ne20

21.

The

high

erth

ere

vers

iona

ryyi

eld,

the

low

erth

efa

irva

lue.

(3)

Mon

thly

mar

ket

rent

Mar

ket

rent

was

dete

rmin

edby

the

esti

mat

edam

ount

for

whi

chal

lin

tere

sts

inre

alpr

oper

tysh

ould

bele

ased

onth

eva

luat

ion

date

betw

een

aw

illi

ngle

ssor

and

aw

illi

ngle

ssee

onap

prop

riat

ele

ase

term

sin

anar

m’s

leng

thtr

ansa

ctio

n,af

ter

prop

erm

arke

ting

and

whe

reth

epa

rtie

sha

dea

chac

ted

know

ledg

eabl

y,pr

uden

tly,

and

wit

hout

com

puls

ion,

the

amou

nts

ofw

hich

wer

eR

MB

75/s

q.m

./m

onth

,RM

B79

/sq.

m./

mon

th,R

MB

80/s

q.m

./m

onth

and

RM

B81

/sq.

m./

mon

thre

spec

tive

lyas

at31

Dec

embe

r20

18,

2019

and

2020

and

30Ju

ne20

21.

The

high

erth

em

onth

lym

arke

tre

nt,t

hehi

gher

the

fair

valu

e.



– I-40 –

(a) Transfer Condition of Lin’an Powerlong

According to the land grant agreement and its supplemental agreement entered into between Lin’an Powerlong, the relevant

government department of Lin’an district, Hangzhou and other relevant parties, as well as the real estate title certificate of the land

on which Hangzhou Lin’an Powerlong Plaza is situated (the Lin’an-Land), Hangzhou Lin’an Powerlong Plaza is restricted from

being transferred in all or in part to other parties for an unlimited period (the “Lin’an Transfer Condition”). However, none of

the provisions of these documents restricts the transfer of the equity interest in Lin’an Project Company.

According to the confirmation letters issued by the Hangzhou Planning and Natural Resources Bureau Lin’an Branch, it is

confirmed that, among others, (i) the proposed transaction contemplated under the Reorganization in relation to Hangzhou Lin’an

Powerlong Plaza will not constitute a breach of the Lin’an Transfer Condition or any other restrictive regulations; and (ii) the

Lin’an Transfer Condition only applies to land use rights attached to Lin’an Land.

To minimize the potential adverse impact of the Lin’an Transfer Condition, if any, on Powerlong REIT, Powerlong Holdings has

provided an irrevocable undertaking to indemnify Powerlong REIT, among others, to the fullest extent permissible by law, for any

liability, losses, damages, fines, fees and costs

15 Investment accounted for using the equity method

The movements of the investment accounted for using the equity method during the year/period are as follows:


2018 2019 2020 2020 2021


(unaudited)

Balance at beginning of the year/period 411,535 501,731 501,258 501,258 493,379

Share of profit/(losses) of an associate 90,196 (473) (7,879) 10,092 (670)

Disposal (Note 1.2(b)) – – – – (492,709)

Balance at the end of the year/period 501,731 501,258 493,379 511,350 –

(a) Nature of investment in an associate as at 31 December 2018, 2019 and 2020:

Name of entity

Place and date ofestablishment/incorporation

Registered/paid-in capital

Proportion ofownership interest

Shanghai Powerlong Kangjun Real EstateDevelopment Co., Ltd.

PRC 30 July 2013 Registered andpaid-in capital ofRMB196,078,431

49%

There was no commitment or contingent liabilities relating to the Group’s interests in the associate.



– I-41 –

(b) Set out below are the summarised financial information of the associate which is accounted for using the equity method.

Summarised balance sheet

As at 31 December

2018 2019 2020

RMB’000 RMB’000 RMB’000

Assets

Current assets 462,637 625,392 863,889

Non-current assets 1,298,098 1,303,200 1,345,160

Total assets 1,760,735 1,928,592 2,209,049

Liabilities

Current liabilities 590,189 552,540 498,568

Non-current liabilities 146,606 353,077 703,586

Total liabilities 736,795 905,617 1,202,154

Net assets 1,023,940 1,022,975 1,006,895

Summarised statement of comprehensive income

Year ended 31 December

For theperiod

from1 January

to28 February

2021 (dateof disposal)2018 2019 2020

RMB’000 RMB’000 RMB’000 RMB’000

Revenue 437,938 32,952 34,238 6,302

Cost of sales (203,420) (3,128) (4,681) (1,184)

Fair value gains/(losses) from investment properties 140,844 (114) 35,027 –

Finance costs – net (12,000) (22,052) (32,594) (4,340)

Profit/(losses) before income tax 329,480 (197) (20,822) (1,824)

Income tax expenses (145,406) (768) 4,742 456

Profit/(losses) and total comprehensive incomefor the year/period 184,074 (965) (16,080) (1,368)

There are no material differences in accounting policies between the Group and the associate.



– I-42 –

(c) Reconciliation of summarised financial information

Reconciliation of the summarised financial information presented to the carrying amounts of the Group’s interest in the associate.

Year ended 31 December

2018 2019 2020

RMB’000 RMB’000 RMB’000

Opening net assets as at 1 January 839,866 1,023,940 1,022,975

Profit/(losses) for the year 184,074 (965) (16,080)

Closing net assets as at 31 December 1,023,940 1,022,975 1,006,895

Less:

– Other partner’s interests (522,209) (521,717) (513,516)

Interests in the associate (carrying value) 501,731 501,258 493,379

16 Financial instrument by categories


30 June20212018 2019 2020

RMB’000 RMB’000 RMB’000 RMB’000

Financial assets at amortised cost– Rental receivables (Note 17) 92,373 85,804 101,410 93,088

– Other receivables (Note 18) 1,360 – – –

– Amounts due from related parties 1,646,562 1,189,885 551,472 289,656

– Restricted cash (Note 20) 6,695 2,705 – –

– Cash and cash equivalents (Note 19) 71,847 52,748 73,178 154,478

1,818,837 1,331,142 726,060 537,222

Financial liabilities at amortised cost– Borrowing (Note 23) 1,180,967 688,697 350,663 340,644

– Amounts due to related parties (Note 28(e)) 1,251,820 1,486,158 1,247,008 1,366,262

– Trade and other payables excluding other taxes payables 108,972 222,368 219,319 171,036

2,541,759 2,397,223 1,816,990 1,877,942

17 Rental receivables


30 June20212018 2019 2020

RMB’000 RMB’000 RMB’000 RMB’000

Rental receivables 95,769 89,537 105,890 96,724

Less: allowance for impairment of rental receivables (3,396) (3,733) (4,480) (3,636)

92,373 85,804 101,410 93,088

As at 31 December 2018, 2019 and 2020 and 30 June 2021, the carrying amounts of rental receivables approximate their fair value due

to the short-term nature.



– I-43 –

Rental income from shopping malls are to be received in accordance with the terms of tenant contracts.

As at 31 December 2018, 2019 and 2020 and 30 June 2021, rental receivables are denominated in RMB.

As at 31 December 2018, 2019 and 2020 and 30 June 2021, the ageing analysis of the rental receivables based on date of revenuerecognition were as follows:


30 June20212018 2019 2020

RMB’000 RMB’000 RMB’000 RMB’000

0-180 days 95,669 88,741 104,873 95,621

181-365 days – 538 546 480

1 to 2 years 27 174 471 623

Over 2 years 73 84 – –

95,769 89,537 105,890 96,724

The maximum exposure to credit risk as at 31 December 2018, 2019 and 2020 and 30 June 2021 was the carrying value of the rentalreceivables disclosed above. The Group normally requested receipt of rental deposits prior to commencement of leases.

The Group applied HKFRS 9 simplified approach to measure expected credit losses which uses a lifetime expected loss allowance for allrental receivables. Note 3.1.2 provides details about the calculation of the allowance.

18 Prepayments and other receivables


30 June20212018 2019 2020

RMB’000 RMB’000 RMB’000 RMB’000

Value added tax (“VAT”) recoverable andother tax recoverable (a) 2,251 3,331 2,812 40,895

Prepayments for repair and maintenance 1,015 604 222 32

Tax refund receivables (b) 1,360 – – –

4,626 3,935 3,034 40,927

(a) As at 30 June 2021, the amounts mainly represent input VAT from the transfer of investment properties to the New ProjectCompanies (Note 1.2(a)), which could be used for deduction of output VAT.

(b) As at 31 December 2018, the amounts represent tax refund from the local tax authority. They are denominated in RMB and theircarrying amounts approximate their fair values due to the short-term nature.

19 Cash and cash equivalents


30 June20212018 2019 2020

RMB’000 RMB’000 RMB’000 RMB’000

Cash at bank 71,818 52,748 73,178 154,478

Cash on hand 29 – – –

71,847 52,748 73,178 154,478

The carrying amounts of cash and cash equivalents are denominated in RMB.



– I-44 –

Cash and cash equivalents held in the PRC are subject to local exchange control regulations. These regulations provide for restriction on

transferring out capital from the PRC other than through normal dividend.

20 Restricted cash

As at 31 December 2018 and 2019, the Group placed cash deposits with designated banks as securities for bank borrowings of the

Retained Project Companies.

21 Share capital and Reserves

The Company was authorized to issue a maximum of 50,000 shares of a single class of no par value. Upon incorporation, one ordinary

share amounting to HK$1 was allotted and issued to Powerlong Holdings and was fully paid up.


2018 2019 2020 2020 2021


(unaudited)

At beginning of year/period 1,381,496 1,967,136 1,512,052 1,512,052 1,151,252

Capital injection from the thenshareholders of the Group 585,640 – – – –*

Capital withdrawn by the thenshareholders of the Group (Note (a)) – (455,084) (360,800) – (17,000)

Deemed distribution to the thenshareholders of the Group (Note (b)) – – – – (737,447)

Changes in ownership interest insubsidiaries without change of control(Note (c)) – – – – 180,679

At end of year/period 1,967,136 1,512,052 1,151,252 1,512,052 577,484

* The amounts were rounded to the nearest thousand.

Reserves during the Track Record Period mainly comprised paid-in capital/issued share capital and capital surplus of companies now

comprising the Group.

(a) Pursuant to the resolutions of the shareholders of certain Retained Project Companies, the companies have approved the return of

part of paid-in capital to their then shareholders. Up to 30 June 2021, cash totalling RMB677,421,000 has been paid out by the

Retained Project Companies.

(b) (i) As part of the Reorganisation detailed in Note 1.2(b), the Group transferred its 49% equity interest in an associate, Shanghai

Kangjun, to the Remaining Group at a consideration of RMB96,080,000. The difference between the consideration of

RMB96,080,000 and the carrying amount of investment in Shanghai Kangjun of RMB492,709,000 was accounted for as a deemed

distribution to the then shareholders of the Group and non-controlling interests.

(ii) As part of the Reorganisation detailed in Notes 1.2(c) and 1.2(e), Lin’an WFOE, Jiaozhou WFOE and Starlong (HK) 7 Limited

acquired equity interest in Jiaozhou Powerlong, Lin’an Powerlong and Anxi Powerlong from the Remaining Group respectively at

the total consideration of approximately RMB400,312,000, which was accounted for as a deemed distribution to the then

shareholders of the Group.

(c) The Group acquired certain equity interests of its subsidiaries from non-controlling shareholders at total considerations of

RMB22,987,000 (Notes 1.2(c) and 1.2(e)). The difference between consideration paid and the carrying amount of equity interests

acquired amounting to RMB180,679,000 was recognised as an increase in reserves.



– I-45 –

22 Retained earnings

Movements in retained earnings are as followings:


2018 2019 2020 2020 2021


(unaudited)

At beginning of year/period 2,928,275 3,630,388 4,101,068 4,101,068 4,320,275

Net Profit 702,113 470,680 219,207 122,500 112,427

At end of year/period 3,630,388 4,101,068 4,320,275 4,223,568 4,432,702

23 Borrowings


30 June20212018 2019 2020

RMB’000 RMB’000 RMB’000 RMB’000

Non-current:Bank borrowings-secured (a) 1,170,479 688,697 350,663 340,644

Other borrowings-secured (b) 10,488 – –

Less: current portion of non-current borrowings (630,967) (338,697) (20,663) (21,644)

550,000 350,000 330,000 319,000

Current:Current portion of non-current borrowings 630,967 338,697 20,663 21,644


(a) As at 31 December 2018, 2019 and 2020 and 30 June 2021, bank borrowings were secured by certain investment properties of the

Group with fair value in aggregate of RMB1,534,901,000, RMB1,832,074,000, RMB892,403,000 and RMB896,113,000,

respectively, and also guaranteed by certain related parties (Note 28(c)).

(b) As at 31 December 2018, other borrowings were secured by pledge of rental receivables and also guaranteed by a related party

(Note 28(c)).

(c) As at 31 December 2018, 2019 and 2020 and 30 June 2021, the weighted average effective interest rate on bank and other

borrowings was 5.7%, 5.4%, 6.0% and 6.2% per annum, respectively.

(d) As at 31 December 2018, 2019, 2020 and 30 June 2021, bank and other borrowings of the Group were denominated in RMB.



– I-46 –

(e) The maturity of the borrowings is as follows:


30 June20212018 2019 2020

RMB’000 RMB’000 RMB’000 RMB’000

Bank borrowings:

Within 1 year 620,479 338,697 20,663 21,644

1–2 years 350,000 20,000 22,000 23,000

2–5 years 115,000 72,000 78,000 81,000

Over 5 years 85,000 258,000 230,000 215,000

1,170,479 688,697 350,663 340,644

Other borrowing:

Within 1 year 10,488 – – –

Total 1,180,967 688,697 350,663 340,644

(f) The carrying amounts and fair value of the non-current borrowings are as follows:


30 June20212018 2019 2020

RMB’000 RMB’000 RMB’000 RMB’000

Carrying amountBank borrowings 550,000 350,000 330,000 319,000

Fair valueBank borrowings (i)

521,660 340,764 320,561 310,066

(i) The fair values were estimated based on discounted cash flow using the prevailing market rates of interest available to the

Group for financial instruments with substantially the same terms and characteristics at the balance sheet date and were

within level 2 of the fair value hierarchy.



– I-47 –

24 Deferred income tax

The analysis of deferred tax assets and liabilities are as follows:

(a) Deferred income tax assets


30 June20212018 2019 2020

RMB’000 RMB’000 RMB’000 RMB’000

Impairment provision 849 933 1,120 909

Unused tax losses 2,208 6,501 4,454 2,227

3,057 7,434 5,574 3,136

Set-off against deferred tax liabilities pursuantto set-off provisions (3,057) (7,434) (5,574) (3,136)

Net deferred tax assets – – – –

The movement in deferred income tax assets during the Track Record Period is as follows:

Impairmentprovision

Unused taxlosses Total

RMB’000 RMB’000 RMB’000

As at 1 January 2018 797 2,574 3,371

Credited/(charged) to profit and loss account 52 (366) (314)

As at 31 December 2018 849 2,208 3,057

Credited to profit and loss account 84 4,293 4,377

As at 31 December 2019 933 6,501 7,434

Credited/(charged) to profit and loss account 187 (2,047) (1,860)

As at 31 December 2020 1,120 4,454 5,574

Charged to profit and loss account (211) (2,227) (2,438)

As at 30 June 2021 909 2,227 3,136

As at 31 December 2018, 2019, 2020 and 30 June 2021, the Group did not recognise deferred tax assets in respect of cumulative

tax losses of RMB17,222,000, RMB17,222,000, RMB2,382,000 and RMB2,382,000 respectively, as it is not probable that future

taxable profits against which the losses can be utilized. The tax losses shall expire in five years from year of occurrence under

current tax legislation.



– I-48 –

Unused tax losses for which no deferred tax asset was recognised are as follows:

Expiry year


30 June20212018 2019 2020

RMB’000 RMB’000 RMB’000 RMB’000

2020 14,840 14,840 – –

2021 2,382 2,382 2,382 2,382

17,222 17,222 2,382 2,382

(b) Deferred income tax liabilities


30 June20212018 2019 2020

RMB’000 RMB’000 RMB’000 RMB’000

Change in fair value of investment properties 1,034,606 1,137,386 1,152,570 1,156,854

Depreciation of investment properties onthe tax bases 191,883 226,935 265,973 266,902

Withholding tax on retained earnings of PRCsubsidiaries – – – 3,062

1,226,489 1,364,321 1,418,543 1,426,818

Set-off against deferred tax assets pursuantto set-off provisions (3,057) (7,434) (5,574) (3,136)

Net deferred tax liabilities 1,223,432 1,356,887 1,412,969 1,423,682



– I-49 –

The movement in deferred income tax liabilities during the Track Record Period is as follows:

Change infair value

ofinvestmentproperties

Depreciationof

investmentpropertieson the tax

bases

Withholdingtax on

retainedearnings of

PRCsubsidiaries Total

RMB’000 RMB’000 RMB’000 RMB’000

As at 1 January 2018 872,987 160,002 – 1,032,989Charged to profit and loss account 161,619 31,881 – 193,500

At 31 December 2018 1,034,606 191,883 – 1,226,489Charged to profit and loss account 102,780 35,052 – 137,832

At 31 December 2019 1,137,386 226,935 – 1,364,321Charged to profit and loss account 15,184 39,038 – 54,222

At 31 December 2020 1,152,570 265,973 – 1,418,543Charged to profit and loss account 4,284 929 3,062 8,275

As at 30 June 2021 1,156,854 266,902 3,062 1,426,818

25 Trade and other payables


30 June20212018 2019 2020

RMB’000 RMB’000 RMB’000 RMB’000

Trade payables (a) 36,411 79,536 70,072 46,317

Other payables– Non-controlling interests (b) – 48,170 48,170 22,987– Deposits received (c) 72,561 94,662 101,077 101,732– Other taxes payable 12,702 19,906 25,033 26,184

85,263 162,738 174,280 150,903

121,674 242,274 244,352 197,220

(a) As at 31 December 2018, 2019 and 2020 and 30 June 2021, the ageing analysis of the trade payables based on invoice date, were

as follows:


30 June20212018 2019 2020

RMB’000 RMB’000 RMB’000 RMB’000

Up to 1 year 34,633 78,162 3,975 1241 to 2 years 1,778 1,054 64,738 1,0112 to 3 years – 320 1,049 44,362More than 3 years – – 310 820

36,411 79,536 70,072 46,317



– I-50 –

(b) The amounts represent the paid-in capital to be returned to the non-controlling interests pursuant to the resolutions ofshareholders of certain Retained Project Companies (Note 21(a)) and the consideration for acquiring equity interest in thesubsidiaries from non-controlling shareholders (Note 21(c)).

(c) The amounts represent mainly deposits received from tenants as performance securities.

(d) As at 31 December 2018, 2019 and 2020 and 30 June 2021, trade and other payables are denominated in RMB and the carryingamounts of trade and other payables approximate their fair values.

26 Notes to the combined statements of cash flows

(a) Cash generated from operations


2018 2019 2020 2020 2021


Profit before income tax 963,984 640,607 300,602 164,385 159,452Adjustments for:

– Net impairment losses onfinancial assets 329 444 869 2,964 (844)

– Finance costs - net 15,770 15,801 22,619 11,458 10,800– Share of (profit)/losses of

investment accounted forusing the equity method (90,196) 473 7,879 (10,092) 670

– Change in fair value ofinvestment properties (646,475) (411,119) (60,735) (28,966) (17,137)

243,412 246,206 271,234 139,749 152,941

Changes in working capital:– Rental receivables (359) 6,125 (16,475) (33,176) 9,166– Net payables/(receivables)

with related parties 7,052 (9,093) (5,388) (15,493) (6,467)– Prepayments and other

receivables (1,102) 691 901 1,029 (37,893)– Advances from lessees 8,133 8,261 461 (21,779) 13,899– Trade and other payables 14,296 28,364 14,409 19,361 (1,804)

271,432 280,554 265,142 89,691 129,842

(b) Net debt reconciliation


2018 2019 2020 2020 2021


Borrowings 1,180,967 688,697 350,663 678,880 340,644Amount due to related parties

(non-trade) 1,243,567 1,474,245 1,240,618 1,035,795 1,359,493Cash and cash equivalents (71,847) (52,748) (73,178) (77,010) (154,478)

Net debt 2,352,687 2,110,194 1,518,103 1,637,665 1,545,659



– I-51 –

(c) The reconciliations of liabilities arising from financing activities

Borrowings

Non-tradeamounts due

to relatedparties Total

RMB’000 RMB’000 RMB’000

As at 1 January 2018 318,184 1,534,411 1,852,595Cash flows from financing activities 862,829 (290,844) 571,985Payments of interest (44,107) – (44,107)Non-cash items:

– Accrual of interest 44,061 – 44,061

As at 31 December 2018 1,180,967 1,243,567 2,424,534

As at 1 January 2019 1,180,967 1,243,567 2,424,534Cash flows from financing activities (492,488) (224,406) (716,894)Payments of interest (49,267) – (49,267)Non-cash items:

– Paid-in capital withdrawn by then shareholders of the subsidiaries – 455,084 455,084– Accrual of interest 49,485 – 49,485

As at 31 December 2019 688,697 1,474,245 2,162,942

As at 1 January 2020 688,697 1,474,245 2,162,942Cash flows from financing activities (338,000) (594,427) (932,427)Payments of interest (22,653) – (22,653)Non-cash items:

–Paid-in capital withdrawn by then shareholders of the subsidiaries – 360,800 360,800–Accrual of interest 22,619 – 22,619

As at 31 December 2020 350,663 1,240,618 1,591,281

As at 1 January 2021 350,663 1,240,618 1,591,281Cash flows from financing activities (10,000) (253,527) (263,527)Payments of interest (10,819) – (10,819)Non-cash items:

– Paid-in capital withdrawn by then shareholders of the subsidiaries – 17,000 17,000– Deemed distribution to the then shareholders of the Group

(Note 21(b)(ii)) – 400,312 400,312– Accrual of interest 10,800 – 10,800– Other changes (i) – (44,910) (44,910)

As at 30 June 2021 340,644 1,359,493 1,740,134

(Unaudited)As at 1 January 2020 688,697 1,474,245 2,162,942Cash flows from financing activities (9,800) (438,450) (448,250)Payments of interest (11,475) – (11,475)Non-cash items:

– Accrual of interest 11,458 – 11,458

As at 30 June 2020 678,880 1,035,795 1,714,675

(i) The amounts of other changes was set off against the amounts due from related parties according to the debt transferagreements.



– I-52 –

27 Capital Commitments

Capital expenditure contracted for at the end of the year but not yet incurred was as follows:


30 June

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Contracted but not provided for 258,402 – – –

28 Related party transactions

Related parties are those parties that have the ability to control, jointly control or exert significant influence over the other party. Parties

are also considered to be related if they are subject to common control or joint control. Related parties may be individuals or other

entities.

For details of the then shareholders of the companies now comprising the Group, please refer to Note 1.1.

Major related parties that had transactions with the Group during the Track Record Period were as follows:

Related partiesRelationship with the Group as at 1 January 2018, 31December 2018, 2019 and 2020 and 30 June 2021

Powerlong Holdings Intermediate holding company

Subsidiaries of Powerlong Holdings (i) Controlled by Powerlong Holdings

Mr. Hoi Kin Hong The ultimate controlling shareholder of Powerlong Holdings

Mr. Hoi Wa Fong A close family member of ultimate controlling shareholder

Fujian Ping An Security Devices and Network Limited Company controlled by ultimate controlling shareholder ofPowerlong Holdings

Shanghai Powerlong A wholly owned subsidiary of Powerlong Holdings

Shanghai Powerlong Kangjun Real Estate Development Co., Ltd. Associate of the Group

(i) Subsidiaries of Powerlong Holdings that had transactions with the Group during the Track Record Period were as follows:

English name Chinese name

Shanghai Powerlong Commercial Property ManagementCompany Limited, Yancheng Branch

上海寶龍商業地產管理有限公司鹽城分公司*

Shanghai Powerlong Commercial Property ManagementCompany Limited, Anxi Branch

上海寶龍商業地產管理有限公司安溪分公司*

Shanghai Powerlong Commercial Property ManagementCompany Limited, Suqian Branch

上海寶龍商業地產管理有限公司宿遷分公司*

Shanghai Powerlong Commercial Property ManagementCompany Limited, Luoyang Branch

上海寶龍商業地產管理有限公司洛陽分公司*

Shanghai Powerlong Commercial Property ManagementCompany Limited, Xinxiang Branch

上海寶龍商業地產管理有限公司新鄉分公司*

Shanghai Powerlong Commercial Property ManagementCompany Limited, Fengxian Branch

上海寶龍商業地產管理有限公司奉賢分公司*

Shanghai Powerlong Commercial Property ManagementCompany Limited, Jiaozhou Branch

上海寶龍商業地產管理有限公司膠州分公司*

Shanghai Powerlong Commercial Property ManagementCompany Limited, Lin’an Branch

上海寶龍商業地產管理有限公司臨安分公司*

Xinxiang Powerlong Property Development Co., Ltd. 新鄉寶龍置業發展有限公司*

Luoyang Powerlong Property Development Co., Ltd. 洛陽寶龍置業發展有限公司*

Shanghai Xiantong Property Co., Ltd. 上海賢通置業有限公司*

Shanghai Ruilong Investment Management Co., Ltd. 上海瑞龍投資管理有限公司*

Fuzhou Powerlong Trading Co., Ltd. 福州寶龍貿易有限公司*



– I-53 –

English name Chinese name

Welly Dragon (HongKong) LTD 龍麗（香港）有限公司Nanjing Powerlong Kangjun Property Development Co.,

Ltd.南京寶龍康浚置業發展有限公司*

Anxi Powerlong Commercial Property Services Co., Ltd. 安溪寶龍商業物業服務有限公司

* The English translation of these companies is for identification purpose only. These companies do not have official English

names.

(a) Transactions with related parties

Save as disclosed elsewhere in the combined financial information, during the Track Record Period, the following transactions

were carried out with related parties at terms mutually agreed by both parties:


30 June

2018 2019 2020 2020 2021


(unaudited)

Rental income charged to– Subsidiaries of Powerlong Holdings 1,006 23,514 24,898 11,376 19,298

Commercial operational services fees charged by– Subsidiaries of Powerlong Holdings 30,489 17,480 16,607 5,807 10,842

Trademark licensing fees charged by– Subsidiaries of Powerlong Holdings – 1,888 943 472 –

Market positioning, tenant sourcing and openingpreparation service fees charged by

– Subsidiaries of Powerlong Holdings – 14,565 – – –

Purchase of repairs and maintenance materials andservices from

– Company controlled by ultimate controllingshareholder of Powerlong Holdings – 831 84 – –

All of the transactions above were carried out in the normal course of the Group’s business and on terms as agreed between the

transacting parties.

(b) Pledges provided for the related parties

As at 31 December 2018, 2019 and 2020 and 30 June 2021, the carry amounts of those borrowings of related parties secured by

certain investment properties of the Group are as follows:


30 June

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Subsidiaries of Powerlong Holdings 1,338,000 1,441,000 1,670,000 1,296,940



– I-54 –

There are no amounts/aggregate amounts paid nor liability/aggregate liabilities incurred during the Track Record Period for the purpose

of fulfilling the pledge. The fair value of the pledge is considered to be insignificant. As at the date of this report, the director of the

Company is of the view that the provision is considered immaterial. The pledges will be fully released upon completion of the

Reorganisation.

(c) Guarantees provided by the related parties

Certain related parties have provided guarantees for all of the Group’s bank and other borrowings as at 31 December 2018, 2019

and 2020 and 30 June 2021 (Note 23).

(d) Amounts due from related parties


30 June

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Rental receivables (i)– Subsidiaries of Powerlong Holdings 326 3,491 1,760 1,623

Other receivables (non-trade) (ii)– Powerlong Holdings 1,645,692 1,179,625 545,803 283,794

Other receivables (trade) (iii)– Subsidiaries of Powerlong Holdings 544 6,769 3,909 4,239

Prepayments (iv)– Subsidiaries of Powerlong Holdings – 3,363 7,819 14,472

1,646,562 1,193,248 559,291 304,128

As at 31 December 2018, 2019 and 2020 and 30 June 2021, the carrying amounts of rental receivables and other receivables from

related parties approximate their fair values due to the short-term nature.

(i) Rental income from car parks, common areas and advertising space are to be received in accordance with the terms of tenant

contracts.

As at 31 December 2018, 2019 and 2020 and 30 June 2021, the ageing analysis of rental receivables from related parties, net

of impairment, based on date of revenue recognition, were as follows:


30 June

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

0–180 days 326 3,491 1,760 1,623

(ii) The amounts are cash advances in nature, unsecured, interest-free and repayable on demand. The Group has agreed with

Powerlong Holdings to fully settle or waive the amounts upon completion of the Reorganisation as detailed in Note 1.2(g).

(iii) The amounts represent mainly utilities charges paid on behalf of the related parties and lease deposits received by the

related parties on behalf of the Group.

(iv) As at 31 December 2019 and 2020 and 30 June 2021, prepayments represent advanced payments to related parties for brand

licensing fee and purchase of promotion and marketing services.



– I-55 –

(e) Amounts due to related parties


30 June

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Trade payables (i)– Company controlled by ultimate controlling shareholder of

Powerlong Holdings 7 548 136 –

– Subsidiaries of Powerlong Holdings 3,444 7,391 2,355 2,208

Other payables (non-trade)– Powerlong Holdings (ii) 1,243,567 1,474,245 1,240,618 1,359,493

Other payables (trade)– Subsidiaries of Powerlong Holdings (iii) 4,802 3,974 3,899 4,561

1,251,820 1,486,158 1,247,008 1,366,262

(i) Trade payables are related to purchase of commercial operational services and repairs and maintenance materials from

related parties. As at 31 December 2018, 2019 and 2020 and 30 June 2021, the ageing analysis of the trade payables to

related parties, based on invoice date, were as follows:


30 June

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Up to 1 year 3,230 7,939 1,781 2,166

1 to 2 years 221 – 710 42

3,451 7,939 2,491 2,208

(ii) The amounts are cash advances in nature, unsecured, interest-free and repayable on demand. The Group has agreed with

Powerlong Holdings to fully settle or waive the amounts upon completion of the Reorganisation as detailed in Note 1.2(g).

(iii) The amounts represent mainly the rental fee of car parks, common areas and advertising space received by the Group on

behalf of the related parties.

(f) Key management compensation

The Group’s key management personnel is the director of the Company. Mr Loo Hock Kheng was appointed as the director of the

Company on 1 April 2021. No director’s emoluments was paid or payable by the Group in respect of his services during the Track

Record Period. The director received emoluments from subsidiaries of Powerlong Holdings. The director is of the opinion that the

services provided to the Group only occupy an insignificant amount of his time and therefore it is concluded that the director is not

remunerated for such services.



– I-56 –

29 Subsidiaries

Particulars of the principal subsidiaries of the Group as at 31 December 2018, 2019 and 2020 and 30 June 2021 and as at date of this

report, are set out as follows:

Name of theSubsidiaries *

Place and date ofincorporation

Registered/ issued andpaid-up capital

Principal activitiesand place of operation Equity interest held as at Note

31 December 30 June

As atdate of

thisreport2018 2019 2020 2021

Directly held by the Company

Starlong (BVI)Third Limited

BVI, 31 March 2021,limited liabilitycompany

HK$1 Investment holding inBVI

N/A N/A N/A N/A 100% (a)

Indirectly held by the Company

Starlong (BVI) ILimited

BVI, 1 April 2021,limited liabilitycompany


N/A N/A N/A N/A 100% (a)

Starlong (BVI) IILimited



N/A N/A N/A N/A 100% (a)

Starlong (BVI) IIILimited



N/A N/A N/A N/A 100% (a)

Starlong (BVI) VLimited



N/A N/A N/A N/A 100% (a)

Starlong (BVI) VILimited



N/A N/A N/A N/A 100% (a)

Starlong (BVI) VIILimited



N/A N/A N/A N/A 100% (a)

Starlong (BVI) VIIILimited



N/A N/A N/A N/A 100% (a)

Starlong (BVI) IXLimited



N/A N/A N/A N/A 100% (a)



– I-57 –





31 December 30 June

As atdate of

thisreport2018 2019 2020 2021

Starlong (HK) 1 Limited Hong Kong, 16 April2021, limitedliability company

HK$1 Investment holding inHong Kong

N/A N/A N/A N/A 100% (a)



N/A N/A N/A N/A 100% (a)



N/A N/A N/A N/A 100% (a)



N/A N/A N/A N/A 100% (a)



N/A N/A N/A N/A 100% (a)



N/A N/A N/A N/A 100% (a)



N/A N/A N/A N/A 100% (a)



N/A N/A N/A N/A 100% (a)

Yancheng PowerlongProperty DevelopmentCo., Ltd.

The PRC, 13 May2008, Limitedliability company

RMB204,924,000 Property investments inthe PRC

100% 100% 100% 100% 100% (b) and (e)

Suqian PowerlongProperty DevelopmentCo., Ltd.

The PRC, 10 December2007, Limitedliability company


100% 100% 100% 100% 100% (a) and (e)

Qingdao PowerlongYingju PropertyDevelopment Co.,Ltd.

