CONNECTED TRANSACTION: AMENDMENTS TO THE TERMS AND CONDITIONS OF THE CONVERTIBLE BONDS

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

This announcement appears for information only and does not constitute an invitation or offer to acquire, purchase or subscribe for any securities of the Company.

MERDEKA FINANCIAL SERVICES GROUP LIMITED

（萬德金融服務集團有限公司*）

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8163) CONNECTED TRANSACTION: AMENDMENTS TO THE TERMS AND CONDITIONS OF THE CONVERTIBLE BONDS THIRD SUPPLEMENTAL DEED RELATING TO THE CONVERTIBLE BONDS

The Board announces that on 20 January 2017 (after trading hours), the Company and the Bondholders entered into the Third Supplemental Deed, pursuant to which the Company and the Bondholders agreed to amend certain terms and conditions of the Convertible Bonds. Save for the Proposed Terms, all other terms of the Convertible Bonds shall remain unchanged and valid.

As at the date of this announcement, the aggregate outstanding principal amount of the Convertible Bonds amounts to HK$124,068,000.

* for identification purposes only

GEM LISTING RULES IMPLICATIONS

Pursuant to Rule 22.03 of the GEM Listing Rules, any alterations in the terms of convertible equity securities after issue must be approved by the Stock Exchange, except where the alterations take effect automatically under the existing terms of such convertible equity securities.

As Ivana is a company controlled and owned by a trust founded by Mr. Cheung, Ivana is a connected person of the Company under the GEM Listing Rules. The Proposed Terms to be effected by the Third Supplemental Deed constitute a connected transaction of the Company. Therefore, the Proposed Terms are subject to reporting and announcement requirements, as well as approval by the Independent Shareholders at the EGM under the GEM Listing Rules. The Company will establish an independent board committee and appoint an independent financial adviser to advise the Independent Shareholders and the independent board committee of the Company in respect of the Proposed Terms. Mr. Cheung and Ivana together with their respective associates will abstain from voting in respect of the resolution(s) approving the Proposed Terms at the EGM. The grant of the Specific Mandate for the issue and allotment of the Conversion Shares will also be subject to approval by the Independent Shareholders at the EGM.

GENERAL

Application will be made by the Company to the Stock Exchange for its approval of: (i) the Proposed Term; and (ii) the listing of, and permission to deal in, the Conversion Shares.

A circular containing, among other things, details of the Convertible Bonds, the Proposed Terms, the letters from the independent board committee and the independent financial adviser and the notice convening the EGM will be despatched to the Shareholders in compliance with the GEM Listing Rules as soon as practicable (which is expected to be on or about 14 February 2017).

If any of the conditions precedent to the Third Supplemental Deed are not satisfied, the Third Supplemental Deed will lapse and will not proceed. Shareholders and potential investors of the Company should exercise caution when dealing in the Shares or any other securities of the Company. BACKGROUND

References are made to the announcements of the Company dated 23 October 2007, 30 May 2011, 4 July 2011, 9 July 2014 and 19 September 2014, and the circulars (the "Circulars") of the

Company dated 30 May 2008, 15 June 2011 and 2 September 2014 in relation to the issue of, and the subsequent amendments made to, the Convertible Bonds in the aggregate principal amount of HK$776,880,000 convertible into Shares at the initial conversion price of HK$0.10 per Conversion Share (subject to adjustment as provided in the terms and conditions of the Convertible Bonds) as part of the consideration for the acquisition of forest concessions in Papua, Indonesia on 12 August 2008.

The Convertible Bonds are unsecured, interest-free and were originally mature on 12 August 2011. Unless converted into the Shares by the Company, the outstanding principal amount of the Convertible Bonds would be redeemed in full on maturity.

By the two supplemental deeds dated 30 May 2011 and 9 July 2014, among other changes on the terms of the Convertible Bonds, the maturity date of the Convertible Bonds and its conversion period have been extended to 12 August 2017.

As at the date of this announcement, the aggregate outstanding principal amount of the Convertible Bonds is HK$124,068,000, which is legally and beneficially owned by three Bondholders, convertible into the Shares at the conversion price of HK$0.3693 per Share.

For further details of the Convertible Bonds, please refer to the Circulars.

THIRD SUPPLEMENTAL DEED RELATING TO THE CONVERTIBLE BONDS

On 20 January 2017 (after trading hours), the Company and the Bondholders entered into the Third Supplemental Deed to: (a) extend the maturity date of the Convertible Bonds for a further three years to 12 August 2020; (b) revise the conversion price of the Convertible Bonds from HK$0.3696 per Share to HK$0.095 per Share; and (c) revise the adjustment events to the Conversion Price to include the following events:

1. issue of Shares for subscription by way of rights, or a grant of options or warrants to subscribe for Shares, at a price which is less than 80% of the market price per Share to the Shareholders;

2. issue wholly for cash of securities convertible into or exchangeable for or carrying rights of subscription for Shares, if in any case the total effective consideration per Share receivable is less than 80% of the market price, or the conversion, exchange or subscription rights of any such issue are altered so that the said total effective consideration receivable is less than 80% of such market price; and

3. issue of Shares being made wholly for cash at a price less than 80% of the market price per Share.

To the best information, knowledge and belief of the Directors after making necessary enquiry, each of Bondholders (other than Ivana which is a connected person of the Company) is an independent third party not connected with the Company and its connected persons.

The Third Supplemental Deed is conditional upon the following conditions:

1. the Stock Exchange granting its approval for the Proposed Terms;

2. the passing of an ordinary resolution by the Independent Shareholders at the EGM approving the Third Supplemental Deed and the transactions contemplated thereunder including the grant of the Specific Mandate; and

3. the GEM Listing Committee of the Stock Exchange having granted the listing of, and permission to deal in, the Conversion Shares to be issued upon exercise of conversion rights attached to the outstanding Convertible Bonds.