UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F

(Mark one)



| |  ̈ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
| | - | ----------------------------------------------------------------------------------------------

OR



| | x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| | - | ------------------------------------------------------------------------------------



For the fiscal year ended December 31,
2014.

OR



| |  ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| | - | ----------------------------------------------------------------------------------------

OR



| |  ̈ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| | - | -------------------------------------------------------------------------------------------



for the transition period
from ________ to _________



Commission file number 001-34944



China Ceramics Co.,
Ltd.

(Exact name of the Registrant
as specified in its charter)



British Virgin Islands

(Jurisdiction of incorporation
or organization)



c/o Jinjiang Hengda
Ceramics Co., Ltd.
Junbing Industrial Zone
Anhai, Jinjiang City
Fujian Province, PRCTelephone: +86 (595) 8576 5053

(Address of principal executive
offices)



Huang Jia Dong
c/o Jinjiang Hengda Ceramics Co., Ltd.
Junbing Industrial Zone
Anhai, Jinjiang City
Fujian Province, PRC
Telephone: +86 (595) 8576 5053Facsimile: +86 (595) 8576 5059

(Name, Telephone, E-mail
and/or Facsimile Number and Address of Company Contact Person)



with a copy to:



Stuart Management Company
830 Post Road East
Suite 205Westport, CT 06880

Securities registered or
to be registered pursuant to Section 12(b) of the Act:

|Title of each class | Name of each exchange on which registered
|------------------- | -----------------------------------------



|ORDINARY SHARES, PAR VALUE $0.001 | The NASDAQ Stock Market LLC
|--------------------------------- | ---------------------------



Securities registered or
to be registered pursuant to Section 12(g) of the Act:



None.



Securities for which there
is a reporting obligation pursuant to Section 15(d) of the Act:



None.



On April 17, 2015 the issuer had 20,430,838 shares
outstanding.



Indicate by check mark if the registrant is
a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes  ̈                  No
x



If this report is an annual or transition report,
indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.

Yes  ̈                  No
x



Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes x                  No
 ̈



Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files).

Yes  ̈                  No
 ̈



Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large
accelerated filer” in Rule 12b-2 of the Exchange Act.



| ̈ Large Accelerated filer |  ̈ Accelerated filer | x Non-accelerated filer
|------------------------- | ------------------- | -----------------------



Indicate by check mark which basis of accounting
the registrant has used to prepare the financial statements included in this filing:



| ̈ US GAAP | x   International Financial Reporting Standards as issued by the International  Accounting Standards Board |  ̈ Other
|--------- | ---------------------------------------------------------------------------------------------------------- | -------



If “Other” has been checked in response
to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

 ̈
Item 17           ̈ Item 18



If this is an annual report, indicate by check
mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  ̈                  No
x











Table
of Contents



|        |          |                                                                              | Page                                   
|------- | -------- | ---------------------------------------------------------------------------- | ---------------------------------------
|        |          |                                                                              |                                        
|PART I  |          | 6                                                                           
|        |          |                                                                              |                                        
|        | ITEM 1.  | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS                        | 6                                      
|        |          |                                                                              |                                        
|        | ITEM 2.  | OFFER STATISTICS AND EXPECTED TIMETABLE                                      | 6                                      
|        |          |                                                                              |                                        
|        | ITEM 3.  | KEY INFORMATION                                                              | 6                                      
|        |          |                                                                              |                                        
|        | ITEM 4.  | INFORMATION ON THE COMPANY                                                   | 26                                     
|        |          |                                                                              |                                        
|        |          | ITEM 4A.                                                                     | UNRESOLVED STAFF COMMENTS              
|        |          |                                                                              |                                        
|        | ITEM 5.  | OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                 | 51                                     
|        |          |                                                                              |                                        
|        | ITEM 6.  | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                   | 74                                     
|        |          |                                                                              |                                        
|        | ITEM 7.  | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                            | 86                                     
|        |          |                                                                              |                                        
|        | ITEM 8.  | FINANCIAL INFORMATION                                                        | 89                                     
|        |          |                                                                              |                                        
|        | ITEM 9.  | THE OFFER AND LISTING                                                        | 91                                     
|        |          |                                                                              |                                        
|        | ITEM 10. | ADDITIONAL INFORMATION                                                       | 92                                     
|        |          |                                                                              |                                        
|        | ITEM 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK                    | 107                                    
|        |          |                                                                              |                                        
|        | ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                       | 109                                    
|        |          |                                                                              |                                        
|PART II |          | 109                                                                         
|        |          |                                                                              |                                        
|        | ITEM 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                              | 109                                    
|        |          |                                                                              |                                        
|        | ITEM 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS | 109                                    
|        |          |                                                                              |                                        
|        | ITEM 15. | CONTROLS AND PROCEDURES                                                      | 109                                    
|        |          |                                                                              |                                        
|        | ITEM 16. | RESERVED                                                                     | 111                                    
|        |          |                                                                              |                                        
|        |          | ITEM 16A.                                                                    | AUDIT COMMITTEE FINANCIAL EXPERT.      
|        |          |                                                                              |                                        
|        |          | ITEM 16B.                                                                    | CODE OF ETHICS.                        
|        |          |                                                                              |                                        
|        |          | ITEM 16C.                                                                    | PRINCIPAL ACCOUNTANT FEES AND SERVICES.



2







|         |          | ITEM 16D.            | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES.             | 112
|-------- | -------- | -------------------- | ----------------------------------------------------------------------- | ---
|         |          |                      |                                                                         |    
|         |          | ITEM 16E.            | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS. | 112
|         |          |                      |                                                                         |    
|         |          | ITEM 16F.            | CHANGES IN REGISTRANT’S CERTIFYING ACCOUNTANT.                          | 112
|         |          |                      |                                                                         |    
|         |          | ITEM 16G.            | CORPORATE GOVERNANCE                                                    | 114
|         |          |                      |                                                                         |    
|         |          | ITEM 16H.            | MINE SAFETY DISCLOSURE                                                  | 114
|         |          |                      |                                                                        
|PART III |          | 114                 
|         |          |                      |                                                                        
|         | ITEM 17. | FINANCIAL STATEMENTS | 114                                                                    
|         |          |                      |                                                                        
|         | ITEM 18. | FINANCIAL STATEMENTS | 114                                                                    
|         |          |                      |                                                                        
|         | ITEM 19. | EXHIBITS             | 115                                                                    



3







CERTAIN INFORMATION



In this Annual Report on Form 20-F (the “Annual
Report”), unless otherwise indicated, “we,” “us,” “our,” and “China Ceramics”
refers to China Ceramics Co., Ltd., a British Virgin Islands company, and its subsidiaries, including Success Winner Limited (“Success
Winner”), a British Virgin Islands company and wholly owned subsidiary of China Ceramics, Stand Best Creation Limited (“Stand
Best”), a Hong Kong company and wholly owned subsidiary of Success Winner and the entity that wholly owns Jinjiang Hengda
Ceramics Co., Ltd. (“Hengda”), a PRC operating company that in turn wholly owns Jiangxi Hengdali Ceramic Materials
Co., Ltd. (“Hengdali”), and Fujian Province Hengdali Building Materials Co., Ltd. each a PRC operating company.



On November 20, 2009, China Holdings Acquisition
Corp. (“CHAC”), our predecessor, merged with and into China Ceramics, its wholly owned British Virgin Islands subsidiary,
resulting in the redomestication of CHAC to the British Virgin Islands as “China Ceramics Co., Ltd.” Immediately following
the merger and redomestication (the “Redomestication”), and as part of the same integrated transaction, China Ceramics
acquired all of the outstanding securities of Success Winner (the “Business Combination”). Unless the context
indicates otherwise, the “Company” refers to CHAC prior to the Business Combination and China Ceramics following the
Business Combination.



Unless the context indicates otherwise, all
references to “China” or “PRC” refer to the People’s Republic of China. All references to “provincial-level
regions” or “regions” include provinces as well as autonomous regions and directly controlled municipalities
in China, which have an administrative status equal to provinces, including Beijing.



All references to “Renminbi,” “RMB”
or “yuan” are to the legal currency of the People’s Republic of China, and all references to “U.S. dollars,”
“dollars,” “$” are to the legal currency of the United States. This Report contains translations of Renminbi
amounts into U.S. dollars at specified rates solely for the convenience of the reader. We make no representation that the Renminbi
or U.S. dollar amounts referred to in this Report could have been or could be converted into U.S. dollars or Renminbi, as the case
may be, at any particular rate or at all. On April 10, 2015, the buying rate announced by the Federal Reserve Statistical
Release was RMB 6.2082 to $1.00.



FORWARD-LOOKING STATEMENTS



This Report contains “forward-looking
statements” that represent our beliefs, projections and predictions about future events. All statements other than statements
of historical fact are “forward-looking statements” including any projections of earnings, revenue or other financial
items, any statements of the plans, strategies and objectives of management for future operations, any statements concerning proposed
new projects or other developments, any statements regarding future economic conditions or performance, any statements of management’s
beliefs, goals, strategies, intentions and objectives, and any statements of assumptions underlying any of the foregoing. Words
such as “may”, “will”, “should”, “could”, “would”, “predicts”,
“potential”, “continue”, “expects”, “anticipates”, “future”, “intends”,
“plans”, “believes”, “estimates” and similar expressions, as well as statements in the future
tense, identify forward-looking statements.



These statements are necessarily subjective
and involve known and unknown risks, uncertainties and other important factors that could cause our actual results, performance
or achievements, or industry results, to differ materially from any future results, performance or achievements described in or
implied by such statements. Actual results may differ materially from expected results described in our forward-looking statements,
including with respect to correct measurement and identification of factors affecting our business or the extent of their likely
impact, the accuracy and completeness of the publicly available information with respect to the factors upon which our business
strategy is based on the success of our business.



4







Forward-looking statements should not be read
as a guarantee of future performance or results, and will not necessarily be accurate indications of whether, or the times by which,
our performance or results may be achieved. Forward-looking statements are based on information available at the time those statements
are made and management’s belief as of that time with respect to future events, and are subject to risks and uncertainties
that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking
statements. Important factors that could cause such differences include, but are not limited to, those factors discussed under
the headings “Risk Factors”, “Operating and Financial Review and Prospects,” “Information on the
Company” and elsewhere in this Annual Report.



This Annual Report should be read in conjunction
with our audited financial statements and the accompanying notes thereto, which are included in Item 18 of this Annual Report.



5







PART
I



| | ITEM 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
| | ------- | -----------------------------------------------------



Not required.



| | ITEM 2. | OFFER STATISTICS AND EXPECTED TIMETABLE
| | ------- | ---------------------------------------



Not required.



| | ITEM 3. | KEY INFORMATION
| | ------- | ---------------



| | A. | Selected financial data
| | -- | -----------------------



The following selected consolidated financial
data as of and for the years ended December 31, 2014, 2013, 2012 have been derived from the audited consolidated financial statements
of China Ceramics included in this Annual Report and the financial data as of and for the years ended December 31, 2011 and 2010
have been derived from previously filed audited consolidated financial statements. This information is only a summary and
should be read together with the consolidated financial statements, the related notes, the section entitled “Operating and
Financial Review and Prospects” and other financial information included in this Annual Report.



The consolidated financial statements are prepared
and presented in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting
Standards Board (“IASB”). The results of operations of China Ceramics in any period may not necessarily be indicative
of the results that may be expected for any future period. See “Risk Factors” included elsewhere in this Annual Report.



CHINA CERAMICS CO., LTD.
AND SUBSIDIARIES



Selected Consolidated
Financial Data



(RMB in Thousands Except per
Share and Operating Data)



|                                                   |  | As of December 31 |           
|-------------------------------------------------- |  | ----------------- | ----------
|                                                   |  | 2014              |           
|Consolidated Statements of Financial Position Data |  |                   |           
|Cash and cash equivalents                          |  |                   | 61,155    
|Total current assets                               |  |                   | 972,893   
|Total assets                                       |  |                   | 1,733,563 
|Total current liabilities                          |  |                   | 284,535   
|Long-term obligations                              |  |                   | 1,404     
|Total liabilities                                  |  |                   | 285,939   
|Total equity                                       |  |                   | 1,447,624 
|Outstanding shares                                 |  |                   | 20,430,838



6







|                                                    |  | For the years ended December 31, |           
|--------------------------------------------------- |  | -------------------------------- | ----------
|                                                    |  | 2014                             |           
|Consolidated Statement of Comprehensive Income Data |  |                                  |           
|Revenues                                            |  |                                  | 1,037,651 
|Gross profit                                        |  |                                  | 104,431   
|Operating income                                    |  |                                  | 56,095    
|(Loss)/profit before taxation                       |  |                                  | (13,890   
|(Loss)/profit attributable to shareholders          |  |                                  | (30,353   
|                                                    |  |                                  |           
|Earnings per share –                                |  |                                  |           
|Basic                                               |  |                                  | (1.49     
|Diluted                                             |  |                                  | (1.49     
|                                                    |  |                                  |           
|Weighted average shares outstanding –               |  |                                  |           
|Basic                                               |  |                                  | 20,430,838
|Diluted                                             |  |                                  | 20,430,838
|                                                    |  |                                  |           
|Cash dividends declared per share (RMB)             |  |                                  | 0.16      



The following table sets forth information concerning
exchange rates between the RMB and the U.S. dollar for the periods indicated. On April 10, 2015, the buying rate announced by Federal
Reserve Statistical Release was RMB 6.2082 to $1.00.



|         |  | Spot Exchange Rate |       
|-------- |  | ------------------ | ------
|Period   |  | Period
Ended       |       
|         |  | (RMB per US$1.00)  |       
|2010     |  |                    | 6.6000
|2011     |  |                    | 6.2939
|2012     |  |                    | 6.2301
|2013     |  |                    | 6.0537
|2014     |  |                    | 6.2046
|October  |  |                    | 6.1124
|November |  |                    | 6.1429
|December |  |                    | 6.2046
|2015     |  |                    |       
|January  |  |                    | 6.2495
|February |  |                    | 6.2695
|March    |  |                    | 6.1990



7







Source:  Federal Reserve Statistical Release



| | (1) | Annual averages, lows, and highs are calculated from month-end rates. Monthly averages, lows, and highs are calculated using
the average of the daily rates during the relevant period.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | B. | Capitalization and Indebtedness
| | -- | -------------------------------



Not required.



| | C. | Reasons for the Offer and Use of Proceeds
| | -- | -----------------------------------------



Not required.



| | D. | Risk factors
| | -- | ------------



You should carefully consider the following
risk factors, together with all of the other information included in this annual report.



Risk Factors Relating
to Our Business



We generate a large percentage of
our revenues from a limited number of customers and our business will suffer if sales to such customers decline.



Our five largest customers accounted for an
aggregate of 18.4%, 20.1% and 20.0% of our total revenue in fiscal years 2012, 2013 and 2014, respectively. We are particularly
exposed to the credit risks of these customers as defaults in payment by our major customers would have a significant impact on
our cash flows and financial results. Our agreements with our major customers do not specify minimum sales volume. There is no
assurance that we will continue to retain these customers or that they will continue to purchase our products at their current
levels in the future. If there is any reduction or cancellation of purchase orders by these customers for any reason, including
a fall in demand from our customers’ downstream developer clients, or a termination of a relationship with these customers,
our revenues will be negatively impacted.



Payment defaults by the customers
to whom we extend credit would harm our cash flows and results.



Our financial position and profitability is
dependent on the creditworthiness of our customers. We are exposed to the credit risks of our customers and this risk increases
the larger the orders are. We usually offer our customers credit terms of approximately 120 to 150 days. Although there has not
been any material collection problem for trade receivables or bad debts in the last three fiscal years, there is no assurance that
we will not encounter doubtful or bad debts in the future. We have not established any bad debt reserves to mitigate the financial
impact of uncollected accounts receivable. Should we experience any unexpected delay or difficulty in collecting receivables from
our customers, our cash flows and financial results may be adversely affected.



8







If our suppliers are unable to fulfill
our orders for raw materials, we may lose business.



Our suppliers are all located in the PRC. Our
purchases of raw materials is based on expected production levels, after taking into consideration, amongst other factors, sales
forecasts and actual orders from our customers. To ensure that we are able to deliver quality products at competitive prices, we
need to secure sufficient quantities of raw materials at acceptable prices and quality on a timely basis. Typically, we do not
enter into any long-term supply agreements with our suppliers. There is no assurance that these suppliers will continue to supply
us in the future or that they will do so at acceptable prices. In the event our suppliers are unable to fulfill our orders or meet
our requirements, we may not be able to find timely replacements at acceptable prices and quality, and this will delay the fulfillment
of our customers’ orders. Consequently, our reputation may be negatively affected, leading to a loss of business and affecting
our ability to attract new business.



Raw materials and energy sources
comprise a substantial portion of our cost of sales and increases in the price of raw materials and energy sources will negatively
impact our profitability.



In fiscal years 2012, 2013 and 2014 our cost
of raw materials and energy source, which consist of clay (comprising mainly of kaolin, flint and feldspar), coal and natural gas
(used to heat our kilns), coloring materials and glazing materials, accounted for approximately 70.9%, 68.7% and 73.8% of our total
cost of sales, respectively. The price of clay, coal, natural gas, coloring materials and glazing materials may fluctuate due to
factors such as global supply and demand for such raw materials and changes in global economic conditions. Coal and natural gas
in aggregate accounted for approximately 27.9%, 22.6% and 22.2% of our total costs of raw materials and energy source in fiscal
years 2012, 2013 and 2014, respectively. Any shortages or interruptions in the supply of clay, coal and natural gas, coloring materials
or glazing materials will result in an increase in the cost of production, thus increasing our cost of sales. If we are not able
to pass on such an increase to our customers or are unable to find alternative sources of clay, coal, coloring materials, or glazing
materials or appropriate substitute raw materials at comparable prices, our gross margins and overall financial performance will
be adversely affected.



If China’s inflation increases
or the prices of energy or raw materials increase, we may not be able to pass the resulting increased costs to our customers and
this may adversely affect our profitability or cause us to suffer operating losses.



Economic growth in China has, in the past, been
accompanied by periods of high inflation. In the past, the Chinese government has implemented various policies from time to time
to control inflation. For example, the Chinese government has periodically introduced measures in certain sectors to avoid overheating
of the economy, including tighter bank lending policies, increases in bank interest rates, and measures to curb inflation, which
has resulted in a decrease in the rate of inflation. An increase in inflation could cause our costs for energy, labor costs, raw
materials and other operating costs to increase, which would adversely affect our financial condition and results of operations.



We are dependent on our management
team and any loss of our key management personnel without timely and suitable replacements may reduce our revenues and profits.



Our chief executive officer, Huang Jia Dong,
and our Sales Deputy General Manager, Su Pei Zhi, have worked with our company since founding it over nineteen years ago. Accordingly,
our success is dependent to a large extent on our ability to retain Messrs. Huang and Su, who are responsible for formulating and
implementing our growth, corporate development and overall business strategies. Mr. Huang currently beneficially owns 8,345,308
shares in us. Our employment agreements with Messrs. Huang and Su end on January 31, 2016, and there is no assurance that we will
be able to enter new long-term agreements with Messrs. Huang or Su. Our business is also dependent on our executive officers who
are responsible for implementing our business plans and driving growth. Please refer to “Directors, Senior Management and
Employees” herein for more information about our directors and officers.



The demand for such experienced personnel is
intense and the search for personnel with the relevant skills set can be time consuming. The loss of our key management personnel
without timely and suitable replacements may reduce our revenues and profits.



9







Failure to compete successfully
with our competitors and new entrants to the ceramics industry in the PRC may result in China Ceramics losing market share.



We operate in a competitive and fragmented industry.
There is no assurance that we will not face competition from our existing competitors and new entrants. We compete with a variety
of companies, some of which have advantages that include: longer operating history, larger clientele base, superior products, better
access to capital, personnel and technology, or are better entrenched. Our competitors may be able to respond more quickly to new
and emerging technologies and changes in customer requirements or succeed in developing products that are more effective or less
costly than our products. Any increase in competition could have a negative impact on our pricing (thus eroding our profit margins)
and reduce our market share. If we are unable to compete effectively with our existing and future competitors and do not adapt
quickly to changing market conditions, we may lose market share.



We have not purchased product liability
insurance and any loss resulting from product liability claims must be paid by us.



Accidents may arise as a result of defects in
our products. If there are any defects in the products designed and/or manufactured by us, we may face claims from our customers
or third parties for the personal injury or property damage suffered as a result of such defects. We have not purchased insurance
coverage for product liability or third party liability and are therefore not covered or compensated by insurance in respect of
losses, damages, claims and liabilities arising from or in connection with product liability or third party liability.



Our production facilities may be
affected by the natural gas supply and power shortages which could result in a loss of business.



Our production facilities consume substantial
amounts of natural gas and electrical power, which are the principal source of energy for our manufacturing operations. Although
we have a back-up generator at both our production facilities, we may experience occasional temporary power shortages disrupting
production due to power rationing activities conducted by the authorities, thunderstorms or other natural events beyond our control.
Accordingly, these production disruptions could result in a loss of business.



Our research and development efforts
may not result in marketable products.