The PRC, 5 June 2013,Limited liabilitycompany

RMB248,632,400 as at31 December 2018;RMB62,000,000 asat 31 December 2019and 2020 and 30June 2021

Property investments inthe PRC

74% 74% 74% 100% 100% (c)



– I-58 –





31 December 30 June

As atdate of

thisreport2018 2019 2020 2021

Hangzhou LongyaoIndustrial Co., Ltd.

The PRC, 3 August2017, Limitedliability company

US$148,636,400 as at31 December 2018;US$103,950,000 asat 31 December2019;US$48,636,400 as at31 December 2020and 30 June 2021

Property investments inthe PRC

100% 100% 100% 100% 100% (d)

Anxi Powerlong AssetsOperation andManagement Co., Ltd.

The PRC, 29 August2012, Limitedliability company


85% 85% 85% 100% 100% (a) and (e)

Xinxiang LongqianEnterpriseManagement Co., Ltd.

The PRC, 29 January2021, Limitedliability company


N/A N/A N/A 100% 100% (a) and (e)

Luoyang LongqianCommercialManagement Co., Ltd.

The PRC, 23 March2021, Limitedliability company


N/A N/A N/A 100% 100% (a) and (e)

Shanghai XiantongEnterpriseDevelopment Co.,Ltd.

The PRC, 12 March2021, Limitedliability company


N/A N/A N/A 100% 100% (a) and (e)

Shanghai RuijiaoEnterpriseManagement Co., Ltd

The PRC, 19 April2021, Limitedliability company


N/A N/A N/A 100% 100% (a) and (e)

Shanghai RuicuiEnterpriseManagement Co., Ltd.

The PRC, 27 May2021, Limitedliability company


N/A N/A N/A 100% 100% (a) and (e)

* The English names of certain subsidiaries and their auditors referred to above were translated from their Chinese names on a best

effort basis by management of the Company, as they do not have official English names.

(a) No audited financial statements have been issued for these companies.

(b) The statutory auditor of Yancheng Powerlong Property Development Co., Ltd. was Yongtuo Certified Public Accountants Co., Ltd.

for the year ended 31 December 2019 and no statutory audit has been performed for this company for the years ended 31 December

2018 and 2020.

(c) The statutory auditor of Qingdao Powerlong Yingju Property Development Co., Ltd. was UniTax ZhenQing Certified Public

Accountants Co., Ltd. for the years ended 31 December 2018, 2019 and 2020.

(d) The statutory auditor of Hangzhou Longyao Industrial Co., Ltd. was Yatai (Group) Certified Public Accountants Co., Ltd. for the

years ended 31 December 2018 and Hangzhou Xinfu Certified Public Accountants Co., Ltd. for the years ended 31 December 2019

and 2020.

(e) All the companies are registered as wholly foreign owned enterprises under the PRC law.

All companies now comprising the Group have adopted 31 December as their financial year end date.



– I-59 –

30 Contingencies

The Group had no material contingent liabilities outstanding as at 31 December 2018, 2019 and 2020 and 30 June 2021 respectively.

31 Event after the balance sheet date

On [●] 2021, the Company declared a dividend of RMB[●] to the [Powerlong Holdings], which has been paid out on [●] 2021.

III SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by the Company or any of the companies now comprising

the Group in respect of any period subsequent to 30 June 2021 and up to the date of this report. Save as disclosed

in this report, no dividend or distribution has been declared or made by the Company or any of the companies now

comprising the Group in respect of any period subsequent to 30 June 2021.



– I-60 –

A. UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following tables set out, for illustrative purposes only, an unaudited pro forma statement of financial

position of Powerlong Commercial Real Estate Investment Trust (“Powerlong REIT”) as at 30 June 2021 (the

“Unaudited Pro Forma Financial Information”).

The Unaudited Pro Forma Financial Information has been prepared based on the audited combined balance

sheet of Starlong (BVI) Second Limited (the “Starlong (BVI) Second”) and its subsidiaries (together, the

“Predecessor Group”) as at 30 June 2021 as set out in Appendix I to this Document, assuming (i) the completion

of the reorganization as set out in the section headed “Reorganization, Structure and Organization of Powerlong

REIT” of this Document (the “Reorganization”), (ii) the completion of the transactions contemplated under the

Reorganization Deed (the “Asset Injection”), (iii) the settlement of the amounts due from/to related parties and

existing borrowing, and (iv) the loan draw-down under the facilities of approximately RMB[REDACTED], as if

they had taken place on 30 June 2021.

The Unaudited Pro Forma Financial Information has been prepared for illustrative purposes only and do not

purport to represent what the assets and liabilities of Powerlong REIT will actually be as at the [REDACTED] or

to give a true picture of the financial position of Powerlong REIT as at the Proposed [REDACTED] or any future

date.


APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

– II-1 –

UNAUDITED PROFORMA STATEMENT OF FINANCIAL POSITION OF POWERLONG REIT

PowerlongREITas at

30 June2021

Auditedcombined

statement offinancialposition

of thePredecessor

Groupas at

30 June2021

Pro formaadjustments Notes

Unauditedpro forma

statement offinancial

position ofPowerlong

REIT

RMB’000 RMB’000 RMB’000 RMB’000(Note 1) (Note 3)

AssetsNon-current assetsInvestment properties – 8,138,108 [REDACTED] [REDACTED]

Current assetsRental receivables – 93,088 [REDACTED] [REDACTED]Prepayments and other receivables – 40,927 [REDACTED] [REDACTED]Amounts due from related parties – 304,128 [REDACTED] 7 [REDACTED]

[REDACTED] 9Cash and cash equivalents – 154,478 [REDACTED] 4 [REDACTED]

[REDACTED] 5[REDACTED] 6[REDACTED] 7[REDACTED] 7[REDACTED] 8[REDACTED] 10(a)[REDACTED] 10(b)

– 592,621 [REDACTED] [REDACTED]

Total assets – 8,730,729 [REDACTED] [REDACTED]

LiabilitiesNon-current liabilitiesBorrowings – 319,000 [REDACTED] 6 [REDACTED]

[REDACTED] 10(a)[REDACTED] 10(b)

Deferred tax liabilities – 1,423,682 [REDACTED] [REDACTED]

– 1,742,682 [REDACTED] [REDACTED]



– II-2 –

PowerlongREITas at

30 June2021

Auditedcombined

statement offinancialposition

of thePredecessor

Groupas at

30 June2021

Pro formaadjustments Notes

Unauditedpro forma

statement offinancial

position ofPowerlong

REIT

RMB’000 RMB’000 RMB’000 RMB’000(Note 1) (Note 3)

Current liabilitiesTrade and other payables – 197,220 [REDACTED] 9 [REDACTED]

[REDACTED] 8Amounts due to related parties – 1,366,262 [REDACTED] 7 [REDACTED]Advances from lessees – 67,722 [REDACTED] [REDACTED]Current income tax liabilities – 325,013 [REDACTED] [REDACTED]Borrowings – 21,644 [REDACTED] 6 [REDACTED]

[REDACTED] 10(a)

– 1,977,861 [REDACTED] [REDACTED]

Total liabilities – 3,720,543 [REDACTED] [REDACTED]

Net assets – 5,010,186 [REDACTED] [REDACTED]

Net current liabilities/(assets) – (1,385,240) [REDACTED] [REDACTED]

Represented by:Share capital – – [REDACTED] [REDACTED]Reserves – 577,484 [REDACTED] 4 [REDACTED]

[REDACTED] 5[REDACTED] 11

Retained earnings – 4,432,702 [REDACTED] 11 [REDACTED]

Net assets attributable to Unitholders – – [REDACTED] 11 [REDACTED]

Total – 5,010,186 [REDACTED] [REDACTED]



– II-3 –

Notes:

(1) Powerlong REIT was constituted by the Trust Deed entered between Powerlong REIT Management Limited (the “REITManager”) and DB Trustees (Hong Kong) Limited (the “Trustee”) on [●]. Powerlong REIT has not been involved in any businessprior to the [REDACTED].

(2) Powerlong Holdings will [REDACTED] of Powerlong REIT for the purpose of [REDACTED]. Immediately followingcompletion of the [REDACTED], assuming the [REDACTED] is not exercised, Powerlong Holdings will remain [REDACTED]issued Units, representing [REDACTED] of all the issued Units of Powerlong REIT.

(3) The balances have been extracted from the audited combined balance sheet of the Predecessor Group as at 30 June 2021 as set outin Appendix I to this Document.

Proforma adjustments in relation to Onshore Reorganization

(4) This represents the capital contribution of RMB1,050,000,000 to of Anxi Powerlong Assets Operation and Management CompanyLimited (the “Anxi Powerlong”) from Shanghai Ruilong Investment Management Company Limited (a subsidiary indirectlyowned by Powerlong Holdings) on 6 August 2021.

Proforma adjustments in relation to Offshore Reorganization

(5) As part of the Reorganization, the HK Intermediary Companies acquired 100% equity interest of the Project Companies or theirholding companies from Retained Group at a consideration of approximately RMB2,148,910,000 as set out in the section headed“Reorganization, Structure and Organization of Powerlong REIT” of this Document.

The above consideration payable is regarded as a deemed distribution and deducts other reserves during the Reorganization.

Other adjustments

(6) This represents the repayments of the borrowings of the Predecessor Group as of 30 June 2021 by Anxi Powerlong amounting toapproximately RMB340,644,000 before the date of the completion of Asset Injection (the “Asset Injection Completion Date”).

(7) The Predecessor Group has agreed with Powerlong Holdings to settle the non-trade amounts of related parties upon completion ofthe Reorganization. The remaining balance of related parties after settlement upon completion of the Reorganization shall bewaived before the Asset Injection Completion Date. The adjustment represents the settlements of the non-trade amounts due fromrelated parties as of 30 June, 2021 of approximately RMB283,794,000 and non-trade amounts due to related parties as of 30 June,2021 of approximately RMB1,359,493,000.

(8) This represents the settlement of other taxes payable as of 30 June,2021 of approximately RMB 7,905,000 upon completion of theReorganization.

(9) This represents the unsettled payables of RMB274,400,000 belonging to Excluded Business but should be transferred to thePredecessor Group. Due to legal obligation of the Existing Project Companies, such payables will be recognised in the statementof financial position of the Powerlong REIT upon the completion of Reorganisation. Since Powerlong Holdings has undertaken toindemnify Powerlong REIT for all the corresponding obligations, Powerlong REIT will recognized a receivable from PowerlongHoldings equivalent to that corresponding unsettled payables at the same time.

(10) On [●], 2021, Starlong (BVI) Second, as the borrower, [●], as the lender, entered into the facilities for a principal amount up tothe RMB[REDACTED]. The term of the facilities is 3 years from the first drawdown date.

(a) This represents the loan draw-down by Powerlong REIT under the term loan facili t ies of approximatelyRMB[REDACTED].

(b) This represents the upfront debt coordination fee for the loan drawn-down of approximately RMB[REDACTED].

(11) On [●] 2021, the REIT Manager (in its capacity as manager of Powerlong REIT) and the Trustee entered into the ReorganizationDeed with Powerlong Holdings (as seller), pursuant to which Powerlong Holdings has conditionally agreed to transfer all of theissued shares of Starlong (BVI) Second to the Trustee (in its capacity as trustee of Powerlong REIT) in exchange for the issuanceof [REDACTED] Units, which represents [REDACTED] of the issued units upon completion of the Reorganization, toPowerlong Holdings or its nominees. The adjustment represents the elimination of pre-acquisition reserves of the PredecessorGroup upon acquisition by Powerlong REIT under common control basis.

(12) Apart from as disclosed above, no other adjustments have been made to the Unaudited Pro Forma Financial Information to reflectany trading results or other transactions entered into by Starlong (BVI) Second or Powerlong REIT subsequent to 30 June 2021.



– II-4 –

B. LETTER FROM THE REPORTING ACCOUNTANTS ON UNAUDITED PRO FORMA FINANCIALINFORMATION

[REDACTED]



– II-5 –

[REDACTED]



– II-6 –

[REDACTED]



– II-7 –

A. LETTER FROM THE REIT MANAGER

The following is the text of the letter from the REIT Manager in relation to the forecast combined net profit of

Powerlong REIT for the period from the [REDACTED] to December 31, 2021 as set out in the section headed

“Profit Forecast for the Profit Forecast Period” in this Document.

[●] 2021

Securities and Futures Commission

Investment Products Division

54/F, One Island East

18 Westlands Road, Quarry Bay

Hong Kong

Dear Sirs,

Confirmation regarding the profit forecast contained in the document

We, Powerlong REIT Management Limited (the “REIT Manager”), in our capacity as the manager of

Powerlong Commercial Real Estate Investment Trust (“Powerlong REIT”), hereby confirm that:

(a) we have exercised due care and consideration in compilation of the profit forecast of Powerlong REIT

for the period from the [REDACTED] to December 31, 2021 (the “Profit Forecast”) as set out in the

section headed “Profit Forecast for the Profit Forecast Period”;

(b) we have satisfied ourselves that the Profit Forecast has been stated after due and careful enquiry; and

(c) we consider that the bases, accounting policies and assumptions used in the Profit Forecast to be

appropriate and reasonable.

We are satisfied that all material facts which have come to our attention have been taken into account in

arriving at the Profit Forecast and are satisfied that the Profit Forecast has been properly considered and

documented.

Yours faithfully,

Powerlong REIT Management Limited(in its capacity as manager of Powerlong Commercial Real Estate Investment Trust)


APPENDIX III LETTERS IN RELATION TO THE PROFIT FORECAST

– III-1 –

B. LETTER FROM PRICEWATERHOUSECOOPERS

The following is the text of a letter received from PricewaterhouseCoopers, Certified Public Accountants,

Hong Kong, for the purpose of incorporation in this document.

[Letterhead of PricewaterhouseCoopers] [DRAFT]

The Board of Directors

Powerlong REIT Management Limited (the “REIT Manager”, as the Manager of Powerlong Commercial Real

Estate Investment Trust)

Room 2A, 14/F, Chun Wo Commercial Centre

23-29 Wing Wo Street

Central

Hong Kong

CLSA Capital Markets Limited

18/F, One Pacific Place

88 Queensway

Hong Kong

BOCI Asia Limited

26/F, Bank of China Tower

1 Garden Road

Central

Hong Kong

[●] 2021

Dear Sirs,

Powerlong Commercial Real Estate Investment Trust (“Powerlong REIT”)

PROFIT FORECAST FOR THE PERIOD FROM [●] 2021 (THE “[REDACTED]”) TO 31 DECEMBER2021

We refer to the forecast of the consolidated profit of Powerlong REIT for the period from the [REDACTED]

to 31 December 2021 (the “Profit Forecast”) set forth in the section headed “Profit Forecast for the Profit Forecast

Period” in the document of Powerlong REIT dated [●] 2021 (the “Document”).

DIRECTORS’ RESPONSIBILITIES

The Profit Forecast has been prepared by the directors of Powerlong REIT Management Limited (the “REITManager”) based on a forecast of the consolidated results of Powerlong REIT and its controlled entities (the

“Power REIT Group”) for a period from the [REDACTED] to 31 December 2021.

The directors of the REIT Manager are solely responsible for the Profit Forecast.



– III-2 –

OUR INDEPENDENCE AND QUALITY CONTROL

We have complied with the independence and other ethical requirements of the Code of Ethics for

Professional Accountants issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”),

which is founded on fundamental principles of integrity, objectivity, professional competence and due care,

confidentiality and professional behaviour.

Our firm applies Hong Kong Standard on Quality Control 1 issued by the HKICPA and accordingly maintains

a comprehensive system of quality control including documented policies and procedures regarding compliance

with ethical requirements, professional standards and applicable legal and regulatory requirements.

REPORTING ACCOUNTANT’S RESPONSIBILITIES

Our responsibility is to express an opinion on the accounting policies and calculations of the Profit Forecast

based on our procedures.

We conducted our engagement in accordance with Hong Kong Standard on Investment Circular Reporting

Engagements 500 “Reporting on Profit Forecasts, Statements of Sufficiency of Working Capital and Statements of

Indebtedness” and with reference to Hong Kong Standard on Assurance Engagements 3000 (Revised) “Assurance

Engagements Other Than Audits or Reviews of Historical Financial Information” issued by the HKICPA. Those

standards require that we plan and perform our work to obtain reasonable assurance as to whether, so far as the

accounting policies and calculations are concerned, the directors of the REIT Manager have properly compiled the

Profit Forecast in accordance with the bases and assumptions adopted by the directors of the REIT Manager and as

to whether the Profit Forecast is presented on a basis consistent in all material respects with the accounting

policies expected to be adopted by the Powerlong REIT Group as set out in the sub-section headed “Profit Forecast

for the Profit Forecast Period—Other Assumptions” on pages 147 to 148 of the Document. Our work is

substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing issued by

the HKICPA. Accordingly, we do not express an audit opinion.

OPINION

In our opinion, so far as the accounting policies and calculations are concerned, the Profit Forecast has been

properly compiled in accordance with the bases and assumptions adopted by the directors of the REIT Manager as

set out in the sub-section headed “Profit Forecast for the Profit Forecast Period—Bases and Assumptions” on

pages 142 to 147 of the Document and is presented on a basis consistent in all material respects with the

accounting policies the REIT Manager expects to be adopted by the Powerlong REIT Group as set out in the

sub-section headed “Profit Forecast for the Profit Forecast Period—Other Assumptions” on pages 147 to 148 of the

Document.



– III-3 –

OTHER MATTER

[We draw attention to the sub-section headed “Profit Forecast for the Profit Forecast Period—Bases and

Assumptions” on pages 142 to 147 of the Document which sets out the assumptions made by the directors of the

REIT Manager regarding the fair value of the Powerlong REIT Group’s investment properties as at 31 December

2021. In preparing the Profit Forecast, the directors of the REIT Manager have assumed that the fair value of the

investment properties as at the [REDACTED] and 31 December 2021 will be the same as the appraised value as at

[30 June] 2021, hence, the Profit Forecast does not consider any change in fair value of investment properties. The

actual increase or decrease in the fair value of the Powerlong REIT Group’s investment properties may be different

from the amount estimated or forecasted. Any difference between the actual increase or decrease in fair value of

the Powerlong REIT Group’s investment properties during the period from the [REDACTED] to 31 December

2021 when compared to the amount as estimated by the directors of the REIT Manager would have the effect of

increasing or decreasing the consolidated profit of the Powerlong REIT Group for the period from the

[REDACTED] to 31 December 2021 attributable to unitholders of Powerlong REIT. Our opinion is not qualified

in respect of this matter.]

Yours faithfully,

[PricewaterhouseCoopers]Certified Public Accountants

Hong Kong



– III-4 –

C. LETTER FROM SAVILLS VALUATION AND PROFESSIONAL SERVICES LIMITED

The following is the text of the letter prepared for the purpose of incorporation in this document receivedfrom Savills Valuation and Professional Services Limited, an independent valuer, in relation to the rental Incomeforecast of Powerlong Commercial Real Estate Investment Trust for the period from the [REDACTED] toDecember 31, 2021 as set out in the section headed “Profit Forecast for the Profit Forecast Period” in thisDocument.

Powerlong REIT Management Limited(in its capacity as the manager ofPowerlong Commercial Real Estate Investment Trust, the “REIT Manager”)Room 2A, 14/F, Chun Wo Commercial Centre23-29 Wing Wo StreetCentralHong Kong

DB Trustees (Hong Kong) Limited(in its capacity as the trustee ofPowerlong Commercial Real Estate Investment Trust, the “Trustee”)Level 60, International Commerce Centre1 Austin Road WestKowloonHong Kong


CLSA Capital Markets Limited18/F, One Pacific Place88 QueenswayHong Kong

[Date]

Dear Sirs,

We confirm that we have examined the rental income used in the calculations of the profit and distributionforecast of Powerlong Commercial Real Estate Investment Trust (“Powerlong REIT”) for the period from the[REDACTED] as defined in the Document in relation to the Proposed [REDACTED] (the “Document”) to 31December 2021 (the “Profit Forecast”) and the related assumptions adopted by the directors of the REIT Manageras required by Appendix F of the Code on Real Estate Investment Trusts and set out under the section headed



– III-5 –

“Profit Forecast for the Profit Forecast Period” in the Document and we confirm that such rental income forecast

for the shopping outlet of the properties has been compiled in accordance with the assumptions made and such

assumptions are reasonable.

The directors of Powerlong Commercial Real Estate Investment Trust are solely responsible for the Profit

Forecast.

Yours faithfully

For and on behalf of

Savills Valuation and Professional Services LimitedAnthony C.K. LauMRICS MHKIS RPS(GP)

Director



– III-6 –

D. REPORT OF JOINT LISTING AGENTS

The following is the text of the letter from CLSA Capital Markets Limited and BOCI Asia Limited, the JointListing Agents of Powerlong REIT, in relation to the forecast combined net profit of Powerlong REIT for the periodfrom the [REDACTED] to December 31, 2021 as set out in the section headed “Profit Forecast for the ProfitForecast Period” in this Document.

2021

The DirectorsPowerlong REIT Management Limited

Dear Sirs,

We refer to the forecast of the combined net profit of Powerlong Commercial Real Estate Investment Trust(“Powerlong REIT”) for the period from [●] being the anticipated date on which the units of Powerlong REIT arefirst [REDACTED] and from which [REDACTED] therein are permitted to take place on The Stock Exchange ofHong Kong Limited (the “[REDACTED]”), to December 31, 2021 (the “Profit Forecast”) as set out in the section“Profit Forecast for the Profit Forecast Period” in the document of Powerlong REIT dated [Date] (the “Document”). The Profit Forecast has been prepared on a forecast of the combined results of Powerlong REIT fromthe [REDACTED] to December 31, 2021.

We have discussed with you the bases and assumptions made by you as set out in the section headed “ProfitForecast for the Profit Forecast Period” in the Document upon which the Profit Forecast has been made. We havealso considered, and relied on:

1. the report dated [●] from PricewaterhouseCoopers confirming that so far as the accounting policies andcalculations are concerned, the Profit Forecast has been properly compiled in accordance with the basesand assumptions adopted by the directors of the REIT Manager and is presented on a basis consistent inall material respects with the accounting policies Powerlong REIT Management Limited (the “REITManager”) expects to be adopted by the Powerlong REIT and its subsidiaries; and

2. the report dated [●] from Savills Valuation and Professional Services Limited confirming that it hasexamined the rental income used in the calculations of the Profit Forecast and the related assumptionsadopted by the REIT Manager, and that such rental income forecast has been compiled in accordancewith the assumptions made and such assumptions are reasonable.

On the basis of the foregoing and on the basis of the accounting policies and calculations adopted by you andreviewed by PricewaterhouseCoopers and on the basis of the assumptions adopted by you and reviewed by SavillsValuation and Professional Services Limited, for the calculations of the Profit Forecast, we, as the joint listingagents of Powerlong REIT, are of the opinion that the Profit Forecast has been made after due and careful enquiry.You, as directors of the REIT Manager, are solely responsible for the Profit Forecast

Yours faithfully,

For and on behalf ofCLSA Capital Markets Limited

For and on behalf ofBOCI Asia Limited



– III-7 –

The following is the text of a letter, summary of values and valuation report prepared for the purpose of

incorporation in this Document received from Savills Valuation and Professional Services Limited, an independent

valuer, in connection with their opinion of values of the properties held by Powerlong REIT Group as at June 30,

2021.

Savills Valuation andProfessional Services Limited

Room 12081111 King’s Road

Taikoo Shing, Hong Kong

T: (852) 2801 6100F: (852) 2530 0756

EA Licence: C-023750savills.com


DB Trustees (Hong Kong) Limited(in its capacity as the trustee ofPowerlong Commercial Real Estate Investment Trust, the “Trustee”)Level 60, International Commerce Centre1 Austin Road WestKowloonHong Kong

CLSA Limited18/F, One Pacific Place88 QueenswayHong Kong


[Date]


APPENDIX IV VALUATION REPORT

– IV-1 –

Dear Sirs,

Re: VARIOUS UNITS OF THE FOLLOWING PROPERTIES (THE “PROPERTIES”) HELD BYPOWERLONG COMMERCIAL REAL ESTATE INVESTMENT TRUST (“POWERLONG REIT”)AND ITS SUBSIDIARIES (HEREINAFTER TOGETHER REFERRED TO AS “POWERLONG REITGROUP”) LOCATED IN THE PEOPLE’S REPUBLIC OF CHINA (THE “PRC”)

– Yancheng Powerlong Plaza– Xinxiang Powerlong Plaza– Suqian Powerlong Plaza– Shanghai Fengxian Powerlong Plaza– Qingdao Jiaozhou Powerlong Plaza– Hangzhou Lin’an Powerlong Plaza– Quanzhou Anxi Powerlong Plaza– Luoyang Powerlong Plaza

INSTRUCTIONS

In accordance with the instructions from the REIT Manager to value the properties held by Powerlong REITGroup situated in the People’s Republic of China (the “PRC”), we confirm that we have carried out inspections,made relevant enquiries and obtained such further information as we consider necessary for the purpose ofproviding you with our opinion of values of the properties as at June 30, 2021 (the “valuation date”) forincorporation in the Document.

BASIS OF VALUATION

Our valuation of each of the properties is our opinion of its market value which we would define as intendedto mean “the estimated amount for which an asset or liability should exchange on the valuation date between awilling buyer and a willing seller in an arm’s-length transaction after proper marketing and where the parties hadeach acted knowledgeably, prudently and without compulsion”.

Moreover, market value is understood as the value of an asset or liability estimated without regard to costs ofsale or purchase (or transaction) and without offset for any associated taxes or potential taxes.

Our valuation has been undertaken in accordance with the HKIS Valuation Standards 2020 of The Hong KongInstitute of Surveyors (“HKIS”), which incorporates the International Valuation Standards (“IVS”), and (whereapplicable) the relevant HKIS or jurisdictional supplement. We have also complied with the requirements set out inChapter 5 and Practice Note 12 of the Rules Governing the Listing of Securities on The Stock Exchange of HongKong Limited and Paragraph 6.8 of the Code on Real Estate Investment Trusts (“REIT Code”) published by TheSecurities and Futures Commission.

IDENTIFICATION AND STATUS OF THE VALUER

The subject valuation exercise is handled by Mr Anthony C.K. Lau, who is a Director of Savills Valuation andProfessional Services Limited (“SVPSL”) and a Member of HKIS (General Practice Division) with over 28 years’experience in valuation of properties in the PRC and has sufficient knowledge of the relevant market, the skills andunderstanding to handle the subject valuation exercise competently.

Prior to your instructions for us to provide this valuation services in respect of the properties, SVPSL hadbeen involved in valuation of the properties for accounting purpose in the last 12 months.

We are independent of Powerlong REIT Group, the REIT Manager and the Trustee. We are not aware of anyinstances which would give rise to potential conflict of interest from SVPSL or Mr Lau in the subject exercise. Weconfirm SVPSL and Mr Lau are in the position to provide objective and unbiased valuation for the properties.



– IV-2 –

VALUATION METHODOLOGY

In the course of our valuation, we have adopted the Income Capitalization Method which we have consideredas the most appropriate valuation method for assessing the market values of the properties due to theirincome-driven nature.

The Income Capitalization Method is a method of valuation whereby the existing rental incomes of alllettable units of a property are capitalized for the respective unexpired terms of contractual tenancies whilst vacantunits are assumed to be let at their respective market rents as at the valuation date. Upon expiry of the existingtenancies, each unit is assumed to be let at its market rent as at the valuation date, which is in turn capitalized forthe unexpired term of the land use rights under which the property is held. The summation of the capitalized valueof the term income for the leased portion, the capitalized value of the reversion income (i.e. market rental income)as appropriately deferred for the leased portion and the capitalized value for the vacant portion provides the marketvalue of the property.

According to the land grant agreement and its supplementary agreement, the shopping outlet of Property No.6 is restricted from being transferred in all or in part to other parties. However, none of the provisions of the landgrant agreement and its supplemental agreement restricts the transfer of the equity interest in Lin’an ProjectCompany. Under this corcumstance, the basis of market value is not applicable in valuing such portion. Therefore,for the REIT Manager’s internal management reference purpose, we have reported the investment value (i.e.non-market value basis) of the shopping outlet of this property in the report. According to the IVS, which the HKISValuation Standards follows, investment value is defined as “the value of an asset to the owner or a prospectiveowner for individual investment or operational objectives”. Investment value is an entity-specific basis of valuewhich reflects the benefit received by an entity from holding the asset (such as rental income) and therefore, doesnot necessarily involve a hypothetical exchange. It must be emphasized that investment value is not market value.

TITLE INVESTIGATION

We have been provided with copies of the title documents relating to the properties. However, we have notsearched the original documents to verify ownership or to ascertain the existence of any amendments which maynot appear on the copies provided to us. In the course of our valuation, we have relied on the information andadvice given by the REIT Manager and the legal opinion issued by the REIT Manager’s legal advisor, Zhong LunLaw Firm, regarding the title to the properties as at the latest practicable date.

SOURCE OF INFORMATION

We have relied to a considerable extent on the information and advice from the REIT Manager on suchmatters as planning approvals, statutory notices, easements, tenure, particulars of occupancy, tenancy details,completion dates, site and floor areas and all other relevant matters. Dimensions, measurements and areas includedin the valuation report are based on the information contained in the documents provided to us and are thereforeonly approximations. No on-site measurements have been taken. We have no reason to doubt the truth and accuracyof the information provided to us by the REIT Manager, which is material to our valuation. We are also advised bythe REIT Manager that no material facts have been omitted from the information supplied. We consider that wehave been provided with sufficient information to reach an informed view.

VALUATION ASSUMPTIONS

In valuing the properties in the PRC, unless otherwise stated, we have assumed that transferable land userights of the properties for their respective specific terms at nominal annual land use fees have been granted andthat any land grant premium payable have already been fully paid. Unless otherwise stated, we have also assumedthat the owners of the properties have good legal titles to the properties and have free and uninterrupted rights tooccupy, use, transfer, lease or assign the properties for the whole of the respective unexpired terms as granted.

No allowance has been made in our valuation for any charges, mortgages or amounts owing on any propertynor for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumedthat the properties are free from encumbrances, restrictions and outgoings of an onerous nature which could affecttheir values.



– IV-3 –

SITE INSPECTION

We have inspected the exterior and where possible, the interior of the properties. During the course of ourinspections, we did not note any serious defects. However, no structural survey has been made and we are thereforeunable to report that the properties are free from rot, infestation and any other defects. No tests were carried out onany of the services. The site inspections were carried out during the period between March 18, 2021 and March 29,2021 by the following valuers:

Property Valuer Date of Inspection

Yancheng Powerlong Plaza Ms Jill Kang (Assistant Valuer) March 25, 2021Xinxiang Powerlong Plaza Mr Yang Shi (Manager) March 22, 2021Suqian Powerlong Plaza Mr Yang Shi (Manager) March 18, 2021Shanghai Fengxian Powerlong Plaza Ms Audrey Xu (Assistant Valuer) March 29, 2021Qingdao Jiaozhou Powerlong Plaza Ms Vivi Zhang (Associate Director) March 29, 2021Hangzhou Lin’an Powerlong Plaza Ms Jill Kang (Assistant Valuer) March 18, 2021Quanzhou Anxi Powerlong Plaza Ms Audrey Xu (Assistant Valuer) March 24, 2021Luoyang Powerlong Plaza Mr Yang Shi (Manager) March 23, 2021

NOVEL CORONAVIRUS (COVID-19)

The outbreak of the Novel Coronavirus (COVID-19), declared by the World Health Organization as a ‘GlobalPandemic’ on the March 11, 2020, has impacted many aspects of daily life and the global economy – with somereal estate markets experiencing significantly lower levels of transactional activity and liquidity. It is expected thatproperty values will be very sensitive to the development of the pandemic and its impact on the economy. Theextents of impact on different sectors of the market are different and the time for marketing and negotiating sale ofa property will be longer than usual time.

Our valuations of the properties are valid only as at the valuation date. However, there will be less certaintyas to how long a valuation may sustain and property price may fluctuate rapidly and materially over a short periodof time. Any changes in market conditions and impacts on property values subsequent to the valuation date cannotbe taken into account. If any party intends to make reference to our valuations when entering into any transaction,he must beware of the high market volatility during this period and that property values may or may not havechanged since the valuation date. Given the unknown future impact that COVID-19 might have on the real estatemarket and the difficulty in differentiating between short term impacts and long-term structural changes, werecommend that you keep the valuations contained within this report under frequent review.

CURRENCY

Unless otherwise stated, all money amounts stated are in Renminbi (“RMB”).

We enclose herewith our summary of values and valuation report.

Yours faithfully,For and on behalf ofSavills Valuation and Professional Services LimitedAnthony C.K. LauMRICS MHKIS RPS(GP)Director

Note: Mr. Anthony C.K. Lau is a professional surveyor who has over 28 years’ experience in valuation of properties in the PRC.



– IV-4 –

SUMMARY OF VALUES

No. Property

Market value inexisting state as at

June 30, 2021

Interestattributable to

PowerlongREIT Group

Market valueattributable to

Powerlong REITGroup as at

June 30, 2021

(RMB) (RMB)

1. Various retail units andcar parking spaces ofYancheng Powerlong Plaza(鹽城寶龍廣場),No. 9 Renmin Middle Road,Tinghu District,Yancheng,Jiangsu Province,PRC

1,544,900,000 100% 1,544,900,000

2. Various retail units ofXinxiang Powerlong Plaza(新鄉寶龍廣場),Jinsui Avenue East Portion,Hongqi District,Xinxiang,Henan Province,PRC

901,100,000 100% 901,100,000

3. Various retail units andcar parking spaces ofSuqian Powerlong Plaza(宿遷寶龍廣場),No. 6 Xihu Road,Sucheng District,Suqian,Jiangsu Province,PRC

1,572,500,000 100% 1,572,500,000

4. Various retail units ofShanghai Fengxian Powerlong Plaza(上海奉賢寶龍廣場),No. 5639 Hangnan Highway,Fengxian District,Shanghai,PRC

981,000,000 100% 981,000,000

5. Various retail units ofQingdao Jiaozhou Powerlong Plaza(青島膠州寶龍廣場),No. 97 Fuzhou South Road,Jiaozhou,Shandong Province,PRC

721,700,000 100% 721,700,000



– IV-5 –

No. Property

Market value inexisting state as at

June 30, 2021

Interestattributable to

PowerlongREIT Group

Market valueattributable to

Powerlong REITGroup as at

June 30, 2021

(RMB) (RMB)

6. Various retail units andcar parking spaces ofHangzhou Lin’an Powerlong Plaza(杭州臨安寶龍廣場),Baihufan,Jinbei Road,Lin’an District,Hangzhou,Zhejiang Province,PRC

138,400,000* 100% 138,400,000*

7. Various retail units ofQuanzhou Anxi Powerlong Plaza(泉州安溪寶龍廣場),No. 2 Jianan Avenue,Chengxiang Town,Anxi County,Quanzhou,Fujian Province,PRC

900,000,000 100% 900,000,000

8. Various retail units ofLuoyang Powerlong Plaza(洛陽寶龍廣場),No. 219 Kaiyuan Avenue,Luolong District,Luoyang,Henan Province,PRC

684,000,000 100% 684,000,000

* The value as stated in the summary of value only represents the market value of the car parking spaces of Property No. 6. According to

the land grant agreement and its supplementary agreement, the shopping outlet of Property No. 6 is restricted from being transferred in

all or in part to other parties. However, none of the provisions of the land grant agreement and its supplemental agreement restricts the

transfer of the equity interest in Lin’an Project Company. Under this corcumstance, the basis of market value is not applicable in valuing

such portion. Therefore, for the REIT Manager’s internal management reference purpose, we have reported the investment value (i.e.

non-market value basis) of the shopping outlet of this property in the report. In this regard, we are of the opinion that the investment

value of the shopping outlet of Property No. 6 was RMB787,700,000 (Renminbi Seven Hundred Eighty Seven Million and Seven

Hundred Thousand) as at the valuation date.



– IV-6 –

VALUATION REPORT

No. Property Description and Tenure Particulars of Occupancy

Market value in existingstate as at

June 30, 2021

1. Various retailunits and car parkingspaces of YanchengPowerlong Plaza(鹽城寶龍廣場),No. 9 RenminMiddle Road,Tinghu District,Yancheng,Jiangsu Province,PRC

(中國江蘇省鹽城市亭湖區人民中路9號鹽城寶龍廣場之多個商舖及停車位)

Yancheng Powerlong Plaza (the“Development”) is a commercialdevelopment completed in 2011.

The Development is situated at thesouthwestern side of theintersection between RenminMiddle Road and Qingnian Road inTinghu District in Yancheng.Developments in the vicinity aredominated by various residentialbuildings. It takes about a15-minutes’ drive from theDevelopment to the city centre.

The property comprises variousretail units and car parking spacesof the Development with a totalgross floor area of approximately171,097.44 sq.m. with breakdownas follows:

As at the valuation date, portionsof shopping outlet of the propertywith a total gross floor area ofapproximately 122,546.59 sq.m.were subject to tenancies for thelatest term due to expire onOctober 19, 2035 with a totalmonthly rent of approximatelyRMB5,600,000.

The remaining portions of theproperty was vacant.

The car parking spaces were eitherlet on monthly or hourly basis.

RMB1,544,900,000(Renminbi

One BillionFive Hundred Forty

Four Million andNine Hundred Thousand)

(100% interestattributable to Powerlong

REIT Group:RMB1,544,900,000

(RenminbiOne Billion

Five Hundred FortyFour Million and

Nine Hundred Thousand)

Use

ApproximateGross

Floor Area(sq.m.)

Shopping Outlet 135,112.01

Non-civil DefenseCar Park

32,734.66(916 Units)

Ancillary Area 3,250.77

Total: 171,097.44

The land use rights of theDevelopment have been granted fora term expiring on September 30,2048 for wholesale and retail uses.

Notes:

1. Pursuant to a Real Estate Title Certificate – Su (2019) Yan Cheng Shi Bu Dong Chan Quan No. 0035636, the building ownership rights

of the shopping outlet of the property with a gross floor area of 135,112.01 sq.m. together with the corresponding land use rights with a

site area of 221,184.00 sq.m. have been granted to Yancheng Baolong Real Estate Development Co., Ltd. (鹽城寶龍置業發展有限公司)

(“Yancheng Project Company (PRC)”) for a term expiring on September 30, 2048 for wholesale and retail uses.



– IV-7 –

2. According to the area information provided by the REIT Manager, the gross floor areas of the property are set out as below:

Floor Usage Gross Floor Area

(sq.m.)

L1 Retail 32,924.89

L2 Retail 33,758.22

L3 Retail 34,171.00

L4 Retail 34,257.90

B1 Car Park 32,734.66

B1 Ancillary 3,250.77

Total: 171,097.44

3. Our valuation has been made on the following basis and analysis of the tenancy profile provided by the REIT Manager:

Occupancy Profile

TypeGross Floor

Area

% To TotalGross Floor

Area

(sq.m.)

Leased 122,546.59 90.70%

Vacant 12,565.42 9.30%

Total: 135,112.01 100.00%

Lease Expiry Profile

Expiry YearGross

Floor Area

% To TotalGross

Floor AreaMonthly

Rent

% To TotalMonthly

Rent

(sq.m.) (RMB)

2021 18,820.17 15.36% 1,434,403 25.47%

2022 11,742.76 9.58% 1,416,873 25.16%

2023 12,246.03 9.99% 984,150 17.48%

2024 12,597.49 10.28% 376,905 6.69%

Over 2024 67,140.14 54.79% 1,418,712 25.20%

Total: 122,546.59 100.00% 5,631,043 100.00%



– IV-8 –

Lease Duration Profile

Expiry YearGross

Floor Area

% To TotalGross

Floor AreaMonthly

Rent

% To TotalMonthly

Rent

(sq.m.) (RMB)

0 – 1 year 5,023.39 4.10% 767,807 13.64%

1 – 2 years 8,103.52 6.61% 1,096,657 19.48%

2 – 3 years 14,022.56 11.44% 1,343,636 23.86%

3 – 4 years 2,059.57 1.68% 196,843 3.50%

Over 4 years 93,337.55 76.17% 2,226,100 39.52%

Total: 122,546.59 100.00% 5,631,043 100.00%

4. In valuing the property, we have adopted the Income Capitalization Method. The key parameters used in the Income Capitalization

Method are summarized below:

UsageMonthly

Market Rent Term YieldReversion

Yield

(RMB/sq.m.or RMB/cps)

Retail 16.2 – 232.8 4.5% – 5% 5.5%

Car Parking Space 609 4%

5. We have been provided with a legal opinion on the title to the property issued by the REIT Manager’s PRC legal advisor, which contains,

inter alia, the following information:

i. the property is subject to a mortgage in favour of The Bank of China Co., Ltd. Nanjing Gulou Branch (中國銀行股份有限公司南京鼓樓支行) for a period from June 6, 2019 to June 5, 2029 at a mortgage amount of RMB550,000,000;

ii. Yancheng Project Company (PRC) is the exclusive legal owner of the property. In the event that the aforesaid mortgage has been

fully paid off, Yancheng Project Company (PRC) is entitled to occupy, use, transfer, lease out, mortgage or obtain profit from the

shopping outlet of the property;

iii. in respect of the underground car park of the property, Yancheng Project Company (PRC) is entitled to occupy, use or obtain profit

from this portion or transfer its right of use; and

iv. apart from its aforesaid mortgage, the property is free from any seizures, substantial litigations or other legal proceedings.

6. Market Overview:

Yancheng City Overview

Yancheng is a major coastal city of Jiangsu Province and one of the most vigorous commercial and industrial city to the north of the

Yangtze River Delta. It has a residential population of 6.7 million and a total area of 16,931 sq.km. in 2020, and is the largest city in

terms of area and the sixth most populous city in Jiangsu Province.

Yancheng plays a leading role in the integration of cities to the north of the Yantze River Delta to the YRD Urban Agglomeration, and is

one of the major cities in the development of Marine Economy Strategy (海洋經濟戰略) as advocated by the provincial government of

Jiangsu.



– IV-9 –

Yancheng Retail Property Market Overview

The development of retail property market in Yangcheng is relatively recent but has been rapid during the past few years. Whilst most of

the retail property projects are concentrated within the developed urban districts of Yandu (鹽都區) and Tinghu (亭湖區 ), major retail

submarkets have spread from catchments along Jianjun Road (建軍路) to other parts of the city proper of Yancheng, which include the

South City (城南) submarket, North City (城北) submarket, West City (城西) submarket and East City (城東) submarket, with

development led by new signature retail projects completed and operated in 2020.

Supply and Demand

As at the end of 2020, total shopping mall stock in Yancheng have accumulated to approximately 3 million sq. m., most of which were

completed and operated after 2015. Pipeline supply for the next three years up to 2023 is estimated to reach approximately 630,000

sq.m. The majority of these retail projects are located in urban districts such as Yandu, Tinghu and Dafeng (大豐區).



– IV-10 –



June 30, 2021

2. Various retailunits of XinxiangPowerlong Plaza(新鄉寶龍廣場),Jinsui AvenueEast Portion,Hongqi District,Xinxiang,Henan Province,PRC

(中國河南省新鄉市紅旗區金穗大道東段新鄉寶龍廣場之多個商舖)

Xinxiang Powerlong Plaza (the“Development”) is a commercialdevelopment completed in 2012.

The Development is situated at thesoutheastern side of the intersectionbetween Jinsui Avenue East Portionand Xinyi Road in Hongqi Districtin Xinxiang. Developments in thevicinity are dominated by variousresidential and commercialbuildings. It takes about a20-minutes’ drive from theDevelopment to the city centre.

The property comprises variousretail units of the Development witha total gross floor area ofapproximately 84,288.31 sq.m.

The land use rights of theDevelopment have been granted fora term expiring on January 7, 2048for commercial use.

As at the valuation date, the wholeshopping outlet of the property wassubject to tenancies for the latestterm due to expire on December19, 2035 with a total monthly rentof approximately RMB4,400,000.

RMB901,100,000(Renminbi

Nine HundredOne Million and

One Hundred Thousand)

(100% interestattributable to the

Powerlong REIT Group:RMB901,100,000

(RenminbiNine Hundred

One Million andOne Hundred Thousand)

Notes:

1. Pursuant to 265 Real Estate Title Certificates, the building ownership rights of the shopping outlet of the property with a total gross floor

area of 84,288.31 sq.m. have been granted to Xinxiang Longqian Enterprise Management Co., Ltd. (新鄉龍潛企業管理有限公司)

(“Xinxiang Project Company (PRC)”) for a term expiring on January 7, 2048 for commercial use.


Floor Usage Gross Floor Area

(sq.m.)

L1 Retail 23,304.10

L2 Retail 29,307.28

L3 Retail 30,516.71

L4 Retail 1,160.22

Total: 84,288.31



– IV-11 –


Occupancy Profile

TypeGross Floor

Area


Area

(sq.m.)

Leased 84,288.31 100.00%

Vacant – –

Total: 84,288.31 100.00%


Expiry YearGross

Floor Area

% To TotalGross

Floor AreaMonthly

Rent

% To TotalMonthly

Rent

(sq.m.) (RMB)

2021 12,824.33 15.21% 1,544,989 35.20%

2022 10,068.74 11.95% 1,083,633 24.69%

2023 2,695.57 3.20% 309,419 7.05%

2024 3,725.36 4.42% 352,671 8.04%

Over 2024 54,974.31 65.22% 1,098,340 25.02%

Total: 84,288.31 100.00% 4,389,052 100.00%


Expiry YearGross

Floor Area

% To TotalGross

Floor AreaMonthly

Rent

% To TotalMonthly

Rent

(sq.m.) (RMB)

0 – 1 year 5,702.40 6.77% 775,471 17.67%

1 – 2 years 5,256.65 6.24% 747,648 17.03%

2 – 3 years 13,880.23 16.47% 1,481,668 33.76%

3 – 4 years 186.78 0.22% 32,887 0.75%

Over 4 years 59,262.25 70.30% 1,351,378 30.79%

Total: 84,288.31 100.00% 4,389.052 100.00%



UsageMonthly


Yield

(RMB/sq.m.)

Retail 12.6 – 272.3 4% – 4.5% 5%



– IV-12 –



i. Xinxiang Project Company (PRC) is the exclusive legal owner of the property and is entitled to occupy, use, transfer, lease out,

mortgage or obtain profit from the shopping outlet of the property; and

ii. the property is free from any seizures, substantial litigations or other legal proceedings.

6. Market Overview:

Xinxiang City Overview

Xinxiang is an inland city located in the northern part of Henan Province, situated next to Zhenghzou and Kaifeng and forms part of the

Central China Urban Agglomeration (中原城市群). The city has a resident population of approximately 6.3 million as at the end of 2020,

and its economic development enjoyed a sustainable growth benefited from the rapid development of nearby Zhengzhou, the capital of

Henan Province. The nominal GDP of Xinxiang increased from RMB200.7 billion in 2015 to RMB301.5 billion in 2020, representing a

CAGR of 8.5%.

Xinxiang Retail Property Market Overview

Major retail catchments in Xinxiang include the Pingyuan Road precinct (平原路) in Hongqi District, with Xinxiang Powerlong Plaza as

the landmark shopping mall in the precinct, and the emerging new catchment in Hongli Avenue (宏力大道), Muye District (牧野區)

where the Xinxiang Wanda Square was built and operated since 2017.

Supply and Demand

Total shopping mall stock in Xinxiang amounted to approximately 850,000 sq.m. as at the end of 2020. Pipeline supply up to 2022

include a total of 5 retail projects with a combined GFA of approximately 370,000 sq.m., with notable new shopping mall project

developed by the Wanfujing Group Co., Ltd., the first of which invested by the mainland retail operator in Xinxiang.



– IV-13 –



June 30, 2021

3. Various retail units andcar parking spaces ofSuqian Powerlong Plaza(宿遷寶龍廣場),No. 6 Xihu Road,Sucheng District,Suqian,Jiangsu Province,PRC

(中國江蘇省宿遷市宿城區西湖路6號宿遷寶龍廣場之多個商舖及停車位)

Suqian Powerlong Plaza (the“Development”) is a commercialdevelopment completed in 2011.

The Development is situated at thesouthwestern side of theintersection between Xihu Road andQingnian Road in Sucheng Districtin Suqian. Developments in thevicinity are dominated by variousresidential and commercialbuildings. It takes about a15-minutes’ drive from theDevelopment to the city centre.

The property comprises variousretail units and car parking spacesof the Development with a totalgross floor area of approximately150,660.15 sq.m. with breakdownas follows:

As at the valuation date, portionsof shopping outlet of the propertywith a total gross floor area ofapproximately 118,232.53 sq.m.were subject to tenancies for thelatest term due to expire onSeptember 20, 2034 with a totalmonthly rent of approximatelyRMB6,800,000.



RMB1,572,500,000(Renminbi

One BillionFive Hundred Seventy

Two Million andFive Hundred Thousand)


Powerlong REIT Group:RMB1,572,500,000

(RenminbiOne Billion

Five Hundred SeventyTwo Million and

Five Hundred Thousand)

Use

ApproximateGross

Floor Area(sq.m.)



30,014.71(680 Units)

Total: 150,660.15

The land use rights of theDevelopment have been granted fora term expiring on November 27,2049 for commercial use.

Notes:

1. Pursuant to 72 Real Estate Title Certificates, the building ownership rights of the property with a total gross floor area of 150,660.15

sq.m. have been granted to Suqian Baolong Real Estate Development Co., Ltd. (宿遷寶龍置業發展有限公司) (“Suqian Project

Company (PRC)”) for a term expiring on November 27, 2049 for commercial use.



– IV-14 –


Floor UsageGross Floor

Area

(sq.m.)

L1 Retail 29,631.20

L2 Retail 29,919.74

L3 Retail 30,050.95

L4 Retail 31,043.55

B1 Car Park 30,014.71

Total: 150,660.15


Occupancy Profile

TypeGross Floor

Area


Area

(sq.m.)

Leased 118,232.53 98.00%

Vacant 2,412.91 2.00%

Total: 120,645.44 100.00%


Expiry YearGross

Floor Area

% To TotalGross

Floor AreaMonthly

Rent

% To TotalMonthly

Rent

(sq.m.) (RMB)

2021 15,375.06 13.00% 1,616,719 23.87%

2022 23,477.20 19.86% 1,968,743 29.07%

2023 7,966.86 6.74% 612,904 9.05%

2024 2,433.01 2.06% 184,449 2.72%

Over 2024 68,980.40 58.34% 2,388,922 35.29%

Total: 118,232.53 100.0% 6,771,737 100.00%



– IV-15 –


Expiry YearGross

Floor Area

% To TotalGross

Floor AreaMonthly

Rent

% To TotalMonthly

Rent

(sq.m.) (RMB)

0 – 1 year 13,820.30 11.69% 732,927 10.82%

1 – 2 years 12,531.48 10.60% 1,710,326 25.26%

2 – 3 years 12,060.32 10.20% 1,356,228 20.03%

3 – 4 years 2,241.20 1.90% 184,205 2.72%

Over 4 years 77,579.23 65.61% 2,788,051 41.17%

Total: 118,232.53 100.00% 6,771,737 100.00%



UsageMonthly


Yield


Retail 24.8 – 232.6 4.5% – 5% 5.5%

Car Parking Space 498 4.5%



i. the property is subject to a mortgage in favour of the Bank of China Co., Ltd. Suqian Branch (中國銀行股份有限公司宿遷分行)

for a period from April 24, 2020 to April 24, 2031 at a mortgage amount of RMB952,410,000;

ii. Suqian Project Company (PRC) is the exclusive legal owner of the property. In the event that the aforesaid mortgage has been fully

paid off, Suqian Project Company (PRC) is entitled to occupy, use, transfer, lease out, mortgage or obtain profit from the property;

and

iii. apart from its aforesaid mortgage, the property is free from any seizures, substantial litigations or other legal proceedings.

6. Market Overview:

Suqian City Overview

Suqian is a prefecture-level city located in northern Jiangsu Province with a total land area of 8,555 sq.km. and a resident population of

approximately 5.0 million at the end of 2020. Industry bases of the city comprise food and beverage processing, textile and clothing, new

materials, mechanical and electrical equipment industries. Its nominal GDP increased at a steady pace from RMB212.6 billion in 2015

to RMB326.2 billion in 2020, representing a CAGR of 8.9%. Per capita disposable income of urban households increased in tandem with

economic development at a CAGR of 7.9% to RMB32,015 during the same period. In addition, total retail sales performed strongly at a

CAGR of 15.0% from RMB62.7 billion to RMB125.8 billion between 2015 and 2020.



– IV-16 –

Suqian Retail Property Market Overview

The Suqian retail property market is developed in retail catchments along urban districts of Sucheng District (宿城區) and Suyu District

(宿豫區). Retail developments have been spread outward towards other suburban areas such as Sihong County (泗洪縣), Siyang County

(泗陽縣) and Shuyang County (沭陽縣) as the provincial government of Jiangsu has put efforts in the development of rural-urban

agglomeration on a county-level basis in northern Jiangsu. It is expected that the government-led planning policy will attract additional

investments from real estate developers into these suburb areas in the 14th FYP.

Supply and Demand

Shopping mall stock in Suqian accumulated to approximately 1.8 million sq.m. as at the end of 2020. Supply in the pipeline up to 2022

is expected to remain stable with at least 5 projects with a combined GFA of approximately 440,000 sq.m. are scheduled for completion.

The majority of these shopping mall projects will be located in Sihong, Siyang and Shuyang County.



– IV-17 –



June 30, 2021

4. Various retail units ofShanghai FengxianPowerlong Plaza(上海奉賢寶龍廣場),No. 5639 HangnanHighway,Fengxian District,Shanghai,PRC

(中國上海市奉賢區航南公路5639號上海奉賢寶龍廣場之多個商舖)

Shanghai Fengxian Powerlong Plaza(the “Development”) is acommercial development completedin 2015.

The Development is situated at thesouthwestern side of theintersection between HangnanHighway and Nanqiao HuanchengEast Road in Fengxian District inShanghai. Developments in thevicinity are dominated by variousresidential buildings. It takes abouta 70-minutes’ drive from theDevelopment to the city centre.


The land use rights of theDevelopment have been granted fora term expiring on December 18,2051 for commercial use.

As at the valuation date, the wholeshopping outlet of the property wassubject to tenancies for the latestterm due to expire on February 28,2031 with a total monthly rent ofapproximately RMB3,700,000.


Nine Hundred andEighty One Million)



(RenminbiNine Hundred and

Eighty One Million)

Notes:

1. Pursuant to a Real Estate Title Certificate – Hu (2021) Feng Zi Bu Dong Chan Quan No. 024059, the building ownership rights of the

property with a gross floor area of 40,688.93 sq.m. together with the corresponding land use rights with a site area of 40,687.50 sq.m.

have been granted to Shanghai Xiantong Enterprise Development Co., Ltd. (上海賢通企業發展有限公司) (“Fengxian Project

Company (PRC)”) for a term expiring on December 18, 2051 for commercial use.



Area

(sq.m.)

L1 Retail 10,182.61

L2 Retail 9,673.39

L3 Retail 11,520.94

L4 Retail 9,311.99

Total: 40,688.93



– IV-18 –


Occupancy Profile

TypeGross Floor

Area


Area

(sq.m.)

Leased 40,688.93 100.00%

Vacant – –

Total: 40,688.93 100.00%


Expiry YearGross

Floor Area

% To TotalGross

Floor AreaMonthly

Rent

% To TotalMonthly

Rent

(sq.m.) (RMB)

2021 6,934.78 17.04% 931,687 25.19%

2022 4,518.49 11.10% 673,309 18.20%

2023 5,822.49 14.31% 622,516 16.83%

2024 2,277.99 5.60% 193,211 5.22%

Over 2024 21,135.18 51.95% 1,278,333 34.56%

Total: 40,688.93 100.00% 3,699,056 100.00%


Expiry YearGross

Floor Area

% To TotalGross

Floor AreaMonthly

Rent

% To TotalMonthly

Rent

(sq.m.) (RMB)

0 – 1 year 2,933.35 7.21% 415,948 11.24%

1 – 2 years 2,859.47 7.03% 473,776 12.81%

2 – 3 years 7,403.14 18.19% 1,054,880 28.52%

3 – 4 years 1,885.65 4.63% 213,486 5.77%

Over 4 years 25,607.32 62.94% 1,540,966 41.66%

Total: 40,688.93 100.00% 3,699,056 100.00%



UsageMonthly


Yield

(RMB/sq.m.)

Retail 45.6 – 324.6 5% – 5.5% 6%



– IV-19 –



i. the property is subject to a mortgage in favour of Ping An Bank Co., Ltd. Shanghai Branch (平安銀行股份有限公司上海分行) for

a period from July 22, 2020 to July 21, 2030 at a mortgage amount of RMB450,000,000;

ii. Fengxian Project Company (PRC) is the exclusive legal owner of the property. In the event that the aforesaid mortgage has been

fully paid off, Fengxian Project Company (PRC) is entitled to occupy, use, transfer, lease out, mortgage or obtain profit from the

property; and


6. Market Overview:

Shanghai City Overview

Shanghai is one of the four municipalities directly controlled by the Chinese government and is the largest economic and commercial

hub of China in terms of total GDP. It is an international trade centre and financial hub and has been ranked among the top 3 global

financial hubs, following New York and London, according to the Global Financial Centres Index in 2021. By market capitalization, the

Shanghai Stock Exchange is the 4th largest for stocks in the world. In addition, the city is home to the world’s largest container port by

container throughput for 11 consecutive years.

As part of the 14th Five Year Plan, Shanghai has identified five suburban areas namely Jiading, Qingpu, Songjiang, Fengxian and Nanhui

as the new impetus driving the city’s continuous growth, with goals of population growth in these emerging new towns to reach 3.6

million by the end of 2025.

Shanghai Retail Property Market Overview

Shanghai’s retail property market can be divided into three segments: prime, secondary and decentralised retail markets. The prime retail

market includes Little Lujiazui, Nanjing Road (West), Nanjing Road (East), Huaihai Road (Middle) and Xujiahui, where traffic is the

heaviest with a high concentration of mid- to high-end shopping malls. The secondary retail market is developed around the prime

market but within the Inner-Ring Road, and includes Zhongshan Park, Daning, Sichuan Road (North), North Bund, Zhuyuan and Huamu.

With continued urbanisation and improved connectivity through rapid infrastructure development, this has led to the emergence and

popularity of a number of decentralised retail markets such as HTH Core and Xinzhuang which cater to the shopping needs of local

communities.

Supply and Demand

As at the end of 2020, the Shanghai shopping mall stock within the Outer Ring Express accumulated to approximately 13.8 million

sq.m., whereas pipeline supply for 2021 is expected to reach approximately 1.6 million sq.m. Citywide shopping mall vacancy rate

continued a decreasing trend since 2Q 2020, as the spread of COVID-19 has by and large kept under control with effective containing

measures and consumer confidence further regained in Shanghai. Vacancy rates in prime and non-prime retail area dropped to 7.6% and

9.6%, respectively, in 2Q 2021.



– IV-20 –



June 30, 2021

5. Various retail units ofQingdao JiaozhouPowerlong Plaza(青島膠州寶龍廣場),No. 97 FuzhouSouth Road,Jiaozhou,Shandong Province,PRC

(中國山東省膠州市福州南路97號青島膠州寶龍廣場之多個商舖)

Qingdao Jiaozhou Powerlong Plaza(the “Development”) is acommercial development completedin 2015.

The Development is situated at thenortheastern side of the intersectionbetween Fuzhou South Road andYangzhou East Road in Jiaozhou.Developments in the vicinity aredominated by various residentialbuildings. It takes about a5-minutes’ drive from theDevelopment to the city centre.

The property comprises variousretail units of the Development witha total gross floor area ofapproximately 76,056.81 sq.m. withbreakdown as follows:

As at the valuation date, portionsof shopping outlet of the propertywith a total gross floor area ofapproximately 74,003.28 sq.m.were subject to tenancies for thelatest term due to expire onSeptember 30, 2035 with a totalmonthly rent of approximatelyRMB2,400,000.



Seven Hundred TwentyOne Million and

Seven HundredThousand)



(RenminbiSeven Hundred Twenty

One Million andSeven Hundred

Thousand)

Use

ApproximateGross

Floor Area(sq.m.)


Ancillary Area 1,392.89

Total: 76,056.81

The land use rights of theDevelopment have been granted fora term expiring on June 17, 2053for commercial use.

Notes:

1. Pursuant to 12 Real Estate Title Certificates – Lu (2016) Jiao Zhou Shi Bu Dong Chan Quan Nos. 0007966 to 0007977, the building

ownership rights of the shopping outlet of the property with a total gross floor area of 74,663.92 sq.m. have been granted to Qingdao

Baolong Yingju Land Development Co., Ltd. (青島寶龍英聚置地發展有限公司) (“Jiaozhou Project Company (PRC)”) for a term

expiring on June 17, 2053 for commercial use.



– IV-21 –



Area

(sq.m.)

L1 Retail 21,746.86

L2 Retail 20,699.31

L3 Retail 19,272.50

L4 Retail 12,945.25

L3 Ancillary 1,392.89

Total: 76,056.81


Occupancy Profile

TypeGross Floor

Area


Area

(sq.m.)

Leased 74,003.28 97.30%

Vacant 2,053.53 2.70%

Total: 76,056.81 100.00%


Expiry YearGross

Floor Area

% To TotalGross

Floor AreaMonthly

Rent

% To TotalMonthly

Rent

(sq.m.) (RMB)

2021 5,942.77 8.03% 318,247 13.13%

2022 7,577.65 10.24% 417,690 17.23%

2023 18,850.53 25.47% 764,961 31.56%

2024 7,569.02 10.23% 218,606 9.02%

Over 2024 34,063.31 46.03% 704,298 29.06%

Total: 74,003.28 100.00% 2,423,802 100.00%



– IV-22 –


Expiry YearGross

Floor Area

% To TotalGross

Floor AreaMonthly

Rent

% To TotalMonthly

Rent

(sq.m.) (RMB)

0 – 1 year 3,778.49 5.11% 278,260 11.48%

1 – 2 years 7,304.21 9.87% 483,811 19.96%

2 – 3 years 12,129.17 16.39% 435,795 17.98%

3 – 4 years 2,160.17 2.92% 64,894 2.68%

Over 4 years 48,631.24 65.71% 1,161,042 47.90%

Total: 74,003.28 100.00% 2,423,802 100.00%



UsageMonthly


Yield

(RMB/sq.m.)

Retail 19.1–156.8 4%–4.5% 5%



i. Jiaozhou Project Company (PRC) is the exclusive legal owner of the property and is entitled to occupy, use, transfer, lease out,

mortgage or obtain profit from the shopping outlet of the property; and


6. Market Overview:

Qingdao City Overview

Qingdao is one of the first 14 coastal cities in China opened to foreign investment in 1984 and is the largest city of Shandong Province

in terms of economic output. It lies in the south of Shandong Peninsula while looks out to the Yellow Sea. It faces the Republic of Korea

and Japan across the sea in the east; and is in the middle of Beijing and Shanghai. It is a major trade port and regional financial hub in

northeast China, a tourist city renowned for sailing and yacht race, and a major industrial base most well-known for its production of

high-speed trains, home appliances and brewery. It covered an area of 11,293.36 sq.km. and had a resident population of 10.1 million in

2020.

Qingdao Retail Property Market Overview

Major retail submarkets in Qingdao are clustered around the Shinan (市南區) and Shibei (市北區) District, with the Xianggang Zhonglu

(香港中路), CBD and Taidong (台東) submarket being the prime retail area and the most established market segments. The Laoshan (嶗山) submarket and Licun (李村) submarket are highly developed retail precincts targeting community residents and shoppers. The

Xinduxin (新都心) submarket, situated in Shibei District, is the new and emerging retail area with heavy policy support by the district

government. In recent years commercial facilities in Qingdao’s west and north shores have gradually improved, attracting many brands

and developers, and these areas are expected to form future new retail hubs.



– IV-23 –

Supply and Demand

Total retail property stock reached approximately 2.6 million sq.m. as at the end of 2020. The majority of which were situated within the

seven major submarkets while some new retail facilities were open and operated in districts such as the Huangdao District (West Coast

New Area) (黃島區（西海岸新區）) and other urban fringe areas.

Pipeline supply has been slowing down in the wake of the pandemic. A total of three new high-quality retail property projects with an

aggregate GFA of approximately 320,000 sq.m. is scheduled to put into market in 2021. Looking forward to 2024, it is expected that an

additional 800,000 sq.m. of retail space will be put into the Qingdao retail market.



– IV-24 –



June 30, 2021

6. Various retail units andcar parking spaces ofHangzhou Lin’anPowerlong Plaza(杭州臨安寶龍廣場),Baihufan,Jinbei Road,Lin’an District,Hangzhou,Zhejiang Province,PRC

(中國浙江省杭州市臨安區錦北街道白湖畈杭州臨安寶龍廣場之多個商舖及停車位)

Hangzhou Lin’an Powerlong Plaza(the “Development”) is acommercial development completedin 2019.

The Development is situated at thesouthwestern side of theintersection between Wusu Roadand Nonglin Avenue in Lin’anDistrict in Hangzhou. Developmentsin the vicinity are dominated byvarious residential buildings. Ittakes about a 75-minutes’ drivefrom the Development to the citycentre.

The property comprises variousretail units and car parking spacesof the Development with a totalgross floor area of approximately92,618.74 sq.m. with breakdown asfollows:

As at the valuation date, the wholeshopping outlet of the property wassubject to tenancies for the latestterm due to expire on November21, 2034 with a total monthly rentof approximately RMB3,200,000.



One Hundred ThirtyEight Million and

Four Hundred Thousand)


REIT Group:RMB138,400,000

(RenminbiOne Hundred Thirty

Eight Million andFour Hundred Thousand)

(see Notes 2)

Use ApproximateGross

Floor Area(sq.m.)



35,700.74(865 Units)

Ancillary Area 188.28

Total: 92,618.74

The land use rights of theDevelopment have been granted fora term expiring on February 27,2058 for commercial use.

Notes:

1. Pursuant to two Real Estate Title Certificates – Zhe (2021) Lin An Qu Bu Dong Chan Nos. 0023253 and 0030095, the building ownership

rights of the shopping outlet of the property with a total gross floor area of 56,729.72 sq.m. together with the corresponding land use

rights with a total site area of 25,487.62 sq.m. have been granted to Hangzhou Longyao Industrial Co., Ltd. (杭州龍耀實業有限公司)

(“Lin’an Project Company (PRC)”) for a term expiring on February 27, 2058 for commercial use.