Our research and development team develops products
which we have identified as having good potential in the market. There is no assurance that we will not experience delays in future
product developments. There is also no assurance that the products which we are currently developing or may develop in the future
will be successful or that we will be able to market these new products to our customers successfully. If our new products are
unable to gain the acceptance of our customers or potential customers, we will not be able to generate future sales from our investment
in research and development.



We may not be able to ensure the
successful implementation of our future plans and strategies, resulting in reduced financial performance.



We intend to expand our market presence and
explore opportunities in strategic investments or alliances and acquisitions. These initiatives involve various risks including,
but not limited to, the investment costs in setting up new offices and sales offices and working capital requirements. There is
no assurance that any future plan can be successfully implemented as the successful execution could depend on several factors,
some of which are not within our control. Failure to successfully implement our future plans or to effectively manage costs may
lead to a material adverse change in our operating environment or affect our ability to respond to market or industry changes,
resulting in reduced financial performance.



10







Due to reduced demand for our products,
we are currently operating our facilities at significantly less than our maximum capacity, which could reduce our profitability.



Our facilities currently provide an aggregate
annual maximum production capacity of approximately 72 million square meters. However, due to a reduction in demand, we are currently
utilizing production facilities capable of producing only 37 million square meters. In addition, we currently have sixteen production
lines of which only nine were utilized as of the end of 2014 due to challenging macroeconomic conditions that began in the fourth
quarter of 2012. The fact that a significant portion of our facilities are not being used means that our net income will be significantly
less than it would otherwise be because we must maintain those unused facilities even though they are not currently being productive.
In addition, if our facilities remain idle for an extended period of time, we may be required to take an impairment charge on our
financial statements. In light of the existence of idle assets at Hengdali, an impairment assessment has been performed by the
directors of the Company to determine the recoverable amount of the property, plant and equipment. The directors of the Company
engaged an independent appraiser to assist the Company to perform a valuation of the property, plant and equipment for impairment
assessment. No impairment loss on property, plant and equipment was recorded for 2014, 2013 and 2012, but further reductions in
demand could result in the impairment in the recoverable amount of our property, plant and equipment in the future with a resulting
reduction in our net income.



In late 2012 and early 2013, we
significantly reduced the selling prices of our products in order to maintain market share, which reduced our revenues and net
income for 2013. However, we raised our selling price on all of our products on July 1, 2014 which increased revenue gains in 2014.



In order to maintain our market share, we significantly
reduced the selling price of certain of our products at the end of 2012 and the beginning of 2013. Our revenues and net income
for those periods were lower than they would otherwise be due to such reductions. In addition, if clients grow accustomed to such
significant reductions, we may need to offer significant discounts in the future, which could reduce our net income and revenues
long term. However, we raised our selling price on all of our products on July 1, 2014 by about 5% to 10% attributable to a moderately
improved macroeconomic environment. We believe our strong marketing efforts and long-standing reputation for best-in-class products
and service will allow us to maintain these increased prices, but there is no assurance that we will not be required in the future
to reduce our prices again to maintain market share.



We may lose revenue if our intellectual
property rights are not protected and counterfeit HD, Hengda, HDL, Hengdeli, WULIQIAO, TOERTO or Pottery Capital of Tang Dynasty
brand products are sold in the market.



We believe our intellectual property rights
are important to our success and competitive position. A portion of our products are manufactured and marketed under our “HD”
or “Hengda,” “HDL” or “Hengdeli,” “Pottery Capital of Tang Dynasty”, “TOERTO”
and “WULIQIAO” labels. We have filed our labels as trademarks in the PRC. Before April13, 2011, WULIQIAO was a trademark
owned by Fujian Province Jinjiang City Hengda Construction Materials Co., Ltd. Hengda signed a Trademark Licensing Contract with
Fujian Province Jinjiang City Hengda Construction Materials Co., Ltd. and was licensed the exclusive right to use WULIQIAO during
the term of that trademark. On April 13, 2011, WULIQIAO was transferred to Hengdali, according to the Certificate of Approved Transference
of Trademark issued on April 13, 2011 by the Trademark Office of the State Administration for Industry & Commerce of the PRC.
In addition, we own twenty-two utility model patents and have certain trade secrets and unpatented proprietary technology. We cannot
assure you that there will not be any unauthorized usage or misuse of our trademarks and patent rights or that our intellectual
property rights will be adequately protected as it may be difficult and costly to monitor any infringements of our intellectual
property rights in the PRC. If we cannot adequately protect our intellectual property, we may lose revenue.



In addition, we believe the branding of our
products and the brand equity in our “HD” or “Hengda”, “HDL or Hengdeli”, “Pottery Capital
of Tang Dynasty”, “TOERTO” and “WULIQIAO” trademarks is critical to our expansion effort and the
continued success of our business. Our efforts to build our brand may be undermined by the sale of counterfeit goods. The counterfeiting
of our products may increase if our products become more popular.



11







In order to preserve and enforce our intellectual
property rights, we may have to resort to litigation against the infringing or counterfeiting parties. Such litigation could result
in substantial costs and diversion of management resources which may have an effect on our financial performance.



We may inadvertently infringe third-party
intellectual property rights, which could negatively impact our business and financial results.



We are not aware of, nor have we received any
claims from third parties for, any violations or infringements of intellectual property rights of third parties by us as of the
date of this Annual Report. Nevertheless, there can be no assurance that as we develop new product designs and production methods,
we would not inadvertently infringe the intellectual property rights of others or others would not assert infringement claims against
us or claim that we have infringed their intellectual property rights. Claims against us, even if untrue or baseless, could result
in significant costs, legal or otherwise, cause product shipment delays, require us to develop non-infringing products, enter into
licensing agreements or may be a distraction to our management. Licensing agreements, if required, may not be available on terms
acceptable to us or at all. In the event of a successful claim of intellectual property rights infringement against us and our
failure or inability to develop non-infringing products or to license the infringed intellectual property rights in a timely or
cost-effective basis, our business and/or financial results will be negatively impacted.



The PRC government has introduced
certain policy and regulatory measures to control the rapid increase in housing prices and cool down the real estate construction
market and the government may adopt further measures in the future that may further adversely affect our business.



Our business depends on the level of business
activity in the property development and construction industries that use our products in their operations in the PRC. Our products
are sold to customers in the property development and construction industries. If the property and construction industries fall
into a recession in the future, the demand for construction materials, such as ceramic tiles, may consequently decrease and have
a significant adverse effect on our business.



The PRC government has committed to taking steps
to regulate real estate development, promote the healthy development of the real estate industry in China, and strengthen the supervision
over land for real estate development purposes. For example, in his 2010 annual report to the National People’s Congress,
as part of the 12th Five-Year Plan, Chinese Premier Wen Jiabao pledged to curb the rise of housing prices in certain
cities to increase the availability of affordable housing. The program targets 36 million units of new housing by 2015 at a cost
of nearly $800 million. The full effect of such policies on the real estate industry and our business will depend in large part
on the implementation and interpretation of the circulars by governmental agencies, local governments, and banks involved in the
real estate industry. We cannot be certain that the PRC government will not issue additional and more stringent regulations or
measures or that agencies and banks will not adopt restrictive measures or practices in response to PRC governmental policies and
regulations, which could negatively affect the industries we serve in the PRC, and thereby harm our sales.



Our manufacturing activities are
dependent upon availability of skilled and unskilled labor, a deficiency of which could result in a reduction in profits.



Our manufacturing activities are labor intensive
and dependent on the availability of skilled and unskilled labor in large numbers. Large labor intensive operations call for good
monitoring and maintenance of cordial relations. Non-availability of labor, poor labor management and/or any disputes between the
labor and management may result in a reduction in profits. Further, we rely on contractors who engage on-site laborers for performance
of many of our unskilled operations. The scarcity or unavailability of contract laborers may affect our operations and financial
performance.



12







We face increasing labor costs and
other costs of production in the PRC, which could limit our profitability.



The ceramic tile manufacturing industry is labor
intensive. Labor costs in China have been increasing in recent years and our labor costs in the PRC could continue to increase
in the future. If labor costs in the PRC continue to increase, our production costs will likely increase which may in turn affect
the selling prices of our products. We may not be able to pass on these increased costs to consumers by increasing the selling
prices of our products in light of competitive pressure in the markets where we operate. In such circumstances, our profit margin
may decrease.



Violation of the Foreign Corrupt
Practices Act or China anti-corruption law could subject us to penalties and other adverse consequences.



We are subject to the United States Foreign
Corrupt Practices Act, which generally prohibits United States public companies from bribing or making prohibited payments to foreign
officials to obtain or retain business. PRC law also strictly prohibits bribery of government officials. While we take precautions
to educate our employees about the Foreign Corrupt Practices Act and Chinese anti-corruption law, there can be no assurance that
we or the employees or agents of our subsidiaries will not engage in such conduct, for which we may be held responsible. If that
were to occur, we could suffer penalties that may have a material adverse effect on our business, financial condition and results
of operations.



During the years ended December 31, 2013
and 2014, we entered into foreign currency transaction agreements that resulted in significant losses to us in 2014.



During 2013 and 2014, we entered into certain
foreign currency transaction agreements with a financial institution related to the movement of the Renminbi against the U.S. dollar.
We recorded realized and unrealized fair value gains on these agreements totaling RMB 3,346,000 for the year ended December 31,
2013. In 2014, as the Renminbi depreciated against the U.S. dollar, we incurred realized and unrealized losses totaling RMB 59,477,000
($9,586,000) for the year ended December 31, 2014 in connection with these agreements. In July 2014, Sound Treasure Limited, our
largest shareholder and an affiliate of our Chief Executive Officer, agreed to assume these agreements. As a result, we will not
be required to fund any losses related to these agreements and will neither suffer any future liabilities arising under those agreements
nor enjoy any benefits arising under those agreements.



We had a material weakness in our internal
control in financial reporting as of December 31, 2012, 2013 and 2014 and uch material weakness could adversely affect our ability
to report our results of operations and financial condition accurately and in a timely manner.



Our management identified material weaknesses
and concluded that our internal control over financial reporting were not effective as of December 31, 2012, 2013 and 2014. A material
weakness (within the meaning of PCAOB Auditing Standard No. 5) is a deficiency, or a combination of deficiencies, in internal controls
over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial
statements will not be prevented or detected on a timely basis.



The specific material weakness we identified
in our internal control over financial reporting for 2012, 2013 and 2014 related to the lack of sufficient qualified accounting
personnel with appropriate understanding of IFRS and SEC reporting requirements commensurate with our financial reporting requirements,
which resulted in a number of internal control deficiencies that were identified as being significant.



We have taken steps to enhance our supervision,
monitoring and review of the financial statements preparation processes, including:



| | 1. | We adopted additional internal review procedures with respect to required disclosures in the reports that we file with, or
submit to, the SEC under the Exchange Act.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



13







| | 2. | On July 24, 2014, we contracted with a US internal control consulting firm to act as our consultant to conduct a separate and
independent review of our financial reporting.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. | Our finance and accounting staff members have attended seminars organized by professional accountancy bodies.
| | -- | -------------------------------------------------------------------------------------------------------------



Until such time we hire sufficient qualified
accounting personnel with appropriate understanding of IFRS and SEC reporting requirements, however, the measures we have taken
may not be sufficient to mitigate the risks associated with the lack of qualified accounting personnel.



Any failure to maintain internal control could
adversely impact our ability to report our financial results on a timely and accurate basis. If our financial statements are not
accurate, investors may not have a complete understanding of our operations. Likewise, if our financial statements are not filed
on a timely basis as required by the SEC and NASDAQ, we could face severe consequences from those authorities. In either case,
there could result a material adverse effect on our business. Inferior internal control could also cause investors to lose confidence
in our reported financial information, which could have a negative effect on the trading price of our stock. We can give no assurance
that additional material weaknesses or restatements of financial results will not arise in the future due to a failure to implement
and maintain adequate internal control over financial reporting or circumvention of these controls. In addition, even if we are
successful in strengthening our controls and procedures, in the future those controls and procedures may not be adequate to prevent
or identify irregularities or errors or to facilitate the fair presentation of our consolidated financial statements.



The audit report included in this prospectus
is prepared by an auditor who is not inspected by the Public Company Accounting Oversight Board (“PCAOB”) and, as such,
you are deprived of the benefits of such inspection.



Auditors of companies
whose shares are registered with the U.S. Securities and Exchange Commission and traded publicly in the United States, including
our independent registered public accounting firm, must be registered with the U.S. Public Company Accounting Oversight Board (the
“PCAOB”) and are required by the laws of the United States to undergo regular inspections by the PCAOB to assess their
compliance with the laws of the United States and professional standards applicable to auditors. Because we have substantial operations
within the PRC, a jurisdiction where the PCAOB is currently unable to conduct inspections without the approval of the Chinese authorities,
our auditor is not currently inspected by the PCAOB. In May 2013, the PCAOB announced that it had entered into a Memorandum of
Understanding on Enforcement Cooperation with the China Securities Regulatory Commission, or CSRC, and the PRC Ministry of Finance,
which establishes a cooperative framework between the parties for the production and exchange of audit documents relevant to investigations
undertaken by the PCAOB, the CSRC or the Ministry of Finance in the United States and the PRC, respectively. The PCAOB continues
to be in discussions with the CSRC and the Ministry of Finance to permit joint inspections in the PRC of audit firms that are registered
with the PCAOB and audit Chinese companies that trade on U.S. exchanges.



This lack of PCAOB
inspections in China prevents the PCAOB from regularly evaluating audits and quality control procedures of any auditors operating
in China, including our auditor. As a result, investors may be deprived of the benefits of PCAOB inspections. The inability of
the PCAOB to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of our auditor's audit
procedures or quality control procedures as compared to auditors outside of China that are subject to PCAOB inspections. Investors
may lose confidence in our reported financial information and procedures and the quality of our financial statements.



14







Proceedings instituted
by the SEC against certain PRC-based accounting firms could result in financial statements being determined to not be in compliance
with the requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act.



On December 3, 2012,
the SEC issued an order instituting administrative proceedings against five of the largest global public accounting firms relating
to work performed in the PRC and such firms’ failure to provide audit work papers to the SEC in this regard. Our independent
registered public accounting firm is not one of the accounting firms referenced in the order. On January 22, 2014, an initial administrative
law decision was issued, censuring the five accounting firms and suspending four of the five firms from practicing before the SEC
for a period of six months. On February 12, 2014, four of these PRC-based accounting firms appealed to the SEC against this decision.
In February 2015, each of the four PRC-based accounting firms agreed to a censure and to pay a fine to the SEC to settle the dispute
and avoid suspension of their ability to practice before the SEC. The settlement requires the firms to follow detailed procedures
to seek to provide the SEC with access to Chinese firms’ audit documents via the CSRC. If the firms do not follow these procedures,
the SEC could impose penalties such as suspensions, or it could restart the administrative proceedings.



In the event that the
SEC restarts the administrative proceedings, depending upon the final outcome, listed companies in the United States with major
PRC operations may find it difficult or impossible to retain auditors in respect of their operations in the PRC, which could result
in financial statements being determined to not be in compliance with the requirements of the Exchange Act, including possible
delisting. Moreover, any negative news about the proceedings against these audit firms may cause investor uncertainty regarding
China-based, United States-listed companies and the market price of our shares may be adversely affected.



If our independent
registered public accounting firm was denied, temporarily, the ability to practice before the SEC and we were unable to timely
find another registered public accounting firm to audit and issue an opinion on our financial statements, our financial statements
could be determined to not be in compliance with the requirements of the Exchange Act.



Risk Factors Relating
to Operations in China



We are dependent on political, economic,
regulatory and social conditions in the PRC.



Approximately 94% of our revenue in each of
the last three fiscal years was derived from the PRC market and we anticipate that the PRC market will continue to be the major
source of revenue for the foreseeable future. Accordingly, any significant slowdown in the PRC economy or decline in demand for
our products from our customers in the PRC will have an adverse effect on our business and financial performance. Furthermore,
as our operations and production facilities are located in the PRC, any unfavorable changes in the social and/or political conditions
may also adversely affect our business and operations.



While the current policy of the PRC government
seems to be one of economic reform to encourage foreign investments and greater economic decentralization, there is no assurance
that such a policy will continue to prevail in the future. There is no assurance that our operations will not be adversely affected
should there be any policy changes.



We are subject to risks related
to the laws and regulations of the PRC and the interpretation and implementation thereof.



Our business and operations, as well as those
of our customers and suppliers in the PRC, are subject to the laws and regulations promulgated by relevant PRC governmental authorities.
The PRC government is still in the process of developing a comprehensive set of laws and regulations in the course of the PRC’s
transformation from a centrally planned economy to a more free market oriented economy. As the legal system in the PRC is still
in flux, laws and regulations or their interpretation may be subject to change. Furthermore, any change in the political and economic
policy of the PRC government may also result in similar changes in the laws and regulations or the interpretation thereof. Such
changes may adversely affect our operations and business in the PRC.



The PRC legal system is a codified legal system
comprising written laws, regulations, circulars, administrative directives, and internal guidelines as well as judicial interpretations.
Decided cases do not form part of the legal structure of the PRC and thus have no binding effect. As such, the administration of
PRC laws and regulations may be subject to a certain degree of discretion by the authorities. This has resulted in the outcome
of dispute resolutions not having the level of consistency or predictability as in other countries with more developed legal systems.
Due to such inconsistency and unpredictability, if we should be involved in any legal dispute in the PRC, we may experience difficulties
in obtaining legal redress or in enforcing our legal rights.



15







From time to time, changes in law, registration
requirements, and regulations or the implementation thereof may also require us to obtain additional approvals and licenses from
the PRC authorities for carrying out our operations in the PRC which would require us to incur additional expenses in order to
comply with such requirements and in turn affect our financial performance with the increase in our business costs. Furthermore,
there can be no assurance that approvals, registrations, or licenses will be granted to us promptly or at all. If we experience
delays in obtaining or are unable to obtain such required approvals, registrations, or licenses, our operations and business in
the PRC, and hence our overall financial performance will be adversely affected.



Our business activities are subject
to certain PRC laws and regulations.



As our production and operations are carried
out in the PRC, we are subject to certain PRC laws and regulations. In addition, being wholly foreign-owned enterprises, we are
required to comply with certain additional laws and regulations. Pursuant to PRC laws and regulations, the breach or non-compliance
with such laws and regulations may result in the PRC authorities suspending, withdrawing or terminating our business license, causing
us to cease production of all or certain of our products, and this would materially and adversely affect our business and financial
performance.



Our corporate affairs in the PRC are governed
by our articles of association and the corporate and foreign investment laws and regulations of the PRC. The principles of the
PRC laws relating to matters such as the fiduciary duties of directors and other corporate governance matters and foreign investment
laws in the PRC are relatively new. Hence, the enforcement of investors or shareholders’ rights under the articles of association
of a PRC company and the interpretation of the relevant laws relating to corporate governance matters remain largely untested in
the PRC.



PRC foreign exchange control may
limit our ability to utilize our profits effectively and affect our ability to receive dividends and other payments from our PRC
subsidiaries.



Hengda is a foreign investment enterprise, or
“FIE,” and is subject to the rules and regulations in the PRC on currency conversion. In the PRC, State Administration
of Foreign Exchange, or SAFE, regulates the conversion of the RMB into foreign currencies. Currently, FIEs are required to apply
to SAFE for “Foreign Exchange Registration Certificates for Foreign Investment Enterprise”. With such registration
certifications (which need to be renewed annually), FIEs are allowed to open foreign currency accounts including the “current
account” and “capital account”. Currently, conversion of currency within the scope of the “current account”
(e.g. remittance of foreign currencies for payment of dividends, etc.) can be effected without requiring the approval of SAFE.
However, conversion of currency in the “capital account” (e.g. for capital items such as direct investments, loans,
securities, etc.) still requires the approval of SAFE.



On October 21, 2005, SAFE promulgated the “Notice
on Issues concerning Foreign Exchange Management in Financing by PRC Residents by Overseas Special Purpose Vehicle and Return Investments”
(the “No. 75 Notice”).



The No. 75 Notice came into effect on November
1, 2005 and requires the following matters, among others, to be complied with: every PRC domestic resident who establishes or controls
an overseas special purpose vehicle, or “SPV,” must apply to the local bureau of SAFE for an “overseas investment
foreign exchange registration.”



Every PRC domestic resident of an SPV who has
completed the “overseas investment foreign exchange registration”, or “Registrant,” must make an application
to the local bureau of SAFE to amend their registration particulars upon (i) the injection of any PRC domestic assets or the equity
interests of any PRC domestic company owned by the PRC domestic resident into the SPV, and (ii) the implementation of any overseas
equity fund-raising by the SPV following an injection of PRC domestic assets or the equity interests of a PRC domestic company;
every Registrant must apply to the local bureau of SAFE for change of registration particulars or recordation within 30 days after
the occurrence of any capital increase or reduction, changes in shareholdings or share swap, merger, long-term investment in equities
or debentures, guarantee of foreign indebtedness and other major capital changes not involving “return investment”,
undertaken by an SPV; and every Registrant must repatriate, within 180 days, dividends or profits which he receives from an SPV
and/or income derived from changes in the shareholding of an SPV.