– IV-25 –

2. According to the land grant agreement and its supplementary agreement, the shopping outlet of the property is restricted from being

transferred in all or in part to other parties. However, none of the provisions of the land grant agreement and its supplemental agreement

restricts the transfer of the equity interest in Lin’an Project Company. Under this corcumstance, the basis of market value is not

applicable in valuing such portion. Therefore, for the REIT Manager’s internal management reference purpose, we have reported the

investment value (i.e. non-market value basis) of the shopping outlet of the property in the report. According to the IVS, which the HKIS

Valuation Standards follows, investment value is defined as “the value of an asset to the owner or a prospective owner for individual

investment or operational objectives”. Investment value is an entity-specific basis of value which reflects the benefit received by an

entity from holding the asset (such as rental income) and therefore, does not necessarily involve a hypothetical exchange. Therefore, we

are of the opinion that the investment value of the shopping outlet of the property was RMB787,700,000 (Renminbi Seven Hundred

Eighty Seven Million and Seven Hundred Thousand) as at the valuation date.



Area

(sq.m.)

B1 Retail 16,058.36

L1 Retail 13,406.47

L2 Retail 12,488.22

L3 Retail 12,371.32

L4 Retail 2,405.35

B1 & B2 Car Park 35,700.74

L4 Ancillary 188.28

Total: 92,618.74


Occupancy Profile

TypeGross Floor

Area


Area

(sq.m.)

Leased 56,729.72 100.00%

Vacant – –

Total: 56,729.72 100.00%



– IV-26 –


Expiry YearGross

Floor Area

% To TotalGross

Floor AreaMonthly

Rent

% To TotalMonthly

Rent

(sq.m.) (RMB)

2021 9,531.98 16.80% 623,905 19.40%

2022 12,181.81 21.47% 979,911 30.47%

2023 4,362.46 7.69% 375,269 11.67%

2024 6,897.93 12.16% 372,849 11.59%

Over 2024 23,755.54 41.88% 864,193 26.87%

Total: 56,729.72 100.00% 3,216,127 100.00%


Expiry YearGross

Floor Area

% To TotalGross

Floor AreaMonthly

Rent

% To TotalMonthly

Rent

(sq.m.) (RMB)

0 – 1 year 2,405.35 4.24% – –

1 – 2 years 10,387.81 18.31% 962,656 29.93%

2 – 3 years 12,722.15 22.43% 976,924 30.38%

3 – 4 years 1,949.42 3.44% 121,057 3.76%

Over 4 years 29,264.99 51.58% 1,155,490 35.93%

Total: 56,729.72 100.00% 3,216,127 100.00%



UsageMonthly


Yield


Retail 46.3–160.4 4.5%–5% 5.5%

Car Parking Space 605 3%



i. Lin’an Project Company (PRC) has legally obtained the good title of the buildings and the corresponding land use rights of the

shopping outlet as mentioned in Note 1. However, according to the requirements from the land grant contract and real estate title

certificates, Lin’an Project Company (PRC) is unable to transfer the shopping outlet directly by means of property right;

ii. in respect of the underground car park of the property, Lin’an Project Company (PRC) is entitled to occupy, use or obtain profit

from this portion or transfer its right of use; and

iii. the property is free from any seizures, substantial litigations or other legal proceedings.



– IV-27 –

7. Market Overview:

Hangzhou City Overview

Hangzhou is the economic, cultural, science and educational centre of Zhejiang Province. Located in the southern wing of the Yangtze

River Delta, western tip of the Hangzhou Bay, it is a sub-provincial city by administration and forms a core in the Hangzhou

Metropolitan Area (杭州都市經濟圈), a regional planning initiative that integrates the city’s development with other north Zhejiang

cities including Huzhou, Shaoxing and Jiaxing. The overall competitiveness of Hangzhou Metropolitan Area ranked 4th amongst 18

metropolitan areas in China after Shanghai, Guangzhou and Beijing and its aggregate GDP accounted for approximately 47.7% of the

provincial GDP in 2020.

The economy of Hangzhou during the 13th Five Year Plan has been built on and driven by the “1+6” industrial structure to move the city

forward to a digitized economy. The “1+6” industrial structure, which comprises digitized economy sector and other major services and

manufacturing sectors, accounted for 73.6% of total economic output of Hangzhou in 2020.

Built on the fast growing high-technology industry and e-commerce, Hangzhou is quickly becoming home to fortune and wealth

accumulation. GDP per capita in 2020 is expected to reach RMB134,936 and remains the highest in Zhejiang province. Urban disposable

income per capita increased 3.9% YOY to RMB68,666 by the end of 2020.

Hangzhou Retail Property Market Overview

Supply and Demand

As at the end of 2020, the Hangzhou retail property stock accumulated to approximately 5.1 million sq.m. Retail properties in prime and

non-prime areas reached 1.37 million sq.m. and 2.75 million sq.m., respectively, accounting for approximately 27.0% and 54.2% of total

stock. Retail properties in suburban areas account for less than 20% of total retail property stock but are witnessing in increasing

numbers with prime quality and design.

Pipeline supply included a total of eight shopping mall projects with an aggregate area of approximately 1.2 million sq.m. scheduled for

completion within 2021. Most of these new shopping mall projects will be situated in emerging submarkets such as Future Sci-tech City

(杭州未來科技城) and Xiaoshan (蕭山).

The retail leasing market has been relatively stable during the pandemic with F&B sector being first to rebound and provides a strong

take-up in prime retail spaces. Overall vacancy rate across Hangzhou remained at approximately 11.9% during 1Q 2021.



– IV-28 –



June 30, 2021

7. Various retail units ofQuanzhou AnxiPowerlong Plaza(泉州安溪寶龍廣場),No. 2 Jianan Avenue,Chengxiang Town,Anxi County,Quanzhou,Fujian Province,PRC

(中國福建省泉州市安溪縣城廂鎮建安大道2號泉州安溪寶龍廣場之多個商舖)

Quanzhou Anxi Powerlong Plaza(the “Development”) is acommercial development completedin 2011.

The Development is situated at thenorthwestern side of theintersection between Yimin SouthRoad and Erhuan South Road inAnxi County in Quanzhou.Developments in the vicinity aredominated by various residentialand commercial buildings. It takesabout a 60-minutes’ drive from theDevelopment to the city centre.


The land use rights of theDevelopment have been granted fora term expiring on February 3, 2050for commercial use.

As at the valuation date, the wholeshopping outlet of the property wassubject to tenancies for the latestterm due to expire on December 6,2034 with a total monthly rent ofapproximately RMB3,500,000.


Nine Hundred Million)



(RenminbiNine Hundred Million)

Notes:

1. Pursuant to a Real Estate Title Certificate – An Guo Yong (2012) No. 0031002, the land use rights of a parcel of land of the property with

a site area of 30,017.68 sq.m. have been granted to Anxi Baolong Asset Management Co., Ltd. (安溪寶龍資產經營管理有限公司)

(“Anxi Project Company (PRC)”) for a term expiring on February 3, 2050 for commercial use.

2. Pursuant to a Real Estate Title Certificate – An Fang Quan Zheng Cheng Xiang Zhen Zi No. 00048620, the building ownership rights of

the property with a gross floor area of 55,488.93 sq.m. have been granted to Anxi Project Company (PRC) for commercial use.



Area

(sq.m.)

L1 Retail 17,694.80

L2 Retail 17,428.28

L3 Retail 17,413.80

L4 Retail 2,952.04

Total: 55,488.93



– IV-29 –


Occupancy Profile

TypeGross Floor

Area


Area

(sq.m.)

Leased 55,488.93 100.00%

Vacant – –

Total: 55,488.93 100.00%


Expiry YearGross

Floor Area

% To TotalGross

Floor AreaMonthly

Rent

% To TotalMonthly

Rent

(sq.m.) (RMB)

2021 4,315.92 7.78% 351,637 9.92%

2022 5,830.54 10.51% 1,319,509 37.21%

2023 3,445.92 6.21% 832,311 23.47%

2024 1,332.83 2.40% 184,112 5.19%

Over 2024 40,563.72 73.10% 858,159 24.21%

Total: 55,488.93 100.00% 3,545,728 100.00%


Expiry YearGross

Floor Area

% To TotalGross

Floor AreaMonthly

Rent

% To TotalMonthly

Rent

(sq.m.) (RMB)

0 – 1 year 540.88 0.97% 121,291 3.42%

1 – 2 years 5,809.68 10.47% 1,467,552 41.39%

2 – 3 years 3,212.08 5.79% 679,748 19.17%

3 – 4 years 1,226.76 2.21% 157,348 4.44%

Over 4 years 44,699.53 80.56% 1,119,789 31.58%

Total: 55,488.93 100.00% 3,545,728 100.00%



UsageMonthly


Yield

(RMB/sq.m.)

Retail 22–552.4 4.5%–5% 5.5%



– IV-30 –



i. the property is subject to a mortgage in favour of China Minsheng Bank Co., Ltd. Quanzhou Branch (中國民生銀行股份有限公司泉州分行) for a period from November 25, 2019 to November 25, 2032 at a mortgage amount of RMB368,000,000;

ii. Anxi Project Company (PRC) is the exclusive legal owner of the property. In the event that the aforesaid mortgage has been fully

paid off, Fengxian Project Company (PRC) is entitled to occupy, use, transfer, lease out, mortgage or obtain profit from the

property; and


7. Market Overview:

Quanzhou City Overview

Quanzhou is a prefecture-level port city located on the southeast coast of Fujian province. It has a land area of approximately 11,015

sq.km. and a resident population of 8.8 million as at the end of 2020.

Quanzhou is an important transportation hub in Fujian province. Quanzhou Port is the third-largest container port in Fujian Province,

and ranked 75 in the Lloyd’s List Top 100 Ports 2020 with an annual throughput of 2,580,000 teu in 2019.

Quanzhou has the largest GDP among nine cities of Fujian province for 20 consecutive years. GDP of Quanzhou increased from

RMB632.1 billion in 2015 to RMB1,015.9 billion in 2020, representing a CAGR of 10.0% and contributing 23.1% of total GDP for the

province. Its per capita disposable income of urban households had increased from RMB37,275 in 2014 to RMB50,968 in 2020,

representing a CAGR of approximately 6.5%.

Quanzhou Retail Property Market Overview

The development of Quanzhou retail property market can be dated back in the middle of 2000s when projects such as SM Mall and Tak

Fi Plaza were opened with critical success in Jinjiang (晉江市) City and Shishi (石獅市) City, respectively. As at the end of 2020, the

Quanzhou retail property market has been fairly developed with total retail property stock accumulated to approximately 2.9 million

sq.m., and retail projects concentrated in established and mature retail catchments in Licheng (鯉城區) and Fengze (豐澤區) District,

followed by the earliest developed retail areas in Jinjiang City and Shishi City, and more recently in Nanan City (南安市).

Supply and Demand

Shopping mall supply slowed down in 2020 due mainly to the pandemic after witnessing a massive supply of up to 1 million sq.m. of

retail space in 2017 and 2018. Pipeline supply in 2021 and 2022 is expected to remain steady, as at least 7 retail projects with an

aggregate area of approximately 440,000 sq.m. are scheduled for completion and put into market.



– IV-31 –



June 30, 2021

8. Various retailunits of LuoyangPowerlong Plaza(洛陽寶龍廣場),No. 219 KaiyuanAvenue,Luolong District,Luoyang,Henan Province,PRC

(中國河南省洛陽市洛龍區開元大道219號洛陽寶龍廣場之多個商舖)

Luoyang Powerlong Plaza (the“Development”) is a commercialdevelopment completed in 2011.

The Development is situated at thesoutheastern side of the intersectionbetween Kaiyuan Road andHouzaimen Road in LuolongDistrict in Luoyang. Developmentsin the vicinity are dominated byvarious residential and commercialbuildings. It takes about a20-minutes’ drive from theDevelopment to the city centre.


The land use rights of theDevelopment have been granted fora term expiring on February 1 ,2046 for commercial use.

As at the valuation date, portionsof shopping outlet of the propertywith a total gross floor area ofapproximately 64,714.28 sq.m.were subject to tenancies for thelatest term due to expire on June30, 2034 with a total monthly rentof approximately RMB2,900,000.



Six Hundred andEighty Four Million)



(RenminbiSix Hundred and

Eighty Four Million)

Notes:

1. Pursuant to a Real Estate Title Certificate – Yu (2021) Luo Yang Shi Bu Dong Chan Quan No. 0048059, the building ownership rights of

the property with a gross floor area of 69,735.22 sq.m. together with the corresponding land use rights with a site area of 20,145.90 sq.m.

have been granted to Luoyang Longqian Commercial Management Co., Ltd. (洛陽龍潛商業管理有限公司) (“Luoyang Project

Company (PRC)”) for a term expiring on February 1 , 2046 for commercial use.



Area

(sq.m.)

L1 Retail 20,275.66L2 Retail 24,637.28L3 Retail 24,822.28

Total: 69,735.22



– IV-32 –


Occupancy Profile

TypeGross Floor

Area


Area

(sq.m.)

Leased 64,714.28 92.80%Vacant 5,020.94 7.20%

Total: 69,735.22 100.00%


Expiry YearGross

Floor Area

% To TotalGross

Floor AreaMonthly

Rent

% To TotalMonthly

Rent

(sq.m.) (RMB)

2021 7,056.87 10.90% 875,542 30.18%2022 5,041.09 7.79% 521,814 17.99%2023 1,964.66 3.04% 104,882 3.62%2024 3,411.34 5.27% 222,277 7.66%Over 2024 47,240.32 73.00% 1,176,144 40.55%

Total: 64,714.28 100.00% 2,900,659 100.00%


Expiry YearGross

Floor Area

% To TotalGross

Floor AreaMonthly

Rent

% To TotalMonthly

Rent

(sq.m.) (RMB)

0 – 1 year 5,031.65 7.78% 764,935 26.37%1 – 2 years 6,426.24 9.93% 573,774 19.78%2 – 3 years 2,727.38 4.21% 222,498 7.67%3 – 4 years 413.42 0.64% 23,945 0.83%Over 4 years 50,115.59 77.44% 1,315,507 45.35%

Total: 64,714.28 100.00% 2,900,659 100.00%



UsageMonthly


Yield

(RMB/sq.m.)

Retail 19.8–192.1 5%–5.5% 6%



– IV-33 –

5. We have been provided with a legal opinion on the title to the property issued by the REIT Manager’s PRC legal advisor, which contains,inter alia, the following information:

i. Luoyang Project Company (PRC) is the exclusive legal owner of the property and is entitled to occupy, use, transfer, lease out,mortgage or obtain profit from the shopping outlet of the property; and


6. Market Overview:

Luoyang City Overview

Luoyang is a prefecture-level city located in the western part of Henan Province with a resident population of approximately 7.1 millionand a total land area of 15,200 sq.km. in 2020.

The city is an old industrial base in Central China and is designated as a National-level Demonstration Area of Industrial Transfer since2019. It is also a major transportation hub in central China and is the first non-provincial capital city in central and western Chinaapproved for operation of metro system.

Luoyang is the second-largest city in Henan Province in terms of total economic output. Its nominal GDP increased at a CAGR of 7.9%from RMB350.7 billion in 2015 to RMB512.8 billion in 2020. The municipal government of Luoyang has set up an objective ofeconomic growth to reach RMB800 billion by the end of the 14th FYP, and RMB1,000 billion by 2028, and to build up the city as themanufacturing base pillared on advanced manufacturing industries.

Luoyang Retail Property Market Overview

Major retail catchments in Luoyang are clustered around those in Luolong (洛龍區) District and Jianxi (澗西區) District, followed byother catchments in Xigong (西工區) District. With the opening of the Luoyang Metro Line 1 in March 2021 and the scheduled openingof Metro Line 1 by the end of 2021, it is expected that the pedestrian flow between Jianxi, Xigong and Luolong District will be highlyincreased and will benefit to the retail market in these areas.

Supply and Demand

Total shopping mall supply in Luoyang have accumulated to approximately 1.1 million sq.m. in 2020. Pipeline supply for the next twoyears is expected to comprise a total of seven projects with an aggregate area of approximately 480,000 sq.m. and diverse locations fromthose in the mature retail catchments to suburban counties and areas such as Luoning County (洛寧縣) and Yanshi City (偃師市), allserving local community needs.



– IV-34 –

MARKET RESEARCH REPORT

IN RESPECT OF

THE PROPERTY MARKET OF VARIOUS CITIES

IN THE PEOPLE’S REPUBLIC OF CHINA

CLIENT : Powerlong REIT Management Limited

REF. NO. : CON [●]

DATE :

Our ref: CON [●]

This report is for the use only of the party to whom it is addressed for the specific purposes to which it refers and no responsibility is acceptedto any third party for use of or reliance on the whole or any part of its contents for any purpose.

Neither the whole nor any part of this report or any reference thereto may be included in any document, circular or statement without our priorwritten approval of the form and context in which it will appear.


APPENDIX V MARKET RESEARCH REPORT

– V-1 –

Jones Lang LaSalle Corporate Appraisal and Advisory Limited7/F One Taikoo Place 979 King’s Road Hong Kongtel +852 2846 5000 fax +852 2169 6001Company Licence No.: C-030171

仲量聯行企業評估及諮詢有限公司香港英皇道979 號太古坊一座7 樓電話 +852 2846 5000 傳真 +852 2169 6001公司牌照號碼：C-030171

[●]

The Board of Directors

Powerlong (Group) Co., Ltd.

Dear Sirs,

Re: MARKET RESEARCH REPORT IN RESPECT OF THE PROPERTY MARKET OF VARIOUSCITIES IN THE PEOPLE’S REPUBLIC OF CHINA

In accordance with instructions of Powerlong (Group) Co., Ltd. (the “Company”), Jones Lang LaSalle

Corporate Appraisal and Advisory Limited (“JLL” or “we”) has prepared a market research report on the property

market of various cities in the PRC, for the purpose of inclusion of relevant information in section of Industry

Overview of the document to be issued in connection with the proposed [REDACTED] on The Stock Exchange of

Hong Kong.

We are pleased to enclose herewith our market research report for your attention in due course.

Yours faithfully,

For and on behalf of

Jones Lang LaSalle Corporate Appraisal and Advisory Limited

Gilbert ChanMRICS MHKIS RPS (GP)

Senior Director



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CONTENT

1. SERVICE STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-4

1.1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-4

2. OVERVIEW OF THE PRC ECONOMY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-5

3. OVERVIEW OF THE REAL ESTATE MARKET IN THE PRC . . . . . . . . . . . . . . . . . . . . . . . . . V-6

3.1. Major Indicators of the Real Estate Market in the PRC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-6

3.2. Impact of the Pandemic on the Real Estate Market in the PRC . . . . . . . . . . . . . . . . . . . . . . . . V-6

3.3. Drivers of the Real Estate Market in the PRC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-6

3.4. Historical Trends of Land Price, Construction Material and Labor Cost . . . . . . . . . . . . . . . . . . V-9

3.5. Recent Development of Real Estate Policies in the PRC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-11

4. THE REAL ESTATE MARKET OF SELECTED CITIES IN THE PRC . . . . . . . . . . . . . . . . . . . V-12

4.1. Geographic Presence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-12

Yangtze River Delta Urban Agglomeration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-12

Bohai Rim Urban Agglomeration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-12

Urban Agglomeration on the West Side of Taiwan Straits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-13

Central Henan Urban Agglomeration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-13

4.2. Selected Cities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-13

Shanghai . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-13

Hangzhou . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-18

Suqian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-23

Yancheng . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-25

Qingdao . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-28

Quanzhou . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-32

Luoyang . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-36

Xinxiang . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-38

5. COMPETITIVE LANDSCAPE AND MARKET POSITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-41

5.1. The Competitive Landscape of Real Estate Industry in PRC . . . . . . . . . . . . . . . . . . . . . . . . . . V-41

5.2. Market Position of the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-42

5.3. Competitive Advantages and Growth Drivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-42

LIMITING CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-44



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1. SERVICE STATEMENT

1.1. Introduction

JLL is an international professional services and investment management firm offering specialized real estateservices to clients seeking increased value by owning, occupying and investing in real estate. JLL operates in morethan 80 countries and has a global workforce of more than 91,000 as of December 31, 2020.

This section was prepared primarily by the designated market research team based on the followinginformation and statistics that are considered reliable: data from various government publications; site visits andinterviews; recognized research institutions; and the proprietary database of JLL.

The following sets out the main reasons JLL adopted the above sources of information and considers them asreliable: it is a general market practice to adopt official data and announcements from various Chinese governmentagencies; and JLL understands the data collection methodology and data source of its proprietary database and thesubscribed database from Statista, CEIC and CREIS.

While preparing this section, JLL has relied on the assumptions listed below: all documents provided by theCompany are true and correct; all published data by the relevant government authorities are true and correct; JLLmakes no warranty or representation that these forecasts will be achieved. The real estate market is constantlyfluctuating and changing. JLL will not take any responsibility to predict or in any way warrant the futureconditions of real estate market; and where subscribed data is obtained from recognized research and publicinstitutions, JLL will rely upon the apparent integrity and expertise of such institutions.

The information and statistics set out in this section have been extracted, in part, from various officialgovernment publications. We believe that the sources of this information are appropriate sources for suchinformation and statistics and reasonable care has been exercised by us in extracting and reproducing suchinformation and statistics. We have no reason to believe that such information and statistics are false or misleadingor that any fact has been omitted that would render such information false or misleading. We have notindependently verified such information and statistics. Accordingly, we do not make any representation as to theaccuracy of such information and statistics, which may be inaccurate, incomplete, out-of-date or inconsistent withother information compiled within or outside China.

The major economic and real estate market indicators in China have been reviewed in order to provide anoverview of the city’s market characteristics, existing market conditions, emerging trend and future prospects as ofthe date of the report. The forecast of property sale price should not be predictions of the future. Rather, they maybe considered as the best estimates of current market. JLL makes no warranty or representation that these forecastswill be achieved. The real estate market is constantly fluctuating and changing. JLL will not take anyresponsibility to predict or in any way warrant the future conditions of real estate market.

This report was based on desk research of specialized industry literature, government and regulatory sources,online data sources, third-party reports and surveys. It contains a significant volume of information which isderived from other sources relating to the economy and real estate market of China, including Statistics Bureaufrom nation, province and city level, Ministry of Housing and Urban-Rural Development of the PRC, Statista,CRIC, CREIS, and other government authorities. JLL has paid necessary attention to its accuracy and authenticityand does not warrant or represent that such information is free from errors. In the course of research, JLLconducted numerous interviews with local developers, buyers and potential buyers, local marketing agents andmarket observers in each market. Moreover, the databases of JLL were utilized if necessary. This report is based onthe information available to us as of 2021.



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2. OVERVIEW OF THE PRC ECONOMY

As the second-largest economic entity, the PRC’s economy has witnessed a moderate growth in recent years.

Despite the pressure from the trade war between China and the U.S., the PRC’s nominal GDP still increased from

RMB68,885.8 billion in 2015 to RMB101,598.6 billion in 2020 with a CAGR of 8.1%, and the GDP is estimated

to grow at a CAGR of 6.3% between 2021 and 2025. The CPI registered 102.5 in 2020, while the total retail sales

of consumer goods grew from RMB30,093.1 billion in 2015 to RMB39,198.1 billion in 2020 at a CAGR of 5.4%.

As the key driver of the economic growth, the fixed asset investment reached RMB52,727.0 billion in 2020.

Furthermore, actual utilization of foreign direct investment grew stably from USD 126.3 billion in 2015 to USD

144.4 billion in 2020. In the meantime, per capita disposable income of urban households rose from RMB31,194.8

to RMB43.834.0 with a CAGR of 7.0%, indicating a significant increase in purchasing power of the urban

residents. The table below sets out selected economic indicators of the PRC for the years indicated:

Major economic indicators in the PRC (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR

Permanent Population (million) 1,374.6 1,382.7 1,390.1 1,395.4 1,400.1 1,411.8 0.5%Nominal GDP (RMB billion) 68,885.8 74,639.5 83,203.6 91,928.1 99,086.5 101,598.6 8.1%Real GDP growth rate (%) 7.0 6.8 6.9 6.7 6.1 2.3 N/ACPI** 101.4 102.0 101.6 102.1 102.9 102.5 102.1*Total retail sales of consumer goods

(RMB billion) 30,093.1 33,231.6 36,626.2 37,778.3 40,801.7 39,198.1 5.4%Fixed asset investment (RMB billion) 56,200.0 60,646.6 64,123.8 64,567.5 56,087.4 52,727.0 -1.3%Per capita disposable income of urban

households (RMB) 31,194.8 33,616.2 36,396.2 39,250.8 42,358.8 43,834.0 7.0%Actual utilization of foreign direct

investment (USD billion) 126.3 126.0 131.0 135.0 138.1 144.4 2.7%Urbanization rate (%) 56.1 57.4 58.5 59.6 60.6 63.9 N/A

Source: China Statistical Yearbook (2020), National Bureau of StatisticsNote: * is the arithmetic mean. ** Preceding year = 100.

Estimation of major economic indicators in the PRC (2021-2025)

2021 2022 2023 2024 20252021-2025

CAGR

Nominal GDP (RMB billion) 112,282.9 119,875.5 127,649.3 135,684.3 143,595.8 6.3%Real GDP growth rate (%) 8.5 5.2 5.0 4.7 4.5 N/A




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3. OVERVIEW OF THE REAL ESTATE MARKET IN THE PRC

3.1. Major Indicators of the Real Estate Market in the PRC

Although a series of tightening policies have been released by the PRC government since 2015, the real estatemarket has achieved rapid growth in recent years. According to National Bureau of Statistics, the real estateinvestment increased from RMB9,597.9 billion in 2015 to RMB14,144.3 billion in 2020 with a CAGR of 8.1%.Meanwhile, the increasing urbanization rate and disposable income have promoted the demand for commercialproperties. The table below sets out selected commercial property market indicators of the PRC for the yearsindicated:

Selected commercial property market indicators of the PRC (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR

Real estate investment (RMB billion) 9,597.9 10,258.1 10,979.9 12,016.5 13,219.4 14,144.3 8.1%Investment in commercial properties

(RMB billion) 1,460.7 1,583.8 1,564.0 1,417.7 1,322.6 1,307.6 -2.2%GFA of commercial properties under

construction (million sq.m.) 1,001.1 1,045.7 1,052.3 1,026.3 1,003.9 932.0 -1.4%GFA of commercial properties sold

(million sq.m.) 92.5 108.1 128.4 119.7 101.7 92.9 0.1%GFA of commercial properties

completed (million sq.m.) 120.3 125.2 126.7 112.6 108.1 86.2 -6.4%


3.2. Impact of the Pandemic on the Real Estate Market in the PRC

The pandemic in 2020 has exerted significant effect on the real estate market, and all segments of the realestate industry have been affected more or less. The demand and off-plan sales was curbed by the pandemic in 2021Q1, while the market is gradually recovering from 2021 Q2 under the effective control measures of thegovernment. As for the commercial property market, investment in commercial properties and GFA of commercialproperties sold decreased slightly in 2020. Due to delayed construction plans and low economic activities, bothsupply and demand in the commercial property market declined in 2020 Q1. Nevertheless, the commercialproperty market has gradually rebounded since 2020 Q2, and the market indicators are anticipated to demonstratean upward trend in the near future.

3.3. Drivers of the Real Estate Market in the PRC

Further Development of Metropolitan Clusters

The construction of metropolitan clusters could promote regional economic development throughresource integration and population inflow, providing huge opportunities for the development of commercialmarket. During the Fourteenth Five-Year Plan (十四五規劃) period, the PRC is expected to form 19 regionalmetropolitan clusters. In particular, the Yangtze River Delta Urban Agglomeration (長三角城市群), one ofthe most essential strategic agglomerations in the PRC, has achieved dynamic economic growth, which willfurther boost the economic development of the PRC in the future. The Central Henan Urban Agglomeration(中原城市群), the largest urban group with the densest population and the transportation advantage, isexpected to become a new growth pole of the economy, as well as an important base for advancedmanufacturing and modern service industries in the PRC. Bohai Rim Urban Agglomeration (環渤海城市群),with the high economic development level and a solid industrial foundation, aims to become a powerfulengine for regional economic development and technological innovation in north China. Urban



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Agglomeration on the West Side of Taiwan Straits (海峽西岸城市群), as the core area of the Straits Economic

Zone (海峽經濟區), attracts a large number of entrepreneurs from Taiwan and has achieved outstanding

economic performance. The development of urban agglomerations could promote population aggregation and

accelerate consumption upgrading, thereby enhancing the purchasing power of urban households and

promoting the development of the local commercial market.

Accelerating Urbanization

The urbanization process of the PRC has made great progress over the past few years. The urban

population grew from 771.2 million to 902.0 million from 2015 to 2020 at a CAGR of 3.2%, and the

urbanization rate reached 63.9% by the end of 2020. The rapid growth of urban population has stimulated the

market consumption demand and promoted the consumption level, resulting in the prosperous commercial

market in the past decades. In the future, the increasing urbanization rate is expected to continuously boost

the commercial market and level up the demand for commercial properties of the PRC. The table below sets

out urbanization indicators of the PRC for the years indicated:

Urbanization indicators of the PRC (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR

Urban population (million) 771.2 793.0 813.5 831.4 848.4 902.0 3.2%Urbanization rate (%) 56.1 57.4 58.5 59.6 60.6 63.9 N/A

Source: China Statistical Yearbook (2016-2020), National Bureau of Statistics

An Increase in Disposable Income and Expenditure of Urban Households

Benefited from the rapid economic growth of the PRC, both income and expenditure have displayed asteady growth between 2015 and 2020. According to National Bureau of Statistics, per capita disposableincome of urban households experienced a rapid growth from RMB31,194.8 to RMB43,834.0 at a CAGR of7.0% during the same period, while per capita consumption expenditure of urban households grew smoothlyfrom RMB21,392.4 to RMB27,007.0 with a CAGR of 4.8%. The improvement of disposable income is likelyto strengthen the purchasing power and enhance consumption demand, therefore driving the development ofthe commercial market in the PRC. The table below sets out income and expenditure indicators of the PRC forthe years indicated:

Per capita income and expenditure indicators of the PRC (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR

Per capita disposable income ofurban households (RMB) 31,194.8 33,616.2 36,396.2 39,250.8 42,358.8 43,834.0 7.0%

Per capita consumptionexpenditure of urbanhouseholds (RMB) 21,392.4 23,078.9 24,445.0 26,112.3 28,063.4 27,007.0 4.8%




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E-commerce Opportunities and Consumer Behavior

Driven by the rapid expansion of internet connectivity and mobile technology, the e-commerce industry

in the PRC has experienced rapid growth. According to National Bureau of Statistics, the retail sales of

e-commerce increased from RMB3,877.3 billion in 2015 to RMB11,760.1 billion in 2020 with a CAGR of

24.8%. As the COVID-19 pandemic has gradually shifted people’s consumption patterns, the e-commerce

industry grew even further. Additionally, the changing consumer behaviors have brought business

opportunities for brick-and-mortar stores to push forward their digitalization process. According to

E-commerce in China 2019 (中國電子商務報告2019) published by Ministry of Commerce of PRC, a digital

retail solution provider called Dmall had helped more than 80 retailers digitally transform their retail

business through digital tools. Additionally, the shift in consumption patterns is anticipated to increase the

demand for high-quality commercial centers and promote the commercial market of the PRC. The table below

sets out e-commerce indicators of the PRC for the years indicated:

Retail sales of e-commerce of the PRC (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR

Retail sales of e-commerce(RMB billion) 3,877.3 5,155.6 7,175.1 9,006.5 10,632.4 11,760.1 24.8%

Retail sales of e-commercegrowth rate (%) 33.3 26.2 32.2 23.9 16.5 10.9 N/A

Source: National Bureau of Statistics

Consumption Habits of the Generation Z

The Generation Z1 (Z世代) is the first generation to have access to the Internet and portable digital

technology since a young age. Compared with other generations, they tend to pay more attention to shopping

experience and have higher requirements for the environment and services provided by the retailers.

According to “GenZ Spending Power White Paper” (《Z世代消費力白皮書》) published by Kantar and

Tecent, Generation Z is estimated to account for 40% of the total consumption capacity in the PRC by 2020.

As the Generation Z has gradually become the main force of market consumption, its consumption habits

could affect the commercial market profoundly. With rising purchasing power from the Generation Z, the

experiential commercial projects are expected to achieve considerable progress. As a result, the physical

retail outlets are likely to focus on improving the consumption environment, introducing emerging

commercial activities and providing personalized service to meet the diversified consumption demand of the

Generation Z.

1 Generation Z: It refers to the generation born from mid-to-late 1990s to the early 2010s. According to the National Bureau of Statistics,there are more than 250 million New Generation citizens in the PRC.



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Policy Restrictions on Property Loans

Two important policies issued in 2020 introduced a series of quantified restrictions on property loanstoward real estate developers, including commercial property developers. On 28th August 2020, the Ministryof Housing and Urban-Rural Development (住房和城鄉建設部) and People’s Bank of China (中國人民銀行)announced a new rule known as the “Three Red Lines” (三條紅線). The first red line requires the debt to assetratio of the developers to be kept below 70%, while the second line requires the debt to net asset ratio to bekept below 100%, and the third red line requires the cash to short-term debt ratio to be kept above 1.0. Basedon the fulfilment of the “Three Red Lines”, the developers are classified into four levels with correspondinglimits on interest-bearing liabilities. This rule limits money inflow to real estate sector from borrower side soas to form a capital monitoring system and regulate the loans activity.