16







On 14 July 2014, China’s State Administration
of Foreign Exchange (SAFE), the foreign exchange control authority, released the Notice of the State Administration of Foreign
Exchange on Relevant Issues Concerning Foreign Exchange Administration for Overseas Investment, Financing and Round Trip Investment
Undertaken by Domestic Residents via Special Purpose Vehicles (Notice 37). The new regulation took effect 4 July 2014. At that
time, the old regulation, “Notice on Issues concerning Foreign Exchange Management in Financing by PRC Residents by Overseas
Special Purpose Vehicle and Return Investments” (the “No. 75 Notice”), which was issued in 2005, was repealed.
Compared with Circular 75, Circular 37 reflects the trend of SAFE’s policy to gradually loosen the restrictions and simplify
the procedures for overseas financing and investment by Chinese residents, so as to fully utilize the financial resources in domestic
and overseas markets. However, as Circular 37 has only recently been issued, the actual interpretation and enforcement of the above
changes by SAFE in practice remain to be seen.



There can be no assurance that SAFE will not
continue to issue new rules and regulations and/or further interpretations of the No. 37 Notice that will strengthen the foreign
exchange control. As we are located in the PRC and all of our sales are denominated in RMB, our ability to pay dividends or make
other distributions may be restricted by PRC foreign exchange control restrictions. There can be no assurance that the relevant
regulations will not be amended to our detriment and that our ability to distribute dividends will not be adversely affected.



Introduction of new laws or changes
to existing laws by the PRC government may adversely affect our business.



The PRC legal system is based on the Constitution
of the People’s Republic of China and is made up of written laws, regulations, circulars and directives. With the PRC’s
entry into the WTO, the PRC government is in the process of developing its legal system so as to encourage foreign investments
and to meet the needs of investors. As the PRC economy is developing at a generally faster rate than its legal system, some degree
of uncertainty exists in connection with whether and how existing laws and regulations will apply to certain events or circumstances.
Some of the laws and regulations, and the interpretation, implementation and enforcement thereof, are still at the experimental
stage and therefore subject to policy changes. There is no assurance that the introduction of new laws or regulations, changes
to existing laws and regulations and the interpretation or application thereof or the delays in obtaining approvals from the relevant
PRC authorities will not have an adverse impact on our business or prospects.



In particular, on August 8, 2006, the Ministry
of Commerce, the China Securities Regulatory Commission, the State-owned Assets Supervision and Administration Commission, the
State Administration of Taxation, the State Administration of Industry and Commerce and the State Administration of Foreign Exchange
promulgated the “Rules on the Mergers and Acquisition of Domestic Enterprises by Foreign Investors” which came into
effect on September 8, 2006, or “the M&A Rules.” Foreign investors should comply with the rules when they purchase
shareholding equities of a PRC domestic non-foreign-funded enterprise, or Domestic Company, or subscribe to the increased capital
of a Domestic Company, and thus changing the nature of the Domestic Company into a foreign investment enterprise. The rules stipulate,
inter alia, (i) that the acquisition of a Domestic Company by an affiliated foreign enterprise established or controlled by PRC
entities or individuals must be approved by the Ministry of Commerce; (ii) that the incorporation of a special purpose vehicle,
which is directly or indirectly controlled by PRC entities for the purpose of an overseas listing of the equity interest of a Domestic
Company, must be subject to the approval of the Ministry of Commerce; (iii) that the acquisition of a Domestic Company by a special
purpose vehicle shall be subject to approval of the Ministry of Commerce and (iv) the offshore listing of a special purpose vehicle
shall be subject to the prior approval from China Securities Regulatory Commission.



17







As Hengda was incorporated as a FIE and China
Ceramics does not fall within the scope of being classified as a special purpose vehicle directly or indirectly established or
controlled by PRC entities or individuals, the M&A Rules did not apply to the Business Combination, and we were not required
to obtain the approval from the Ministry of Commerce, the approval from the China Securities Regulatory Commission and/or any other
approvals from PRC government authorities as stipulated by the M&A Rules. There is however no assurance that the PRC authorities
will not issue further directives, regulations, clarifications or implementation rules, which may require us or other relevant
parties to obtain further approvals with respect to the Business Combination. If new laws are promulgated or the existing laws
are reinterpreted, our structure could be determined to be in violation of such laws and subject to sanction by applicable government
authorities.



Environmental, health and safety
laws have in the past and may in the future impose material liabilities on us and require us to incur material capital and operational
costs.



We are subject to environmental, health and
safety laws and regulations in the PRC that impose controls on our air, water and waste discharges, on our storage, handling, use,
discharge and disposal of chemicals, and on exposure of our employees to hazardous substances. These laws and regulations could
require us to incur costs to maintain compliance and could impose liability to remedy the effects of hazardous substance contamination.
Although we do not believe that we have violated any of such laws and regulations and therefore have not incurred any significant
liabilities under these laws and regulations in the past, the environmental laws and regulations are constantly evolving and becoming
stricter in the PRC. The adoption of new laws or regulations or our failure to comply with these laws or regulations in the future
could cause us to incur material liabilities and could require us to incur additional expenses, curtail operations and/or restrict
our ability to expand. Hengdali is currently in the process of applying for a Pollutant Discharge Permit, and the environmental
protection agency in Gaoan has accepted Hengdali’s application. If the Pollutant Discharge Permit is not issued and Hengdali
discharges pollutants, Hengdali may be warned, ordered to stop discharging pollutants, and/or fined by the environmental protection
agency.



During 2014, our Hengda facility was required
by the local governmental entity to begin using natural gas to operate the facility, as opposed to coal. This mandated change in
fuel source is part of a province-wide (and country-wide) effort to reduce pollution. This change resulted in our incurring a one-time
charge of approximately RMB 5.6 million ($0.9 million) in December 2013, and has increased our cost of goods produced at that facility
because natural gas is a more expensive energy source than coal. There is no assurance that in the future our other production
facilities will not be required to make similar modifications which could have similar adverse effects on our operations.



Our business will suffer if we lose
our land use rights.



There is no private ownership of land in China
and all land ownership is held by the government of China, its agencies, and collectives. In the case of land used for business
purposes, land use rights can be obtained from the government for a period up to 50 years, and are typically renewable. Land use
rights can be granted upon approval by the land administrative authorities of China (State Land Administration Bureau) upon payment
of the required land granting fee, the entry into a land use agreement with a competent governmental authority and certain other
ministerial procedures. We have received land use certificates for certain parcels of land on which our operations reside, but
we may not have followed all procedures required to obtain such certificates or paid all required fees. If the Chinese administrative
authorities determine that we have not fully complied with all procedures and requirements needed to hold a land use certificate,
we may be forced by the Chinese administrative authorities to retroactively comply with such procedures and requirements, which
may be burdensome and require us to make payments, or such Chinese administrative authorities may invalidate or revoke our land
use certificate entirely. If the land use right certificates needed for our operations are determined by the government of China
to be invalid or if they are not renewed, we may lose production facilities or employee accommodations that would be difficult
or even impossible to replace. Should we have to relocate, our workforce may be unable or unwilling to work in the new location
and our business operations will be disrupted during the relocation. The relocation or loss of facilities could cause us to lose
sales and/or increase our costs of production, which would negatively impact our financial results.



18







We own certain buildings collectively,
which may limit our right to use, renovate or dispose of such buildings.



Together with three other companies, we collectively
own several buildings located at the Junbing Industrial Zone in Jinjiang City with a total construction area of 29,120.83 square
meters. As a result, our right to use, renovate and dispose of such buildings may be limited.



Our business will suffer if we fail
to comply with environmental protection regulations



Companies which cause severe pollution to the
environment are required to restore the environment or remedy the effects of the pollution within a prescribed time limit. If a
company fails to report and/or register the environmental pollution it caused, it will receive a warning or be penalized. Companies
that fail to restore the environment or remedy the effects of the pollution within the prescribed time will be penalized or have
their business licenses terminated. Companies that have polluted and endangered the environment must bear the responsibility for
remedying the danger and effects of the pollution, as well as to compensate any losses or damages suffered as a result of such
environmental pollution.



Our Hengda facility obtained a Temporary Pollutant
Discharge Permit (JH(2013)ZZ No. 320) granted by Jinjiang City Environmental Protection Bureau that will expire on April 27, 2015.
Hengda is currently in the process of applying for the renewal of the permit. Hengdali is currently in the process of applying
for a Pollutant Discharge Permit, and the environmental protection agency in Gaoan has accepted Hengdali’s application. If
the Pollutant Discharge Permit is not issued and Hengdali discharges pollutants, Hengdali may be warned, ordered to stop discharging
pollutants, and/or fined by the environmental protection agency. If Hengdali’s application is denied, or if the Hengdali
facility is ordered to stop discharging pollutants or is fined, that could have a material adverse effect on our results of operations
and financial condition.



Our corporate structure together with
applicable law impede shareholders from asserting claims against us and our principals.



All of our operations and records, and all of
our senior management are located in the People’s Republic of China. Shareholders of companies such as ours have limited
ability to assert and collect on claims in litigation against such companies and their principals. In addition, China has very
restrictive secrecy laws that prohibit the delivery of many of the financial records maintained by a business located in China
to third parties absent Chinese government approval. Since discovery is an important part of proving a claim in litigation, and
since most if not all of our records are in China, Chinese secrecy laws could frustrate efforts to prove a claim against us or
our management.



In order to commence litigation in the United
States against an individual such as an officer or director, that individual must be served. Generally, service requires the cooperation
of the country in which a defendant resides. China has a history of failing to cooperate in efforts to affect such service upon
Chinese citizens in China.



If we become directly subject to
the recent scrutiny involving U.S.-listed Chinese companies, we may have to expend significant resources to investigate and/or
defend the matter, which could harm our business operations, stock price and reputation and could result in a complete loss of
your investment in us.



Recently, U.S. public companies that have substantially
all of their operations in China have been the subject of intense scrutiny by investors, financial commentators and regulatory
agencies. Much of the scrutiny has centered around financial and accounting irregularities and mistakes, a lack of effective internal
controls over financial reporting and, in many cases, allegations of fraud. As a result of the scrutiny, the publicly traded stock
of many U.S. listed China-based companies that have been the subject of such scrutiny has sharply decreased in value. Many of these
companies are now subject to shareholder lawsuits and/or SEC enforcement actions that are conducting internal and/or external investigations
into the allegations. If we become the subject of any such scrutiny, whether any allegations are true or not, we may have to expend
significant resources to investigate such allegations and/or defend our company. Such investigations or allegations will be costly
and time-consuming and distract our management from our business plan and could result in our reputation being harmed and our stock
price could decline as a result of such allegations, regardless of the truthfulness of the allegations.



19







Risks to China Ceramics’
Shareholders



If our shares again trade below
$1.00 per share, we may be required to engage in a reverse sock split of our shares in order to continue to meet Nasdaq listing
requirements.



Our
sock traded below $1.00 per share from the end of last year to the beginning of this year, which resulted in our falling out of
compliance with Nasdaq minimum bid price rules. Since that time, our share price has increased and we are again in compliance with
the Nasdaq continued listing requirements. However, if our stock price declines again, we may be required to engage in a reverse
split in order to bring our share price above $1.00 in order to comply with Nasdaq continued listing requirements. If a reverse
split takes place, our trading volume may decrease, adversely affecting the ability of our shareholders to purchase or sell shares
in the open market. In addition, reverse splits sometimes cause the trading price of the resulting security to be lower than the
pre-split share price and there is no guarantee that a reverse split will maintain its share price on a post-reverse split adjusted
basis above $1.00 to comply with Nasdaq continued listing requirements.



The price of our shares could be
volatile and could decline at a time when you want to sell your holdings.



The price of our shares has been and may continue
to be volatile, and that volatility may continue for an extended period of time. Since the completion of the business combination
through April 10, 2015, the trading price of our shares ranged between $10.10 and $0.71 per share.



There is a risk that China Ceramics
could have been treated as a domestic corporation for U.S. federal income tax purposes after the Redomestication and the Business
Combination, which, among other things, could have resulted in significantly greater U.S. federal income tax liability to China
Ceramics.



Section 7874(b) of the Internal Revenue Code
of 1986, as amended (the “Code”) generally provides that a corporation organized outside the United States that acquires,
directly or indirectly, pursuant to a plan or series of related transactions substantially all of the assets of a corporation organized
in the United States will be treated as a domestic corporation for U.S. federal income tax purposes if shareholders of the acquired
corporation, by reason of owning shares of the acquired corporation, own at least 80% (of either the voting power or the value)
of the stock of the acquiring corporation after the acquisition. Under regulations promulgated under Section 7874, a warrant holder
of either the acquired corporation or the acquiring corporation generally is treated for this purpose as owning stock of the acquired
corporation or the acquiring corporation, as the case may be, with a value equal to the excess of the value of the shares underlying
the warrant over the exercise price of the warrant. If Section 7874(b) were to have applied to the Redomestication, then, among
other things, China Ceramics, as the surviving entity, would have been subject to U.S. federal income tax on its worldwide taxable
income following the Redomestication and the Business Combination as if China Ceramics were a domestic corporation.



Although Section 7874(b) should not have applied
to treat China Ceramics as a domestic corporation for U.S. federal income tax purposes, due to the absence of full guidance on
how the rules of Section 7874(b) applied to the transactions completed pursuant to the Redomestication and Business Combination,
this result is not entirely free from doubt. Shareholders are urged to consult their own tax advisors on this issue. See the discussion
in the section entitled “Taxation — United States Federal Income Taxation — Tax Treatment of China Ceramics After
the Redomestication and the Business Combination.” The balance of this discussion assumes that China Ceramics has been and
will be treated as a foreign corporation for U.S. federal income tax purposes.



20







There is a risk that China Ceramics
will be classified as a passive foreign investment company, or “PFIC,” which could result in adverse U.S. federal income
tax consequences to U.S. holders of its shares.



In general, China Ceramics will be treated as
a PFIC for any taxable year in which either (1) at least 75% of its gross income (including its pro rata share of the gross income
of its 25% or more-owned corporate subsidiaries) is passive income or (2) at least 50% of the average value of its assets (including
its pro rata share of the assets of its 25% or more-owned corporate subsidiaries) produce, or are held for the production of, passive
income. Passive income generally includes dividends, interest, rents, royalties, and gains from the disposition of passive assets.
If China Ceramics is determined to be a PFIC for any taxable year (or portion thereof) that is included in the holding period of
a U.S. Holder (as defined in the section entitled “Taxation—United States Federal Income Taxation—General”)
of its shares, the U.S. Holder may be subject to increased U.S. federal income tax liability upon a sale or other disposition of
the shares of China Ceramics or the receipt of certain excess distributions from China Ceramics and may be subject to additional
reporting requirements. Based on the composition (and estimated values) of the assets and the nature of the income of China Ceramics
and its subsidiaries during its 2014 taxable year, China Ceramics does not believe that it would be treated as a PFIC for such
year. However, because China Ceramics has not performed a definitive analysis as to its PFIC status for its 2014 taxable year,
there can be no assurance in respect to its PFIC status for such year. There also can be no assurance with respect to China Ceramics’
status as a PFIC for its current (2015) taxable year or any future taxable year. U.S. Holders of the shares of China Ceramics are
urged to consult their own tax advisors regarding the possible application of the PFIC rules. See the discussion in the section
entitled “Taxation—United States Federal Income Taxation—U.S. Holders—Passive Foreign Investment Company
Rules.”



Under the EIT Law, China Ceramics,
Success Winner and/or Stand Best may be classified as a “resident enterprise” of the PRC. Such classification could
result in PRC tax consequences to China Ceramics, our non-PRC resident shareholders, Success Winner and/or Stand Best.



On March 16, 2007, the National People’s
Congress approved and promulgated a new tax law, the PRC Enterprise Income Tax Law, or “EIT Law,” which took effect
on January 1, 2008. Under the EIT Law, enterprises are classified as “resident enterprises” and non-resident enterprises.
An enterprise established outside of China with “de facto management bodies” within China is considered a “resident
enterprise,” meaning that it can be treated in a manner similar to a Chinese enterprise for enterprise income tax purposes.



The implementing rules of the EIT Law define
“de facto management bodies” as a managing body that in practice exercises “substantial and overall management
and control over the production and operations, personnel, accounting, and properties” of the enterprise; however, it remains
unclear whether the PRC tax authorities would deem our managing body as being located within China. Due to the short history of
the EIT Law and lack of applicable legal precedents, the PRC tax authorities determine the PRC tax resident treatment of a foreign
(non-PRC) company on a case-by-case basis.



If the PRC tax authorities determine that China
Ceramics, Success Winner and/or Stand Best is a “resident enterprise” for PRC enterprise income tax purposes, a number
of PRC tax consequences could follow. First, China Ceramics, Success Winner and/or Stand Best may be subject to the enterprise
income tax at a rate of 25% on China Ceramics’, Success Winner’s and/or Stand Best’s worldwide taxable income,
as well as PRC enterprise income tax reporting obligations. Second, under the EIT Law and its implementing rules, dividends paid
between “qualified resident enterprises” are exempt from enterprise income tax. As a result, if China Ceramics, Success
Winner and Stand Best are each treated as “qualified resident enterprises,” all dividends from Hengda to China Ceramics
(through Success Winner and Stand Best) should be exempt from the PRC enterprise income tax.



21







If Stand Best were treated
as a PRC “non-resident enterprise” under the EIT Law, then dividends that Stand Best receives from Hengda (assuming
such dividends were considered sourced within the PRC) (i) may be subject to a 5% PRC withholding tax, provided that Stand Best
owns more than 25% of the registered capital of Hengda continuously within 12 months immediately prior to obtaining such dividend
from Hengda, and the Arrangement between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance
of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, or the “PRC-Hong Kong Tax Treaty,”
were otherwise applicable, or (ii) if such treaty does not apply (i.e., because the PRC tax authorities may deem Stand Best to
be a conduit not entitled to treaty benefits), may be subject to a 10% PRC withholding tax. Similarly, if Success Winner were treated
as a “non-resident enterprise” under the EIT Law and Stand Best were treated as a “resident enterprise”
under the EIT Law, then dividends Success Winner receives from Stand Best (assuming such dividends were considered sourced within
the PRC) may be subject to a 10% PRC withholding tax. A similar situation may arise if China Ceramics were treated as a “non-resident
enterprise” under the EIT Law, and Success Winner were treated as a “resident enterprise” under the EIT Law.
Any such taxes on dividends could materially reduce the amount of dividends, if any, we could pay to our shareholders.



Finally, if China Ceramics
is determined to be a “resident enterprise” under the EIT Law, this could result in a situation in which a 10% PRC
tax is imposed on dividends China Ceramics pays to its shareholders that are not tax residents of the PRC, or “non-resident
investors,” and that are enterprises but not individuals, and gains derived by them from transferring China Ceramics’
shares, if such income is considered PRC-sourced income by the relevant PRC tax authorities. In such event, China Ceramics may
be required to withhold a 10% PRC tax on any dividends paid to such non-resident investors. Such non-resident investors also may
be responsible for paying PRC tax at a rate of 10% on any gain derived by such investors from the sale or transfer of China Ceramics’
shares in certain circumstances. China Ceramics would not, however, have an obligation to withhold PRC tax with respect to such
gain under the PRC tax laws. Also, if China Ceramics is determined to be a “resident enterprise,” its nonresident investors
who are individuals may also be subject to potential PRC individual income tax at a rate of 20% with respect to dividends received
from China Ceramics and/or gains derived by them from the sale or transfer of China Ceramics’ shares.



Moreover, the State Administration
of Taxation, or “SAT,” released Circular Guoshuihan No. 698, or Circular 698, on December 10, 2009 that reinforces
the taxation of certain equity transfers by non-resident investors through overseas holding vehicles. Circular 698 addresses indirect
equity transfers as well as other issues. Circular 698 is retroactively effective from January 1, 2008. According to Circular 698,
where a nonresident investor who indirectly holds an equity interest in a PRC resident enterprise through a non-PRC offshore holding
company indirectly transfers an equity interest in the PRC resident enterprise by selling an equity interest in the offshore holding
company, and the latter is located in a country or jurisdiction where the actual tax burden is less than 12.5% or where the offshore
income of its residents is not taxable, the non-resident investor is required to provide the PRC tax authority in charge of that
PRC resident enterprise with certain relevant information within 30 days of the execution of the equity transfer agreement. The
tax authorities in charge will evaluate the offshore transaction for tax purposes. In the event that the tax authorities determine
that such transfer is abusing forms of business organization and a reasonable commercial purpose for the offshore holding company
other than the avoidance of PRC income tax liability is lacking, the PRC tax authorities will have the power to re-assess the nature
of the equity transfer under the doctrine of substance over form. A reasonable commercial purpose may be established when the overall
international (including U.S.) offshore structure is set up to comply with the requirements of supervising authorities of international
(including U.S.) capital markets. If the SAT’s challenge of a transfer is successful, it may deny the existence of the offshore
holding company that is used for tax planning purposes and subject the non-resident investor to PRC tax on the capital gain from
such transfer. Since Circular 698 has a short history, there is uncertainty as to its application. We (or a nonresident investor)
may become at risk of being taxed under Circular 698 and may be required to expend valuable resources to comply with Circular 698
or to establish that we (or such non-resident investor) should not be taxed under Circular 698, which could have a material adverse
effect on our financial condition and results of operations (or such non-resident investor’s investment in us).



In additional, the PRC
resident enterprise may be required to provide necessary assistance to support the enforcement of Circular 698.