On 31st December 2020, the People’s Bank of China and China Banking and Insurance RegulatoryCommission (中國銀行保險監督管理委員會) issued “Notice on Establishing the Management System ofReal Estate Loan Concentration of Banking Financial Institutions” (《關於建立銀行業金融機構房地產貸款集中度管理制度的通知》), also known as the “Double Red Lines” (兩條紅線). The notice categorized fivelevels for the upper limit of property loans for real estate companies and private housings: 40% and 32.5% forlarge banks, 27.5% and 20% for medium-sized banks, 22.5% and 17.5% for small banks, 17.5% and 12.5%for county-rural cooperative medical institutes, 12.5% and 7.5% for rural banks. The “Double Red Lines”restricts capital inflow from the lender side in order to control the total amount of property loans from banks.

Under these two policies, it is more difficult for commercial developers to obtain property loans unlessthey did not touch these lines. To cope with financing restrictions and reduce financing costs, commercialdevelopers would have to lower their financial leverage and debts and focus on improving the quality of coreproperty development. It is estimated that commercial developers with a rational financial structure andhigh-quality commercial properties will probably survive in the future.

3.4. Historical Trends of Land Price, Construction Material and Labor Cost

Land Price

Land acquisition cost is crucial for real estate developers, as it is one of the largest components in thecost structure. According to the selected 300 cities in CREIS database (中國房地產指數系統), the averagecommercial land price demonstrated an upward trend from RMB3,751.5 per sq.m. to RMB4,747.4 per sq.m.between 2015 and 2020 with a CAGR of 4.8%. Since 2017, the average commercial land price has maintaineda relatively steady level. In the upcoming years, following the restrictions imposed on the residential marketand the developers’ business focus shifts into the commercial market, it is believed that such a trend is likelyto continue. The table below sets out the commercial land price indicator of the PRC for the years indicated:

Commercial land price indicator of the PRC (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR

Average commercial land price(RMB per sq.m.) 3,751.5 4,021.4 5,079.2 4,788.1 4,514.0 4,747.4 4.8%

Source: CREIS

Note: The average commercial land price is calculated based on 300 cities in CREIS database.



– V-9 –

Construction Material

Construction material plays a significant role in the cost structure for real estate developers. According

to China Iron and Steel Association (中國鋼鐵工業協會) and China Cement Association (中國水泥協會), the

steel price index displayed a sharp growth in 2016 and maintained at a high level between 2017 and 2020,

while the cement price reached RMB455.0 per ton at the end of 2020 with a CAGR of 13.0% from 2015 to

2020. Supported by the rising demand in the real estate industry, the prices of construction material are

anticipated to maintain an upward trend in the near future. The table below sets out selected indicators of key

construction materials of the PRC for the years indicated:

Selected indicators of key construction material of the PRC (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR

Steel price index(Base year 1994=100) 56.4 99.5 121.8 107.1 106.1 124.5 N/A

Cement price (RMB per ton) 247.4 318.7 414.9 449.0 471.0 455.0 13.0%

Source: China Iron and Steel Association, China Cement Association

Labor Costs

Additionally, labor cost is a crucial factor in the cost structure for real estate developers. According to

National Bureau of Statistics, the average wage of urban construction worker experienced a steady growth

from RMB48,886.0 in 2015 to RMB65,580.0 in 2019 at a CAGR of 7.6%. Driven by the steady growth of

economy, the average annual wage of urban construction worker is predicted to maintain a steady growth in

the upcoming years. The table below sets out labor costs indicator of the PRC for the years indicated:

Labor costs indicator of the PRC (2015-2020)

2015 2016 2017 2018 2019 20202015-2019

CAGR

Average annual wage of urbanconstruction worker (RMB) 48,886.0 52,082.0 55,568.0 60,501.0 65,580.0 N/A 7.6%




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3.5. Recent Development of Real Estate Policies in the PRC

The PRC government plays a vital role in the real estate market. The strong economic status and high

urbanization rate pushed the commercial market into a flourishing period from 2015 to 2020. During this period,

the government has implemented a series of policies to promote the commercial market.

On 2nd January 2018, General Office of the State Council (國務院辦公廳) announced “Opinions on

Promoting the E-commerce and Accelerating the Cultivation of New Economic Growth Power” (《關於大力發展電子商務加快培育經濟新動力的意見》). According to this document, the government will further remove the entry

barriers of e-commerce, reduce related tax burden and strengthen the financial service support for e-commerce

enterprises. It is anticipated that the e-commerce and cross-border commerce of the PRC will continue to grow

rapidly.

On 24th September 2018, in order to minimize the obstacles in consumption and strengthen the position of

consumption in the economy, the General Office of the State Council (國務院辦公廳) introduced “Implementation

Plan for Improving the System and Mechanism to Promote Consumption (2018-2020)” (《完善促進消費體制機制實施方案(2018-2020年)》). This plan promised to provide more accessible market admissions for consumer

services, revitalize the offline consumption market, standardize commercial services and establish rational credit

system in commercial market. In the future, the business environment of the PRC will be further regulated and the

diversified business development may drive for the sustained economic growth.

On 28th January 2019, the National Development and Reform Commission (國家發展和改革委員會)

published “the Implementation Plan on Further Optimizing the Supply to Promote the Steady Growth of

Consumption and the Formation of a Strong Domestic Market” (《進一步優化供給推動消費平穩增長促進形成強大國內市場的實施方案》). According to this plan, the government will subsidize the consumption-related tourism

and eco-friendly home appliances, and actively carry out the poverty relief plan by improving sales in

underdeveloped areas. The plan also aims to upgrade rural consumption and stimulate the interplay of urban-rural

consumption, which is expected to narrow down the gap between rural areas and urban cities and release the

consumption potential in rural areas.

On 16th August 2019, the General Office of the State Council introduced “the Opinions on Accelerating

Circulation and Promoting Commercial Consumption” (《關於加快發展流通促進商業消費的意見》), in order to

cater for the business evolution and consumption upgrading trends, as well as optimize the consumption

environment. According to this document, traditional department stores, stadiums and factories in financial

distress are encouraged to upgrade their properties into multifunctional commercial buildings, which is estimated

to offer more opportunities for commercial market.

In March 2020, the National Development and Reform Commission published the “Implementation Opinions

on Promoting Consumption, Expanding Capacity and Improving Quality, Accelerating the Formation of a Strong

Domestic Market” (《關於促進消費擴容提質加快形成強大國內市場的實施意見》), which put forward 19

measures in six areas: market supply, consumption upgrade, consumption network, consumption ecology,

consumption capacity and consumption environment. It aims to improve the consumption capacity of residents,

establish a “Smart +” consumption ecological system and ultimately create a safe and healthy consumption

market.



– V-11 –

4. THE REAL ESTATE MARKET OF SELECTED CITIES IN THE PRC

4.1. Geographic Presence

The Group is an integrated real estate developer originated from Macao. With the mission of “Create space

full of love”, it has expanded business into different sectors including residential properties, commercial

properties, hotel, culture and arts. Its commercial properties are mainly distributed in the Yangtze River Delta

Urban Agglomeration (長江三角洲城市群), Bohai Rim Urban Agglomeration (環渤海城市群), Urban

Agglomeration on the West Side of Taiwan Straits (海峽西岸城市群) and Central Henan Urban Agglomeration (中原城市群). The overview of the four regions is as follows.

Overview of the Regions

Yangtze River Delta Urban Agglomeration

Yangtze River Delta Urban Agglomeration consists of Shanghai and three neighbouring provinces

Jiangsu, Zhejiang and Anhui. With over 230 million of total population, it is considered as one of the most

densely populated areas in the PRC. In December 2019 the Communist Party of China Central Committee and

the State Council (中共中央國務院) released “the Outline of the Integrated Regional Development of the

Yangtze River Delta” (《長江三角洲區域壹體化發展規劃綱要》), which will promote the development of the

Yangtze River Economic Belt and enhance the comprehensive strength of the Yangtze River Delta.

Yangtze River Delta Urban Agglomeration has always served as a key driver for the economic

development of the PRC. Its nominal GDP reached RMB24.5 trillion in 2020, representing nearly one-fourth

of the nominal GDP of the PRC, which ranks the first among the major urban agglomerations. Total retail

sales of consumer goods registered RMB9.8 trillion in 2020, accounting for one-fourth of the total retail sales

of consumer goods in the PRC, demonstrating a booming consumption market in the region.

Bohai Rim Urban Agglomeration

Centered on the megacity of Tianjin, Bohai Rim Urban Agglomeration covers Jing-Jin-Ji, Shandong and

Liaodong Peninsula surrounding the Bohai Sea. It is associated with the Yangtze River Delta, the Pearl River

Delta, Hong Kong, Macao, Taiwan, Southeast Asian countries, Mongolia and Russia, marking it an essential

area to foster domestic and foreign economic cooperation. The Fourteenth National Congress of the

Communist Party of China (中國共產黨第十四次全國代表大會) in 1992 firstly confirmed the idea of “the

Bohai Economic Rim”, proposed to accelerate the development and opening of the Bohai Economic Rim and

regarded the area as one of the key areas of national opening and development.

The economic growth of Bohai Rim has traditionally relied on secondary industry, while along with the

economic development and industrial update, the tertiary sector plays an increasingly important role. Bohai

Rim has become the engine of economic development in the north of the PRC, which is regarded as the third

largest urban agglomeration in terms of economy, subordinating to the Yangtze River Delta and the Greater

Bay Area. The nominal GDP of Bohai Rim recorded RMB17.3 trillion in 2020, taking up 17.1% of the total

GDP in the PRC, subordinated to the Yangtze River Delta among the major urban agglomerations in the PRC.

Meanwhile, total retail sales of consumer goods reached RMB2.9 trillion, accounting for approximately

one-fifth of the economic indicator of the PRC, suggesting a strong consumption level and high growth

potential in the commercial market.



– V-12 –

Urban Agglomeration on the West Side of Taiwan Straits

Taken Fuzhou, Quanzhou, Xiamen, Wenzhou and Shantou as the five core cities, Urban Agglomeration

on the West Side of Taiwan Straits consists of 20 prefecture-level cities in Fujian, Zhejiang, Jiangxi and

Guangdong provinces. It faces Taiwan across Taiwan Strait, bordering the Yangtze River Delta to the north

and the Greater Bay Area to the south. According to the Fourteenth Five-Year Plan (十四五規劃) of the PRC,

Urban Agglomeration on the West Side of Taiwan Straits will be upgraded to Guangdong-Fujian-Zhejiang

Urban Agglomeration (粵閩浙城市群), indicating that the development driver may move from reliance on

Fujian Province to the integration of the three provinces.

The unique geographic location assisted the West Side of Taiwan Straits to become an important starting

point of Maritime Silk Road (海上絲綢之路). Several large port cities are located on the West Side of Taiwan

Strait, such as Wenzhou, Fuzhou, Quanzhou and Xiamen, providing opportunities to develop foreign

trade-oriented economy. Its nominal GDP registered RMB7.0 trillion in 2020, representing 6.9% of the total

GDP of the PRC. Additionally, total retail sales of consumer goods reached RMB3.0 trillion, accounting for

7.8% of the total retail sales of the PRC. The shift of development focus from Fujian Province to the

integration of Guangdong, Fujian and Zhejiang provinces may promote the coordinated development of the

economy, as well as drive the growth in consumption power and consumption level in the region.

Central Henan Urban Agglomeration

Central Henan Urban Agglomeration contains 30 prefecture-level cities in Henan, Shanxi, Hebei,

Shandong and Anhui provinces, covering a total land area of 287,000 sq.km. In 2016 National Development

and Reform Commission of the PRC (中華人民共和國國家發展和改革委員會) published “the Development

Plan of Central Henan Urban Agglomeration” (《中原城市群發展規劃》), which marked this region as a new

growth pole for the economic development of the PRC, as well as an important national base for advanced

manufacturing and modern service industries.

Central Henan Urban Agglomeration plays a vital role in leading the economic development of the

central and western regions. In 2020 Henan Provincial Government deepened the strategic cooperation with

Shanghai, aiming to actively involve in the integrated development with the Yangtze River Delta. The

nominal GDP and total retail sales of consumer goods recorded RMB8.1 trillion and RMB3.4 trillion in 2020,

taking up nearly 8.0% of the above economic indicators of the PRC respectively. The cooperation of Central

Henan Urban Agglomeration with Yangtze River Delta Urban Agglomeration is estimated to improve the

quality of economic development and boost consumption level of the region.

4.2. Selected Cities

Shanghai

Overview

Shanghai is a direct-controlled municipality in the PRC, located at the mouth of the Yangtze river,

bordering Jiangsu and Zhejiang provinces to the west and facing East China Sea to the east. By the end of

2020, the city occupied a total land area of 6,340.5 sq.km. with 24.9 million permanent population. Shanghai

is an international economic, financial, trade, shipping, scientific and technological innovation center as well

as the core city of the Yangtze River Delta and the Shanghai Mega-Metropolitan Circle (上海大都市圈). Its

pillar industries lie in finance, information technology and real estate.



– V-13 –

Economic Overview

As the national hub for economy and commerce, Shanghai has continuously promoted the developmentof service industries, including finance and real estate, and implemented the innovation-driven strategy toachieve high-quality economic progress. Its nominal GDP increased stably from RMB2,688.7 billion in 2015to RMB3,870.1 billion in 2020 with a CAGR of 7.6%, and the GDP is estimated to increase at a CAGR of6.1% from 2021 to 2025. Total retail sales of consumer goods grew steadily from RMB1,160.6 billion in 2015to RMB1,593.3 billion in 2020 at a CAGR of 6.5%, reflecting the strong consumption demand in Shanghai.During the same period, per capita disposable income of urban households rose continuously fromRMB52,962 to RMB76,437, representing a CAGR of 7.6%.

According to the Fourteenth Five-Year Plan (十四五規劃) of Shanghai Municipal Government, the citywill enhance its position as the national central city, as well as play a leading role in the development of theYangtze River Delta and the PRC. From 2021 to 2025, the real GDP growth rate is predicted to maintainabove 5.0%, and per capita disposable income of urban households may keep pace with the economic growth.Benefiting from the promising economy and increasing income level, the population inflow may expand theconsumption demand, further supporting the development of the commercial market. The table below sets outselected economic indicators relating to Shanghai for the years indicated:

Selected economic indicators of Shanghai (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR


goods (RMB billion) 1,160.6 1,258.8 1,370.0 1,487.5 1,584.8 1,593.3 6.5%Per capita disposable income of


(RMB billion) 635.3 675.6 724.7 762.3** 801.2** 883.7** 6.8%Actual utilization of foreign

direct investment(Dollar billion) 18.5 18.5 17.0 17.3 19.0 20.2 1.9%

Source: Shanghai Statistical Yearbook (2016-2020), Bureau of Statistics of ShanghaiNote: * is the arithmetic mean. ** is calculated based on the growth rate. *** Preceding year = 100.

Estimation of selected economic indicators in Shanghai (2021-2025)

2021 2022 2023 2024 20252021-2025

CAGR

Nominal GDP (RMB billion) 4,250.0 4,510.0 4,800.0 5,110.0 5,380.0 6.1%Real GDP growth rate (%) 8.3 5.6 5.4 5.2 4.8 N/ATotal retail sales of consumer

goods (RMB billion) 1,756.7 1,854.2 1,955.9 2,058.0 2,161.5 5.3%Per capita disposable income of

urban households (RMB) 84,920 91,300 98,090 105,040 112,340 7.2%




– V-14 –

Fengxian is a suburban district located in the south part of Shanghai. Driven by the development of

biomedicine and chemical industry, the economy has witnessed a stable growth. From 2015 to 2020, the

nominal GDP of Fengxian climbed dramatically from RMB79.5 billion to RMB119.0 billion, representing a

CAGR of 8.4%. Meanwhile, total retail sales of consumer goods rose from RMB38.8 billion to RMB51.7

billion at a CAGR of 5.9%. The table below sets out selected economic indicators of Fengxian for the years

indicated:

Selected economic indicators of Fengxian (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR

Permanent Population (million) 1.16 1.17 1.16 1.15 1.16 1.14 -0.3%Nominal GDP (RMB billion) 79.5 88.9 101.8 112.0 117.3 119.0 8.4%Real GDP growth rate (%) 4.1 10.2 10.0 8.7 5.2 2.0 N/ATotal retail sales of consumer


urban households (RMB) 39,712 44,056 47,873 52,032 56,444 N/A N/AFixed asset investment

(RMB billion) 29.2 30.1 36.5 44.1 46.6 52.7 12.5%Actual utilization of foreign

direct investment(Dollar billion) 0.3 0.3 0.3 0.3 0.3 0.3 -1.2%

Source: Fengxian Statistical Yearbook (2016-2020), Bureau of Statistics of Fengxian

Overview of Real Estate Market

Both robust consumer demand and strong purchasing power in Shanghai have fuelled the vigorous

development in the real estate market during the past few years. The real estate investment rose steadily from

RMB346.9 billion in 2015 to RMB471.0 billion in 2020 with a CAGR of 6.3%. Meanwhile, investment in

commercial properties fluctuated with a CAGR of 3.7% between 2015 and 2020. After reaching its peak in

2016, GFA of commercial properties sold displayed a downward trend from 2017 to 2020, mainly due to the

government’s ownership requirement policy on commercial properties in 2016.



– V-15 –

Benefited from the optimistic economic development, the real estate market in Shanghai is likely to maintain

a steady growth in the next few years. As the national commerce center, Shanghai will focus on commercial

upgrading and the development of key commercial clusters to enhance the prosperous business atmosphere, thus

attracting continuous investment amid the fierce market competition. Besides, Shanghai is planning to promote the

development of surrounding Five New Cities (五大新城): Jiading, Qingpu, Songjiang, Fengxian and Nanhui,

which may further appeal to population, strengthen the strong demand in real estate market and accelerate

commercial aggregation. The table below sets out selected commercial property market indicators of Shanghai for

the years indicated:

Commercial property market indicators of Shanghai (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR


Investment in commercialproperties (RMB billion) 46.8 51.9 50.7 46.1 45.7 56.0 3.7%


GFA of commercial propertiessold (million sq.m.) 1.1 2.1 0.8 1.0 0.9 0.8 -5.9%


Source: Shanghai Statistical Yearbook (2016-2020), Bureau of Statistics of Shanghai, CREIS



– V-16 –

Owing to industrial upgrading and urban expansion, Fengxian has appealed to a growing number of

people, boosting regional commercial market. From 2015 to 2020, real estate investment rose rapidly with a

CAGR of 15.5%, outpacing the fixed asset investment growth. The table below sets out selected commercial

property market indicators of Fengxian for the years indicated:

Commercial property market indicators of Fengxian (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR


Investment in commercialproperties (RMB billion) 1.2 0.6 0.8 1.5 1.9 N/A N/A

GFA of commercial propertiesunder construction(million sq.m.) 0.79 0.98 1.11 1.49 1.70 N/A N/A

GFA of commercial propertiessold (million sq.m.) 0.03 0.10 0.02 0.00 0.01 N/A N/A

GFA of commercial propertiescompleted (million sq.m.) 0.08 0.01 0.02 0.01 0.17 N/A N/A

Source: Fengxian Statistical Yearbook (2016-2020), Bureau of Statistics of Fengxian

Overview of Real Estate Market Policies

Since 2015, Shanghai Municipal Government has released several preferential policies on commercial

land and properties, including optimization of commercial land supply structure and promotion of modern

commerce and service industries, so as to advance the steady and sound development of the commercial

market.

On 20th July 2016, Fengxian District Government published “the Implementation Rules for Speeding

up the Development of Modern Service Industry in Fengxian District” (《奉賢區加快發展現代服務業實施細則》) to support the development of regional commerce. It states that the government will provide up to RMB3

million as operation and cultivation fund to enlarge commercial properties operated by top developers to

maintain high occupancy rates. Besides, for commercial properties that fill market gap and even surrender

part of their profits, the government will also offer rent subsidies to achieve long-term cultivation of the

market.



– V-17 –

On 7th November 2018, Shanghai Municipal Government released “the Shanghai Industrial Map”

(《上海市產業地圖》), which demonstrated the direction of future industrial development in detail. As for the

modern commerce industry, Shanghai will build 15 municipal-level commercial centers surrounded by regional

and community commercial centers, as well as improve the city’s commercial operation and service to achieve the

high-quality development of commercial market. Among them, Shanghai Municipal Government will establish

several regional commercial centers in Qingpu and Fengxian, including Qingpu Old City (青浦老城) commercial

center and Fengcheng (奉城) commercial center, etc.

On 15th November 2018, Shanghai Municipal Government issued “Several Opinions on the City’s

Comprehensive Promotion of High-Quality Utilization of Land Resources” (《關於印發本市全面推進土地資源高質量利用若幹意見的通知》), stating to optimize the supply structure of commercial land, as well as encourage

real estate developers to hold commercial properties for continuous operation, in order to improve the

effectiveness of commercial land supply.

Hangzhou

Overview

Hangzhou is regarded as the capital city of Zhejiang Province and one of the 15 sub-provincial cities in

the PRC. It is located at the head of Hangzhou Bay, separating Shanghai and Ningbo and covering a total land

area of 16,853.6 sq.km. With a permanent population of 11.9 million at the end of 2020, it is the most

populous city of Zhejiang Province. According to “Top 100 Cities by Comprehensive Strength in 2020”

(《2020年中國百強城市排行榜》), Hangzhou represented the fifth place, with the pillar industries of digital

economy, tourism and cultural creativity.

Economic Overview

Hangzhou has undergone rapid growth in the digital economy since 2014, contributing to more than half

of the city’s economic growth. The nominal GDP increased from RMB1,049.5 billion in 2015 to RMB1,610.6

billion in 2020 at a CAGR of 8.9%, and the GDP is estimated to grow at a CAGR of 7.5% from 2021 to 2025.

Total retail sales of consumer goods grew remarkably from RMB428.1 billion in 2015 to RMB597.3 billion in

2020 with a CAGR of 6.9%, indicating strong consumption demand in Hangzhou. Along with the economic

development, per capita disposable income of urban households demonstrated an upward trend from

RMB48,316 to RMB68,666 between 2015 and 2020 at a CAGR of 7.3%, suggesting a rapid ascent in

consumption capacity.



– V-18 –

According to the Fourteenth Five-Year Plan (十四五規劃) of Hangzhou Municipal Government,

Hangzhou will continue to deepen the industrial transformation of digital economy. By the end of 2025, the

nominal GDP of Hangzhou is estimated to exceed RMB2,300 billion, while per capita disposable income of

households is targeted at RMB85,000. Driven by the promising economic development and capital

agglomeration effect, the real estate market demand tends to remain rigid in the coming years. The table

below sets out selected economic indicators relating to Hangzhou for the years indicated:

Selected economic indicators of Hangzhou (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR





direct investment (USD billion) 7.1 7.2 6.6 6.8 6.1 7.2 0.2%

Source: Hangzhou Statistical Yearbook (2016-2020), Bureau of Statistics of HangzhouNote: * is the arithmetic mean. ** is calculated based on the growth rate. *** Preceding year = 100.

Estimation of selected economic indicators in Hangzhou (2021-2025)

2021 2022 2023 2024 20252021-2025

CAGR


goods (RMB billion) 688.4 735.1 784.4 834.5 885.8 6.5%Per capita disposable income of





– V-19 –

Lin’an has become the tenth district of Hangzhou since 2017, and it covers the western suburbs of the

city. In 2019, the Research Institute of Development Strategy for Small-to-Medium Cities (中小城市發展戰略研究院) released their research results, from which Lin’an was rewarded one of the Top 100 districts in

terms of comprehensive strength (全國綜合實力百強區) and one of the Top 100 districts in terms of green

development (全國綠色發展百強區). The nominal GDP of Lin’an climbed moderately from RMB46.8 billion

in 2015 to RMB60.0 billion in 2020, representing a CAGR of 5.1%. At the same time, total retail sales of

consumer goods and per capita disposable income of urban households increased at a CAGR of 3.8% and

7.7% between 2015 and 2020 respectively, which suggests a stable and healthy growth in commercial market.

Selected economic indicators of Lin’an (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR

Permanent Population (million) N/A N/A 0.59 0.59 0.60 0.63 N/ANominal GDP (RMB billion) 46.8 51.9 53.1 54.0 57.3 60.0 5.1%Real GDP growth rate (%) 8.9 8.5 7.6 7.2 8.0 3.5 N/ACPI** 100.7 101.7 101.9 101.9 102.0 N/A N/ATotal retail sales of consumer



(RMB billion) 23.1 26.6 29.0 32.3* 42.0* 52.4* 17.8%Actual utilization of foreign


Source: Hangzhou Statistical Yearbook (2016-2020), Bureau of Statistics of HangzhouNote: * is calculated based on the growth rate. ** Preceding year = 100.



– V-20 –


In recent years the real estate market in Hangzhou has been maintaining healthy development. Real

estate investment rose rapidly from RMB247.2 billion in 2015 to RMB357.7 billion in 2020 at a CAGR of

7.7%, mainly derived from the sustained rise in investment in residential properties, while investment in

commercial properties remained relatively stable. In addition, the large amount of new supply in recent years

has slowed down the decontamination speed, and the GFA of commercial properties sold decreased from 0.6

million sq.m. to 0.3 million sq.m. between 2015 and 2020.

The promising economic development and increasing consumption capacity of residents could bring a

steady increase in real estate investment. The “Asian Games” (“亞洲運動會”) in 2022 is likely to effectively

promote the development of a series of industries and create millions of new jobs. The inflow of population

could also be attracted by the improvement of “Points-based HUKOU System” (“積分落戶制”), further

expanding the consumption and supporting the commercial market. Driven by the increased demand and

corresponding growth of supply in commercial properties, both average rent and vacancy rate of commercial

properties are anticipated to take positive progress. The table below sets out selected commercial property

market indicators of Hangzhou for the years indicated:

Commercial property market indicators of Hangzhou (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR

Real estate investment(RMB billion) 247.2 260.6 273.4 306.9 339.7 357.7* 7.7%

Investment in commercialproperties (RMB billion) 32.4 30.4 32.9 30.6 28.8 29.8* -1.7%

GFA of commercial propertiesunder construction(million sq.m.) 13.2 N/A 14.9 14.6 14.3 15.3 3.0%

GFA of commercial propertiessold (million sq.m.) 0.6 N/A 1.7 1.6 1.0 0.3 -12.3%


Source: Hangzhou Statistical Yearbook (2016-2020), Bureau of Statistics of Hangzhou, CREISNote: * is calculated based on the growth rate.



– V-21 –

Lin’an is the only district in Hangzhou with no purchase restrictions on residential properties, attracting

non-residents and new residents of Hangzhou to purchase apartments. The inflow of population has enlarged

the consumption demand, promoting the rapid development of the commercial market in Lin’an. From 2015

to 2020, real estate investment surged at a CAGR of 30.9%, and investment in commercial properties also

demonstrated rapid growth, further promoting the development of commercial properties. The table below

sets out selected commercial property market indicators of Lin’an for the years indicated:

Commercial property market indicators of Lin’an (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR


Investment in commercialproperties (RMB billion) 0.6 0.6 0.9 1.3 1.5 N/A N/A

Source: Hangzhou Statistical Yearbook (2016-2020), Bureau of Statistics of Hangzhou


Since 2014 Hangzhou has launched several restriction policies on commercial properties, targeting at

transforming traditional commercial circles of retail, encouraging community-based business and improving

the quality of new retail development.

In 2014 Hangzhou Development and Reform Commission (杭州市發展和改革委員會) proposed the

“Four Batches” (四個一批) restriction policies on commercial properties. It states that the construction of

commercial properties should return to rationality and move towards the layout optimization. In particular,

Hangzhou will suspend the development of new large-scale commercial properties in the north and east of the

city, while put great emphasis on the development of community-based commercial properties in Binjiang

and Xiasha. This policy aims to transform the traditional commercial circle of retail to community-based

business and prevent the possible emergence of commercial real estate bubble.

In 2018 Hangzhou Bureau of Planning and Natural Resources (杭州市規劃和自然資源局) released “the

Letter of Adding Restrictions on Quasi Residence to the Sale of Proposed Business Land Planning

Conditions” (《關於擬出讓商業商務用地規劃條件增加類住宅限制要求的函》). The letter states that if the

planning conditions do not explicitly allow the construction of hotel-style apartments or other types of

“quasi-residence” (類住宅), the developers should not construct apartment-style offices, hotel-style offices

or other housing with residential functions, and the minimum property division should be greater than 300

sq.m.

At the end of 2019, Hangzhou Municipal Government issued “Five-Year Action Plan for New Retail

Development in Hangzhou (2019-2023)” (《杭州市新零售發展五年行動計劃（2019-2023年）》). The action

plan aims to build a “New Retail Demonstration City” (新零售示範之城), which takes Wulin-Hubin-Wushan

and Qianjiang New City-Qianjiang Century City business circles as the core, surrounded by key commercial

districts and large-scale commercial complexes. It may promote commercial innovation and upgrading and

considerably improve the quality of new retail development in Hangzhou.



– V-22 –

Suqian

Overview

Suqian is a prefecture-level city located in the north of Jiangsu Province, occupying a total land area of8,555 sq.km. with a permanent population of 5.0 million at the end of 2020. It is adjacent to Xuzhou to thenorth-west, Lianyungang to the north-east, and borders Anhui Province to the west. Suqian is a member cityof the Yangtze River Delta Urban Agglomeration. The abundant natural resources of Suqian have stronglysupported the development of the food and beverage, textile and clothing, new materials, mechanical andelectrical equipment industries.

Economic Overview

With solid industrial foundations, Suqian has experienced rapid economic development during the pastfew years. The nominal GDP increased rapidly from RMB212.6 billion in 2015 to RMB326.2 billion in 2020with a CAGR of 8.9%, and the GDP is estimated to increase at a CAGR of 7.5% between 2021 and 2025.From 2015 to 2020, per capita disposable income of urban households grew from RMB22,233 toRMB32,015. Total retail sales of consumer goods increased rapidly from RMB62.7 billion to RMB125.8billion at a CAGR of 15.0% between 2015 and 2020. Additionally, driven by the constant growth of industrialinvestment, fixed asset investment showed an upward trend, reaching RMB145.9 billion in 2020.

According to the Fourteenth Five-Year Plan (十四五規劃) and the Report on the Work of theGovernment (2021) (2021政府工作報告) of Suqian Municipal Government, the real GDP growth rate isestimated to exceed 7.5% by the end of 2021 and level off at 6.5% for the upcoming years. The growth rate oftotal retail sales of consumer goods and fixed asset investment is anticipated to reach 6.0% and 7.0%respectively in the coming years. Suqian aims to build as an advanced manufacturing base in the YangtzeRiver Delta by the end of 2023. The table below sets out selected economic indicators relating to Suqian forthe years indicated:

Selected economic indicators of Suqian (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR

Permanent Population (million) 4.9 4.9 4.9 4.9 4.9 5.0 0.5%Nominal GDP (RMB billion) 212.6 237.5 261.1 286.5 308.4 326.2 8.9%Real GDP growth rate (%) 10.0 9.1 7.5 6.8 6.9 4.5 N/ACPI**** 101.6 102.0 101.9 102.1 103.1 102.4 102.2*Total retail sales of consumer



(RMB billion) 183.9 206.0 219.4 137.1 145.8 145.9** -4.5%***Actual utilization of foreign


Source: Suqian Statistical Yearbook (2016-2020), Bureau of Statistics of Suqian; Jiangsu Statistical Yearbook (2016-2020),

Bureau of Statistics of Jiangsu

Note: * is the arithmetic mean. ** is calculated based on the growth rate. *** The negative CAGR is mainly due to the reform ofthe statistical method in 2018. **** Preceding year = 100.



– V-23 –

Estimation of selected economic indicators in Suqian (2021-2025)

2021 2022 2023 2024 20252021-2025

CAGR

Nominal GDP (RMB billion) 362.0 396.0 426.0 456.0 483.0 7.5%Real GDP growth rate (%) 9.8 6.0 5.9 5.7 5.6 N/APer capita disposable income of




In the past few years, Suqian has undergone industrial transformation and upgrading, leading to a

temporary cool down in the local commercial market. The real estate investment increased slightly from

RMB36.3 billion in 2015 to RMB36.8 billion in 2020 at a CAGR of 0.3%. Meanwhile, investment in

commercial properties displayed a downward trend from 2015 to 2019, increasing to RMB2.6 billion in 2020.

The GFA of commercial properties sold was doubled from 2015 to 2020 with a CAGR of 11.5%.

With abundant natural resources and solid industrial foundation, Suqian is as an advanced

manufacturing base in the Yangtze River Delta. In the future, the strengthened industrial agglomeration effect

may continue to accelerate the economic growth in the city. Suqian is also planning to integrate with Xuzhou

Metropolitan Circle (徐州都市圈), which will further promote consumption upgrading and attract more retail

brands. The table below sets out selected commercial property market indicators of Suqian for the years

indicated:

Commercial property market indicators of Suqian (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR




GFA of commercial propertiessold (million sq.m.) 0.4 0.5 0.7 0.4 0.6 0.8 11.5%


Source: Suqian Statistical Yearbook (2016-2020), Bureau of Statistics of Suqian, Jiangsu Statistical Yearbook (2016-2020),

Bureau of Statistics of Jiangsu, CREIS



– V-24 –


In recent years Suqian has issued several policies to encourage the development of the service industry,

especially traditional retail, culture and tourism, which may promote the development of core business areas

and the improvement of commercial properties.