22







On February 3, 2015, the
State Administration of Tax issued a Public Notice Regarding Certain Corporate Income Tax Matters on Indirect Transfer of Properties
by Non-tax Resident Enterprise, or Public Notice 7. Public Notice 7 has introduced a new tax regime that is significantly different
from that under Circular 698. Public Notice 7 extends its tax jurisdiction to not only indirect transfers set forth under Circular
698 but also transactions involving transfer of other taxable assets, through the offshore transfer of a foreign intermediate holding
company. In addition, Public Notice 7 provides clearer criteria the Circular 698 on how to assesss reasonable commercial purposes
and has introduced safe harbors for internal group restructurings and the purchase and sale of equity through a public securities
market. Public Notice 7 also brings challenges to both the foreign transferor and transferee (or other person who is obligated
to pay for the transfer) of the taxable assets. Where a non-resident erterprise conducts an “indirect transfer” by
transferring the taxable assets indirectly by disposing of the equity interests of an overseas holding company, the non-resident
enterprise being the transferor, or the transferee, or the PRC entity which directly owned the taxable assets may report to the
relevant tax authority such indirect transfer. Using a “substance over form” principle, the PRC tax authority may re-characterize
such indirect transfer as a dirct transfer of the equity intersts in the PRC tas resident enterprise and other properties in China,
As a result, gains derived from such indirect transfer may be subject on PRC enterprise income tax, and the transferee or other
person who is obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at a rate of up to 10%
for the transfer of equity interests in a PRC resident enterprise. Both the transferor and the transferee may be subject to penalties
under PRC tax laws if transferee fails to withhold the taxes and the transferor fails to pay the taxes.



We face uncertainties with
respect to the reporting and consequences of private equity financing transactions, share exchange or other transactions involving
the transfer of shares in our company by investors that are non-PRC resident enterprises, or sale or purchase of shares in other
non-PRC resident companies or other taxable assetsby us. Our company and other non-resident enterprises in our group may be subject
to filing obligations or being taxed if our company and other non-resident enterprises in our group are transferors in such transactions,
and may be subject to withholding obligations if our company and other non-resident enterprises in our group are transferees in
such transactions, under Circular 698 and Public Notice 7. For the transfer to shares in our company by investors that are non-PRC
resident enterprises, our PRC subsidiaries may be requested to assist in the filing under Circular 698 and Public Notice 7. As
a result, we may be required to expend valuable resources to comply with Circular 698 and Public Notice 7 to request the relevant
transferors from whom we purchase taxable assets to comply with thiese circulars, or to establish that our company and other non-resdient
entreprises in our group should not be taxed under thers circulars, which may have a material adverseeffect on our financial condition
and results of operations.



The PRC tax authorities
have the discretion under Circular 698 and Public Notice 7 to make adjustments to the taxable capital gains based on the difference
between the fair value of the taxable assets transferred and the cost of investment. If the PRC tax authorities make adjustments
to the taxable incomen of the transactions under Circular 698 and Public Notice 7, our income tax costs associated with such potential
acquisitions will be increased, which may have an advers effect on our financial condition and results of operations.



If any PRC tax applies
to a non-resident investor, the non-resident investor may be entitled to a reduced rate of PRC tax under an applicable income tax
treaty and/or a deduction for such PRC tax against such investor’s domestic taxable income or a foreign tax credit in respect
of such PRC tax against such investor’s domestic income tax liability (subject to applicable conditions and limitations).
Shareholders should consult with their own tax advisors regarding the applicability of any such taxes, the effects of any applicable
income tax treaties, and any available deductions or foreign tax credits.



For a further discussion of these issues, see
the section herein captioned “Taxation—PRC Taxation.”



23







Fluctuations in exchange rates could
adversely affect our business and the value of our shares.



The value of our shares will be indirectly affected
by the foreign exchange rate between U.S. dollars and the Renminbi and between those currencies and other currencies in which our
revenue may be denominated. Because all of our earnings and cash assets are denominated in Renminbi, fluctuations in the exchange
rate between the U.S. dollar and the Renminbi will affect the relative purchasing power of these proceeds, as well as our financial
results reported in U.S. dollar terms without giving effect to any underlying change in our business, financial condition or results
of operations. Fluctuations in the exchange rate will also affect the relative value of any dividend we issue after this offering
that will be exchanged into U.S. dollars and earnings from, and the value of, any U.S. dollar-denominated investments we make in
the future.



Since July 2005, the Renminbi has not been pegged
to the U.S. dollar. Although the People’s Bank of China regularly intervenes in the foreign exchange market to prevent significant
short-term fluctuations in the exchange rate, the Renminbi may appreciate or depreciate significantly in value against the U.S.
dollar in the medium to long term. Moreover, it is possible that in the future the Chinese authorities may lift restrictions on
fluctuations in the Renminbi exchange rate and lessen intervention in the foreign exchange market. On March 17, 2014, the People’s
Bank of China announced that the RMB exchange rate flexibility increased to 2% in order to proceed further with reform of the RMB
exchange rate regime. These could result in a further and more significant fluctuation in the RMB’s value against the U.S.
Dollar.



Very limited hedging transactions are available
in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions in an
effort to reduce our exposure to foreign currency exchange risk. While we may enter into hedging transactions in the future, the
availability and effectiveness of these transactions may be limited, and we may not be able to successfully hedge our exposure
at all. In addition, our foreign currency exchange losses may be magnified by Chinese exchange control regulations that restrict
our ability to convert Renminbi into foreign currencies.



During
2013 and 2014, we entered into certain foreign currency transaction agreements with a financial institution related to the fluctuation
of the Renminbi against the U.S. dollar, not for hedging purposes but for investment purposes. We recorded fair value gains on
these agreements totaling RMB 3,346,000 for the year ended December 31, 2013. However, in 2014, as the Renminbi depreciated against
the U.S. dollar, we incurred realized and unrealized losses totaling RMB 59,477,000 ($9,586,000) for the year ended December 31,
2014 in connection with these agreements. We do not intend to enter into similar transactions for investment purposes n the future.



As the rights of shareholders under
British Virgin Islands law differ from those under U.S. law, you may have fewer protections as a shareholder.



Our corporate affairs will be governed by our
memorandum and articles of association, the BVI Business Companies Act, 2004 (as amended) (the BVI Act), and the common
law of the British Virgin Islands. The rights of shareholders to take legal action against our directors, actions by minority shareholders
and the fiduciary responsibilities of our directors under British Virgin Islands law are governed by the common law of the British
Virgin Islands and by the BVI Act. The common law of the British Virgin Islands is derived in part from comparatively limited judicial
precedent in the British Virgin Islands as well as from English common law, which is applied in the British Virgin Islands by virtue
of the Common Law (Declaration of Application) Act. The rights of our shareholders and the fiduciary responsibilities of our directors
under British Virgin Islands law are not as clearly established as they would be under statutes or judicial precedents in some
jurisdictions in the United States. In particular, the British Virgin Islands has a less developed body of securities laws as compared
to the United States, and some states (such as Delaware) have more fully developed and judicially interpreted bodies of corporate
law.



As a result of all of the above, holders of
our shares may have more difficulty in protecting their interests through actions against our management, directors or major shareholders
than they would as shareholders of a U.S. company.



24







British Virgin Islands companies
may not be able to initiate shareholder derivative actions, thereby depriving shareholders of the ability to protect their interests.



British Virgin Islands companies may not have
standing to initiate a shareholder derivative action in a federal court of the United States. The circumstances in which any such
action may be brought, and the procedures and defenses that may be available in respect to any such action, may result in the rights
of shareholders of a British Virgin Islands company being more limited than those of shareholders of a company organized in the
United States. Accordingly, shareholders may have fewer alternatives available to them if they believe that corporate wrongdoing
has occurred. The British Virgin Islands courts are also unlikely to recognize or enforce against us judgments of courts in the
United States based on certain liability provisions of U.S. securities law which are penal in nature; and to impose liabilities
against us, in original actions brought in the British Virgin Islands, based on certain liability provisions of U.S. securities
laws that are penal in nature. There is no statutory recognition in the British Virgin Islands of judgments obtained in the United
States, although the courts of the British Virgin Islands will generally recognize and enforce the non-penal judgment of a foreign
court of competent jurisdiction under the common law without retrial on the merits. This means that even if shareholders were to
sue us successfully, they may not be able to recover anything to make up for the losses suffered.



The laws of the British Virgin Islands
provide some protection for minority shareholders, but minority shareholders will not necessarily have recourse in all cases where
they may be dissatisfied with our conduct



Under the laws of the British Virgin Islands,
there is little statutory law for the protection of minority shareholders other than the provisions of the BVI Act dealing with
shareholder remedies. The principal protection under statutory law is that shareholders may bring an action to enforce the constitutional
documents of the company memorandum and articles of association as shareholders are entitled to have the affairs of the company
conducted in accordance with the BVI Act and the memorandum and articles of association of the company. A shareholder may also
bring an action under statute if he feels that the affairs of the company have been or will be carried out in a manner that is
unfairly prejudicial or discriminatory or oppressive to him.



There are also common law rights for the protection
of shareholders that may be invoked.



The market price for our shares
has been and may continue to be volatile.



The market price for our shares has been and
is likely to continue to be highly volatile and subject to wide fluctuations in response to factors including the following:



| | · | actual or anticipated fluctuations in our quarterly operating results and changes or revisions of our expected results;
| | - | -----------------------------------------------------------------------------------------------------------------------



| | · | changes in financial estimates by securities research analysts;
| | - | ---------------------------------------------------------------



| | · | changes in the economic performance or market valuations of companies specializing in the ceramics business in China;
| | - | ---------------------------------------------------------------------------------------------------------------------



| | · | announcements by us and our affiliates or our competitors of new products, acquisitions, strategic relationships, joint ventures
or capital commitments;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | addition or departure of our senior management and key personnel; and
| | - | ---------------------------------------------------------------------



| | · | fluctuations of exchange rates between the RMB and the U.S. dollar.
| | - | -------------------------------------------------------------------



Volatility in the price of our shares
may result in shareholder litigation that could in turn result in substantial costs and a diversion of our management’s attention
and resources.



The financial markets in the United States and
other countries have experienced significant price and volume fluctuations, and market prices have been and continue to be extremely
volatile. Volatility in the price of our shares may be caused by factors outside of our control and may be unrelated or disproportionate
to our results of operations. In the past, following periods of volatility in the market price of a public company’s securities,
shareholders have frequently instituted securities class action litigation against that company. Litigation of this kind could
result in substantial costs and a diversion of our management’s attention and resources.



25







Although we paid semi-annual dividends
in 2013 and 2014, the payment of any dividend is subject to the discretion of our Board of Directors and we may decide not to declare
a dividend in future periods, in which case, shareholders will benefit from an investment in our shares only if those share appreciate
in value.



We paid dividends in July 2013, January 2014,
July 2014 and January 2015. The declaration and payment of cash dividends is at the discretion of our board of directors and will
depend on factors our board of directors deems relevant, including among others, our results of operations, financial condition
and cash requirements, business prospects, and the terms of our credit facilities, if any, and any other financing arrangements.
If we choose not to declare dividends in the future, realization of a gain on shareholders’ investments will depend on the
appreciation of the price of our shares, and there is no guarantee that our shares will appreciate in value.



We may not be able to pay any dividends
on our shares in the future due to British Virgin Islands law.



Under British Virgin Islands law, we may only
pay dividends to our shareholders if the value of our assets exceeds our liabilities and we are able to pay our debts as they become
due. We cannot give any assurance that we will declare dividends of any amounts, at any rate or at all in the future. Future dividends,
if any, will be at the discretion of our board of directors, and will depend upon our results of operations, cash flows, financial
condition, payment to us of cash dividends by our subsidiaries, capital needs, future prospects and other factors that our directors
may deem appropriate.



We may need additional capital,
and the sale of additional shares or equity or debt securities could result in additional dilution to our shareholders.



We believe that our current cash and cash equivalents
and anticipated cash flow from operations will be sufficient to meet our anticipated cash needs for the foreseeable future. We
may, however, require additional cash resources due to changed business conditions or other future developments, including any
investments or acquisitions we may decide to pursue. If these resources are insufficient to satisfy our cash requirements, we may
seek to sell additional equity or debt securities or obtain one or more additional credit facilities. The sale of additional equity
securities could result in additional dilution to our shareholders. The incurrence of indebtedness would result in increased debt
service obligations and could result in operating and financing covenants that would restrict our operations. It is uncertain whether
financing will be available in amounts or on terms acceptable to us, if at all.



| | ITEM 4. | INFORMATION ON THE COMPANY
| | ------- | --------------------------



| | A. | History and Development of the Company
| | -- | --------------------------------------



Our principal PRC-based operating subsidiary,
Hengda, was established on September 30, 1993 under the laws of the PRC. Hengda is a wholly foreign-owned enterprise in China.



Our other PRC-based operating subsidiary, Hengdali,
was established on May 4, 2008 under the laws of the PRC. All of the equity interests in Hengdali are 100% owned by Hengda.



Stand Best was established on January 17, 2008
under the laws of Hong Kong. Stand Best acquired the entire shareholdings of Hengda on April 1, 2008 for consideration of RMB 58,980,000.
As a result of this acquisition, Hengda became the wholly owned subsidiary of Stand Best.



Success Winner was established on May 29, 2009
under the laws of British Virgin Islands with Mr. Wong Kung Tok as its sole shareholder and sole director.



26







On June 30, 2009, pursuant to the capitalization
agreement dated June 30, 2009, Success Winner was issued the 9,999 shares allotted by Stand Best as per the capitalization exercise
of a shareholder’s loan of HK$67.9 million (RMB 58.9 million). On the same date, the shareholder of Stand Best, Mr. Wong
Kung Tok transferred all his shareholdings in Stand Best to Success Winner. Therefore, Mr. Wong Kung Tok, from June 30, 2009 to
November 20, 2009, indirectly owned 100% of Stand Best and in turn, 100% of Hengda.



CHAC was incorporated in Delaware on June 22,
2007 and was organized as a blank check company for the purpose of acquiring, through a stock exchange, asset acquisition or other
similar business combination, or controlling, through contractual arrangements, an operating business that had its principal operations
in Asia, with a focus on potential acquisition targets in China.



Pursuant to the terms of a merger and stock
purchase agreement dated August 19, 2009, on November 20, 2009, CHAC merged with and into China Ceramics, its wholly owned British
Virgin Islands subsidiary, and immediately thereafter, and as part of the same integrated transaction, China Ceramics acquired
all of the outstanding securities of Success Winner.



Prior to China Ceramics’ acquisition of
Success Winner, neither CHAC nor China Ceramics had any operations.



On November 19, 2009, Hengda entered into a
definitive acquisition agreement to acquire a new production facility in Gaoan, Jiangxi Province, PRC by purchasing 100% of the
equity interests in Hengdali. The closing of the acquisition was subject to the Gaoan City Administration for Industry and Commerce
transferring the registration and business license of Hengdali from Hengdali’s former shareholders to Hengda. The transfer
occurred on January 8, 2010. Hengda appointed an executive officer to take control over Hengdali’s operating and financing
activities on the same day. In total, Hengda assumed loans of RMB 60.0 million and paid cash consideration of RMB 185.5 million
for the acquisition.



On September 17, 2013, Fujian Province Hengdali
Building Materials Co., Ltd. (“Fujian Hengdali”) was incorporated in Pingtan, Fujian Province, and is 100% owned by
Hengda. Fujian Hengdali’s approved scope of business includes sales of building materials and interior and exterior decoration
materials.



The total maximum annual production capacity
from our two facilities is 72 million square meters of ceramic tiles as of December 31, 2014. However, due to current economic
conditions, we are currently utilizing production facilities capable of producing 37 million square meters.



The following chart reflects our organizational
structure as of December 31, 2014:







27







China Ceramics’ History



China Ceramics is a British Virgin Islands limited
liability company whose predecessor, CHAC, incorporated in Delaware on June 22, 2007, was organized as a blank check company for
the purpose of acquiring, through a stock exchange, asset acquisition or other similar business combination, or controlling, through
contractual arrangements, an operating business, that has its principal operations in Asia.



Pre-IPO Private Placement



On November 21, 2007, CHAC completed a private
placement of 2,750,000 warrants to Paul K. Kelly, James D. Dunning, Jr., Alan G. Hassenfeld, Gregory E. Smith, Xiao Feng, Cheng
Yan Davis, Soapakij (Chris) Cheavranant and Ruby Bin Kao, collectively referred to as the founding shareholders, as a result of
which CHAC received net proceeds of $2,750,000.



The Initial Public Offering



On November 21, 2007, CHAC consummated its initial
public offering of 12,000,000 units. On December 14, 2007, the underwriters of CHAC’s initial public offering exercised their
over-allotment option for an offering of 800,000 units. Each unit in the offering consisted of one share and one share purchase
warrant. Each warrant entitled the holder to purchase from China Ceramics one share in China Ceramics at an exercise price of $7.50.
CHAC’s shares and warrants started trading separately as of December 17, 2007.



28







The Business Combination



Pursuant to the terms of a merger and stock
purchase agreement dated August 19, 2009, on November 20, 2009, CHAC merged with and into China Ceramics, its wholly owned British
Virgin Islands subsidiary, and, immediately thereafter, and as part of the same integrated transaction, China Ceramics acquired
all of the issued and outstanding shares of Success Winner held by its former shareholder in exchange for $10.00 and 5,743,320
shares of China Ceramics shares. In addition, 8,185,763 shares of the China Ceramics shares were placed in escrow (the “Contingent
Shares”) to be released to the seller in the event certain earnings and stock price thresholds were achieved. Of the Contingent
Shares, 5,185,763 Contingent Shares were released based on our achieving growth in either net earnings before tax or net earnings
after tax. 3,000,000 Contingent Shares that were eligible to be released if China Ceramics shares closed at or above certain share
price targets for any twenty trading days within a thirty trading day period prior to April 30, 2012 were canceled because we did
not meet applicable price targets. We currently have 20,430,838 issued and outstanding shares.



Concurrent with the Business Combination, we
redeemed and purchased an aggregate of 11,193,149 of our shares from our public stockholders for an aggregate purchase price of
approximately $109.6 million (in transactions intended to assure the successful completion of the Business Combination). Such shares
were voted in favor of the Business Combination and the other related proposals.



On November 16, 2012 all of our share purchase
warrants expired and ceased to trade.



China Ceramics’ registered office is c/o
Harneys Corporate Services Limited of Craigmuir Chambers, P.O. Box 71, Road Town, Tortola, British Virgin Islands.



| | B. | Business Overview
| | -- | -----------------



Overview



We are a leading Chinese manufacturer of ceramic
tiles used for exterior siding and for interior flooring and design in residential and commercial buildings. The ceramic tiles,
sold under the “HD” or “Hengda,” “HDL” or “Hengdeli”, “Pottery Capital of
Tang Dynasty”, “TOERTO” and  ”WULIQIAO” brands are available in over two thousand styles,
colors and size combinations. Currently, we have five principal product categories: (i) porcelain tiles, (ii) glazed tiles, (iii)
glazed porcelain tiles, (iv) rustic tiles, and (v) polished glazed tiles. Porcelain tiles are our best-selling products, accounting
for over 67.8% of our total revenue in 2014.



Ceramic tiles are widely used in the PRC as
a construction material for residential and commercial buildings. Ceramic tiles are used for flooring, interior walls for decorative
purposes and on exterior siding due to their resistance to temperature, extreme environments, erosion, abrasion and discoloration
for extended periods of time. Citigroup Global Markets reports that the PRC government has actively promoted the construction of
affordable housing by ensuring that 77% of the new land made available was allocated to those in the low-income bracket, especially
in Tier II and III cities. During the 11th National People’s Congress (NPC) relating to the central government’s draft
12th Five Year Plan (2011 -2015), Premier Wen Jiabao pledged that the government will curb excessive housing price growth and provide
enough affordable houses for needy residents. Premier Wen stated that, from 2011 to 2015, the country aims to build 36 million
units of affordable housing covering 20 percent of the country’s households. In addition, the government recently released
a statement stating that the greatest potential for expanding domestic demand and sustaining economic growth lies in urbanization.
Since urbanization leads to new property development and construction, this could positively impact the Company’s business.



Our manufacturing facilities operated by Jinjiang
Hengda Ceramics Co., Ltd. are located in Jinjiang, Fujian Province, and our manufacturing facilities operated by Jiangxi Hengdali
Ceramic Materials Co., Ltd. are located in Gaoan, Jiangxi Province. Combined, these facilities currently provide an aggregate annual
maximum production capacity of approximately 72 million square meters. However, due to current economic conditions, we are currently
utilizing production facilities capable of producing 37 million square meters. We currently have sixteen production lines (nine
of which were utilized as of the end of 2014), with each production line optimized to manufacture specific size ranges to maximize
efficiency and output.



29







We primarily sell our products through an exclusive
distributor network or directly to property developers. We have long-term relationships with our customers; most of our top ten
customers in 2014 have been purchasing from us for over ten years. We have been in discussions with some large property developers
in China to be their exclusive or primary provider of ceramic tiles and, although no arrangements or agreements have been entered
into, we expect to enter into arrangements of that type in the foreseeable future.



We focus our research and development efforts
on developing innovative and environmentally-friendly products. We own twenty-two utility model patents. Our stringent tile management
and marketing efforts have created a strong business reputation and high brand awareness as demonstrated by us receiving numerous
awards such as the “Chinese Well-Known Trademark” award from the Intermediate People’s Court of Xiangtan City
and “Asia’s 500 Most Influential Brands 2012” award from the World Brand Laboratory.



Our Industry



We operate in the Chinese ceramic tile industry
which is fragmented, highly competitive and closely tied to the PRC economy. Although there is little industry data available,
management believes from its knowledge of other manufactures that it is one of the largest PRC-based manufacturers of ceramic tiles.



In 2014, China’s gross domestic product
(GDP) totaled approximately $10.4 trillion, making it the world’s second largest economy after the United States. Although
2014 GDP grew by 7.4% compared to 7.7% annual GDP growth in 2013, we believe that construction and real estate development will
continue to be a key driver behind China’s GDP growth with property investment and related industries constituting a significant
percentage of its GDP. Demand for ceramic tile product depends upon and directly correlates to activity in the construction and
real estate development industries. The ceramic tile industry’s two primary markets in the PRC are residential construction
applications and commercial construction applications.



We believe that China’s real estate sector
has been under pressure due to speculative activities and government policies that restricted construction with the intent to rein
in rising prices. However, we see some positive developments in recent reports that the government is urging local planning authorities
to free up land supplies for housing development. The government recently released a statement stating that the greatest potential
for expanding domestic demand and sustaining economic growth lies in urbanization. Since urbanization leads to new property development
and construction, this could positively impact our business.



We believe that the real estate and the construction
and building materials sectors continue to be vital to sustaining China’s economy growth. In order to address the challenging
market environment of 2014, the Chinese government has taken various actions to stimulate real estate development and home purchases.
These include the lowering of interest rates by the central bank, including a recent rate cut in late February 2015, and relaxed
reserve requirements for small banks to increase lending. We believe that these actions could positively impact our business because
they could help real estate developers begin new projects by lowering their cost of borrowing as well as improving mortgage terms
for borrowers, which would make home purchases more affordable. Regulatory easing has also included a loosening of home purchase
restrictions in second and third tier cities intended to moderate pricing and increase demand. This could be of direct benefit
to the Company since its marketing strategies have historically focused on real estate projects in second and third tier cities.



30







Commencing in the fourth quarter of 2012, we
experienced challenging market conditions in China’s real estate and construction markets which resulted in a marked decrease
in our sales volume of our ceramic tile products for the quarter. Beginning in December 2012, we began reducing the selling price
of our ceramic tile products to be competitive in the market and to maintain market share. For fiscal 2013, our full year revenue
was was down 35.4% as compared to fiscal 2012 full year revenue, resulting from a 24.8% decrease in the sales volume of our ceramic
tiles and a 14.1% decline in our average selling price. However, in fiscal 2014, we believe that we have begun to emerge from the
sector downturn that occurred in late 2012 due to challenging macroeconomic conditions. For fiscal 2014, our full year revenue
was up 11.2% as compared to fiscal 2013 resulting from a 1.2% increase in the sales volume of our ceramic tiles and a 9.7% increase
in our average selling price.



Key Factors Affecting the Chinese Ceramic
Tile Industry



The overall performance of the ceramic tile
industry is influenced by consumer confidence, spending for durable goods, interest rates, turnover in housing, the condition of
the residential and commercial construction industries and the overall strength of the economy and the recent restriction policy
on the purchase of property. Demand for our ceramic tile products in the PRC heavily depends on the following economic factors
and government policies designed to drive growth in the construction and real estate development sectors of the PRC economy.



Urbanization



Over the last twenty years, China has experienced
rapid urbanization due to the increasingly limited capacity of rural areas to provide adequate economic support for a large agrarian
population, the increasing disparity in disposable incomes between rural and urban dwellers and the easing of restrictions which
historically limited rural to urban migration from rural areas to towns and cities. The development of an industrial base and service
sector in urban areas has also driven large labor pools with a broad range of skills to urban areas. It is estimated that China’s
urban population will expand from 572 million in 2005 to 926 million in 2025 and hit the one billion mark by 2030. In 20 years,
China’s cities will have added 350 million people to its urban population — more than the entire population of the
United States today. As a result of the urbanization trend and the associated need to expand an underdeveloped infrastructure to
accommodate and house such growth, we believe that commercial and residential construction will expand measurably in future years,
thereby creating additional demand for our products.



Potential of Tier II and III cities



Much of the growth in China’s GDP is
being driven by economic activity in Tier II and Tier III cities, such as Chengdu, Chongqing, and Tianjin, which commonly have
populations that exceed 10 million individuals who often live in dwellings that do not meet modern standards. According to Jones
Lang LaSalle, Tier I cities will account for only 10% of China’s commercial real estate activities by 2020, which highlights
the attractive commercial development opportunities in Tier II and III cities. The economic impact of this trend is being felt
across China’s Tier II and Tier III cities as the upswing in new residential and commercial construction projects and renovations
is generating new demand for construction materials.



31







Importance of distributors



The majority of exterior ceramic tile manufacturers
do not have sufficient resources to provide their own sales coverage nationwide and rely heavily on local distributors with roughly
82% of total sales pushed through such channels. As competition has intensified, many manufacturers have started to bid directly
to real-estate developers for large construction projects. Direct sales represented 18%, 15% and 18% of total sales in 2014, 2013
and 2012, respectively and market participants expect this share will continue to increase, placing a premium on a manufacturer’s
internal sales force while requiring product lines with greater flexibility to meet direct customer demands.



Industry and Product Offerings



There are two product segments within the ceramic
tile industry: exterior and interior.



Exterior ceramic tiles



Exterior ceramic tile is mainly used as a decorative
and protective component on building exteriors. Unlike other types of tiles, exterior ceramic tile must endure harsh environmental
conditions and typically is manufactured to be water/dirt-resistant, non-corrosive and energy efficient. In addition, exterior
ceramic tiles have other demands that interior ceramic tiles do not always have, including mandatory expansion joints, moisture
considerations and thermal demands. Depending on the ultimate use of the ceramic tile and customer preferences, exterior ceramic
tiles are often manufactured with customized glazing, coloring and other design and aesthetic features.



Interior ceramic tiles



Interior ceramic tiles are mainly used for decorative
purposes on walls and floors in kitchens and bathrooms. Interior ceramic tiles are differentiated by design, style and perceived
quality. Within China, interior ceramic tiles are typically purchased by residential owners or renovation contractors rather than
property developers.



The manufacturing process is similar for both
segments, however the distribution channels are different. Interior ceramic tiles are sold through retail stores and directly to
contractors or residential owners. Exterior ceramic tiles are sold through distributors or directly to large property developers.
Due to the higher cost distribution chain and typically smaller order sizes, profit margins are generally less within the interior
ceramic tile industry.



Future Product Trends



As the ceramic tile industry in the PRC matures,
builders are demanding construction materials that reduce building weight, making it possible to use light building structures
and accelerate the speed of construction. Government policies meant to address energy efficiency are promoting the use of innovative
wall materials, particularly those performing well in heat preservation and insulation and that are light in weight, and manufactured
utilizing waste materials, less energy and fewer raw materials. In an effort to differentiate their products and meet government
policies, ceramic tile manufacturers are increasingly focusing on research and development efforts.



China Ceramics’ Products



We sell 100% exterior wall ceramic tiles. 
We produce five types of ceramic tiles:



Porcelain tiles:  Porcelain
tiles are fired at extreme temperatures and are therefore stronger and harder than other types of ceramic tiles. The material and
the color is the same throughout and porcelain tiles are extremely durable. Although porcelain tiles have a matte surface, they
absorb less water than other ceramic tiles, and as such, they are a superior solution for exterior tiling where there is frequent
exposure to moisture.



32







Glazed tiles:  Glazed tiles
have a glossy finish and color patterns may be added to the exterior surface of the tile. The glaze does not go beyond the exterior
surface of the tile and the interior color will show if the tile is chipped. Although glazed tiles are less water-resistant than
matte porcelain tiles, they are easier to clean due to their glossy surface.



Glazed porcelain tiles:  Glazed
porcelain tiles combine the advantages of porcelain tiles and glazed tiles, thus enabling the tiles to have a porcelain body with
a stain-proof and glossy finish.



Rustic tiles:  Rustic tiles
have greater versatility in their design as textures and colors can be added to their exterior surfaces and therefore can be used
in more decorative situations. In addition to being used on exterior walls, rustic tiles are also used for interior walls and flooring.



Polished glazed tiles: Polished glazed
tiles can be manufactured in differing sizes according to customer specifications, with the largest sized tiles measuring 800 mm
by 800 mm.



We can produce over 2,000 different combinations
of products, colors, textures and sizes to meet the various demands of our customers.



Our Competitive Strengths



We believe the following competitive strengths
will enable us to compete in the ceramic tile industry in China:



Brand Recognition



We believe that the “Hengda,” “HD,”
“Hengdeli,” “HDL,”, “Pottery Capital of Tang Dynasty”, “TOERTO” and “WULIQIAO”
brands are well recognized and highly regarded in markets where our products are sold. Before April 13, 2011, WULIQIAO was a trademark
owned by Fujian Province Jinjiang City Hengda Construction Materials Co., Ltd. Hengda signed a Trademark Licensing Contract with
Fujian Province Jinjiang City Hengda Construction Materials Co., Ltd. and was licensed the exclusive right to use WULIQIAO during
the term of that trademark, which expires on January 27, 2020. On April 13, 2011, WULIQIAO was transferred to Hengdali. In 2005,
the brands “Hengda” and “HD” were each certified as a Fujian Well-Known Trademark by the Fujian Well-Known
Trademark Award Commission and recognized as a “Chinese Well-known Trademark” in 2005 by the Intermediate People’s
Court of Xiangtan City. Since 2012, we have been recognized with the “Asia’s 500 Most Influential Brands” award
from the World Brand Laboratory. Our products are selected for inclusion in strategic and high-profile projects such as the 16th
Asian Games, the 11th National Chinese Games Village and the Chinese Academy of Sciences.



Focus on Tier II and Tier III Cities



Because of recent efforts by the PRC government
to tighten monetary policy and constrain real estate prices in the “Tier-I” cities such as Beijing, Shanghai, Shenzhen,
and Guangzhou, we believe the outlook for our business has improved, given our concentration in Tier-II and Tier-III cities. Approximately
5.91% of our revenue in the year ended December 31, 2014 was from sales of our products for use in projects in Tier-I cities, and
we expect any weakness in the Tier-I cities to be offset by continued demand growth in the Tier-II and Tier-III cities, driven
by urbanization trends as well as by the PRC government’s commitment to low-income housing.



Long-Term Sales Relationships



We have established an extensive distributor
network and long term customer relationships, where most of Hengda’s top ten customers in 2014 have been purchasing from
us for over 10 years each.



33







Experienced Management Team



Our experienced, professional and dedicated
management team brings a wealth of knowledge to our day-to-day operations and provides us with strategic direction. Our Chairman,
Chief Executive Officer and founder, Huang Jia Dong, has more than 20 years of experience in the ceramics industry and is Vice-Chairman
of the Fujian Province Ceramic Industry Association. The other members of the senior management team have many years of experience
in the ceramic industry.



Modern, environmentally friendly, and
efficient manufacturing capabilities



We have modern manufacturing facilities. Our
Hengda facility received an ISO 9001:2000 accreditation, an international standard that acknowledged our quality control process.
Our employees are required to undergo internal training regarding quality control policies, targets and procedures, as well as
production and processing techniques.



We upgraded our Hengda production lines to recover
and/or reuse waste water, waste dust, exhaust and kiln after-heat in 2007, which reduced our energy usage and energy costs. Our
new Hengdali production lines were also built using new equipment that incorporates recovery methods for recycling waste water,
waste dust, exhaust and kiln after-heat that operate at a higher efficiency rate. We received an Energy Conservation Advance Enterprise
Award in 2008 from the Jinjiang City Government.



Focus on Research and Development



We have devoted substantial resources to establishing
research and development capabilities in an effort to improve our products and diversify our product mix. Our R&D team has
also focused on environmentally friendly products like the ultra-thin tile, which in addition to using fewer raw materials can
reduce load-bearing stress and can provide enhanced insulating capabilities, and developed over 2000 types of different product
combinations. As of the date of this Annual Report, we own eighteen utility model patents. “Utility model patents”
means any new technical solution relating to the shape, the structure, or their combination, of a product, which is fit for practical
use. In addition, we were awarded a “High-tech Enterprise Certificate” in 2007 from Fujian Provincial Department of
Science and Technology, affirming our innovations in the industry. As of December 31, 2014, our research and development team includes
20 employees and focuses on new products as well as developing energy and resource efficient production methods.



Strategic Location within the PRC



We are located in Jinjiang and Gaoan. The Jinjiang
region is an established ceramic and construction material hub in the PRC, and the Gaoan region is a developing ceramic production
area supported by the local government. Both of these areas are located near the raw materials required to produce ceramic tiles.
As distributors and direct customers come to these areas to procure construction materials for sale, construction projects or export,
these locations provide us a regular flow of customers and demand. These centralized industry locations allow us to respond quickly
to customer demands and react rapidly to emerging market trends. The proximity and ease of access to major ports and transportation
infrastructure in both of these regions enables us to decrease transportation and logistics costs.



Our Growth Strategy



We intend to further strengthen our position
as a leading manufacturer of ceramic tiles in China by implementing the following strategies:



Broadening Our Distribution Network



We sell our products mainly to distributors
located in major Tier-I cities such as Shanghai and Beijing and Tier-II cities such as Tianjin, Wuhan, Chengdu and Shenyang. We
plan to establish and/or increase our presence in Tier-II and Tier-III cities in provinces such as Zhejiang, Anhui, Heilongjiang,
Guizhou, Henan, Hebei, Shandong, Shanxi, Shaanxi, and Yunnan.



34







We believe that our Hengdali production facility
in Gaoan will better position us to expand into new markets and reach additional end customers as transportation and logistical
costs of delivering products to these areas will be reduced.



Evaluating Opportunities to Increase
Exports



Currently, we export approximately 7% of our
products through PRC trading companies. We intend to increase the exported volume of our products with additional PRC trading companies
and by promoting our products in regional and international trade shows with a focus on direct selling efforts to property developers
in the PRC.



Pursuing Selective Acquisition Opportunities



We will explore business combinations that broaden
our product line, expand our customer base and allow us to penetrate new geographic regions. Our management believes that it has
sufficient expertise to find and acquire suitable ceramic production facilities and/or companies to increase our scale and geographic
diversification within the PRC. Our management intends to only pursue acquisitions where it believes that we will be able to continue
to provide cost competitive, high quality ceramic tiles to our customers.



Further Enhancing Our Brand Awareness



We plan to enhance awareness of the “Hengda”
or “HD,” “HDL” or “Hengdeli,” “TOERTO” and “WULIQIAO” brands in the
PRC exterior ceramic tile industry. Hengda produces our “Hengda” or “HD” brands, which are marketed toward
the high-end market. Hengdali produces our “HDL” or “Hengdeli” brands, which are marketed to the mid-level
market, “TOERTO” brand, which is a specialized brand for our large-sized rustic tiles and “WULIQIAO” brand,
which is a specialized brand for oriental pattern large-sized rustic tiles. WULIQIAO is a trademark owned by Fujian Province Jinjiang
City Hengda Construction Materials Co., Ltd. Hengda signed a Trademark Licensing Contract with Fujian Province Jinjiang City Hengda
Construction Materials Co., Ltd. and has been licensed the exclusive right to use WULIQIAO during the term of that trademark. Our
branding strategy is to reach a larger customer base with a wide spectrum of product offerings. We plan on strengthening our brands
by marketing our products to property developers and the construction industry, partnering with local distributors, attending national
fairs and promoting our products through inclusion in strategic high-profile projects.



Developing Advanced Products That Meet
Evolving Building Construction Requirements



We strive to develop new products that address
market demand for advanced building materials that meet or exceed evolving government policies for energy efficiency. Our research
and development efforts are focused on developing tiles which:



| | · | Reduce raw materials and energy consumption in the production process;
| | - | ----------------------------------------------------------------------



| | · | Have a density less than half of other tiles;
| | - | ---------------------------------------------



| | · | Reduce load bearing stress on exterior walls of buildings and tile shedding;
| | - | ----------------------------------------------------------------------------



| | · | Recycle our by-products and limit waste output in our production process;
| | - | -------------------------------------------------------------------------



| | · | Utilize a honeycomb structure which optimizes insulation performance for new products, such as our light-weight product lines;
| | - | ------------------------------------------------------------------------------------------------------------------------------



| | · | Have higher standards for water resistance; and
| | - | -----------------------------------------------



| | · | Are easier to attach to exterior walls.
| | - | ---------------------------------------



We will continue to invest in research and development
to maintain our competitive position in the industry.



35







Production Process and Facilities



A typical production line for ceramic tiles
is comprised of preparation equipment (which typically includes a miller and a spray dryer), a press (which is used for shaping
raw ceramic material), a glazing line (used to supply glazed materials to the pressed tiles), a kiln (used to harden the soft mixture
of clay and minerals into a hard ceramic body by subjecting the mixture to high temperature) and packaging.



The following chart sets out the major steps
involved in the production process:







The procedures involved in the production of
ceramic tiles are summarized below:



36







| | (i) | Inspecting
| | --- | ----------



Raw materials for ceramic products consist mainly
of clay (comprised of inorganic materials such as kaolin, flint and feldspar) obtained mostly from areas adjacent to our facilities,
such as Dehua county of Quanzhou city and the Fujian province. Raw materials are inspected by quality control staff upon receipt.
Batch calculations that take into consideration both physical properties and chemical compositions of the raw materials are performed
to ensure that the right amounts are mixed.



| | (ii) | Mixing and Grinding
| | ---- | -------------------



After stringent checks on the quality of the
clay and weighing, the raw material department mixes the clay as determined during inspection. The mixture is then sent to a ball
mill where water is added to form a slurry for finer grinding. This process takes approximately 12 hours to complete. The slurry
is then filtered and metallic particles are removed magnetically. The slurry is inspected at this stage for density, flow speed
and water ratio. Compared with many competitors who use stone ball millers, we use aluminum ball millers to grind materials. Aluminum
ball millers have a higher initial cost, but have higher grinding speed and can better process stone chips existing in the slurry.
The slurry is then moved to a large slurry pool. Based on the production schedule, portions of the slurry may be moved to smaller
slurry pools where coloring materials can be added. The mixture in smaller slurry pools are churned for approximately 24 hours
to keep quality and color consistent in the end product.



| | (iii) | Spray Drying
| | ----- | ------------



A spray dryer is then used to remove most of
the water content in the slurry to obtain granules with the required moisture level for processing. The slurry is pumped into an
atomizer, consisting of a rapidly rotating disk or nozzle where droplets are formed. The droplets of the slurry spray are then
dried by a rising hot air column, forming small free-flowing granules of a standard size and specific moisture content which is
used in the next stage. The stream of gases used to dry the slurry can be at temperatures as high as 1,100°C. The granules
are then moved to and held in steel containers called hoppers for over 24 hours to ensure consistency and uniformity of granule
size and color.



| | (iv) | Molding
| | ---- | -------



The granules flow from a hopper into the mold
die where they are compressed by steel plungers and then ejected by the bottom plunger in varying sizes based on specifications.
The automated presses used operate at pressures as high as 1,600 tons per square meter. The ceramic bisque, a shaped non-fired
ceramic tile, is then passed through to the dryer to remove most of the remaining water content present in preparation for the
firing and/or glazing stages. The tiles are fed into the dryer and conveyed horizontally on rollers, at temperatures of 250°C
for approximately 15 to 25 minutes based on tile type.



| | (v) | Glazing
| | --- | -------



Glazing involves applying one or more coats
of glaze, comprised mainly of silica and other coloring agents such as iron, chromium, cobalt or manganese, onto the tile surface.
The dried ceramic bisque is then sent to the glazing station where a design and/or color is added. The glaze concentration and
glazing quantity is controlled by computers to avoid chromatic aberration and lack of uniformity. Not all products, such as porcelain
tiles, require glazing.



| | (vi) | Firing
| | ---- | ------



After molding and/or glazing, the ceramic bisque
is fired in a kiln. Typically, the temperature in a kiln is about 1,200°C and the firing process takes less than one hour.
The entire firing process is monitored and controlled by computers. We currently have twelve firing lines, nine located in the
Hengda facility and three located at the Hengdali facility.



37







| | (vii) | Packaging
| | ----- | ---------



After the firing process, tiles are inspected
for quality. Tiles which pass inspection are packaged and moved to the storage facility.



Quality Control & Assurance



The quality of our products is critical to our
continued growth and success. In July 2002, our Hengda facility received ISO 9001:2000 accreditation, an international certification
certificate, acknowledging our quality control process. Quality control procedures begin at the receipt of raw materials and continue
throughout the manufacturing process ending with a final quality check prior to packaging. Our employees are required to undergo
internal training regarding our quality control policies, targets and procedures, as well as production and processing techniques.
As of December 31, 2014, our quality assurance team consisted of 84 members.