In January 2019, Suqian Municipal Government released “Several Policy Measures to Support the

Development of the Service Industry” (《支持服務業發展的若干政策措施》), pursuant to which the

construction of core commercial areas are supported. In particular, the government offers decoration subsidy

of RMB200,000 for newly introduced well-known domestic and foreign retail brands, subsidy of

RMB300,000 for commercial complexes reaching RMB1 billion sales revenue in the first time, and subsidy

of RMB100,000 for newly introduced famous commercial enterprise with GFA over 1,000 sq.m. in the core

business districts of West Lake Road.

In July 2020, Suqian Municipal Government published the “Notice on Promoting the Cultural and

Tourism Consumption” (《關於促進文化和旅遊消費若干措施的通知》), with the aim of stimulating the

potential consumption in culture and tourism. Based on this document, Suqian will proactively promote the

construction of business centers in the core district, build characteristic towns in the counties and take

measures to boost the commercial economy.

Yancheng

Overview

Yancheng is a prefecture-level city located in the central coastal area of Jiangsu Province, and is

regarded as one of the core cities of the Yangtze River Delta Urban Agglomeration. It occupies a total land

area of 16,931 sq.km., bordering Nantong and Taizhou to the south, Huai’an and Yangzhou to the west. By the

end of 2020, the permanent population of Yancheng was 6.7 million. It is one of the central cities in the

Yellow Sea Eco-Economic Circle (環黃海經濟圈) and plays an important role in the development of Marine

Economy Strategy (海洋經濟戰略) in Jiangsu Province. The pillar industries contain automobile, steel, new

energy and electronic information.

Economic Overview

In recent years, driven by the healthy development of pillar industries, Yancheng has experienced

continuous economic growth. The nominal GDP grew steadily from RMB418.2 billion in 2015 to RMB595.3

billion RMB in 2020 at a CAGR of 7.3%, and the GDP is estimated to grow at a CAGR of 6.6% from 2021 to

2025. Per capita disposable income of urban households demonstrated an upward trend, increasing from

RMB28,200 in 2015 to RMB40,403 in 2020 at a CAGR of 7.5%. Similarly, total retail sales of consumer

goods reached RMB221.6 billion in 2020, with a CAGR of 8.6% from 2015 to 2020. In addition, the

development of high technology manufacturing industry and construction of infrastructure contributed to the

growth in fixed asset investment, which rose from RMB337.3 billion in 2015 to RMB454.7 billion in 2020

with a CAGR of 6.2%.



– V-25 –

According to the Fourteenth Five-Year Plan (十四五規劃) of the Yancheng Municipal Government, the real

GDP growth rate is estimated to exceed 6% per year from 2021 to 2025. By the end of 2025, the high-tech industry

could potentially account for 45% of the total output in industries above a certain scale. In the future, Yancheng is

planning to become a model city of bilateral interaction between Northeast Asia Economic Circle (東北亞經濟圈) and Yangtze River Delta Economic Circle (長三角經濟圈). The table below sets out selected economic indicators

relating to Yancheng for the years indicated:

Selected economic indicators of Yancheng (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR

Permanent Population (million) 7.2 7.2 7.2 7.2 7.2 6.7 -1.5%Nominal GDP (RMB billion) 418.2 454.7 499.0 538.7 570.2 595.3 7.3%Real GDP growth rate (%) 10.5 8.9 6.8 5.5 5.1 3.5 N/ACPI*** 101.6 102.1 101.7 101.9 103.3 102.3 102.2*Total retail sales of consumer





Source: Yancheng Statistical Yearbook (2016-2020), Bureau of Statistics of Yancheng; Jiangsu Statistical Yearbook (2016-2020),

Bureau of Statistics of Jiangsu


Estimation of selected economic indicators in Yancheng (2021-2025)

2021 2022 2023 2024 20252021-2025

CAGR

Nominal GDP (RMB billion) 649.0 705.0 752.0 797.0 838.0 6.6%Real GDP growth rate (%) 7.6 5.0 4.9 4.7 4.6 N/ATotal retail sales of consumer






– V-26 –


Over the past few years, Yancheng has experienced steady growth in the economy and real estate market.

The real estate investment rose from RMB36.8 billion in 2015 to RMB51.7 billion in 2020 at a CAGR of

7.1%. Investment in commercial properties decreased from RMB6.3 billion in 2015 to RMB5.6 billion in

2020. Additionally, the GFA of commercial properties sold increased smoothly from 2015 to 2020, reaching

0.7 million sq.m in 2020.

Yancheng is targeting to build as “an International Cooperation Demonstration Area of China and South

Korea” (中韓國際合作示範區), attracting investment from South Korea and stimulate the commercial

business development in the region. Yancheng also aims to take advantage of wetland resources and develop

as an international eco-tourism city. The flourishing tourism economy is going to support economic growth

and generate demand for commercial properties. The table below sets out selected commercial property

market indicators of Yancheng for the years indicated:

Commercial property market indicators of Yancheng (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR



GFA of commercial propertiesunder construction(million sq.m.) 4.5 N/A 4.0 3.8 4.1 4.1 -1.8%

GFA of commercial propertiessold (million sq.m.) 0.6 N/A 0.7 0.7 0.7 0.7 2.2%


Source: Yancheng Statistical Yearbook (2016-2020), Bureau of Statistics of Yancheng, Jiangsu Statistical Yearbook (2016-2020),

Bureau of Statistics of Jiangsu, CREIS



– V-27 –

Overview of the Real Estate Market Policies

In recent years Yancheng has published several policies to promote the commercial market by attracting

investment, stimulating tourism consumption and regulating the supply of commercial land.

In May 2017, Yancheng Municipal Government issued “the Implementation Opinions on the Creation

and Cultivation of Characteristic Small Towns” (《關於培育創建特色小鎮的實施意見》), which focuses on

creating industrial towns and tourism towns. The government will formulate supporting measures in order to

attract central enterprises, private enterprises, foreign capital and other types of entities to invest in the

construction of small towns. In addition, a series of key industrial projects will be constructed, which could

facilitate the tourism consumption, further promoting the development of commercial market.

In July 2018, Yancheng Municipal Government released “Opinions on Further Strengthening the

Concession and Reservation of Urban Land” (《關於進一步加強市區土地出讓與儲備工作的意見》),

pointing out that the commercial land should not set restrictions with exclusivity, uniqueness or tailor-made

for bidders that affect fair competition. The just and favourable business environment could also assist the

development of local commercial market.

Qingdao

Overview

Qingdao is one of the major port cities located in eastern China and faces Yellow Sea (黃海) to the east.

It occupies a total land area of 11,064 sq.km. with 10.1 million permanent population at the end of 2020.

Qingdao is featured for its marine industry and tourism in the north of the PRC. It is also the economic center

of Shandong Province as well as an important node in the Bohai Economic Rim (環渤海經濟區) and the

Economic Corridor of New Eurasia Continental Bridge (新亞歐大陸橋經濟走廊).

Economic Overview

As one of the earliest coastal open cities in the PRC, Qingdao has developed as an International

Shipping Hub (國際航運樞紐) through industrial transformation and economic upgrade in recent years. Its

nominal GDP grew continuously from RMB865.9 billion in 2015 to RMB1,240.1 billion in 2020,

representing a CAGR of 7.4%, ranking the top city in terms of economic performance in Shandong Province,

and from 2021 to 2025, the nominal GDP is estimated to increase at a CAGR of 7.4%. Between 2015 and

2020, total retail sales of consumer goods rose from RMB354.8 billion to RMB520.4 billion at a CAGR of

8.0%, and per capita disposable income of urban households increased from RMB40,370 to RMB55,905 with

a CAGR of 6.7%, demonstrating gradually enhanced consumption power of urban households. A solid

economic foundation for development has encouraged the fixed asset investment to ascend from RMB655.6

billion in 2015 to RMB1,053.0 billion in 2020 at a CAGR of 9.9%.



– V-28 –

According to the Fourteenth Five-Year Plan (十四五規劃) of Qingdao Municipal Government, the city aims

to develop as the National Central City (國家中心城市) and the Global Maritime Central City (全球海洋中心城市). From 2021 to 2025, its real GDP growth rate is predicted to increase at around 7.0% annually. With favorable

policies and restructured industries, Qingdao could obtain a stable and promising economic growth in the

following years. The table below sets out selected economic indicators relating to Qingdao for the years indicated:

Selected economic indicators of Qingdao (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR

Permanent Population (million) 9.1 9.2 9.3 9.4 9.5 10.1 2.0%Nominal GDP (RMB billion) 865.9 928.3 1,013.7 1,094.9 1,174.1 1,240.1 7.4%Real GDP growth rate (%) 7.9 7.7 7.4 7.3 6.5 3.7 N/ACPI*** 101.2 102.5 102.0 102.1 103.3 102.4 102.3*Total retail sales of consumer



(RMB billion) 655.6 745.5 777.7 839.1** 1,020.4** 1,053.0** 9.9%Actual utilization of foreign

direct investment (USD billion) 6.7 7.0 7.7 8.7 5.8 5.9 -2.7%

Source: Qingdao Statistical Yearbook (2016-2020), Bureau of Statistics of QingdaoNote: * is the arithmetic mean. ** is calculated based on the growth rate. *** Preceding year = 100.

Estimation of selected economic indicators in Qingdao (2021-2025)

2021 2022 2023 2024 20252021-2025

CAGR







– V-29 –

Jiaozhou, a county of Qingdao, is one of the Top 100 Counties in China (全國百強縣) that has achieved

solid economic performance in recent years. The nominal GDP in Jiaozhou increased significantly from

RMB98.1 billion in 2015 to RMB122.6 billion in 2020, representing a CAGR of 4.6%. Meanwhile, total retail

sales of consumer goods grew dramatically from RMB32.9 billion to RMB56.8 billion with a CAGR of

11.5%, and per capita disposable income of urban households rose from RMB35,877 to RMB49,290 at a

CAGR of 6.6%. The fast-growing economy has facilitated the fixed asset investment to rise from RMB89.8

billion in 2015 to RMB145.2 billion in 2020, representing a CAGR of 10.1%. The table below sets out

selected economic indicators relating to Jiaozhou for the years indicated:

Selected economic indicators of Jiaozhou (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR

Permanent Population (million) 0.8 0.8 0.8 0.9 0.9 N/A N/ANominal GDP (RMB billion) 98.1 103.6 113.7 121.1 114.8 122.6 4.6%Real GDP growth rate (%) 9.3 9.1 9.2 8.0 7.9 5.5 N/ATotal retail sales of consumer





Source: Jiaozhou Statistical Yearbook (2016-2020), Bureau of Statistics of JiaozhouNote: * is calculated based on the growth rate.


Empowered by the steady economic growth and increasing purchasing power, Qingdao has witnessed

rapid development in commercial market in recent years. The real estate investment increased from

RMB112.2 billion in 2015 to RMB204.5 billion in 2020 with a CAGR of 12.8%. Nevertheless, under the

influence of online shopping, the commercial market underperformed in recent years, while

community-based commercial properties may provide new growth opportunity in the future.



– V-30 –

As the largest economic entity in Shandong Province, Qingdao will probably contribute to the commercial

market prosperity in the future. Also, with the plan of establishing as the International Consumption Central City

(國際消費中心城市), Qingdao is likely to attract increasing consumption to promote the development of the

commercial market. The table below sets out selected commercial property market indicators of Qingdao for the

years indicated:

Commercial property market indicators of Qingdao (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR



GFA of commercial propertiesunder construction (millionsq.m.) 10.9 10.5 10.9 10.5 10.2 9.1 -3.5%

GFA of commercial propertiessold (million sq.m.) 0.9 0.8 1.3 1.2 0.9 0.5 -11.9%


Source: Qingdao Statistical Yearbook (2016-2020), Bureau of Statistics of Qingdao, CREIS

Jiaozhou has experienced prosperity in commercial market in the past few years. The real estate

investment soared from RMB3.5 billion in 2015 to RMB25.5 billion in 2020, representing a prominent CAGR

of 48.7%. The table below sets out selected commercial property market indicators of Jiaozhou for the years

indicated:

Commercial property market indicators of Jiaozhou (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR


Source: Jiaozhou Statistical Yearbook (2016-2020), Bureau of Statistics of Jiaozhou



– V-31 –


In recent years, Qingdao has put great efforts on the transformation and upgrade of commercial

properties, as well as the internalization of the commercial market, which may facilitate steady development

of commercial properties and establishment of a well-regulated commercial market in Qingdao.

On 27th July 2018, Qingdao Municipal Government introduced the “Guidebook for Cases of Promoting

the Implementation of the International City Strategy “Internationalization +” Action Plan in Qingdao

(2018-2019)” (《青島市推進實施國際城市戰略“國際化+”行動計畫對標案例指導手冊（2018-2019）》),

aiming at the internationalization of the commercial market. The Guidebook made references to several

outstanding commercial models in developed cities to assist Qingdao in constructing as a district for

comprehensive smart consumption.

On 31st December 2020, Qingdao Municipal Bureau of Commerce issued the “Qingdao Commercial

Network Specialized Plan (2020-2035)” (《青島市商業網點專項規劃（2020-2035年）》), which introduced

the plan for Qingdao commercial market in the future. It laid out a construction guidance for newly-built

commercial properties, and could also help to accelerate the transformation and upgrade of existing

commercial properties in Qingdao.

Quanzhou

Overview

Quanzhou is one of the regional hubs located in the southeast of the PRC, with Fuzhou to the north,

Xiamen to the south and Taiwan Strait to the east. It occupies a total land area of 11,015 sq.km. with

population of approximately 8.7 million by the end of 2019. Quanzhou is known as the starting point of the

Maritime Silk Road (海上絲綢之路) and well-recognized for its mechanical manufacturing industry in Fujian

Province. It is also one of the central cities in Urban Agglomeration on the West Side of Taiwan Straits.

Economic Overview

The focus on manufacturing industry in these years has enabled Quanzhou to achieve prosperous

economic development. The nominal GDP increased from RMB632.1 billion in 2015 to RMB1,015.9 billion

in 2020 at a CAGR of 10.0%, ranking first among all cities in Fujian Province, and the GDP is estimated to

grow at a CAGR of 7.8% from 2021 to 2025. Between 2015 and 2020, total retail sales of consumer goods

grew from RMB335.9 billion to RMB522.9 billion with a CAGR of 9.3%, and per capita disposable income

of urban households rose from RMB37,275 to RMB50,968, indicating a steady growth of purchasing power.

Benefiting from the stable economic growth, the fixed asset investment increased from RMB347.8 billion in

2015 to RMB488.6 billion in 2020 with a CAGR of 7.0%.



– V-32 –

According to the Fourteenth Five-Year Plan (十四五規劃) of Quanzhou Municipal Government, Quanzhou

will develop as a Famous Maritime Silk Road City (海絲名城) and Manufacture-dominant City (製造強市). By the

end of 2025, its nominal GDP is anticipated to reach approximately RMB1,500 billion. Quanzhou Municipal

Government will also endeavor to establish the Free Trade Zone Quanzhou Area (自由貿易區泉州片區). Under a

series of favorable policies, Quanzhou has great potential to achieve steady growth in the future. The table below

sets out selected economic indicators relating to Quanzhou for the years indicated:

Selected economic indicators of Quanzhou (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR

Permanent Population (million) 8.5 8.6 8.7 8.7 8.7 N/A N/ANominal GDP (RMB billion) 632.1 692.1 794.0 901.9 994.7 1,015.9 10.0%Real GDP growth rate (%) 8.8 8.0 8.4 8.9 8.0 2.9 N/ACPI*** 101.8 101.7 101.1 101.5 102.3 102.5 101.8*Total retail sales of consumer





Source: Quanzhou Statistical Yearbook (2016-2020), Bureau of Statistics of QuanzhouNotes: * is the arithmetic mean. ** is calculated based on the growth rate. *** Preceding year = 100.

Estimation of selected economic indicators in Quanzhou (2021-2025)

2021 2022 2023 2024 20252021-2025

CAGR







– V-33 –

Being a county of Quanzhou, Anxi is listed in the National Top 100 Counties and has achieved a steady

economic performance during previous years. The nominal GDP of Anxi rose from RMB42.4 billion in 2015

to RMB74.8 billion in 2020, representing a CAGR of 12.0%. Meanwhile, total retail sales of consumer goods

increased from RMB20.5 billion to RMB56.8 billion, and per capita disposable income of urban households

grew dramatically from RMB25,320 to RMB35,548. Along with the rapid economic growth, the fixed asset

investment increased from RMB29.3 billion in 2015 to RMB44.2 billion in 2020 at a CAGR of 8.5%. The

table below sets out selected economic indicators relating to Anxi for the years indicated:

Selected economic indicators of Anxi (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR

Permanent Population (million) 1.01 1.01 1.02 1.03 1.03 N/A N/ANominal GDP (RMB billion) 42.4 46.6 51.5 57.4 73.1 74.8 12.0%Real GDP growth rate (%) 8.0 8.0 8.9 8.9 7.9 3.3 N/ACPI** 101.8 101.1 101.1 N/A N/A N/A N/ATotal retail sales of consumer





Source: Anxi Statistical Bulletin (2016-2020), Bureau of Statistics of AnxiNote: * is calculated based on the growth rate. ** Preceding year = 100.


Due to outstanding economic performance, Quanzhou commercial market has experienced positive

development in recent years. The real estate investment increased from RMB68.2 billion in 2015 to RMB96.3

billion in 2020 with a CAGR of 7.2%, while the investment in commercial properties witnessed a decline

from RMB10.8 billion in 2015 to RMB6.7 billion in 2020. From 2015 to 2020, both GFA of commercial

properties sold and completed rose significantly and reached 1.2 million sq.m. and 0.7 million sq.m.,

representing CAGRs of 8.5% and 8.3% respectively.



– V-34 –

As the largest GDP entity in Fujian Province, the real estate market in Quanzhou is likely to achieve rapid

growth in the future. Meanwhile, the plan of establishing the National Culture and Tourism Consumption Pilot

City (國家文化和旅遊消費試點城市) lays a strong foundation for the local commercial development. The table

below sets out selected commercial property market indicators of Quanzhou for the years indicated:

Commercial property market indicators of Quanzhou (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR



GFA of commercial propertiesunder construction (millionsq.m.) 8.4 8.3 8.0 7.7 7.2 6.3 -5.6%



Source: Quanzhou Statistical Yearbook (2016-2020), Bureau of Statistics of Quanzhou, CREIS

Driven by the economic achievements, Anxi has formed a steady-growing commercial market. The real estate

investment increased drastically from RMB6.2 billion in 2015 to RMB12.5 billion in 2020 with a CAGR of 15.0%,

and the investment in commercial properties reached RMB0.9 billion in 2020. The economic performance of Anxi

is forecasted to invigorate the local commercial market in the future. The table below sets out selected commercial

property market indicators of Anxi for the years indicated:

Commercial property market indicators of Anxi (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR


Investment in commercialproperties (RMB billion) N/A N/A N/A 0.9 0.8 0.9 N/A

Source: Anxi Statistical Yearbook (2016-2020), Bureau of Statistics of Anxi



– V-35 –


In recent years, Quanzhou has introduced several measures to accelerate the development of

e-commerce and optimize the business environment, which may promote healthy development of commercial

properties and establish a well-functioning commercial market in Quanzhou.

On 8th May 2020, Quanzhou Municipal Bureau of Commerce introduced the “Measures to Accelerate

the Development of E-commerce in Quanzhou 2020-2021” (《2020-2021年泉州市加快推進電子商務發展若干措施》), which targets to encourage the development of cross-border e-commerce and the normalization of

e-commerce industry, thereby creating healthy environment for commercial market in Quanzhou.

On 8th February 2021, Quanzhou Municipal Government issued “Measures for Further Optimizing

Business Environment in Quanzhou” (《泉州市進一步優化營商環境的若干措施》), which disclosed a series

of measures to assist the development of enterprises. These measures include smart service for government

affairs, cross-regional business service, and the optimization of tax service.

Luoyang

Overview

Luoyang is a prefecture-level city and sub-central city located in the west part of Henan Province,

covering a total land area of 15,200 sq.km. with a permanent population of 7.1 million by the end of 2020. It

connects Zhengzhou to the east and Sanmenxia to the west. Luoyang is one of the core cities in Central Henan

Urban Agglomeration (中原城市群) because of its convenient location and solid industrial foundation. The

city is regarded as an important transportation hub in central and western China, and a “National-level

Demonstration Area of Industrial Transfer” (國家級產業轉移升級示範區).

Economic Overview

Along with the industrial development, Luoyang has experienced rapid economic growth in recent

years. The nominal GDP grew rapidly from RMB350.7 billion in 2015 to RMB512.8 billion in 2020 with a

CAGR of 7.9%, and the GDP is estimated to increase at a CAGR of 7.5% between 2021 and 2025. Per capita

disposable income of urban households maintained a constant growth, from RMB28,686 in 2015 to

RMB39,287 in 2020 at a CAGR of 6.5%. With the sustained growth in the economy and disposable income,

total retail sales of consumer goods displayed an upward trend, reaching RMB210.6 billion in 2020.

Additionally, the solid industrial foundation and outstanding scientific strength have led to significant growth

in fixed asset investment, from RMB357.7 billion to RMB590.6 billion between 2015 and 2020 at a CAGR of

10.5%.



– V-36 –

According to the Fourteenth Five-Year Plan (十四五規劃) and Report on the Work of the Government (2021)

(2021年政府工作報告) of Luoyang Municipal Government, the nominal GDP is anticipated to exceed RMB800

billion by the end of 2025. The city sets a target of becoming an advanced manufacturing base in the PRC, which

is anticipated to boost economic growth and accelerate the urbanization process. The table below sets out selected

economic indicators relating to Luoyang for the years indicated:

Selected economic indicators of Luoyang (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR




billion) 357.7 412.0 460.0 506.0** 557.7** 590.6** 10.5%Actual utilization of foreign


Source: Luoyang Statistical Yearbook (2016-2020), Bureau of Statistics of Luoyang; Henan Statistical Yearbook (2016-2020),

Bureau of Statistics of Henan


Estimation of selected economic indicators in Luoyang (2021-2025)

2021 2022 2023 2024 20252021-2025

CAGR






Supported by the constant economic growth, the real estate market in Luoyang maintained an upward

trend over the past years. The real estate investment grew from RMB33.4 billion to RMB44.8 billion,

representing a CAGR of 6.1% from 2015 to 2020. Investment in commercial properties fluctuated smoothly

and registered RMB4.4 billion in 2020. Meanwhile, the GFA of commercial properties sold grew rapidly

from 0.1 million sq.m to 0.5 million sq.m at a CAGR of 36.6%.



– V-37 –

With the economic development, Luoyang plans to build a “Cross-border E-commerce ComprehensivePilot Zone” (跨境電商綜合試驗區), which could attract e-commerce investment and form a flourishingcommercial market. The table below sets out selected commercial property market indicators of Luoyang forthe years indicated:

Commercial property market indicators of Luoyang (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR






Source: Luoyang Statistical Yearbook (2016-2020), Bureau of Statistics of Luoyang, Henan Statistical Yearbook (2016-2020),

Bureau of Statistics of Henan, CREIS

Overview of the Real Estate Market Policies

In recent years, Luoyang has accelerated the construction of intelligent business districts and stimulatedthe growth of e-commerce and express logistics, with the aim of stimulating consumption and promoting thehealthy development of commercial market.

In March 2019, Luoyang Municipal Government introduced “the Implementation Plan for Promotingthe Consumption Growth” (《進一步促進消費增長實施方案》), which speeds up efforts on establishingseveral intelligent business districts to stimulate consumption, as well as encourages enterprises to diversifybusiness models.

In June 2019, Luoyang Municipal Government published “the Implementation Plan for Promoting theCoordinated Development of E-commerce and Express Logistics” (《推進電子商務與快遞物流協同發展實施方案》). Based on this document, Luoyang is expected to build a Demonstration Zone of E-commerce andLogistic (電子商務快遞物流示範園區) to accelerate the e-commerce infrastructure construction andsimplify the process of e-commerce licenses.

Xinxiang

Overview

Xinxiang is an important central city in northern Henan, bordering with Zhengzhou, Kaifeng to thesouth, Hebi to the north, Jiaozuo and Shanxi Province to the west, and Shandong Province to the east. By theend of 2020, it has a total land area of 8,249 sq.km. and permanent population of 6.3 million. Xinxiang is animportant industrial city in Central Plain as well as one of the core cities in the Central Henan UrbanAgglomeration.



– V-38 –

Economic Overview

In the previous years, Xinxiang has achieved steady economic development from its pillar industries,including modern logistics, retail, tourism and finance. The nominal GDP of Xinxiang rose from RMB200.7billion in 2015 to RMB301.5 billion in 2020 representing a CAGR of 8.5%, and the GDP is estimated to growat a CAGR of 7.4% from 2021 to 2025. Between 2015 and 2020, total retail sales of consumer goodsincreased rapidly from RMB70.9 billion to RMB96.7 billion with a CAGR of 6.4%, and per capita disposableincome of urban households grew from RMB25,349 to RMB34,097. Thanks to the rapid economic increase,the fixed asset investment ascended from RMB196.5 billion in 2015 to RMB292.2 billion in 2020 at a CAGRof 8.3%.

According to the Suggestions for the Fourteenth Five-Year Plan (十四五規劃建議) of XinxiangMunicipal Government, Xinxiang aims to actively construct the International Land Port (國際陸港),including regular transportation of China-Europe Freight Trains (Xinxiang) (中歐班列(新鄉號)) andXinxiang-Japan-Korea International Rail-Sea Combined Freight Trains (新日韓鐵海聯運國際班列). Withthe supporting plan, the economy is anticipated to keep positive growth in the coming years. The table belowsets out selected economic indicators relating to Xinxiang for the years indicated:

Selected economic indicators of Xinxiang (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR




billion) 196.5 204.2 224.1 246.7** 274.6** 292.2** 8.3%Actual utilization of foreign


Source: Xinxiang Statistical Yearbook (2016-2020), Bureau of Statistics of XinxiangNotes: * is the arithmetic mean. ** is calculated based on the growth rate. *** Preceding year = 100.

Estimation of selected economic indicators in Xinxiang (2021-2025)

2021 2022 2023 2024 20252021-2025

CAGR







– V-39 –


Owing to the rapid economic growth, Xinxiang commercial market has experienced steady development

during the past few years. The real estate investment increased rapidly from RMB24.6 billion in 2015 to

RMB36.0 billion in 2020 at a CAGR of 7.9%, whereas the investment in commercial properties was reduced

to RMB1.2 billion in 2020. Moreover, GFA of commercial properties under construction grew slightly from

1.9 million sq.m. to 2.0 million sq.m., while both GFA of commercial properties sold and completed ascended

from 0.1 million sq.m. to 0.2 million sq.m., representing CAGRs of 13.7% and 7.3% respectively.

Along with the positive economic development, Xinxiang is likely to achieve continuous growth in the

real estate market. Also, Xinxiang targets to develop into one of the Consumption Central Cities in North

Henan (豫北地區消費型中心城市), which could accelerate the consumption upgrade and promote the

development of commercial market. The table below sets out selected commercial property market indicators

of Xinxiang for the years indicated:

Commercial property market indicators of Xinxiang (2015-2020)

2015 2016 2017 2018 2019 20202015-2020

CAGR






Source: Xinxiang Statistical Yearbook (2016-2020), Bureau of Statistics of Xinxiang, CREIS


In recent years Xinxiang has encouraged the development of e-commerce and service industries, so as to

facilitate the healthy development of commercial properties and construct a promising commercial market in

Xinxiang.

On 2nd June 2017, Xinxiang Municipal Government released “Several Opinions on Further

Accelerating the Development of E-commerce” (《關於進一步加快電子商務發展的若干意見》), which

encourages the innovation of e-commerce and the construction of e-commerce industry cluster to create an

ideal environment for the rising e-commerce market in Xinxiang.



– V-40 –

On 27th July 2018, Xinxiang Municipal Government introduced “Several Opinions on Encouraging

Xinxiang Entrepreneurs to Return Back, Startup Business and Facilitate Innovation Development” (《關於鼓勵新商回歸創業創新發展的若干意見》), aiming at attracting the migrant entrepreneurs to start their

business in Xinxiang. This policy encourages returning entrepreneurs to develop e-commerce and service

industries with rewarding measures.

5. COMPETITIVE LANDSCAPE AND MARKET POSITION

5.1. The Competitive Landscape of Real Estate Industry in PRC

Compared with the residential properties market, the commercial properties market in the PRC started

relatively late. As many developers construct commercial properties in the first and second-tier cities with sound

economic development and high consumption level, the competition in these areas are getting more intensive.

Nevertheless, third and fourth-tier cities in core urban agglomerations have also attracted developers who are

seeking new development opportunities in recent years. Although the market has become increasingly competitive,

the leading commercial real estate developers with capital advantages and sound operational management

capability are estimated to continue to expand their market shares.

After several years of development, the Group has become one of the leading commercial real estate

developers in the PRC. According to Top 100 Commercial Real Estate Developers in 2021 (2021年中國商業地產百強企業) released by CREIS, the Group ranked fourth in terms of comprehensive strength, operating capacity and

growth potential. The Group competes with five leading national and regional real estate developers in the aspects

of land acquisition capabilities, financial investment, brand recognition, product quality and customer services.

The table below sets out the ranking of the Group and its competitors in 2021:

The ranking of the Group and its competitors in 2021

Ranking123456

CompanyCompany ACompany BCompany CThe GroupCompany DCompany E

Source: CREISNote: Company A was incorporated in 1988, with its headquarter located in Dalian. Company B was incorporated in 2007, with its

headquarter located in Shanghai, and specializes in certain industry that differentiates from other companies. Company C was

incorporated in 1983, with its headquarter located in Shenzhen. Company D was incorporated in 1993, with its headquarter located

in Shanghai. Company E was incorporated in 1990, with its headquarter located in Nanjing.

Compared with its competitors, the Group has various product lines consisting of high-end shopping malls,

mid-range shopping malls, and community-based commercial centers to cater to the demand of different

customers. Powerlong Plaza, as the largest mid-range product of the Group in terms of volume, provides

convenience for people’s daily consumption and contributes to the development of the local consumption market.

Besides, the Group has a concentrated deployment in Shanghai, Jiangsu and Zhejiang provinces, and manages

several projects in high-capacity cities such as Shanghai, Ningbo, Hangzhou and Nanjing.



– V-41 –

5.2. Market Position of the Group

Powerlong Group was established in Macau in 1990, and after several years of development, its businesses

have expanded into different sectors containing residential properties, commercial properties, hotels, culture and

arts. Powerlong Real Estate Holdings Ltd has specialized in the development and operation of commercial

properties since 2003, and by the end of 2020 it has constructed 193 projects in more than 40 cities in the Yangtze

River Delta, the Greater Bay Area, the Bohai Economic Rim, the Western Taiwan Straits Economic Zone and other

regions. Powerlong Commercial Management Group began to provide commercial operation service in 2007. By

the end of 2020, it provides management services to 121 projects, among which 86 projects are based in the

Yangtze River Delta, accounting for 71% of the total projects.

According to EH Consulting (億瀚智庫), the Group was ranked 51st in 2020 in terms of contracted sales

(based on equity), and 44th in terms of the GFA sold of the real estate properties. Based on the 2020 Ranking of

Top 200 Real Estate Developers in the PRC (2020年中國房地產企業銷售榜TOP 200) issued by CRIC (克爾瑞),

the Group ascended to 51st in the aspect of contracted sales (based on equity). Additionally, the Group has honored

the China Top 100 Real Estate Developers (中國房地產開發企業100強) by CREIS for 15 consecutive years, and

the Top 10 Brands of China Commercial Real Estate Developers (中國商業地產企業品牌價值10強) by China Real

Estate Industry Association (中國房地產業協會) for 10 consecutive years.

5.3. Competitive Advantages and Growth Drivers

The main advantages of the Group include but not limited to:

1) Top 100 real estate company and high brand awareness

Established in 1990, the Group has expanded its business into residential real estate, commercial real

estate, hotel, culture and art, and has built high brand awareness across the PRC. Powerlong Real Estate

Holdings Ltd has been awarded with many authoritative honors, such as Top 100 Real Estate Developers and

Top 10 Brands of Commercial Real Estate Developers of the PRC. Powerlong Real Estate Holdings Ltd has

accumulated rich experience in commercial property development and management and its commercial

projects are well-known nationally.

2) Diversified layout in urban agglomerations with strong economic growth potentials

The Powerlong REIT has diversified commercial properties layout across several key economic

development areas in the PRC, included but not limited to the Yangtze River Delta Urban Agglomeration, the

Bohai Rim Urban Agglomeration, the Urban Agglomeration on the West Side of Taiwan Straits and the

Central Henan Urban Agglomeration. These urban agglomerations have benefited from rapid economic

growth and increase of per capita consumption level in recent years. Furthermore, the commercial properties

are mainly located in mature communities of key cities with a steady rise in consumption demand.