Notable Awards & Certificates



We have received numerous awards and certificates
for our branding, product quality and R&D achievements. Select awards include:



|Year
        InitiallyReceived |  | Award
        & Certificate Name                                |  | Issuer                                                                          
|------------------------------ |  | --------------------------------------------------------------- |  | --------------------------------------------------------------------------------
|2002                           |  | ISO 9001:2000 Quality Management System Certificate             |  | China Certification Center for Quality Mark                                     
|2005                           |  | ISO 14001:2004 Environmental Management Standards Certificate   |  | Fujian Branch of Beijing World Standards Certification Centre                   
|2005                           |  | Fujian Well-known Trademark                                     |  | Fujian Well-known Trademark Award Commission                                    
|2005                           |  | Chinese Well-known Trademark                                    |  | Intermediate People’s Court of Xiangtan City                                    
|2006                           |  | Inspection Exempted Products Certificate                        |  | National Bureau of Quality and Technical Supervision                            
|2007                           |  | High-tech Enterprise Certificate                                |  | Fujian Provincial Department of Science and Technology                          
|2008                           |  | Energy Conservation Advanced Enterprise                         |  | Jinjiang City Government                                                        
|2009                           |  | Fujian 100 Important Industrial Enterprise                      |  | Fujian Economic and Trading Commission                                          
|2010                           |  | Asia’s 500 Most Influential Brands 2010                         |  | World Brand Laboratory                                                          
|2010                           |  | Fujian’s Top 300 Enterprises                                    |  | Fujian Enterprise Evaluation Center and Fujian Enterprise Evaluation Association
|2011                           |  | China’s 500 Most Valuable Brands                                |  | World Brand Laboratory                                                          
|2011                           |  | Top 100 Fastest Growing Enterprises for China Building Material |  | China Building Materials Enterprise Management Association                      
|2011                           |  | Top 500 Enterprise in China Building Material                   |  | China Building Materials Enterprise Management Association                      
|2011                           |  | Customer Preferred Top 10 Brand                                 |  | China International Nameplate Development Association                           
|2012                           |  | Asia’s 500 Most Influential Brands 2012                         |  | World Brand Laboratory                                                          
|2013                           |  | China’s 500 Most Valuable Brands                                |  | World Brand Laboratory                                                          
|2013                           |  | Asia’s 500 Most Influential Brands 2013                         |  | World Brand Laboratory                                                          
|2014                           |  | China’s 500 Most Valuable Brands                                |  | World Brand Laboratory                                                          



38







Customers, Sales & Marketing



We primarily sell our products through an exclusive
distributor network or directly to property developers. Distributors are located in major cities such as Shanghai, Beijing, and
Shenyang and second and third tier cities such as Chengdu, Haikou, Hefei, Tianjin, Wuhan and other rural areas in the PRC. We have
long-term relationships with many of our customers; most of our top ten customers in 2014 have been purchasing from us for several
years.



The following table sets forth revenues by geographic
market and the related percentage for the years ended 2012, 2013 and 2014:



|                  |  | 2012    |           |  | 2013       |  |      | 2014    | 
|----------------- |  | ------- | --------- |  | ---------- |  | ---- | ------- | 
|Geographic Market |  | RMB’000 |           |  | Percentage |  |      | RMB’000 | 
|PRC               |  |         | 1,350,517 |  |            |  | 93.5 | %       | 
|Japan             |  |         | 10,850    |  |            |  | 0.8  | %       | 
|Burma             |  |         | 8,453     |  |            |  | 0.6  | %       | 
|India             |  |         | 9,463     |  |            |  | 0.7  | %       | 
|Korea             |  |         | 8,201     |  |            |  | 0.6  | %       | 
|Thailand          |  |         | 8,958     |  |            |  | 0.6  | %       | 
|Hong Kong         |  |         | 8,706     |  |            |  | 0.6  | %       | 
|Turkey            |  |         | 5,678     |  |            |  | 0.4  | %       | 
|Spain             |  |         | 6,561     |  |            |  | 0.5  | %       | 
|South Africa      |  |         | 6,687     |  |            |  | 0.5  | %       | 
|Sierra Leone      |  |         | 5,173     |  |            |  | 0.3  | %       | 
|Ghana             |  |         | 5,299     |  |            |  | 0.3  | %       | 
|Russia            |  |         | 3,154     |  |            |  | 0.2  | %       | 
|Morocco           |  |         | 4,037     |  |            |  | 0.2  | %       | 
|Great Britain     |  |         | 3,154     |  |            |  | 0.2  | %       | 
|Total             |  |         | 1,444,891 |  |            |  | 100  | %       | 



Our top ten customersare set forth in the table
below, and none of these customers individually accounted for more than 10% of our total revenue for the years ended December 31,
2012, 2013 and 2014.



The following table sets forth revenue for our
major customers and the related percentage of our net revenue for the years 2012, 2013 and 2014.



|                                                            |  | 2012    |         |  | 2013       |  |     | 2014    | 
|----------------------------------------------------------- |  | ------- | ------- |  | ---------- |  | --- | ------- | 
|Customer Name                                               |  | RMB’000 |         |  | Percentage |  |     | RMB’000 | 
|Foshan City Jundian Ceramics Co., Ltd.                      |  |         | 139,184 |  |            |  | 9.6 | %       | 
|Fuzhou Chuanpin Materials Co., Ltd.                         |  |         | 30,779  |  |            |  | 2.1 | %       | 
|Chengdu City Dehui Construction Materials Co., Ltd.         |  |         | 28,257  |  |            |  | 2.0 | %       | 
|Liuzhou City Shengquanda Trading Co., Ltd.                  |  |         | 28,994  |  |            |  | 2.0 | %       | 
|Shangrao New Fangyuan Materials Co., Ltd.                   |  |         | 27,941  |  |            |  | 1.9 | %       | 
|Kunming Minhengda Trading Co., Ltd.                         |  |         | 26,032  |  |            |  | 1.8 | %       | 
|Sichuan Heli Construction Materials Co., Ltd.               |  |         | -       |  |            |  | -   |         | 
|Shanghai Qisen Construction Materials Co., Ltd.             |  |         | -       |  |            |  | -   |         | 
|Jiangxi Zhongshi Industry Co., Ltd.                         |  |         | 28,599  |  |            |  | 2.0 | %       | 
|Nanjing Huli Construction Materials Co., Ltd.               |  |         | -       |  |            |  | -   |         | 
|Chaozhou Chenqiao Jianxing Construction Materials Co., Ltd. |  |         | 27,392  |  |            |  | 1.9 | %       | 
|Xuzhou Haige Material Co., Ltd                              |  |         | 26,739  |  |            |  | 1.9 | %       | 
|Hubei Wanshi Trading Co., Ltd                               |  |         | 25,308  |  |            |  | 1.8 | %       | 



39







Our business and profitability is not materially
dependent on any industrial, commercial or financial contract with any of our customers. None of our directors or executive officers
or their respective affiliates has any interest, direct or indirect, in any of our customers.



Sales and Marketing



The sales and marketing department is responsible
for formulating sales policies and pricing based on market analysis, surveys and forecasts, developing and implementing our sales
and marketing campaigns, and promoting our products and brand. Additionally, our sales department is responsible for cultivating
new customers and business relationships, as well as servicing existing accounts.



We participate in a variety of sales and marketing
activities including trade shows, in-house sales and marketing seminars, factory tours, outdoor advertising, B2B catalogs and customer
calls. We believe that these techniques allow us to gather and better understand customers’ needs and requirements and to
obtain feedback on our products and services and intend to continue utilizing these techniques.



In the future, we intend to participate in international
trade fairs and seminars from time to time to promote our brand and products, and to establish a network with industry professionals
outside the PRC. To augment our plan to expand our markets internationally, our products will also be advertised on and available
to purchase on the Internet. As of December 31, 2014, our Sales and Marketing Department had 40 employees.



Backlog



We typically receive orders from customers two
months in advance of production on a rolling basis. We enter into a dealership agreement with customers, and a sales or purchase
contract each time a customer places an order. If a customer makes any changes to an order after we have used any raw materials
in fulfilling the order, the customer bears the losses. Once we have delivered the products to the customer and the customer has
examined and accepted the products, we provide no quality guarantees. We confirm amounts payable with each customer on a monthly
basis. The products typically must be delivered to customers within 90 days of receipt of the sales order, and the customers typically
must pay for the products within 120 to 150 days of delivery.



As of December 31, 2014, our backlog was RMB
137.0 million ($22.1 million) which represents approximately the next two months of revenue at the time, compared to a backlog
of approximately RMB 136.6 million as of December 31, 2013.



Major Suppliers & Raw Materials



Our major suppliers will usually deliver raw
materials within 1-2 months after they have received our purchase order. The typical credit term from our major suppliers is from
1 to 4 months after the raw materials have been delivered.



Clay, coal and natural gas are the main raw
materials and energy sources required to manufacture ceramic tiles. We purchase clay and coal from at least two independent suppliers.
Other major sourced materials include coloring and packaging. We are not dependent on any one of our PRC based suppliers as we
are able to source raw materials from alternative vendors should the need arise.



40







Our suppliers are selected by our purchasing
department and are assessed on criteria such as the quality of materials supplied, duration of their business relationship with
us, pricing, delivery reliability and response time to orders placed by us. We have sufficient raw materials on hand to support,
on average, three weeks of production at any point in time to minimize any potential production delays that could arise due to
a delay in raw material delivery.



We have not experienced significant production
disruptions due to a supply shortage from our suppliers, nor have we had a major dispute with a supplier.



Our major suppliers for the last three years
are set forth in the table below, and except for Jinjiang Xinao Gas Company Limited and Foshan City Sanshui Baoligao Inorganic
Materials Co., Ltd., no suppliers accounted for more than 10% of our total purchases of raw materials and energy sources for the
years ended December 31, 2012, 2013 and 2014. Our business or profitability is not materially dependent on any industrial, commercial
or financial contract with any of our suppliers.



The following chart lists our major suppliers
and the related percentage of our total purchases of raw materials and energy sources in fiscal years 2012, 2013 and 2014:



|                                                               |  |       |  | 2012    |        |  | 2013       |  |      | 2014    | 
|-------------------------------------------------------------- |  | ----- |  | ------- | ------ |  | ---------- |  | ---- | ------- | 
|Supplier Name                                                  |  | Type  |  | RMB’000 |        |  | Percentage |  |      | RMB’000 | 
|Jinjiang Xinao Gas Company Limited                             |  | Gas   |  |         | -      |  |            |  | -    |         | 
|Foshan City Sanshui Baoligao Inorganic Materials Co., Ltd.     |  | Color |  |         | 32,404 |  |            |  | 4.40 | %       | 
|Fengxin Huafeng Ceramic Co., Ltd.                              |  | Clay  |  |         | 37,125 |  |            |  | 5.04 | %       | 
|Quanzhou Like Ceramic Materials Co., Ltd.                      |  | Color |  |         | 32,805 |  |            |  | 4.46 | %       | 
|Foshan City Nanhai Huaxiong  Ceramic Materials Co., Ltd.       |  | Color |  |         | -      |  |            |  | -    |         | 
|Foshan City Sanshui Golden Eagle Inorganic Materials Co., Ltd. |  | Color |  |         | 40,058 |  |            |  | 5.44 | %       | 
|Foshan City Nanhai Zhongtai Glaze Production Plant             |  | Color |  |         | 45,015 |  |            |  | 6.12 | %       | 
|Yongchun Junjie Mining Co., Ltd.                               |  | Coal  |  |         | 36,207 |  |            |  | 4.92 | %       | 
|Jiangxi Jinanyuntong Transportation Co., Ltd                   |  | Coal  |  |         | -      |  |            |  | -    |         | 
|Xinyu City Yanhua Industrial Co., Ltd.                         |  | Clay  |  |         | 24,671 |  |            |  | 3.35 | %       | 



None of our officers or directors or their respective
affiliates has any interest, direct or indirect, in any of the above major suppliers. There are no arrangements or understanding
with any suppliers pursuant to which any of our directors and executive officers were appointed.



Research and Development



We have devoted substantial resources to establishing
research and development capabilities in an effort to improve our products and diversify our product mix. Our research and development
team focuses on new products as well as developing energy and resource efficient production methods.



41







We focus our research and development efforts
on the following:



| | · | Expanding and improving production capacity;
| | - | --------------------------------------------



| | · | Improving and developing new production and processing techniques;
| | - | ------------------------------------------------------------------



| | · | Improving the use and selection of raw materials to lower costs; and
| | - | --------------------------------------------------------------------



| | · | Developing new products and designs to address changing market demands.
| | - | -----------------------------------------------------------------------



Our research and development costs were approximately
RMB 1.2 million, RMB 1.1 million and RMB 1.3 million ($0.2 million) for fiscal years 2012, 2013 and 2014. From time to time, we
may enter into collaboration with other research institutes to develop new products or improve our production process. As of December
31, 2014, our R&D department had 20 employees.



Competition



We face intense competition from our existing
competitors and new market entrants. Our primary competitors are usually privately owned companies that are located mainly in the
PRC. Our principal competitors are Zhuhai White Rabbit Ceramics Co., Ltd, Foshan Shiwan Yulong Ceramics Co., Ltd, Jinjiang Haoyuan
Ceramics, Co., Ltd, Jinjiang Wanli Ceramics Co., Ltd, Jinjiang Tengda Ceramics Co., Ltd and Jinjiang Haoshan Construction Materials
Co., Ltd. We compete primarily based on product quality, brand recognition, and an extensive distributor network.



Intellectual Property



We protect our intellectual property primarily
through a mix of patent and trademark registrations.



Registered Trademarks



Our brand name distinguishes our products and
promotes consumer awareness of our products.



42







We have registered the following trademarks
in the PRC:



|Trademark |  | Class/Products                                                                                                                                                                                                                  |  | Validity Term                                 |  | Registration No.
|--------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------- |  | ----------------
|          |  |                                                                                                                                                                                                                                 |  |                                               |  |                 
|          |  | 19/ Tile, ceramic tile and wave pattern tile                                                                                                                                                                                    |  | From February 21, 2012 to February 20, 2022   |  | 1716827         
|          |  |                                                                                                                                                                                                                                 |  |                                               |  |                 
|          |  | 19/ Tile; non-metallic tile; ceramic tile; non-metallic wall tile for constructional use; wave pattern tile; glass mosaic; non-metallic floor tile                                                                              |  | From March 28, 2009 to March 27, 2019         |  | 4971248         
|          |  |                                                                                                                                                                                                                                 |  |                                               |  |                 
|          |  | 19/ Tile; ceramic tile; wave pattern tile; non-metallic tile for constructional use; marble; manual stone; terrazzo; glass mosaic                                                                                               |  | From September 14, 2006 to September 13, 2016 |  | 3893819         
|          |  |                                                                                                                                                                                                                                 |  |                                               |  |                 
|          |  | 19/ Tile; non-metallic tile;  ceramic tile; glass mosaic;  non-metallic tile for constructional use; non-metallic construction material; marble; granite; manual stone.                                                         |  | From October 21, 2010 to October 20, 2020     |  | 7543650         
|          |  |                                                                                                                                                                                                                                 |  |                                               |  |                 
|          |  | 19/ Tile; non-metallic tile; non-metallic tile for constructional use; non-metallic wall tile for constructional use; non-metallic floor tile; non-metallic ground tile; glass mosaic; plaster; cement; concrete building unit. |  | From May 14, 2011 to May 13, 2021             |  | 8289754         
|          |  |                                                                                                                                                                                                                                 |  |                                               |  |                 
|          |  | 19/ Tile; non-metallic tile; non-metallic tile for constructional use; non-metallic wall tile for constructional use; non-metallic floor tile; non-metallic ground tile; glass mosaic; plaster; cement; concrete building unit. |  | From May 14, 2011 to May 13, 2021             |  | 8289921         
|          |  |                                                                                                                                                                                                                                 |  |                                               |  |                 
|          |  | 19/ Tile, ceramic tile, asbestos cement tile, glass mosaic, non-metallic tile, non-metallic tile for constructional use, fireclay, firebrick, tile, ceramic kiln furniture.                                                     |  | From April 13, 2011 to January 27, 2020       |  | 1357830         



43







Before April 13, 2011, WULIQIAO was a trademark
owned by Fujian Province Jinjiang City Hengda Construction Materials Co., Ltd. for Class 19 (Products: tile, ceramic tile, asbestos
cement tile, glass mosaic, non-metallic tile, non-metallic tile for constructional use, fireclay, firebrick, tile, ceramic kiln
furniture). Hengda signed a Trademark Licensing Contract with Fujian Province Jinjiang City Hengda Construction Materials Co.,
Ltd. and was licensed the exclusive right to use WULIQIAO during the terms of that trademark, which expires on January 27, 2020.
Since April 13, 2011, WULIQIAO has been transferred to Hengdali, according to Certificate of Approved Transference of Trademark
issued on April 13, 2011 by Trademark Office of the State Administration for Industry & Commerce of the P.R. China.



Patents



We currently own twenty two utility model patents
in the PRC for exterior wall tiles, which were applied for in November of 2007, July of 2011 and November of 2012 respectively.
A “utility model patent” is a new technical solution relating to the shape, the structure, or their combination, of
a product, which is fit for practical use. Utility model patents have a ten year term from the application date.



Except as disclosed above, as of December 31,
2014, our business or profitability is not materially dependent on any other trademarks, copyrights, registered designs, patents,
grant of licenses from third parties, new manufacturing processes or other intellectual property rights.



Environmental



We are subject to various environmental regulations
with respect to noise and air pollution and discharge of hazardous materials. We are also subject to periodic inspection. We obtained
a Temporary Pollutant Discharge Permit for our Hengda production facility, which will expire on April 27, 2015, and we are currently
in the process of applying for the renewal of the permit. The permit is subject to annual renewal. We are currently in the process
of applying for a Pollutant Discharge Permit for our Hengdali production facility. We are not subject to any pending actions of
alleged violations of applicable PRC environmental laws. If the Pollutant Discharge Permit is not issued and Hengdali discharges
pollutants, Hengdali may be warned, ordered to stop discharging pollutants, and/or fined by the environmental protection agency.



Legal Proceedings



On June 6, 2014, a putative class action complaint
(the “Pollock Complaint”) was filed in the United States District Court for the Southern District of New York against
us and various current and former directors and officers asserting claims of violations of Section 10(b) of the Securities Exchange
Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder against all defendants, and asserting claims
for violations of Section 20(a) of the Exchange Act against the individual defendants; and pursuing remedies under the Exchange
Act. The complaint is captioned Robert Pollock, Individually and On Behalf Of All Others Similarly Situated v. Huang Jia Dong,
Su Pei Zhi, Hen Man Edmund, Ding Wei Dong, Paul K. Kelly, Cheng Yan Davis, William L. Stulginsky, Su Wei Feng, Shen Cheng Liang,
Jianwei Liu, And China Ceramics Co., Ltd. (Case No. 14-cv-4100).



On June 16, 2014, a putative class action complaint
(the “Artinoff Complaint”) was filed in the United States District Court for the Southern District of New York against
us and various current and former directors and officers asserting claims of violations of Section 10(b) of the Securities Exchange
Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder against all defendants, and asserting claims
for violations of Section 20(a) of the Exchange Act against the individual defendants; and pursuing remedies under the Exchange
Act. The complaint is captioned Roger Artinoff, Individually and On Behalf Of All Others Similarly Situated v. China Ceramics Co.
Ltd., Huang Jia Dong, Su Pei Zhi, Hen Man Edmund, Ding Wei Dong, Paul K. Kelly, Cheng Yan Davis, William L. Stulginsky And Su Wei
Feng. (Case No. 14-cv-4312).



44







On July 2, 2014, a putative class action complaint
(the “Finlayson Complaint”) was filed in the United States District Court for the Southern District of New York against
us and various current and former directors and officers asserting claims for violations of Section 10(b) of the Exchange Act and
Rule 10b-5 promulgated thereunder against all defendants, and claims for violations of Section 20(a) of the Exchange Act against
the individual defendants; and pursuing remedies under the Exchange Act. The complaint is captioned Richard Finlayson, Individually
and On Behalf Of All Others Similarly Situated v. Huang Jia Dong, Su Pei Zhi, Hen Man Edmund, Ding Wei Dong, Paul K. Kelly, Cheng
Yan Davis, William L. Stulginsky, Su Wei Feng, Shen Cheng Liang, Jianwei Liu, and China Ceramics Co., Ltd. (Case No. 14-cv-4997).



On February 6, 2015, we and the individual defendants
reached an agreement in principle to settle the above-described cases as against all defendants and us in consideration of the
payment by us of $850,000, consisting of a combination of cash and our common stock. The settlement is subject to the execution
of a mutually acceptable settlement agreement and the approval of the settlement by the Court.



Seasonality



The second and third calendar quarters have
been the peak season of the property developing industry, and, therefore, our quarterly sales are usually highest from May to September
compared to the rest of the year. We have lower sales between the months of January and March due to the effects of cold weather
and the PRC Spring Festival.



The seasonality information above is based on
our turnover trend in the last three years and may vary slightly from year to year depending on the demand by our customers and
end customers for our products. However, management believes that the seasonality information for the last three years is representative
of the seasonality trend going forward.



Governmental Regulations



Environmental Protection Regulations



In accordance with the PRC Environmental Protection
Law adopted on December 26, 1989, the Administration Supervisory Department of Environmental Protection of the State Council sets
the national guidelines for the discharge of pollutants. The People’s Governments of provinces, autonomous regions and municipalities
may also set their own guidelines for the discharge of pollutants within their own provinces or districts in the event that the
national guidelines are inadequate. A company which causes environmental pollution and discharges other polluting materials which
endanger the public should implement environmental protection methods and procedures into their business operations. This may be
achieved by setting up a system of accountability within the company’s business structure for environmental protection, adopting
effective procedures to prevent environmental hazards such as waste gases, water and residues, dust powder, radioactive materials
and noise arising from production, construction and other activities from polluting and endangering the environment. The environmental
protection system and procedures should be implemented simultaneously with the commencement of and during the operation of construction,
production and other activities undertaken by the company. Any company which discharges environmental pollutants should report
and register such discharge with the Administration Supervisory Department of Environmental Protection and pay any fines imposed
for the discharge. A fee may also be imposed on the company for the cost of any work required to restore the environment to its
original state. Companies which have caused severe pollution to the environment are required to restore the environment or remedy
the effects of the pollution within a prescribed time limit. If a company fails to report and/or register the environmental pollution
it caused, it will receive a warning or be penalized. Companies that fail to restore the environment or remedy the effects of the
pollution within the prescribed time will be penalized or have their business licenses terminated. Companies that have polluted
and endangered the environment must bear the responsibility for remedying the danger and effects of the pollution, as well as to
compensate any losses or damages suffered as a result of such environmental pollution.



45







Our Hengda facility obtained a Temporary Pollutant
Discharge Permit (JH(2013)ZZ No. 320) granted by Jinjiang City Environmental Protection Bureau on October 28, 2013 that will expire
on April 27, 2015. Hengda is currently in the process of applying for the renewal of the permit.. Hengdali is currently in the
process of applying for a Pollutant Discharge Permit, and the environmental protection agency in Gaoan has accepted Hengdali’s
application. If the Pollutant Discharge Permit is not issued and Hengdali discharges pollutants, Hengdali may be warned, ordered
to stop discharging pollutants, and/or fined by the environmental protection agency.



Government Regulations Relating to Foreign
Exchange Controls



The principal regulation governing foreign exchange
in the PRC is the Foreign Currency Administration Rules and a series of implementing rules and regulations, as amended. Under these
rules, the Renminbi, the PRC’s currency, is freely convertible for trade and service related foreign exchange transactions
(such as normal purchases and sales of goods and services from providers in foreign countries), but not for direct investment,
loan or investment in securities outside of China unless the prior approval of the State Administration for Foreign Exchange, or
SAFE, of the PRC is obtained. Foreign investment enterprises, or FIEs, are required to apply to the SAFE for Foreign Exchange Registration
Certificates for FIEs. With such registration certificates, which need to be renewed annually, FIEs are allowed to open foreign
currency accounts including a basic account and capital account. Currency translation within the scope of the basic account, such
as remittance of foreign currencies for payment of dividends, can be effected without requiring the approval of the SAFE. Such
transactions are subject to the consent of PRC banks which are authorized by the SAFE to review basic account currency transactions.
However, conversion of currency in the capital account, including capital items such as direct investment, loans and securities,
still require approval of the SAFE. On November 21, 2005, the SAFE issued Circular No. 75 on Relevant Issues Concerning Foreign
Exchange Control on Domestic Residents Corporate Financing and Roundtrip Investment Through Offshore Special Purpose Vehicles.
Circular No. 75 confirms that the use of offshore special purpose vehicles as holding companies for PRC investments are permitted,
but proper foreign exchange registration applications are required to be reviewed and accepted by the SAFE.



Regulation of Foreign Currency Exchange



Foreign currency exchange in the PRC is governed
by a series of regulations, including, without limitation, the Foreign Currency Administrative Rules (1996), as amended, and the
Administrative Regulations Regarding Settlement, Sale and Payment of Foreign Exchange (1996), as amended. Under these regulations,
the Renminbi is freely convertible for trade and service-related foreign exchange transactions, but not for direct investment,
loans or investments in securities outside China without the prior approval of the SAFE. Pursuant to the Administrative Regulations
Regarding Settlement, Sale and Payment of Foreign Exchange, foreign-invested enterprises in China may purchase foreign exchange
without the approval of the SAFE for trade and service-related foreign exchange transactions by providing commercial documents
evidencing these transactions. They may also retain foreign exchange, subject to a cap approved by SAFE, to satisfy foreign exchange
liabilities or to pay dividends. However, the relevant Chinese government authorities may limit or eliminate the ability of foreign-invested
enterprises to purchase and retain foreign currencies in the future. In addition, foreign exchange transactions for direct investment,
loan and investment in securities outside China are still subject to limitations and require approvals from the SAFE. On August
29, 2008, SAFE issued Circular No. 142 on Relevant Business Operations Issues Concerning Improving the Administration of the Payment
and Settlement of Foreign Exchange Capital of Foreign-Invested Enterprises, with respect to the administration of conversion of
foreign exchange capital contributions of FIEs into Renminbi, unless otherwise permitted by PRC laws or regulations, Renminbi converted
from foreign exchange capital contributions can only be applied to activities within the approved business scope of FIEs and cannot
be used for domestic equity investment or acquisitions.



46







Regulation of Dividend Distribution



The principal laws and regulations in China
governing distribution of dividends by foreign-invested companies include:



| | · | The Sino-foreign Equity Joint Venture Law (1979), as amended;
| | - | -------------------------------------------------------------



| | · | The Regulations for the Implementation of the Sino-foreign Equity Joint Venture Law (1983), as amended;
| | - | -------------------------------------------------------------------------------------------------------



| | · | The Sino-foreign Cooperative Enterprise Law (1988), as amended;
| | - | ---------------------------------------------------------------



| | · | The Detailed Rules for the Implementation of the Sino-foreign Cooperative Enterprise Law (1995), as amended;
| | - | ------------------------------------------------------------------------------------------------------------



| | · | The Foreign Investment Enterprise Law (1986), as amended; and
| | - | -------------------------------------------------------------



| | · | The Regulations of Implementation of the Foreign Investment Enterprise Law (1990), as amended.
| | - | ----------------------------------------------------------------------------------------------



Under these regulations, foreign-invested enterprises
in China may pay dividends only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards
and regulations. In addition, wholly foreign-owned enterprises in China are required to set aside at least 10% of their respective
accumulated profits each year, if any, to fund certain reserve funds unless such reserve funds have reached 50% of their respective
registered capital. These reserves are not distributable as cash dividends.



Insurance



We have not purchased insurance coverage for
product liability or third party liability and are therefore not covered or compensated by insurance in respect of losses, damages,
claims and liabilities arising from or in connection with product liability or third party liability. In addition, we currently
do not maintain business interruption insurance. As a result, our business and prospects could be adversely affected in the event
of such problems in our operations and may suffer losses that could have a material adverse effect on our business, financial condition,
results of operations, or cash flows.



47







| | C. | Organizational Structure
| | -- | ------------------------



The following chart illustrates China Ceramics’
organizational structure as of December 31, 2014:







48







Corporate Structure and Background



Our principal PRC-based operating subsidiary,
Hengda, was established on September 30, 1993 under the laws of PRC. All of the equity interests in Hengda are 100% owned by Stand
Best. Hengda is a wholly foreign-owned enterprise in China.



Hengdali was established on May 4, 2008 under
the laws of PRC. All of the equity interests in Hengdali are 100% owned by Hengda.



Stand Best was established on January 17, 2008
under the laws of Hong Kong. Stand Best acquired the entire shareholdings of Hengda on April 1, 2008 for consideration of RMB 58,980,000.
As a result of this acquisition, Hengda became the wholly owned subsidiary of Stand Best.



Success Winner was established on May 29, 2009
under the laws of British Virgin Islands with Mr. Wong Kung Tok as its sole shareholder and sole director.



On June 30, 2009, pursuant to the capitalization
agreement dated June 30, 2009, Success Winner was issued the 9,999 shares allotted by Stand Best as per the capitalization exercise
of a shareholder’s loan of HK$67.9 million (RMB 58.9 million). On the same date, the shareholder of Stand Best, Mr. Wong
Kung Tok transferred all his shareholdings in Stand Best to Success Winner. Therefore, Mr. Wong Kung Tok, from June 30, 2009 to
November 20, 2009, indirectly owned 100% of Stand Best and in turn, 100% of Hengda.



CHAC was incorporated in Delaware on June 22,
2007 and was organized as a blank check company for the purpose of acquiring, through a stock exchange, asset acquisition or other
similar business combination, or controlling, through contractual arrangements, an operating business that had its principal operations
in Asia, with a focus on potential acquisition target in China.



Pursuant to the terms of a merger and stock
purchase agreement dated August 19, 2009, on November 20, 2009, CHAC merged with and into China Ceramics, its wholly owned British
Virgin Islands subsidiary, and immediately thereafter, as part of the same integrated transaction, China Ceramics acquired all
of the outstanding securities of Success Winner.



Prior to China Ceramics’ acquisition of
Success Winner, neither CHAC nor China Ceramics’ had any operations.



On November 19, 2009, Hengda entered into a
definitive acquisition agreement to acquire a new production facility in Gaoan, Jiangxi Province, PRC by purchasing 100% of the
equity interests in Hengdali. The closing of the acquisition was subject to the Gaoan City Administration for Industry and Commerce
transferring the registration and business license of Hengdali from Hengdali’s former shareholders to Hengda. The transfer
occurred on January 8, 2010. Hengda appointed an executive officer to take control over Hengdali’s operating and financing
activities on the same day. In total, Hengda assumed loans of RMB 60.0 million and paid cash consideration of RMB 185.5 million
for the acquisition, of which RMB 145.4 million was advanced to Hengdali’s former shareholders by December 31, 2009.



On September 17, 2013, Fujian Province Hengdali
Building Materials Co., Ltd. (“Fujian Hengdali”) was incorporated in Pingtan, Fujian Province, and is 100% owned by
Hengda. Fujian Hengdali’s approved scope of business includes sales of building materials and interior and exterior decoration
materials.



| | D. | Property, plant and equipment
| | -- | -----------------------------



Together with three other companies, we jointly
own six buildings comprised of one office building and five workshops in Jinjiang, Fujian Province. We recorded the related fixed
assets in proportion to the amount we paid for our part of the buildings, which represents our interests in the buildings. As co-owners
of these six buildings under the relevant Building Ownership Certificate, all co-owners have collective rights and obligations
to the jointly-owned property under PRC law, and typically the disposal of such jointly owned property by one owner without the
consent of all other owners is prohibited.



49







The land-use rights of the co-owned six buildings
are ownd by us, expire in 2055 and cover approximately 10,023 square meters. We also own land-use rights and seven buildings in
Gaoan, Jiangxi Province for office buildings, workshops, warehouses, and raw material yards and staff quarters. The land-use rights
for these facilities expire on various dates in 2058 through 2060 and cover an aggregate of approximately 344,324 square meters.



We currently lease 17 properties in Jinjiang,
Fujian Province in the PRC for various uses including warehouses, office space, workshops, staff quarters and stock yards. The
lease terms range from three to five years.



As of December 31, 2014 our Hengda production
facility in Jinjiang City, Fujian Province in the PRC, had a total gross floor area of approximately 140,000 square meters and
employed 1,077 production personnel and our Hengdali production facility in Gaoan, Jiangxi Province in the PRC, has a total gross
floor area of approximately 344,324 square meters and employed 339 production personnel. The Hengda facility consists of eleven
production lines with an annual production capacity of 42 million square meters. The Hengdali facility consists of five production
lines with an annual production capacity of 30 million square meters of ceramic tiles. Historically, we have not experienced
any form of disruption in our production facility.



Combined, these facilities currently provide
an aggregate annual maximum production capacity of approximately 72 million square meters. However, due to current economic conditions,
we are currently utilizing production facilities capable of producing 37 million square meters. We currently have sixteen production
lines (nine of which were utilized at the end of 2014), with each production line optimized to manufacture specific size ranges
to maximize efficiency and output.



In 2013, we expended RMB 51.7 million ($8.5
million) for the acquisition of equipment at our Hengda and Hengdali facility to improve the production line, expended RMB 28.4
million ($4.7 million) to modify an existing production line at the Hengda facility to enable the manufacture of products that
are in high demand, expended RMB 5.6 million ($0.9 million) for the acquisition of equipment at Hengda facility that replaced coal
with gas as the source of Hengda’s power supply, and expended RMB 11.4 million ($1.9 million) for the interior build-out
of the completed office building adjacent to the Hengdali facility.



During 2014, our Hengda facility was required
by the local governmental entity to begin using natural gas to operate the facility, as opposed to coal. This mandated change in
fuel source is part of a province-wide (and country-wide) effort to reduce pollution. This change resulted in our incurring a one-time
charge of approximately RMB5.6 million ($0.9 million) in December 2013, and will increase our cost of goods produced at that facility
because natural gas is a more expensive energy source than coal. Fuel source (comprising coal and natural gas) accounted for 16.4%
and 15.3% of the total cost of sales in 2014 and 2013, respectively. There is no assurance that in the future our other production
facilities will not be required to make similar modifications which could have similar adverse effects on our operations.





| | ITEM 4A. | UNRESOLVED STAFF COMMENTS
| | -------- | -------------------------



Not Applicable.



50







| | ITEM 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS
| | ------- | --------------------------------------------



Overview



We are a British Virgin Islands limited liability
company whose predecessor, CHAC, was incorporated in Delaware on June 22, 2007 and was organized as a blank check company for the
purpose of acquiring, through a stock exchange, asset acquisition or other similar business combination, or controlling, through
contractual arrangements, an operating business that had its principal operations in Asia, with a focus on potential acquisition
target in China.



Pursuant to the terms of a merger and stock
purchase agreement dated August 19, 2009, on November 20, 2009, CHAC merged with and into China Ceramics, its wholly owned British
Virgin Islands subsidiary, and, immediately thereafter, as part of the same integrated transaction, China Ceramics acquired all
of the outstanding securities of Success Winner.



China Ceramics, through our operating subsidiaries,
is a leading PRC-based manufacturer of ceramic tiles used for exterior siding and for interior flooring and design in residential
and commercial buildings. The ceramic tiles, sold under the “HD” or “Hengda”, “HDL” or “Hengdeli”,
“TOERTO” and “WULIQIAO” brands are available in over two thousand styles, colors and size combinations.
Currently, we have five principal product categories: (i) porcelain tiles, (ii) glazed tiles, (iii) glazed porcelain tiles, (iv)
rustic tiles, and (v) polished glazed tiles. Porcelain tiles are our best-selling products, accounting for over 67.8% of our total
revenue in 2014.



Combined, these facilities currently provide
an aggregate annual maximum production capacity of approximately 72 million square meters. However, due to current economic conditions,
we are currently utilizing production facilities capable of producing 37 million square meters. We currently have sixteen production
lines (nine of which were utilized at the end of 2014), with each production line optimized to manufacture specific size ranges
to maximize efficiency and output.



Basis of Presentation



The following discussion and analysis of our
financial condition and results of operations is based on the selected financial information as of and for the years ended December
31, 2012, 2013 and 2014 and has been prepared based on the consolidated financial statements of China Ceramics Co., Ltd. and its
subsidiaries. The consolidated financial statements of China Ceramics Co., Ltd. and its subsidiaries have been prepared in accordance
with IFRS as issued by the International Accounting Standards Board, or “IASB.” The consolidated financial statements
have been prepared on the historical cost basis, except for derivative financial instruments that have been measured at fair value.



The business combination on November 20, 2009
has been accounted for as a reverse recapitalization. The acquisition agreement resulted in the former owner of Success Winner
obtaining effective operating and financial control of the combined entity. Prior to the acquisition, we had no operating business.
Accordingly, the acquisition does not constitute a business combination for accounting purposes and is accounted for as a capital
transaction. That is, the transaction is in substance a reverse recapitalization, equivalent to the issuance of equity interests
by Success Winner for the net monetary assets of China Ceramics accompanied by a recapitalization. The consolidated financial statements
are a continuation of the financial statements of Success Winner. The assets and liabilities of China Ceramics are recognized at
their carrying amounts at the date of acquisition with a corresponding credit to the consolidated equity and no goodwill or other
intangible assets are recognized. The equity of the combined entity recognized at the date of acquisition represents the equity
balances of Success Winner together with the deemed proceeds from the reverse recapitalization determined as described above. However,
the equity structure presented in the consolidated financial statements (number and values of equity instruments issued) reflects
the equity structure of the legal parent, China Ceramics. Costs directly attributable to the transaction have been debited to equity
to the extent of net monetary assets received.



Results of Operations



The following table sets forth our financial
results for the years ended December 31, 2012, 2013 and 2014.



51







|                                                                                    |  | Year Ended December 31, |           
|----------------------------------------------------------------------------------- |  | ----------------------- | ----------
|RMB(‘000)                                                                           |  | 2012                    |           
|Revenue                                                                             |  |                         | 1,444,891 
|Cost of sales                                                                       |  |                         | (1,063,892
|Gross profit                                                                        |  |                         | 380,999   
|Other income                                                                        |  |                         | 378       
|Other expenses                                                                      |  |                         | (1,943    
|Realized and unrealized fair value  Gain/(loss) on derivative financial instruments |  |                         | -         
|Selling and distribution expenses                                                   |  |                         | (11,378   
|Administrative expenses                                                             |  |                         | (29,974   
|Finance costs                                                                       |  |                         | (9,319    
|Profit/(loss) before taxation                                                       |  |                         | 328,763   
|Income tax (expense)/credit                                                         |  |                         | (84,932   
|Profit/(loss) attributable to shareholders                                          |  |                         | 243,831   



Description of Selected Income Statement
Items



Revenue.  We generate revenue
from the sales of ceramic tiles, including porcelain tiles, glazed porcelain tiles, glazed tiles, rustic tiles and polished glazed
tiles, net of rebates and discounts. For the past three fiscal years, the second and third calendar quarters have been the peak
season of the property developing industry, and, therefore, our quarterly sales are usually highest from May to September compared
to the rest of the year. In addition, we have observed lower sales between the months of January to March. This is because property
developing activities are low due to the effects of cold weather and the PRC Spring Festival. For 2014, we attribute our increased
revenues and improved gross profit margin to our increased selling prices. Beginning in December 2012, we began reducing the selling
price of our ceramic tile products to be competitive in the market and to maintain market share. However, we raised our selling
price on all of our products on July 1, 2014.



Cost of sales.  Cost of sales
consists of costs directly attributable to production, including the cost of clay, color materials, glaze materials, coal, salaries
for staff engaged in production activity, electricity, depreciation, packing materials, and related expenses.



The most significant factors that directly or
indirectly affect our cost of sales are as follows:



| | · | Availability and price of clay;
| | - | -------------------------------



| | · | Availability and price of coal; and
| | - | -----------------------------------



| | · | Availability and price of dyes; and
| | - | -----------------------------------



| | · | Price of energy.
| | - | ----------------



Clay is a key material for making ceramic tiles,
and accounted for approximately 25.0% of our cost of sales in 2014. Fujian and Jiangxi Provinces, where our production facilities
are located, are the largest clay production areas in China and clay supply is stable and sufficient for our production and planned
production.



Coal and gas are our major fuel sources for
making ceramic tiles. Coal and gas accounted for approximately 6.8% and 9.6%, respectively, of our cost of sales in the year ended
December 31, 2014. We have long-term relationships with our coal suppliers. Prices of coal have experienced fluctuations in the
past few years. During 2014, our Hengda facility was required by the local governmental entity to begin using natural gas to operate
the facility. This increased our cost of goods produced at that facility because natural gas is a more expensive energy source
than coal.



52







Dyes are another key material for making ceramic
tiles, and accounted for approximately 28.7% of our cost of sales in the year ended December 31, 2014. A number of dyes are used
in ceramic tiles, and the prices of different dyes have experienced fluctuations in the past few years.



Other income and other expenses.  Other
income consists of interest income. Other expenses primarily consist of the loss on disposal of equipment, foreign exchange loss
and provision for litigation.



Selling and distribution expenses.  Selling
and distribution expenses consist of payroll, traveling expenses, transportation and advertising expenses incurred by our selling
and distribution team.



Administrative expenses.  Administrative
expenses consist primarily of employee remuneration, payroll taxes and benefits, general office expenses and depreciation. We also
incur additional expenses related to costs of compliance with securities laws and other regulations, including audit and legal
fees and investor relations expenses.



Finance Costs.  Finance costs
consist of interest expense on bank loans.



Income taxes. Our subsidiaries in the
PRC are subject to the PRC Enterprise Income Tax Law, and the applicable income tax rate pursuant to such law in the years ended
December 31, 2012, 2013 and 2014 is 25%.