3) Robust organic growth of high-end shopping center

In addition to the advanced geographic location, the high-end shopping centers of Powerlong REIT

generate robust organic growth. Benefiting from the deployment of asset enhancement and operational

improvement measures, the rental income may achieve steady and improving growth, and the tenant base may

be more diversified so as to improve the occupancy rate.



– V-42 –

4) Stable and high-quality tenant base and cooperation with well-known brands

The commercial properties have stable, diversified and high-quality tenant base that ensures high

occupancy rates of commercial properties. Powerlong Commercial Management Group has built connections

with over 7,100 brands in various industries, from which more than 140 are the strategic partners. Benefited

from the stable tenant base and sound tenant management system, the commercial properties have maintained

high occupancy rate. Additionally, some tenant brands choose to cooperate with the Group to open their first

stores in the region, further expanding the brand awareness of the Group and stimulating the consumption

demand.

5) Reliable investment strategy

The Powerlong REIT has continuously tracked high-quality commercial properties in the PRC and

sought for investment opportunities. It conducts comprehensive research considering a series of factors,

included but not limited to geographic location, growth potential, occupancy rate, tenant base and facilities.

The target commercial properties should provide attractive long-term cash flows and returns. Besides, as one

of the leading real estate developers in the Yangtze River Delta, the Group offers priority to commercial

projects that locate in the Yangtze River Delta or new Tier 1 and 2 cities with high development potentials.



– V-43 –

LIMITING CONDITIONS

This report is for the use of the party to whom it is addressed only and no liability accepted to any third party

for the whole or any part of its contents. It may not be reproduced, either in whole or in part, nor altered in any way,

without the prior written permission of Jones Lang LaSalle Corporate Appraisal and Advisory Limited (“JLL”).

The information and analysis in this report should be regarded solely as a general guide instead of a formal

valuation for any land or property interest. It must not be used as part of such contents.

The information contained in this report has been obtained from a variety of sources generally regarded to be

reliable and is considered to be reasonable at the time of undertaking this research. Whilst care has been taken in

its preparation, no representation is made, or responsibility accepted by JLL, in respect of the accuracy or

timeliness of the whole or any part. Potential investors or developers are encouraged to carry out their own

assessment of market potentials or project feasibility.

We stressed again that forecasting future sales prices, development and investment returns and development

viability is a problematic exercise which at best should be regarded as an indicative assessment of possibilities

rather than values with absolute certainties. The process of marking forward projections involves assumptions

which are acutely sensitive to changing conditions, variations in any one of which factors may significantly affect

the viability of a project and we draw your attention to this factor. Such conditions external events include but are

not restricted to new laws or government regulations, changes of company strategies or policies, innovations of

social economic and policies, and other important incidents which have influence on the market.

JLL should not be required to give testimony or attendance in court or to any government agency due to the

conclusions on the referenced property, unless prior arrangements have been made. JLL also does not accept any

liability in negligence of otherwise for any loss or damage suffered by any party resulting from reliance on this

report other than as specified in the contract of engagement.



– V-44 –

The following is the text of a letter, summary of building survey report prepared for the purpose ofincorporation in this document received from Savills Project Consultancy Limited, an independent buildingsurveyor, in connection with its building survey as the property interests of the Company.


DB Trustees (Hong Kong) LimitedLevel 60, International Commerce Centre1 Austin Road WestKowloonHong Kong

CLSA Capital Markets Limited18/F, One Pacific Place88 QueenswayHong Kong


Dear Sirs

Building Condition Survey of Fengxian Powerlong Plaza, SuQian Powerlong Plaza, Yancheng PowerlongPlaza, Jiaozhou Powerlong Plaza, Luoyang Powerlong Plaza, Xinxiang Powerlong Plaza, Lin’An PowerlongPlaza, An’Xi Powerlong Plaza

BUILDING SURVEY SUMMARY

1. Introduction

Savills Property Services (Shanghai) Co., Ltd was appointed as the Building Consultant to conduct a duediligence review of the following properties (hereinafter referred to as “The Properties”

1. Fengxian Powerlong Plaza2. SuQian Powerlong Plaza3. Yancheng Powerlong Plaza4. Jiaozhou Powerlong Plaza


APPENDIX VI LETTER FROM THE BUILDING SURVEYORIN RELATION TO ITS BUILDING SURVEYOR REPORT

– VI-1 –

5. Luoyang Powerlong Plaza6. XinXiang Powerlong Plaza7. Lin’An Powerlong Plaza8. An’Xi Powerlong Plaza

This Letter provides a summary of our approach and findings. In our role as the building consultant, we:

1. Conducted comprehensive building and building services condition survey of the Properties by visualinspection between 1 March 2021 and 15 March 2021 to confirm the structural integrity of theProperties and identify any existing major defects. Major building elements in accessible common areasof the Properties, including building facade, units, external areas, roofs, corridors, lavatories, plantrooms etc. Major building services installations including mechanical ventilation, air-conditioning, fireservices, plumbing & drainage, electricity, lifts and escalators.

2. Compiled 10-Year Forecasts of Repair, Maintenance and Capital Expenditure of the Properties, and

3. Carried out inspection of current building layout and usage, comparing our findings against the latestgeneral building plans approved by Government to identify any additional structure, existing orpotential hazards, and deviations in respect of fire safety requirements and usage etc.

2. Conclusion

Based on our comprehensive building condition survey and re-inspection, we believe that the Properties werein reasonable condition, consistent with buildings of a similar age, type and usage and that there were no materialdefects that would affect the operation and usage of the Properties and impede the transfer of the Properties.

The repair, maintenance and capital expenditure forecasts were calculated on the basis of current local marketrates and therefore the future expenditure requirements are comparable with the amounts generally required forProperties of similar age and commercial usage profile.

No apparent structural defects such as differential settlement, structural movement or deflection wasidentified on the exposed structural elements at the time of inspection; the apparent absence of these circumstancesindicates that the Properties are structurally safe.

3. Survey Conducted

Comprehensive Building Condition Survey

The comprehensive building condition survey carried out on the Properties referred to above wasconducted by a Hong Kong Registered Professional Surveyor (Building Surveying) and included a review ofthe Properties, which covered their fabric, structure and building services installations, to verify their presentphysical condition

The comprehensive building condition survey comprised a visual inspection of the external facades,roofs and internal common areas to establish their overall condition and state of repair. Particular attentionwas paid to the existence of external & internal building fitout defects and building services defects.

The purpose of the building condition survey is to identify (a) structural soundness, (b) building layout,(c) building defects and (d) building services defects. Findings of the survey are as follows:

(a) Structural Soundness—No major structural defect was found.



– VI-2 –

(b) Building Layout—The following works were common deviations identified in the Properties from the

approved as-built drawings: i) Addition of kiosk at external areas; ii) Addition of covered space on roof

area as a store room. No obvious structural defects due to addition of the above structures were found.

(c) Building Defects—Overall condition of building elements of accessible common areas and units in

development were generally good except some defects such as cracks & seepages in ceiling, floor and

wall. No major building defects were found.

(d) Building Services Defects—Major building services installations including mechanical ventilation, air

conditioning, fire services, lifts, plumbing and drainage of the Property were generally in good

condition with minor defects such as damaged or worn-out insulation of condensing water pipes,

air-conditioning ducts, uncovered trunking system, rusty building service equipment structures,

un-conditioned power room and leaking valves & pipes.

10-Year Forecasts of Repair, Maintenance and Capital Expenditure

We prepared 10-Year Forecasts of Repair, Maintenance and Capital Expenditure for the Properties for

the 10 years ending at 2031, including the estimated costs of maintaining the Properties and associated

building services installations. The following methodologies were used in preparing the forecasts:

1. The existing condition of the Properties was developed through our site inspection on the defects

found.

2. Estimated routine annual maintenance costs were based on the available historical data provided

and our professional judgment in formulating appropriate maintenance schedules.

3. Estimated costs were based on current market rates, with an inflation rate allowed.

4. The estimated expenditure on repairs and maintenance was calculated on the basis of sufficient

work being carried out to maintain the existing standards of the Properties in good condition,

consistent with private sector maintenance practices.

Our 10-Year Forecasts of Repair, Maintenance and Capital Expenditure does not include routine daily repair

of consumables, maintenance of landscaping areas, any termed maintenance contract on routine maintenance (e.g.

lubricants for machinery), accidental damages/force majeure.

Category ofExpenditure 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031

(RMB’000)

Fengxian 362 357 462 427 397 474 417 462 456 425Suqian 1,236 1,162 1,180 1,648 1,225 1,337 1,341 1,636 1,411 1,515Yancheng 871 809 824 1,082 884 924 937 1,075 1,008 1,048Jiaozhou 454 503 498 687 565 537 570 719 604 615Luoyang 417 481 538 723 675 647 690 760 731 724Xinxiang 673 676 691 920 771 715 875 883 817 910An’xi 604 609 725 846 669 736 708 915 805 715Lin’an 828 672 803 1,017 752 827 944 921 919 964



– VI-3 –

The capital expenditure figures shown above include building and building services expenditure. Building

capital expenditure items include re-roofing, external wall refurbishment and internal area refurbishment etc.

Building services capital expenditure items include replacement of valves, pumps and major equipment etc.

4. Reports Delivered

Reports were prepared in relation to the Properties for which comprehensive building condition survey was

conducted and included:

– A detailed description of our findings

– An assessment of the structural soundness of the Properties

– Plans indicating the location of photographs taken

– Photographs of typical defects

– Estimated costs of recommended repairs/replacement

– List of outstanding items

We confirm that there is no major outstanding item that is material and would affect our opinion and

conclusion in the report.

5. Limiting Conditions

In preparing the report, we have relied on the information supplied by the Company such as the copy of record

plans, statutory certificates of completion, maintenance records, schematic diagrams, test certificates and

maintenance and capital expenditure records, which we have supplemented with interviews of staff, and

independently verified through physical site inspections and verifications. Where necessary, we have made

relevant enquiries and obtained such further information as we consider necessary to allow us to provide you with

this report. We have also conducted site inspections and meetings with the staff from the management companies.

We have carried out our inspection purely on a visual basis, without testing of any kind to the building fabric and

building services system. Parts of the building structure that were not visible without removal of wall finishes or

building fabric have not been inspected and no destructive testing has been carried out and we have not inspected

the areas which are inaccessible or covered up and we cannot accept any responsibility for the inaccessible areas,

concealed parts of the buildings and building services system. However, our visual inspection of the accessible

areas of the Properties did not reveal any defects that would lead us to require an immediate inspection of the

inaccessible or covered areas at the time of inspection.

Your SincerelyFor and on behalf of

Savills Project Consultancy LimitedWayne Chen

Director



– VI-4 –

Investors should note that the following statements are based on advice received by the REIT Managerregarding the relevant laws, regulations and practice in the PRC in force as at the date of this Circular andmay be subject to change.

REGULATIONS OF FOREIGN INVESTMENT INTO THE REAL ESTATE MARKET

Foreign investment into the PRC real estate market is legally permissible.

Since July 2006, foreign companies and individuals are no longer permitted to directly acquire and hold realestate in the PRC for investment purpose. Rather, a local PRC company, commonly referred to as foreign investedreal estate enterprise (“FIREE”), must be established to carry out real estate investment. This requirement wasestablished by the Opinions on Regulating the Access to and Administration of Foreign Investment in the RealEstate Market (關於規範房地產市場外資准入和管理的意見) jointly promulgated by the People’s Bank of China(“PBOC”), the State Administration for Foreign Exchange (“SAFE”) and other authorities on 11 July 2006,pursuant to which an overseas entity or individual investing in real estate in China other than for self-use, mustapply for the establishment of a foreign invested real estate enterprise in accordance with applicable PRC laws andshall only conduct operations within the authorised business scope after obtaining the relevant approvals from andregistering with the relevant governmental authorities.

FIREE is one type of foreign invested enterprise. It is subject to the same laws and regulations that generallyapply to the foreign invested enterprises in other industries. In addition, an FIREE is not permitted to borrowforeign debts, including borrowing from foreign shareholder or foreign bank. This industry-specific restriction onborrowing was established by the Circular on Further Strengthening and Regulating the Examination, Approval,and Supervision of Direct Investment in Real Estate by Foreign Investors (關於進一步加強、規範外商直接投資房地產業審批和監管的通知) jointly promulgated by the Ministry of Commerce (“MOFCOM”) and SAFE on 23May 2007 and the Circular of the State Administration of Foreign Exchange on Distributing the AdministrativeMeasures for Registration of Foreign Debts (國家外匯管理局關於發佈《外債登記管理辦法》的通知) promulgatedby SAFE and effective on 13 May 2013. Specifically, any FIREE established on or after 1 June 2007 is notpermitted to register foreign debts with SAFE and is therefore unable to borrow foreign debt, and any FIREEestablished before 1 June 2007 may still borrow foreign debt to the extent within and permitted by the differencebetween its total investment amount and registered capital after having satisfied certain statutory conditions.

Since October 2016, the formation, dissolution and major corporate change of an FIREE is no longer subjectto approval by the MOFCOM or its local counterparty. The approval has been replaced with a filing for recordal,unless the underlying real estate project is on the Special Administrative Measures for Access of ForeignInvestment (Negative List) (2020 Edition) (外商投資准入特別管理措施（負面清單）（2020年版）) jointlypromulgated by the National Development and Reform Commission and the MOFCOM on 23 June 2020. Mosttypes of real estate project are not on such list, including shopping malls.

THE LAND AND PROPERTY SYSTEM OF THE PRC

The Land System

All land in the PRC (also the “State”) is either state-owned or collectively-owned, depending on the locationof the land. All land in the urban areas is state-owned, and all land in the rural or suburban areas including land forhouses and private plots in fields and on hillsides are, unless otherwise prescribed by the state, collectively-owned.The State has the right to expropriate or take over land in accordance with law if required for the benefit of thepublic. Although all land in the PRC is owned by the State or by collectives, private individuals, enterprises and


APPENDIX VII OVERVIEW OF THE RELEVANT LAWS AND REGULATIONSIN THE PRC AND OF COMPARISON CERTAIN ASPECTS OF

ITS PROPERTY LAWS AND THE LAWS OF HONG KONG

– VII-1 –

other organisations are permitted to hold and develop land for which they are granted or allocated land use rights.Furthermore, those who obtain the State-owned land use rights by means of grant (出讓) or assignment (轉讓) canlease the aforementioned land use rights to a third party. In April 1988, the Constitution of the PRC (the“Constitution”) was amended by the PRC National People’s Congress to allow for the transfer of land use rightsfor value. In December 1988, the Land Administration Law (中華人民共和國土地管理法) of the PRC wasamended to permit the transfer of land use rights for value. Under the Provisional Regulations of the PRCConcerning the Grant and Assignment of the Right to Use State-owned Land in Urban Areas (中華人民共和國城鎮國有土地使用權出讓和轉讓暫行條例) (the “Urban Land Regulations”) promulgated in May 1990, localgovernments at or above county level have the power to grant land use rights for specific purposes and for adefinite period to a land user pursuant to a contract for the grant of land use rights upon payment of a land grantpremium. Under the Urban Land Regulations, there are different maximum periods of grant for different uses ofland. They are generally as follows:

Use of LandMaximum Period

(in years)

Commercial, tourism, entertainment 40Residential 70Industrial 50Educational, scientific, cultural, public health and sports 50Comprehensive utilisation or others 50

Under the Urban Land Regulations, all local and foreign enterprises are permitted to acquire land use rightsunless the law provides otherwise. The State may not expropriate possession of lawfully granted land use rightsprior to expiration of the term of grant. If public interest requires the expropriation of possession by the Stateunder special circumstances during the term of grant, compensation must be paid by the State. A land user maylawfully assign, mortgage or lease its land use rights to a third party, and such assignment, mortgage or lease willnot extend the remainder of the term of grant.

Upon expiration of the term of grant, renewal is possible subject to the application for renewal before theexpiry of the lease term and execution of a new contract for the grant of land use rights, payment of a premium orrelated usage fee. If the term of the grant is not renewed, the land use rights and ownership of any buildings thereonwill revert to the State without compensation.

The PRC Civil Code (民法典) (the “PRC Civil Code”) was promulgated by The National People’s Congressin May 2020 and was effective from 1 January 2021. According to the PRC Civil Code, when the term of the rightto use construction land for residential (but not other) purpose expires, it will be renewed automatically.

Grant of Land Use Rights

PRC law distinguishes between the ownership of land and the right to use land. Land use rights can be grantedby the State to a person to entitle him/her to the exclusive use of a piece of land for a specified purpose within aspecified term and on such other terms and conditions as may be prescribed. A land grant premium is payable onthe grant of land use rights. The maximum term that can be granted for the right to use a piece of land depends onthe purpose for which the land is used. As described above, the maximum limits specified in the relevantregulations vary from 40 to 70 years depending on the purpose for which the land is used.

Under the PRC law, there are four methods by which land use rights may be granted, namely by privateagreement, tender, auction or listing-for-sale.




– VII-2 –

On 11 June 2003, the Ministry of Land and Resources (which has been combined into the Ministry ofNational Resources as from March 2018) promulgated the Regulation on Grant of State-owned Land Use Rights byAgreement (協議出讓國有土地使用權規定), which became effective on 1 August 2003. According to suchregulation, if there is only one intended user on a piece of land, the land use rights (excluding land use rights usedfor business purposes, such as commercial, tourism, entertainment and commodity residential properties) may begranted by way of private agreement. The local land bureau at municipal or county level, together with otherrelevant government departments including the urban planning authority, will formulate the plan on grant ofstate-owned land use rights by private agreement (協議出讓方案) concerning issues including the specificlocation, boundary, purpose of use, area, term of grant, conditions of use, conditions for planning and designing,time of supply, and submit such plan as well as the proposed minimum price of land grant premium, which isdesignated by the group decision based on the valuation result, to the relevant government for approval. The localland bureau at municipal or county level and the intended user will negotiate the land grant premium which shallnot be lower than the minimum price approved by the relevant government and enter into the land grant contractbased on such plan. If two or more entities are interested in the land use rights proposed to be granted, such landuse rights shall be granted by way of tender, auction or listing-for-sale. Furthermore, according to the RulesRegarding the Grant of State-owned Construction Land Use Rights by Way of Tender, Auction and Listing-for-sale(招標拍賣掛牌出讓國有建設用地使用權規定) (the “Land Use Grant Rules”) which are effective from 1November 2007, land use rights for properties for industrial use, commercial use, tourism, entertainment andcommodity residential purposes can only be granted through tender, auction and listing-for-sale.

Where land use rights are granted by way of tender, tender announcement will be issued by the local landbureau at municipal or county level. The announcement will set out the terms and conditions as well as otherrelevant information upon which the land use rights are proposed to be granted. Representatives of the transferorand relevant experts will form a tender evaluation group to evaluate the tenders which have been submitted. Thetender evaluation group will review the tender documents in accordance with the tender evaluation standards andmethods determined in the tender documents. The successful bidder will then be asked to sign the grant contractwith the local land bureau at municipal or county level and pay the relevant land grant premium within a prescribedperiod.

Where land use rights are granted by way of auction, a public auction will be held by the relevant local landbureau at municipal or county level. The land use rights are granted to the bidder with the highest bid. Thesuccessful bidder will be asked to enter into a land grant contract with the local land bureau.

Where land use rights are granted by way of listing-for-sale, a public notice will be issued by the local landbureau at municipal or county level to specify the location, area and purpose of use of land and the initial biddingprice, period for receiving bids and terms and conditions upon which the land use rights are proposed to begranted. The land use rights are granted to the bidder with the highest bid and which satisfies the terms andconditions. The successful bidder will then enter into a grant contract with the local land bureau.

Upon signing of the contract for the grant of land use rights, the grantee is required to pay the land grantpremium pursuant to the terms of the contract, and the contract will later be submitted to the relevant local landbureau for the issue of the land use right certificate. The land use right certificate shall not be issued separatelyaccording to the proportion of the land transfer fee paid in the land transfer contract.

The Ministry of Land and Resources promulgated Notice on Problems Regarding Strengthening the Supplyand Regulation of Land Used for Real Estates Supply (關於加強房地產用地供應和監管有關問題的通知) (the“Notice on Land Supply”) on 8 March 2010. According to the Notice on Land Supply, the land provision foraffordable housing, redevelopment of shanty towns and small/medium residential units for self-residence purposeshould be no less than 70% of total land supply, and the land supply for large residential units will be strictly




– VII-3 –

controlled and land supply for villa projects will be banned. The Notice on Land Supply also requires that thelowest land grant premium shall be no less than 70% of the basic land grant premium in which the granted land islocated and the real estate developers’ bid deposit shall be no less than 20% of the lowest grant premium. The landgrant contract must be executed within 10 working days after the land transaction is confirmed. The minimumdown payment of the land grant premium shall be 50% and must be paid within one month after the execution ofthe land grant contract. The remaining land grant premium shall be paid in accordance with the contract, but nolater than one year. If the land grant contract is not executed in accordance with the requirement above, the landshall not be handed over and the deposit will not be returned. If no land grant premium is paid after the executionof the contract, the land will be taken back.

In September 2010, the Ministry of Land and Resources and the Ministry of Housing and Urban-RuralDevelopment jointly issued the Notice on Further Strengthening the Administration and Control of the Land-useand Construction of Real Estates (關於進一步加強房地產用地和建設管理調控的通知), which stipulates, amongother things, that the planning and construction conditions and land use standards shall be specified when a parcelof land is to be granted, and the restrictions on the area of one parcel of land granted for commodity residentialproperties shall be strictly implemented. The development and construction of large low-density residentialproperties shall be strictly restricted, and the floor area ratio for residential land is required to be more than 1. Inaddition, a property developer and its shareholders will be prohibited from participating in land bidding before anyillegal behaviours in which it engages, such as land idle for more than one year on its own reasons, have beencompletely rectified.

Transfer of Land Use Rights

After land use rights relating to a particular area of land have been granted by the State, unless any additionalrestriction is imposed, the party to whom such land use rights are granted may transfer, lease or mortgage such landuse rights after certain statutory conditions are met. The difference between a transfer and a lease is that a transferinvolves the vesting of the land use rights by the transferor in the transferee during the term for which such landuse rights are vested in the transferor. A lease, on the other hand, does not involve a transfer of such land use rightsby the lessor to the lessee. Furthermore, a lease, unlike a transfer, does not usually involve the payment of atransfer price. Instead, a rent is payable during the term of the lease. Land use rights cannot be transferred, leasedor mortgaged if the provisions of the grant contract, with respect to the prescribed period and conditions ofinvestment, development and use of the land, have not been complied with. In addition, different areas in the PRChave different conditions which must be fulfilled before the respective land use rights can be transferred, leased ormortgaged.

All transfers, mortgages and leases of land use rights must be evidenced by a written contract between theparties which must be registered with the relevant local land bureau at municipal or county level. Upon a transferof land use rights, all rights and obligations contained in the contract pursuant to which the land use rights wereoriginally granted by the State are assigned to the transferee automatically.

Under the Administration Law of Urban Real Property of the PRC (2019 revision) (中華人民共和國城市房地產管理法（2019年修訂）) (the “Urban Real Property Law”), if land use rights are acquired by means of grant, thereal property shall not be assigned before the following conditions have been met: (i) the land grant premium forthe grant of land use rights must have been paid in full in accordance with the land grant contract and a land useright certificate must have been obtained; (ii) investment or development must have been made or carried out inaccordance with terms of the land grant contract; (iii) where the investment or development involves housingconstruction projects, more than 25% of the total amount of investment or development must have been made orcompleted; (iv) where the investment or development involves a large tract of land, conditions for use of the landfor industrial or other construction purposes must have been satisfied; (v) where the real property is assigned witha completed building, the building ownership certificate is needed as well.




– VII-4 –

Documents of Title

In the PRC, interest in land or building is registered with and certified by the government. Land registrationis achieved by the issue of a land use right certificate (土地使用證) by the relevant authority to the land user. It isthe evidence that the land user has obtained land use rights which can be assigned, mortgaged or leased. Thebuilding registration is the issue of a building ownership certificate (房屋所有權證) or a real estate rightscertificate (房地產權證) to the owner. It is the evidence that the owner has obtained building ownership rights inrespect of the building erected on a piece of land. In the past, the registration systems for lands and buildings inmost cities were separate, and the names of the certificates were different. On 24 November 2014, the StateCouncil issued the Interim Regulations on Real Estate Registration (不動產登記暫行條例), which was furtherrevised on 24 March 2019, to consolidate the registration systems. As a result, local government is required toestablish a unified real estate registry to take charge of the registration of both lands and buildings, and thecertificate to be issued upon completion of a registration has been renamed to “real estate title certificate (不動產權證書)”. However, all the land use right certificates (土地使用證), building ownership certificates (房屋所有權證) and real estate rights certificates (房地產權證) issued before then should remain valid (land use rightcertificates (土地使用證), building ownership certificates (房屋所有權證), real estate rights certificates (房地產權證) and real estate title certificate (不動產權證書) are hereinafter referred to collectively as the “TitleCertificates” and individually as a “Title Certificate”).

According to the Land Registration Regulations (土地登記規則) (the “Registration Regulations”)promulgated by the State Land Administration Bureau (國家土地管理局), the predecessor of the Ministry of Landand Resources, on 28 December 1995 and the PRC Civil Code, all land use rights and building ownership rightswhich are duly registered are protected by the law.

Mortgage

The grant of mortgage in the PRC is governed by the PRC Civil Code and other relevant laws and regulationsregulating real estates. Under the PRC Civil Code, any mortgage contract must be in writing and generally containspecified provisions including (i) the type and amount of the principal indebtedness secured; (ii) the term of theobligation by the debtor; (iii) the name, quantity, etc.of or the right to use the mortgaged property; and (iv) thescope of the mortgage. For mortgages of urban real properties, new buildings on a piece of land constructed aftera mortgage contract has been entered into will not be subject to the mortgage.

The validity of a mortgage depends on the validity of the mortgage contract and registration of the mortgagewith authorities. If the loan in respect of which the mortgage was given is not duly repaid, the mortgagee may sellthe property to settle the outstanding amount and return the balance of the proceeds from the sale or auction of themortgaged property to the mortgagor. If the proceeds from the sale of such property are not sufficient to cover theoutstanding amount, the mortgagee may bring proceedings before a competent court or arbitration tribunal (wherethere is an agreement to recover the amount outstanding through arbitration) in the PRC.

The PRC Civil Code also contains comprehensive provisions dealing with guarantees. Under the PRC CivilCode, guarantees may be in two forms: (i) guarantees whereby the guarantor bears the liability when the debtorfails to perform the payment obligation; and (ii) guarantees with joint and several liability whereby the guarantorand debtor are jointly and severally liable for the payment obligation.

Lease

Both the Urban Land Regulations and the Urban Real Property Law permit leasing of granted land use rightsand buildings thereon. However, leasing of land use rights obtained by allocation (劃撥) and of buildings on suchallocated land is regulated by the Urban Land Regulations.




– VII-5 –

Leasing of urban real properties is also governed by the Administrative Measures for Leasing ofCommodity Housing (商品房屋租賃管理辦法) issued by the Ministry of Housing and Urban-RuralDevelopment in December 2010, which became effective on 1 February 2011. According to theAdministrative Measures for Leasing of Commodity Housing, landlords and tenants are required to enter intolease contracts which must contain specified provisions, the floor area per tenant may not be less than theminimum living space stipulated by the local government where the building is located, no kitchens,lavatories, balconies or basement storerooms should be rented out as residence, and the lease contract shouldbe registered with the relevant construction or property authorities at municipal or county level within 30days after its conclusion. If the lease contract is extended or terminated or if there is any change to theregistered items, the landlord and the tenant are required to effect alteration registration, extension ofregistration or deregistration with the relevant construction or property authorities within 30 days after theoccurrence of the alteration, extension or termination.

The PRC Civil Code provides among others, that the lease contract shall be in writing if its term is oversix months, and the term of any lease contract shall not exceed twenty years. During the lease term, anychange in the ownership of the leased property does not affect the validity of the lease contract. The tenantmay sub-let the leased property if it is agreed by the landlord and the lease contract between the landlord andthe tenant is still valid and binding.

When the landlord is to sell a leased property under a lease contract, it shall give the tenant a reasonableadvance notice before the sale, and the tenant has the priority right to buy such leased property on equalconditions. The tenant can waive such rights in the lease.

The tenant must pay rent on time in accordance with the lease contract. In the event of default of rentalpayment without reasonable cause, the landlord may ask the tenant to pay within a reasonable period of time andmay terminate the lease contract if the defaulted tenant fails to pay by the prescribed time limit.

Except as mentioned below or unless otherwise specified in the lease contract, if the landlord wishes toterminate the lease before its expiry date, prior consent shall be obtained from the tenants who are entitled to beindemnified for any resulting loss.

The landlord has the right to terminate the lease contract if the tenant sub-lets the property without priorconsent from the landlord, or causes loss to the leased properties resulting from using the property not incompliance with the usage as stipulated in the lease contract, or defaults in rental payment and fails to rectify suchdefault after a reasonable period as required by the landlord, or other circumstances occur allowing the landlord toterminate the lease contract under relevant PRC laws and regulations.

Sale and Transfer of Property

Under the Administrative Measures for the Sale of Commodity Buildings (商品房銷售管理辦法) and theAdministrative Regulations on Urban Real Estate Development and Operation (城市房地產開發經營管理條例) aslast amended in November 2020, commodity buildings may be put to pre-sale and post-completion sale uponsatisfaction of certain preconditions. The preconditions for pre-sale include: (a) the land grant premium has beenpaid in full for the grant of the land use rights as provided by the land grant contract and a Title Certificate inrespect of the land has been properly obtained, (b) the construction project planning permit and the constructionwork commencement permit have been obtained, (c) the capital injected in the development and construction hasexceeded 25% of the total investment of the project construction, and the construction progress, the date ofcompletion of construction and the date of delivery have been determined, and (d) the pre-sale permit has beenobtained. The preconditions for post-completion sale include: (a) the property development enterprise shall have abusiness licence and a qualification certificate of a property development enterprise; (b) the enterprise shall obtain




– VII-6 –

a land use right certificate or other approval documents for land use; (c) the enterprise shall have the construction

works planning permit and construction works commencement permit; (d) the building shall have been completed,

inspected and accepted as qualified; (e) the relocation of the original residents shall have been completed; (f) the

provision of essential facilities for supplying water, electricity, heating, gas, communication, etc. shall have been

made ready for use, and other essential utilities and public facilities shall have been made ready for use, or a date

for their construction and delivery shall have been specified; and (g) the property management plan shall have been

completed.

Before the post-completion sale of a commodity building, a property development enterprise shall

submit the property development project manual and other documents evidencing the satisfaction of

preconditions for post-completion sale to the property development authority.

According to the Urban Real Estate Law and the Provisions on Administration of Transfer of Urban Real

Estate promulgated by the Ministry of Construction (城市房地產轉讓管理規定) in August 1995, as amended

in August 2001, a real estate owner may sell, bequeath or otherwise legally transfer real estate to another

person or legal entity. When transferring a building, the ownership of the building and the land use rights to

the site on which the building is situated are transferred together. The parties to transfer must enter into a real

estate transfer contract in writing and register the transfer with the real estate administration authority having

jurisdiction over the location of the real estate within 90 days of the execution of the transfer contract.

Where the land use rights were originally obtained by grant, the real property may only be transferred on

the condition that:

• the land grant premium has been paid in full for the grant of the land use rights as provided by the land

grant contract and a Title Certificate in respect of the land has been properly obtained;

• investment in or development of such land must have been made or carried out in accordance with the

terms of the land grant contract;

• in the case of a project in which buildings are being developed, development representing more than

25% of the total investment has been completed;

• in case of a development of a large tract of land, conditions for using such land for industrial or other

purpose have been satisfied; and

• in case of where completed building is involved, the Title Certificate in respect of such building has

been obtained.

If the land use rights were originally obtained by grant, the term of the land use rights after transfer of the real

estate will be the remaining portion of the original term provided for in the land grant contract after deducting the

time that has been used by the former land users. In the event that the assignee intends to change the use of the land

provided for in the original grant contract, consent must first be obtained from the original land use rights grantor

and the planning administration authority at the relevant city or county level and an agreement to amend the land

grant contract or a new land grant contract must be signed in order to, inter alia, change the use of the land and

adjust the land grant premium accordingly.




– VII-7 –

If the land use rights were originally obtained by allocation, such allocated land use rights may be changed to

granted land use rights if approved by the government vested with the necessary approval power as required by the

State Council. After the government authorities vested with the necessary approval power approved such change,

the grantee must complete the formalities for the grant of the land use rights and pay the land grant premium

according to the relevant statutes. Land for industry (including warehouse land, but excluding mining land),

commercial use, tourism, entertainment and commodity housing development must be granted by tender, auction

or listing-for-sale under the current PRC laws and regulations. Approved by more than half of the owners who

collectively hold the exclusive part of the building that accounts for more than 50% of the total area of the building

Property Management Rules in the PRC

The provision of property management service used to be subject to special licensing requirement in the PRC,

but the State Council has abolished such requirement in 2017. A property management enterprise is no longer

required to obtain a property management enterprise qualification certificate in order to carry out property

management activities pursuant to the Decision on the Cancellation of the Third Batch of Matters for

Administrative Licensing Items Delegated by the Central Government for Implementation by Local Authorities

(國務院關於第三批取消中央指定地方實施行政許可事項的決定) issued on 12 January 2017 and the Decisions

on the Cancellation of Certain Administrative Licensing Items (國務院關於取消一批行政許可事項的決定) issued

on 22 September 2017. According to the Regulation on Property Management (物業管理條例) enacted by the State

Council on 8 June 2003 and enforced on 1 September 2003, as last amended on 19 March 2018 and effective on 19

March 2018, owners may engage or dismiss a property management company with the consent of more than half of

the owners who in the aggregate hold the exclusive part of the building that accounts for more than 50% of the total

area of the building. If the developer is to employ a property management enterprise before the formal employment

of a property management enterprise by the owners after the formation of the owners’ meeting, it shall enter into

a preparation stage property management services contract in writing with such property management enterprise.




– VII-8 –

COMPARISON OF CERTAIN ASPECTS OF THE PRC PROPERTY LAWS AND THE LAWS OF HONGKONG

The following is a general comparison of the legal protection of proprietary rights over real estate conferred

by the legal systems of the PRC and Hong Kong:

PRC Hong Kong

General General

Under the Urban Real Property Law, the legitimaterights and interests of the owners over real estate shallbe protected by the law of the PRC, on which no personmay unlawfully infringe.

In general, the legitimate rights and interests of theowners over real estate in PRC are protected under PRClaw.

Following Hong Kong’s reunification with the PRC on1 July 1997, the Basic Law of Hong Kong becomes theconstitution of Hong Kong. Article 6 of the Basic Lawprovides that Hong Kong shall protect the right ofprivate ownership of property in accordance with thelaw. Under the concept of “one country, two systems”,Hong Kong enjoys a high degree of autonomy and itslegal system is separate from that of the PRC. Theproprietary rights of land owners over landed propertiesin Hong Kong are protected under Hong Kong law,which consists of the English common law principles aswell as the Hong Kong legislations.

Land System in the PRC System of Land Holding in Hong Kong

PRC law distinguishes between the ownership of landand the right to use land. According to the Constitution,all land in the cities is owned by the State while land inthe rural and suburban areas, unless otherwise specifiedby law, is owned by collectives. Houses sites (宅基地),privately farmed crop land (自留地) and hilly land (自留山) are also owned by collectives. The State mayexpropriate or take over land and pay compensation inaccordance with law if such land is required for publicinterest.

Land tenure in Hong Kong is essentially leasehold.Title to a landed property is derived from Governmentlease or agreements and conditions of grant (as the casemay be) granted by the Hong Kong Government.Owners of landed properties in Hong Kong areeffectively long leaseholders.




– VII-9 –

PRC Hong Kong

Under the Urban Land Regulations, a system for thegrant and transfer of state owned land in urban areaswas implemented. Pursuant to this system, all local andforeign companies, enterprises and other organisationsand individuals, unless the law provides otherwise, arepermitted to acquire land use rights and to develop andoperate properties in accordance with PRC law.

Under the Urban Land Regulations, local governmentsat or above county level have the power to grant landuse rights for specific purposes and for a definite periodto a land user pursuant to a contract for the grant of landuse rights upon payment of a land grant premium. Thereare different maximum periods of grant for differentuses of land. They are generally as follows:

• up to 70 years for residential use;

• up to 50 years for industrial use;

• up to 50 years for educational, scientific, cultural,public health and sports uses;

• up to 40 years for commercial, tourism andentertainment uses; and

• up to 50 years for comprehensive use or all otheruses.

Upon expiration of the term of grant, it is possible for aland user to renew such term subject to the execution ofa new land grant contract and payment of a land grantpremium. If the term of the grant is not renewed, theland use rights of the land and ownership of anybuilding thereon will revert to the State withoutcompensation. According to the PRC Civil Code, whenthe term of the right to use construction land forresidential (but not other) property purposes expires, itwill be renewed automatically.

Due to historical reasons, the terms of the Governmentleases vary from short term leases to leases of up to 999years. Article 120 of the Basic Law essentially providesthat all Government leases of land granted, decidedupon or renewed before the establishment of the HongKong Special Administrative Region which extendedbeyond 30 June 1997, and all rights in relation to suchGovernment leases, shall continue to be recognised andprotected under the law of Hong Kong. Article 121 ofthe Basic Law provides that as regards all Governmentleases of land granted or renewed where the originalGovernment leases contain no right of renewal, duringthe period from 27 May 1985 to 30 June 1997, whichextend beyond 30 June 1997 and expire not later than30 June 2047, the Government lessee is not required topay any additional premium as from 1 July 1997, but anannual rent equivalent to 3% of the rateable value of thelanded property concerned is payable to the Hong KongGovernment.

In general, the terms of the earlier Government leasesare less restrictive. As society has become moresophisticated, extensive development requirements,obligations and restrictions are found in recentGovernment grants. Very often, the Government willprovide a restriction on alienation in the Governmentlease—the grantee is required to comply with all thepositive obligations in the Government lease, suchcompliance being evidenced by the issuance of acertificate of compliance by the Lands Department,before the grantee is in a position to sell/assign anyindividual unit or carpark of the development. If nosuch compliance has been issued, the grantee can onlysell/assign the units unless it shall have obtained therelevant prior writ ten consent from the LandsDepartment. Any non-compliance of the terms of theGovernment grant may render the Governmentexercising its rights of re-entry of the land.




– VII-10 –

PRC Hong Kong

Under the Urban Land Regulations, there are threemethods by which land use rights may be granted,namely by agreement, tender or auction. According tothe Land Use Grant Rules which are effective from 1November 2007, land use rights for properties forcommercial use, tourism, entertainment andcommodity residential purposes can only be grantedthrough tender, auction and listing-for-sale.

On 11 June 2003, the Ministry of Land and Resourcespromulgated the Regulation on Transfer of State-ownedLand Use Rights by Agreement. According to thisregulation, land use rights may be granted by way ofagreement if it is not required under applicable lawsand regulations that the land be granted by tender,auction and listing-for-sale.

Upon signing of the contract for the grant of land useright, the grantee is required to pay the land grantpremium in accordance with the terms of the contract.Once the land grant premium is paid in full, the contractmay be submitted to the relevant local bureau for theissue of a land use rights certificate evidencing thegrant of land use rights.

In September 2007, the Ministry of Land and Resourcesfurther promulgated the Regulations on the Grant ofState-owned Construction Land Use Rights ThroughTender, Auction and Listing-for- sale to require thatland for industrial use, except land for mining, mustalso be granted by tender, auction and listing-for-sale.Only after the grantee has paid the land grant premiumin full under the land grant contract, can the granteeapply for the land registration and obtain the land userights certificates. Furthermore, land use rightscertificates may not be issued in proportion to the landgrant premium paid under the land grant contract.

Subject to any restrictions imposed, the party to whichthe land use right is granted may transfer such land userights. The transfer may be by way of sale, exchange orgift. The term of land use rights for the transferred landis the original term granted under the grant contract lessthe term which has already been enjoyed by the originalgrantee.

Certain Government leases and certain legislations inHong Kong contain Government’s right of resumptionof the land or any part thereof for public purposesbefore expiry of the terms granted. Compensation maybe made payable to the affected owners.

Any individual or corporate legal entity, whether localor overseas, may own landed property in Hong Kong.Property transactions in Hong Kong attract payment ofad valorem stamp duty in accordance with the StampDuty Ordinance (Chapter 117 of the Laws of HongKong). Under the said Ordinance (i): any residentialproperty acquired on or after 27 October 2012, eitherby an individual or a company (regardless of its place ofincorporation), and resold within 36 months will besubject to payment of special stamp duty at differentrates (up to 20% of the stated consideration or marketvalue) for different holding periods (up to 36 months)of such property on top of the current ad valorem stampduty (the “AVD”); (ii) a buyer’s stamp duty at 15% ofthe stated consideration or market value is payable ontop of the current AVD if a residential property isacquired on or after 27 October 2012 by any person(including limited company), except where he/she is aHong Kong permanent resident or other exemptionsapply; (iii) any agreement for sale for the acquisition ofany residential property executed on or after 5November 2016, either by an individual or a company,will be subject to AVD at a flat rate of 15% of theconsideration or value of the residential property(whichever is the higher) unless specifically exemptedor excepted therein (e.g. Hong Kong permanentresident purchaser who does not own any interest in anyother residential property in Hong Kong); (iv) unlessspecifical ly exempted or otherwise provided,acquisition of more than one residential property undera single instrument executed on or after 12 April 2017will be subject to the AVD flat rate at 15%, even if thepurchaser is a Hong Kong permanent resident who isacting on his/her own behalf and is not a beneficialowner of any interest in other residential property inHong Kong at the time of acquisition; and (v) subject tothe enactment of the relevant amendment bill by theLegislative Council, AVD rates up to 4.25% onnon-residential property transactions will be chargedon the agreement for sale executed on or after 26November 2020.




– VII-11 –

PRC Hong Kong

A transfer of land use rights must be evidenced by awritten contract. Upon such transfer, all rights andobligations contained in the original contract for thegrant of land use rights by the State are deemed to besimultaneously transferred to the transferee, togetherwith any buildings and other fixtures on the land. Thetransfer must be duly registered at the relevant localland bureau and a new land use rights certificate will beissued and the original land use rights certificate will besuspended.

Under the Urban Real Property Law, in relation to atransfer of land for which land use rights were acquiredby way of grant, the following conditions must be met:

• the land grant premium must have been paid infull in accordance with the land grant contract anda Title Certificate in respect of the land must havebeen obtained;

• investment in or development of such land musthave been made or carried out in accordance withthe terms of the land grant contract;

• if the investment or development involves theconstruction of building on the land, more than25% of the total amount of investment ordevelopment must have been made or completed;

• where the investment or development involves alarge tract of land, conditions for the use of theland for industrial or other construction purposesmust have been met; and

• where completed building is involved, the TitleCertificate in respect of such building must havebeen obtained.




– VII-12 –

PRC Hong Kong

Property Owners’ Committee Strata Title Ownership

According to the Regulation on Property Management,owners may engage or dismiss a property managementcompany with the consent of more than half of theowners who hold the exclusive part of the building thataccounts for more than 50% of the total area of thebuilding. If, before the formal employment of aproperty management enterprise by the owners after theformation of the owners’ meeting, the developer is toemploy a property management enterprise, it shall enterinto a preparation stage property management servicescontract in writing with such real estate managemententerprise.

Strata-title ownership is commonly found in HongKong’s multi-storey buildings. The structure is derivedfrom the concept that all owners of the units are holdingthe land and the development jointly as co-owners.Such piece of land and the development built thereonare notionally divided into a number of undividedshares. An owner of each unit holds a certain number ofthe allocated undivided shares, together with theexclusive right to hold, use, occupy and enjoy his unit.All owners of the development then share the use ofsuch common part and common facilities of thedevelopment which are intended for common use. Theallocation of the undivided shares is usually made bythe authorised person of the development withreference to the gross floor area of each unit .Immediately after the first unit of a development isassigned, the developer, the first purchaser of a unit andthe building manager of the development will enter intoa document known as the Deed of Mutual Covenant andManagement Agreement (the “DMC”), which sets outthe rights and obligations of the parties vis-à-vis eachother relating to the co-ownership and management ofthe development.

The system of building management in Hong Kong ismainly based upon private contractual arrangementsbetween the owners of units in the development byvirtue of a DMC. The governing legislation for buildingmanagement is the Building Management Ordinance,which also plays an important role in guarding againstdrafting in of unfair terms by the developer in the DMCand in setting out the framework for the mandatoryterms to be contained in a DMC, to the intent that therights and obligations of the owners and the buildingmanager of the development are regulated for thepurpose of co-ownership and management of thedevelopment. The DMC is usually prepared inaccordance with the guidelines laid down by theGovernment and the rules laid down by The LawSociety of Hong Kong. It is commonly found in thenewer Government leases that the terms of the DMChave to be approved by the Lands Department.




– VII-13 –

PRC Hong Kong

Documents of Title Land Registration

In the PRC, interest in land or building is registeredwith and certified by the government. Land registrationis effected by the issue of land use rights certificate bythe relevant authority to the land user evidencing thatthe land user has obtained land use rights which can beassigned, mortgaged or leased. The buildingregistration is the issue of a building ownershipcertificate or a real estate rights certificate to the ownerevidencing that the owner has obtained buildingownership rights in respect of the building. In the past,the registration systems for lands and buildings in mostcities were separate, and the names of the certificateswere different. On 24 November 2014, the StateCouncil issued the Interim Regulations on Real EstateRegistration (不動產登記暫行條例) to consolidate theregistration systems. As a result, local government isrequired to establish a unified real estate registry totake charge of the registration of both lands andbuildings, and the certificate to be issued uponcompletion of a registration has been renamed to “realestate title certificate (不動產權證書)”. However, allthe land use right certificates, building ownershipcertificates and real estate rights certificates issuedbefore then should remain valid.

According to the Registration Regulations and theBuilding Registration Measures, all land use rights andbuilding ownership rights which are duly registered areprotected by law.

The registration systems for lands and buildings havebeen consolidated in the PRC. Each county is requiredto establish a unified real estate registry to take chargeof the registration of lands and buildings in itsjurisdiction.

The present land registration system in Hong Kong is a“deeds registration” system. The governing legislationis the Land Registration Ordinance. Documentsaffecting landed properties in Hong Kong are lodgedwith the Land Registry for registration.

The Land Registry maintains a public land register forrecording interests in the landed property in HongKong. Registration does not serve as a proof that aperson registered as the owner has good title to theproperty. The deeds registration system simply conferspriority on registered documents and any registereddocument will become a public record. Legal advice ontitle checking should be sought if one would like toascertain whether a person has good and marketabletitle to a particular property.

Hong Kong has enacted the Land Titles Ordinance(Chapter 585 of the Laws of Hong Kong) in 2004. Thenew title registration system will transform the presentsystem of deeds registration into a system of titleregistration. Under the new system, the title registerwill be conclusive evidence of title to the property.However, the date on which the new system will beimplemented is yet to be ascertained.




– VII-14 –

PRC Hong Kong

Proving Title to Property

Before the ti t le registration comes into actualoperation, an owner’s title to a property has to beproved by investigation of the original title deeds (ifthey relate exclusively to a particular property) orcertified copies of the title deeds in order to ascertainthe owner’s ti t le is properly derived from hispredecessors in title and is not encumbered.

The Conveyancing and Property Ordinance (Chapter219 of the Laws of Hong Kong) is the governinglegislation of the conveyance of landed property inHong Kong. It was enacted in 1984. It has been adoptedfrom the relevant English statutes and codified variouscommon law principles in real estate conveyanceaspects. Apart from this ordinance, the rulings in thejudgements of the court cases play an important part indetermining whether the title to a property is in order.




– VII-15 –

PRC Hong Kong

Leases/Tenancies in PRC Leases/Tenancies in Hong Kong

Both the Urban Land Regulations and the Urban RealProperty Law permit leasing of granted land use rightsand buildings thereon.

Leasing of urban real properties is also governed by theAdministrative Measures for Leasing of CommodityHousing (商品房屋租賃管理辦法) issued by theMinistry of Housing and Urban-Rural Development inDecember 2010, which became effective on 1 February2011. According to the Administrative Measures forLeasing of Commodity Housing, landlords and tenantsare required to enter into lease contracts which mustcontain specified provisions, the floor area per tenantmay not be less than the minimum living spacestipulated by the local government where the buildingis located, no kitchens, lavatories, balconies orbasement storerooms should be rented out as residence,and the lease contract should be registered with therelevant construction or property authori t ies atmunicipal or county level within 30 days after itsconclusion. If the lease contract is extended orterminated or if there is any change to the registereditems, the landlord and the tenant are required to effectalteration registration, extension of registration orderegistration with the relevant construction orproperty authorities within 30 days after the occurrenceof the extension, termination or alteration.

The PRC Civil Code provides among others, that thelease contract shall be in writing if its term is over sixmonths, and the term of any lease contract shall notexceed twenty years. During the lease term, any changein the ownership of the leased property does not affectthe validity of the lease contract. The tenant maysub-let the leased property if it is agreed by the landlordand the lease contract between the landlord and thetenant is still valid and binding. When the landlord is tosell a leased property under a lease contract, it shallgive the tenant a reasonable advance notice before thesale, and the tenant has the priority right to buy suchleased property on equal conditions.

The tenant must pay rent on time in accordance with thelease contract. In the event of default of rental paymentwithout reasonable cause, the landlord may ask thetenant to pay within a reasonable period of time, andmay terminate the lease contract if the defaulted tenantfails to pay by the prescribed time limit.

The governing legislation of leasing and letting oflanded property in Hong Kong is the Landlord andTenant (Consolidation) Ordinance (Chapter 7 of theLaws of Hong Kong) (the “LTCO”). Under the formerregime before the amendment is made to the LTCO in2004, a domestic tenant is entitled to statutory renewalof tenancy provided he is willing to pay the prevailingmarket rent. Only on certain statutory grounds ofopposition stated in the pre- amended LTCO, namelyself-occupation by the landlord, rebuilding by thelandlord, use of property for an illegal purpose orillegal subletting etc, could the landlord refuse to renewthe tenancy. This regime has been abolished by theLandlord and Tenant (Consolidation) (Amendment)Ordinance 2004 (the “Amendment Ordinance”) whichcame into effect on 9 July 2004.

Further, under the Amendment Ordinance, the fixedterm non-domestic tenancy will end upon the expirationof its contractual term and the landlord is no longerrequired to give any statutory notice to the tenant to endthe tenancy, unless expressly required by the tenancy.

After the implementation of the AmendmentOrdinance, in general, the landlord and the tenant enjoymore freedom in their negotiation on the terms of theletting. It is common practice in Hong Kong forlandlords, especially those who own the wholecommercial developments or residential blocks toimpose extensive obligations on the tenants, such as thecovenants to pay rent, management fees and rates, andsometimes promotion levy (particularly for largeshopping arcades), to maintain the leased premises in agood condition, not to underlet, to comply with theDMC, the land grant, ordinances and othergovernmental regulations. The landlord’s obligationsare usually confined to the giving of “quiet enjoyment”(in brief it means the non- interference with the tenant’srights under the tenancy agreement), payment ofgovernment rent and the obligation to repair thestructural part of the premises. The landlord or thetenant may institute legal proceedings to enforce theirrights under the tenancy.

A lease with a term exceeding three years should be in adeed or it may not be effective. A lease for longer thanthree years should also be registered in the LandRegistry, otherwise it is likely to be defeated bysuccessors in title of the landlord. Further, if an optionto renew the tenancy is granted to the tenant, commonlaw cases laid down the ruling that the tenant shouldsubmit the tenancy agreement for registration in theLand Registry in order to obtain priority against thirdparty interest even though the original term or theoption term does not exceed three years.




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FOREIGN EXCHANGE CONTROLS

The lawful currency of the PRC is the RMB, which is subject to foreign exchange controls and is not freelyconvertible into foreign exchange at this time. SAFE, under the authority of the PBOC, is empowered with thefunctions of administering all matters relating to foreign exchange, including the enforcement of foreign exchangecontrol regulations.

On 29 January 1996, the State Council promulgated the PRC Foreign Currency Administration Rules (中華人民共和國外匯管理條例) (the “Foreign Currency Administration Rules”) which became effective from 1 April1996. The Foreign Currency Administration Rules classifies all international payments and transfers into currentaccount items and capital account items. Current account items are no longer subject to SAFE approval whilecapital account items, in most cases, are still subject to approval from or registration with SAFE. The ForeignCurrency Administration Rules was subsequently amended on 14 January 1997. Such amendment affirms that theState shall not restrict international current account payments and transfers. The Foreign Currency AdministrationRules was further amended by the State Council on 1 August 2008 and came effective on 5 August 2008. Under therevised Foreign Currency Administration Rules, the compulsory settlement of foreign exchange is dropped. Aslong as the capital inflow and outflow under the current accounts are based upon legal and genuine transactions,individuals and entities may keep their income in foreign currencies inside or outside the PRC according to theprovisions and terms to be set forth by the SAFE. The foreign exchange income generated from current accounttransactions may be retained or sold to financial institutions engaging in the settlement and sale of foreignexchange. Whether to retain or sell the foreign exchange income generated from capital account transactions tofinancial institutions is subject to approval from or registration with the SAFE or its branches, except for otherwisestipulated by the State. Foreign exchange or settled fund of foreign exchange of capital account must be used in away that is compliant with SAFE regulations, and the SAFE or its branches are empowered to supervise theutilisation of the foreign exchange or settled fund of foreign exchange of capital account and the alterations of thecapital accounts. The RMB follows a managed floating exchange rate system in line with the market demand andsupply. A domestic individual or entity who conducts the overseas direct investment or overseas issue andtransaction of negotiable securities and derivative financial products shall undergo registration formalities withforeign exchange administrative authorities of the State.

On 20 June 1996, PBOC promulgated the Administrative Regulation on Foreign Exchange Settlement, Saleand Payment (結匯、售匯及付匯管理規定) (the “Settlement Regulations”) which became effective on 1 July1996. The Settlement Regulations superseded the Provisional Regulations for the Administration of Settlement,Sale and Payment of Foreign Exchange (結匯、售匯及付匯暫行管理規定) and abolished the remainingrestrictions on convertibility of foreign exchange in respect of current account items while retaining the existingrestrictions on foreign exchange transactions in respect of capital account items. On the basis of the SettlementRegulations, the PBOC published the Announcement on the Implementation of Foreign Exchange Settlement andSale Banks by Foreign invested Enterprises (外商投資企業實行銀行結售匯工作實施方案). The announcementpermits foreign invested enterprises to open, on the basis of their needs, foreign exchange settlement accounts forcurrent account receipts and payments of foreign exchange, and specialised accounts for capital account receiptsand payments at designated foreign exchange banks.

On 1 September 2006, the Ministry of Construction and SAFE promulgated the Circular on the IssuesConcerning the Regulation of Foreign Exchange Administration of the Real Estate Market (關於規範房地產市場外匯管理有關問題的通知) (which was amended on 4 May 2015 pursuant to the Circular of the StateAdministration of Foreign Exchange on Repealing and Revising the Regulatory Documents concerning the Reformfor Registered Capital Registration System (國家外匯管理局關於廢止和修改涉及註冊資本登記制度改革相關規範性文件的通知)). This circular states that: (i) where foreign exchange is remitted for a real estate purchase, theforeign purchaser shall be subject to examination by the designated foreign exchange bank. The remitted funds




– VII-17 –

shall be directly remitted by the bank to the RMB account of the real estate development enterprise and no paymentremitted from abroad by the purchasers shall be kept in the foreign exchange account of current account of the realestate development enterprises; (ii) where the commercial house transaction fails to complete and the foreignpurchaser intends to remit the purchase funds in RMB back to foreign currencies, the foreign purchaser shall besubject to examination by the designated foreign exchange bank; (ii) when selling real estates in the PRC and thepurchase price received in RMB is remitted to foreign currencies, the foreign purchaser shall be subject toexamination by the local branch of SAFE; and (iv) if its land use right certificate has not been obtained or thecapital-fund in respect of development project is less than 35% of the total investment amount of the project, aforeign invested real estate enterprise is prohibited from borrowing from any foreign lenders and SAFE shall notprocess the foreign debt registration or examination and approval regarding the settlement of foreign debt. Pleasealso note that the eligibility of a FIREE to incur foreign debt is subject to further restrictions imposed by theauthorities in respect of its establishment date, i.e., a FIREE established on or after 1 June 2007 is not permitted toregister foreign debts with SAFE and is therefore unable to borrow foreign debt, and any FIREE established before1 June 2007 may still borrow foreign debt to the extent within and permitted by the difference between its totalinvestment amount and registered capital after having satisfied certain statutory conditions.

With regard to foreign direct investments, SAFE has also issued and amended a series of circulars andregulations over the years regulating the administration of foreign exchange in foreign direct investments. Thecurrent effective SAFE regulations on foreign direct investments include without limitation, (i) the Provisions onthe Administration of Foreign Exchange in Foreign Direct Investments of Foreign Investors (外國投資者境內直接投資外匯管理規定) issued on 10 May 2013, (ii) Circular of the State Administration of Foreign Exchange onFurther Simplifying and Improving the Direct Investment-related Foreign Exchange Administration Policies (國家外匯管理局關於進一步簡化和改進直接投資外匯管理政策的通知) issued on 13 February 2015, (iii) Circular ofthe State Administration of Foreign Exchange on Reforming the Management Approach regarding the Settlementof Foreign Exchange Capital of Foreign-invested Enterprises (國家外匯管理局關於改革外商投資企業外匯資本金結匯管理方式的通知) issued on 30 March 2015 and (iv) Circular of the State Administration of ForeignExchange on Reforming and Regulating Policies on the Control over Foreign Exchange Settlement of CapitalAccounts (國家外匯管理局關於改革和規範資本項目結匯管理政策的通知) issued on 9 June 2016. Pursuant tothese SAFE regulations, (i) the SAFE no longer processes foreign exchange registrations for foreign directinvestments. Instead, foreign exchange registrations for foreign direct investments may be directly handled bydesignated foreign exchange banks; (ii) where the contribution of foreign exchange capital has been confirmed bythe local branch of SAFE, such foreign exchange capital can be converted into RMB by the foreign investedenterprise at its bank based on its operational needs; and (iii) the RMB funds obtained by a foreign investedenterprise from conversion of its foreign exchange capital may only be used within its approved business scope orfor purpose otherwise approved by laws and cannot be(i) directly or indirectly used for purpose outside theapproved business scope or prohibited by law; (ii) directly or indirectly used for securities investment or any otherspeculative investment; (iii) unless otherwise provided as part of the approved business scope, used for extendingloans to a non-affiliate; (iv) used for construction or purchase of real estate for purposes other than self-use (exceptfor real estate enterprises).




– VII-18 –

1. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following agreements and documents will be available for inspection free of charge at the office

of the REIT Manager at Room 2A, 14/F, Chun Wo Commercial Centre, 23-29 Wing Wo Street, Central, Hong

Kong, during normal business hours up to the [REDACTED]:

(a) Trust Deed;

(b) Accountant’s report of the Predecessor Group, the text of which is set out in Appendix I to this

Document;

(c) the audited combined financial statements of the Predecessor Group for the years ended 31 December

2018, 2019 and 2020 and the six months ended 30 June 2021;

(d) the report on unaudited pro forma financial information and the reporting accountant’s report in relation

thereto, the text of which is set out in Appendix II to this Document;

(e) the letter from the REIT Manager on the profit forecast, the letter from the auditor on the profit forecast,

the letter from the Joint Listing Agents on the profit forecast and the letter from the Independent

Property Valuer on the rental income forecast, the text of which is set out in Appendix III to this

Document;

(f) the valuation report, the text of which is set out in Appendix IV to this Document;

(g) the letter from the Market Consultant in relation its Market Research Report, the text of which is set out

in Appendix V to this Document;

(h) the letter from the Building Surveyor in relation to its Building Survey Report, the text of which is set

out in Appendix VI to this Document;

(i) the corporate governance policy adopted by the REIT Manager;

(j) each of the agreements referred to in the section headed “Material Agreements and Other Documents” in

this Document;

(k) written consents referred to in the section headed “Experts” in this Document; and

(l) the Trustee’s letters confirming no objection to the appointment and composition of the board of

directors of the Project Companies.

In addition, a copy of the Trust Deed will be available for inspection free of charge at the above registered

office of the REIT Manager during normal business hours as long as the Units are [REDACTED] on the Stock

Exchange.


APPENDIX VIII GENERAL INFORMATION

– VIII-1 –

2. INTELLECTUAL PROPERTY RIGHTS

As of the Latest Practicable Date, Powerlong Group Development has granted the REIT Manager (in its

capacity as manager of Powerlong REIT) the right and license to use the following trademarks in its name and in

connection with the business and for the benefit of Powerlong REIT, pursuant and subject to the terms and

conditions contained in the Trademark Licensing Agreement:

No. Trademark OwnerPlace ofRegistration

RegistrationNumber Class Duration

1 Powerlong GroupDevelopment

PRC 1491792 35 December 13, 2030


PRC 1503954 35 January 6, 2031


PRC 4442908 35 October 27, 2028


PRC 18797536 35 October 13, 2028


PRC 18798176 35 October 13, 2028


PRC 30155923 35 April 20, 2029


PRC 11096867 36 November 6, 2023


PRC 14596333 36 December 13, 2027


PRC 18798253 36 May 20, 2027



– VIII-2 –




PRC 14596334 36 April 6, 2026


PRC 11096879 37 November 6, 2023


PRC 4442896 37 August 27, 2028


PRC 18797710 37 2027-02-06


PRC 18798240 37 2027-02-06


PRC 18798361 37 2027-12-06


PRC 18795756 37 2027-02-06


PRC 30141603 41 2029-04-20


PRC 18795272 42 2028-02-06


PRC 31184886 42 2030-05-06


PRC 3657327 43 2025-11-13



– VIII-3 –




PRC 18795335 43 2027-02-06


PRC 3657326 43 2025-11-20


PRC 18798067 45 2027-02-20


PRC 31179210 45 2030-03-27

3. QUALIFICATIONS AND CONSENTS OF EXPERTS

The qualifications of the experts who have given opinions in this Document are as follows:

Name Qualification

CLSA Capital Markets Limited A licensed corporation under the SFO to engage in type 4 (advisingon securities) and type 6 (advising on corporate finance) of theregulated activities

BOCI Asia Limited A licensed corporation under the SFO to engage in type 1 (dealing insecurities) and type 6 (advising on corporate finance) of theregulated activities

PricewaterhouseCoopers Certified Public Accountants under Professional AccountantsOrdinance (Chapter 50 of the Laws of Hong Kong), RegisteredPublic Interest Entity Auditor under Financial Reporting CouncilOrdinance (Chapter 588 of the Laws of Hong Kong)

Zhong Lun Law Firm PRC Legal Advisors

Savills Valuation and ProfessionalServices Limited

Independent Property Valuer

Jones Lang LaSalle CorporateAppraisal and Advisory Limited

Industry Consultant

Independent Property Valuer in respect of the Connected PartyTransactions of Powerlong REIT

Savills Project Consultancy Limited Building Surveying Consultant



– VIII-4 –

Each of the entities listed above has given and has not withdrawn its written consent to the issue of this Documentwith the inclusion of its report and/or opinion and/or memorandum and/or valuation certificate and/or summarythereof (as the case may be) and/or references to its name included herein in the form and context in which it isincluded.

4. MISCELLANEOUS

As of the Latest Practicable Date:

(a) none of the Directors nor any of the parties listed in paragraph 3 of this Appendix was interested inPowerlong REIT’s promotion, or in any assets which have, within the two years immediately precedingthe issuance of this Document, been acquired or disposed of by or leased to any member of thePredecessor Group, or are proposed to be acquired or disposed of by or leased to Powerlong REIT or anycompanies controlled by it;

(b) none of the Directors nor any of the parties listed in paragraph 3 of this Appendix were materiallyinterested in any contract or arrangement subsisting at the date of this Document which is significant inrelation to Powerlong REIT’s business;

(c) save in connection with the [REDACTED] and save as disclosed in the section headed “[REDACTED]”of this Document, none of the parties listed in paragraph 3 of this Appendix:

(i) was interested legally or beneficially in any of the Units or any shares in any of companiescontrolled by Powerlong REIT; or

(ii) had any right (whether legally enforceable or not) to subscribe for or to nominate persons tosubscribe for Powerlong REIT’s securities;

(d) no amount or securities or benefit had been paid or allotted or given within the two years preceding thedate to this Document to any of Powerlong REIT’s promoters nor was any such securities or amount orbenefit intended to be paid or allotted or given;

(e) there were no outstanding loans or guarantees granted or provided by Powerlong REIT or anycompanies controlled by it to, or for the benefit of, any of the Directors;

(f) none of the Directors or their associates had any ownership interest in the top five tenants in respects ofthe REIT Properties;

(g) save as disclosed in “Reorganization, Structure and Organization of Powerlong REIT” in thisDocument, within the two years immediately preceding the date of this Document, Powerlong REIT hadnot issued nor agreed to issue any Units fully or partly paid either for cash or for a consideration otherthan cash;

(h) save in connection with the [REDACTED], no outstanding Units were under option or were agreedconditionally or unconditionally to be put under option;

(i) save as disclosed in “Reorganization, Structure and Organization of Powerlong REIT” in thisDocument, Powerlong REIT had not issued or agreed to issue any founder units, management units ordeferred units;

(j) none of the equity and debt securities of Powerlong REIT was [REDACTED] or dealt with in any otherstock exchange nor was any other [REDACTED] or permission to deal being or proposed to be sought;



– VIII-5 –

(k) Powerlong REIT had no outstanding convertible debt securities;

(l) within the two years immediately preceding the date of this Document, no commissions, discounts,

brokerages or other special items had been granted or paid to any Director, proposed Director, promoter, any

of the parties listed in paragraph 3 of this Appendix nor any other person in connection with the issue or sale

of any Units or shares or loan capital of Powerlong REIT or any of the companies controlled by it;

(m) there were no arrangements in existence under which future dividends are to be waived or agreed to be

waived; and

(n) there had been no interruptions in the business of the Predecessor Group which may have or have had a

significant effect on the financial position of the Predecessor Group, taken as a whole, in the last 12 months.



– VIII-6 –