Results of Operations



Year ended 2014 compared to the year ended
2013



Revenue.  The following table
sets forth the breakdown of revenue, by product categories, for fiscal years 2013 and 2014:



|                   |  | December 31, |        
|------------------ |  | ------------ | -------
|Revenue RMB (‘000) |  | 2013         |        
|Porcelain          |  |              | 643,803
|Glazed Porcelain   |  |              | 55,116 
|Glazed             |  |              | 44,841 
|Rustic             |  |              | 116,503
|Polished Glazed    |  |              | 72,631 
|Total              |  |              | 932,894



Revenue increased by RMB 104.8 million, or 11.2%,
to RMB 1,037.7 million ($167.2 million) in the year ended December 31, 2014, from RMB 932.9 million for the year ended December
31, 2013. The year-over-year increase in revenue was primarily driven by a 9.7% increase in our average selling price in 2014 as
compared to 2013 (RMB 29.5 ($4.8) per square meter for 2014 compared to RMB 26.9 per square meter for 2013), which we view as reflective
of our market positioning and the modestly improved macroeconomic conditions during 2014 relative to the downturn in our sector
that occurred in late 2012.



Porcelain tiles. Revenue from porcelain
tiles increased 9.3% from RMB 643.8 million for the year ended December 31, 2013 to RMB 703.6 million ($113.4 million) for the
year ended December 31, 2014. The increase was primarily attributable to an increase in the average selling price. The average
selling price increased by 7.4% to RMB 26.2 ($4.2) per square meter for the year ended December 31, 2014 from an average selling
price of RMB 24.4 per square meter for the year ended December 31, 2013. Porcelain tiles for exterior walls are still our most
popular product and have the largest market potential of all of our tiles. We expect porcelain tiles to continue to be our key
product for the foreseeable future.



53







Glazed porcelain tiles.Revenue from
glazed porcelain tiles decreased 20.0% from approximately RMB 55.1 million for the year ended December 31, 2013 to RMB 44.1 million
($7.1 million) for the year ended December 31, 2014. The decrease was mainly due to a decrease in sales volume. The sales volume
decreased by 25% or 0.5 million square meters to approximately 1.6 million square meters for the year ended December 31, 2014 from
2.1 million square meters for the year ended December 31, 2013. Glazed porcelain tiles accounted for 4.2% of total sales for the
year ended December 2014 compared to 5.9% for the year ended December 2013.



Glazed tiles. Revenue from glazed tiles decreased 10.6% from RMB 44.8 million
for the year ended December 31, 2013 to RMB 40.1 million ($6.5 million) for the year ended December 31, 2014. The decrease was
mainly due to a decrease in sales volume. The sales volume decreased by 13.7% or 0.3 million square meters to approximately 1.8
million square meters for the year ended December 31, 2014 from 2.1 million square meters for the year ended December 31, 2013.
Among our other products, glazed tiles have a lower average selling price of RMB 22.3 in 2014. Glazed porcelain tiles accounted
for 3.9% of total sales for the year ended December 2014 compared to 4.8% for the year ended December 2013.



Rustic tiles.Revenue from rustic tiles
decreased 13.7% from RMB 116.5 million for the year ended December 31, 2013 to RMB 100.5 million ($16.2 million) for the year ended
December 31, 2014 which was mainly due to a decrease of sales volume. The sales volume decreased by 17.4% or 0.5 million square
meters to approximately 2.2 million square meters for the year ended December 31, 2014 from 2.7 million square meters for the year
ended December 31, 2013. Rustic tiles accounted for 9.7% of total sales for the year ended December 31, 2014 from 12.5% for the
year ended December 31, 2013.We have been promoting rustic tiles since we introduced them in 2007 and believe that rustic tiles
will become a larger portion of our product mix due to its variety of patterns and textures.



Polished glazed tiles.Revenue from polished
glazed tiles increased 105.7% from RMB 72.6 million for the year ended December 31, 2013 to RMB 149.4 million ($24.1 million) for
the year ended December 31, 2014, mainly due to an increase in sales volume. The sales volume increased by 100.4% or 1.3 million
square meters to approximately 2.6 million square meters for the year ended December 31, 2014 from 1.3 million square meters for
the year ended December 31, 2013. We began selling polished glazed tiles in the second quarter of 2011. We believe that this product
represents both a functional and cost-effective replacement for actual marble or stone materials used in a decorative fashion inside
homes. The polished glazed tiles are of a larger size than our other tiles and we believe that demand for this series will increase
in the future.



Cost of sales.The following table sets
forth the breakdown of cost of sales, by product segment, for December 31, 2013 and 2014:



|Cost of sales RMB (‘000) |  | 2013 |         |  | Percentage |  |        | 2014 |  |  | Percentage | 
|------------------------ |  | ---- | ------- |  | ---------- |  | ------ | ---- |  |  | ---------- | 
|Porcelain                |  |      | 598,771 |  |            |  | 68.13  | %    |  |  | 628,185    | 
|Glazed Porcelain         |  |      | 55,787  |  |            |  | 6.34   | %    |  |  | 43,946     | 
|Glazed                   |  |      | 42,847  |  |            |  | 4.88   | %    |  |  | 38,011     | 
|Rustic                   |  |      | 110,442 |  |            |  | 12.57  | %    |  |  | 90,263     | 
|Polished Glazed          |  |      | 70,971  |  |            |  | 8.08   | %    |  |  | 132,815    | 
|Total                    |  |      | 878,818 |  |            |  | 100.00 | %    |  |  | 933,220    | 



Cost of sales was RMB 933.2 million ($150.4
million) for the year ended December 31, 2014 compared to RMB 878.8 million for the year ended December 31, 2013, representing
an increase of RMB 54.4 million, or 6.2%. The increase in cost of sales was primarily due to the increase in raw material costs
and costs of energy source.



Gross profit.The following table sets
forth the breakdown of our gross profit and gross profit margin, by product segment, for December 31, 2013 and 2014:



|                 |  | December 31, |       
|---------------- |  | ------------ | ------
|                 |  | 2013         |       
|RMB (‘000)       |  | Gross Profit |       
|Porcelain        |  |              | 45,032
|Glazed Porcelain |  |              | (671  
|Glazed           |  |              | 1,994 
|Rustic           |  |              | 6,061 
|Polished Glazed  |  |              | 1,660 
|All products     |  |              | 54,076



54







Our gross profit increased 93.1% or RMB 50.3
million from RMB 54.1 million for the year ended December 31, 2013 to RMB 104.4 million ($16.8 million) for the year ended December
31, 2014. Our gross profit margin was increased from 5.8% for the year ended December 31, 2013 to 10.1% for the year ended December
31, 2014. The year-over-year increase in gross profit margin was primarily driven by an increase in the selling prices of our products
since the third quarter of 2014.



Administrative expenses.Administrative
expenses were RMB 29.5 million ($4.8 million) for the year ended December 31, 2014, compared to RMB 27.6 million for the year ended
December 31, 2013, representing an increase of RMB 1.9 million, or 7.1%. The year-over-year increase in administrative expenses
was primarily due to the increase in audit fees and lawyer fees related to the regaining of compliance with the Nasdaq requirments
and the outstanding class action litigation.



Finance costs.Finance costs increased
8.5% or RMB 0.4 million from RMB 4.2 million for the year ended December 31, 2013 to RMB 4.6 million ($0.7 million) for the year
ended December 31, 2014. The year-over-year increase in finance costs was resulted from the increase in interest paid on bank borrowings
outstanding in 2014.



Other expenses.Other expenses decreased
45.8% or RMB 9.3 million from RMB 20.2 million for the year ended December 31, 2013 to RMB10.9 million ($1.8 million) for the year
ended December 31, 2014. In 2013, we disposed of old equipment at our Hengda facility resulting in an expense of RMB 18.9 million.
In 2014, loss on diposal of property, plant and equipment was RMB 3.5 million. Other expenses in 2014 included the provision for
a litigation claim of RMB 5.3 million relating to the settlement of the outstanding class action litigation.



Loss before taxation.Loss before taxation
increased 275.7% from RMB 3.7 million for the year ended December 31, 2013 to RMB 13.9 million ($2.2 million) for the year ended
December 31, 2014. The increase in loss before taxation was mainly due to realized and unrealized fair value loss on derivative
financial instruments of RMB 59.5 million ($9.6 million), as opposed to a gain of RMB 3.3 million in 2013.During the second quarter of 2013 and the first quarter of 2014, we entered into certain foreign currency transaction agreements
with Taishin International Bank for investment purposes. The agreements meet the definition of a derivative: no initial net investment;
value changes in response to the change of exchange rate (US$ versus RMB); and the agreements are settled at a future date. In
July 2014, our Chief Executive Officer, the Company’s largest shareholder, and an affiliate of our Chief Executive Officer,
agreed to assume these agreements. As a result, after July 31, 2014, we were no longer required to fund any losses related to these
agreements, and will neither suffer any future liabilities arising under those agreements nor realize any benefits arising under
those agreements.



Income taxes.We incurred an income
tax expense of RMB 16.5 million ($2.7 million) for the year ended December 31, 2014 compared to an income tax credit of RMB 1.7
million for the year ended December 31, 2013, representing an increase in expenses of RMB 18.1 million. Our PRC statutory enterprise
income tax rate was 25.0% for the years ended December 31, 2014 and 2013. Excluding the loss of our BVI holding company and Hong
Kong incorporated subsidiary, our effective tax rates for 2014 were 25.4%. The tax credit in 2013 was related to over-provision
of PRC income tax in prior years of RMB2.9 million, offset by withholding tax on profits retained by our PRC subsidiary of RMB1.2
million.



Loss attributable to shareholders.Loss
attributable to shareholders increased approximately RMB28.3 million or 14 times from RMB 2.0 million for the year ended December
31, 2013 to RMB 30.3 million ($4.9 million) for the year ended December 31, 2014. The year-over-year increase in loss attributable
to shareholders was primarily caused by the increase in fair value loss on derivative financial instruments of RMB 62.8 million
in 2014 and the increase in income tax expenses of RMB18.1 million, offset by an increase in gross profit of RMB50.4 million.



55







Year ended 2013 compared to the year ended
2012



Revenue.  The following table
sets forth the breakdown of revenue, by product categories, for fiscal years 2012 and 2013:



|                   |  | December 31, |          
|------------------ |  | ------------ | ---------
|Revenue RMB (‘000) |  | 2012         |          
|Porcelain          |  |              | 784,383  
|Glazed Porcelain   |  |              | 57,359   
|Glazed             |  |              | 97,411   
|Rustic             |  |              | 374,276  
|Ultra-thin         |  |              | 45,794   
|Polished Glazed    |  |              | 85,668   
|Total              |  |              | 1,444,891



Revenue decreased by RMB 512.0 million, or 35.4%,
to RMB 932.9 million in the year ended December 31, 2013, from RMB 1,444.9 million for the year ended December 31, 2012. The year-over-year
decrease in revenue was primarily driven by a 24.8% decrease in the sales volume of ceramic tiles to 34.7 million square meters
in the year ended December 31, 2013 from 46.2 million square meters in the year ended December 31, 2012. In addition, we began
price reductions in December 2012 that resulted in a 14.1% decrease in our average selling price in 2013 as compared to 2012 (RMB
26.9 per square meter for the year end 2013 per square meter compared to RMB 31.3 per square meter for 2012). We attributed our
reduced sales volume to the continued challenging business conditions in China’s real estate and construction sector duiring
the period. Because no distributors ordered ultra-thin tiles for 2013, we stopped production of ultra-thin tiles in 2013.



Porcelain tiles. Revenue from porcelain
tiles decreased 17.9% from RMB 784.4 million for the year ended December 31, 2012 to RMB 643.8 million for the year ended December
31, 2013. The decrease was primarily attributable to a decrease in the sales volume and the average selling price. The average
selling price decreased by 9.6% to RMB 24.4 per square meter for the year ended December 31, 2013 from an average selling price
of RMB 27.0 per square meter for the year ended December 31, 2012, the sales volume decreased by 2.7 million square meters to approximately
26.4 million square meters for the year ended December 31, 2013 from 29.1 million square meters for the year ended December 31,
2012. The decrease in volume was caused by a reduction in market demand. Porcelain tiles for exterior walls are still our most
popular product and have the largest market potential of all of our tiles. We expect porcelain tiles to continue to be our key
product for the foreseeable future.



Glazed porcelain tiles. Revenue from
glazed porcelain tiles decreased 4.0% from approximately RMB 57.4 million for the year ended December 31, 2012 to RMB 55.1 million
for the year ended December 31, 2013. The decrease was mainly due to a decrease in average selling price. The average selling price
decreased 4.1% to RMB 25.7 per square meter for the year ended December 31, 2013 from an average selling price of RMB 26.8 per
square meter for the year ended December 31, 2012. Glazed porcelain tiles accounted for 5.9% of total sales for the year ended
December 31, 2013 compared to 4.0% for the year ended December 31, 2012.



Glazed tiles. Revenue from glazed tiles decreased by 54.0% from RMB 97.4 million
for the year ended December 31, 2012 to RMB 44.8 million for the year ended December 31, 2013. The decrease was mainly due to
a decrease in sales volume. The sales volume decreased by 2.8 million square meters to approximately 2.1 million square meters
for the year ended December 31, 2013 from 4.9 million square meters for the year ended December 31, 2012. Glazed tiles have a
lower selling price than our other products. Glazed porcelain tiles accounted for 4.8% of total sales for the year ended December
31, 2013 compared to 6.7% for the year ended December 31, 2012.



56







Rustic tiles.Revenue from rustic tiles
decreased 68.9% from RMB 374.3 million for the year ended December 31, 2012 to RMB 116.5 million for the year ended December 31,
2013 which was mainly due to a decrease of sales volume and average selling price. The sales volume decreased by 4.6 million square
meters to approximately 2.7 million square meters for the year ended December 31, 2013 from 7.3 million square meters for the year
ended December 31, 2012. The average selling price decreased 16.5% to RMB 42.5 per square meter for the year ended December 31,
2013 from an average selling price of RMB 50.9 per square meter for the year ended December 31, 2012. Rustic tiles accounted for
12.5% of total sales for the year ended December 31, 2013 from 25.9% for the year ended December 31, 2012.We have been promoting
rustic tiles since it was introduced in 2007 and believe that rustic tiles will become a larger portion of our product mix due
to its variety of pattern and texture.



Ultra-thin tiles.Revenue from ultra-thin
tiles decreased 100% from RMB 45.8 million for the year ended December 31, 2012 to nil for the year ended December 31, 2013 as
no distributors ordered ultra-thin tiles for the year ended December 31, 2013.



Polished glazed tile.Revenue from polished
glazed tiles decreased 15.3% from RMB 85.7 million for the year ended December 31, 2012 to RMB 72.6 million for the year ended
December 31, 2013, mainly due to the decrease in average selling price. The average selling price decreased by 11.1% to RMB 55.5
per square meter for the year ended December 31, 2013 from an average selling price of RMB 62.4 per square meter for the year ended
December 31, 2012. We introduced polished glazed tiles in March 2011 and began selling them in the second quarter of 2011. We believe
that this product represents both a functional and cost-effective replacement for actual marble or stone materials used in a decorative
fashion inside homes. The polished glazed tiles are of a larger size than our other tiles and we believe that demand for this series
will increase in the future.



Cost of sales.The following table sets
forth the breakdown of cost of sales, by product segment, for December 31, 2012 and 2013:



|                         |  | December 31, |          
|------------------------ |  | ------------ | ---------
|Cost of sales RMB (‘000) |  | 2012         |          
|Porcelain                |  |              | 576,279  
|Glazed Porcelain         |  |              | 49,633   
|Glazed                   |  |              | 94,641   
|Rustic                   |  |              | 255,933  
|Ultra-thin               |  |              | 29,110   
|Polished Glazed          |  |              | 58,296   
|Total                    |  |              | 1,063,892



Cost of sales was RMB 878.8 million for the
year ended December 31, 2013 compared to RMB 1,063.9 million for the year ended December 31, 2012, representing a decrease of RMB
185.1 million, or 17.4%. The decrease in cost of sales was primarily due to the decrease in sales volume.



Gross profit.The following table sets
forth the breakdown of our gross profit and gross profit margin, by product segment, for December 31, 2012 and 2013:



|                 |  | December 31, |        
|---------------- |  | ------------ | -------
|                 |  | 2012         |        
|RMB (‘000)       |  | Gross Profit |        
|Porcelain        |  |              | 208,104
|Glazed Porcelain |  |              | 7,726  
|Glazed           |  |              | 2,770  
|Rustic           |  |              | 118,343
|Ultra-thin       |  |              | 16,684 
|Polished Glazed  |  |              | 27,372 
|All products     |  |              | 380,999



57







Our gross profit decreased 85.8% from RMB 381.0
million for the year ended December 31, 2012 to RMB 54.1 million for the year ended December 31, 2013. Our gross profit margin
declined from 26.4% for the year ended December 31, 2012 to 5.8% for the year ended December 31, 2013. The year-over-year decrease
in gross profit margin was primarily driven by a decrease in the selling price and an increase in material cost and labor cost.
The decrease in gross profit during the period in dollar terms was mainly driven by the decrease in sales volume and price since
the fourth quarter of 2012.



Administrative expenses.Administrative
expenses were RMB 27.6 million for the year ended December 31, 2013, compared to RMB 30.0 million for the year ended December 31,
2012, representing a decrease of RMB 2.4 million, or 8.0%. The year-over-year decrease in administrative expenses was primarily
due to a reduction to RMB 2.1 million of non-cash share-based compensation expenses in 2013 related to the 2010 Incentive Compensation
Plan, which is designed to retain directors and senior management. The comparable non-cash share-based expenses were RMB 5.7 million
in the year ended December 31, 2012.



Finance costs.Finance costs decreased
54.8% from RMB 9.3 million for the year ended December 31, 2012 to RMB 4.2 million for the year ended December 31, 2013. The year-over-year
decrease in finance costs resulted from the decrease in average debt outstanding in 2013. The average debt outstanding was RMB
79,826,000 and RMB 122,500,000 during the years ended December 31, 2013 and 2012, respectively.



Other expenses. Other expenses increased
about 9.4 times from RMB 1.9 million for the year ended December 31, 2012 to RMB 20.2 million for the s year ended December 31,
2013. The year-over-year increase was primarily caused by the loss on disposal of property, plant and equipment of RMB 18.9 million.
The disposal of property, plant and equipment primarily related to the disposal of old equipment at our Hengda facility during
2013.



Profit/(loss) before taxation.We recorded
a profit of RMB 328.8 million before taxation for the year ended December 31, 2012 and a loss of RMB 3.7 million before taxation
for the year ended December 31, 2013. The loss in 2013 was mainly due to our lower gross profit.



Income taxes.We incurred an income
tax credit of RMB 1.7 million for the year ended December 31, 2013 compared to an income tax expense of RMB 84.9 million for the
year ended December 31, 2012, representing a decrease in income tax expense of RMB 86.6 million, due to lower profit before taxation
in 2013. Our PRC statutory enterprise income tax rate was 25.0% for the years ended December 31, 2013 and 2012. The tax credit
in 2013 was related to over-provision of PRC income tax in prior years of RMB 2.9 million, offset by withholding tax on profits
retained by our PRC subsidiary of RMB 1.2 million.



Profit/(loss) attributable to shareholders.We recorded a profit of RMB 243.8 million attributable to shareholders for the year ended December 31, 2012 and a loss of RMB
2.0 million attributable to shareholders for the year ended December 31, 2013. The year-over-year change from net profit to net
loss was primarily driven by lower gross profit in 2013.



58







Liquidity and Capital Resources



The following table presents a summary of our
cash flows and beginning and ending cash balances for the years ended December 31, 2012, 2013 and 2014:



|                                                       |  | Year Ended December 31, |         
|------------------------------------------------------ |  | ----------------------- | --------
|RMB(‘000)                                              |  | 2012                    |         
|Net cash generated from operating activities           |  |                         | 191,201 
|Net cash (used in)/generated from investing activities |  |                         | (18,871 
|Net cash (used in)/generated from financing activities |  |                         | (125,000
|Net cash flow                                          |  |                         | 47,330  
|Cash and cash equivalents at beginning of year         |  |                         | 42,149  
|Effect of foreign exchange rate differences            |  |                         | (31     
|Cash and cash equivalents at end of year               |  |                         | 89,448  



We have historically financed our liquidity
requirements mainly through operating cash flow, bank loans and issuance of new shares.



Cash flows from operating activities.



Our net cash generated from operating activities
was RMB 22.7 million ($3.7 million) for the year ended December 31, 2014, a decrease of RMB 29.4 million, or 56.4%, from RMB 52.1
million net cash generated from operating activities in 2013. The year-over-year decrease was mainly due to an increased level
of trade receivables and a decrease in trade payables in 2014. We had a cash outflow for trade receivables of RMB 58.9 million
($9.5 million) and a cash outflow for trade payables of RMB 30.4 million ($4.9 million) in 2014. In 2013, we had a cash outflow
for trade receivables of RMB 35.1 million and a cash inflow for trade payables of RMB 37.4 million. The year over year decrease
was offset by an increased level of accrued liabilities, other payables and amounts due to related parties. We have a cash inflow
for this liabilities and payables of RMB 28.8 million ($4.6 million) in 2014 compared to a cash outflow of RMB 11.1 million in
2013.



Our net cash generated from operating activities
was RMB 52.1 million for the year ended December 31, 2013, a decrease of RMB 139.1 million, or 72.8%, from RMB 191.2 million net
cash generated from operating activities for the year ended December 31, 2012. The year-over-year decrease was driven by the slowdown
and decrease of revenue in 2013, resulting in a loss before taxation of RMB 3.7 million in 2013 as compared to a profit before
taxation of RMB 328.8 million in 2012. Also, our trade receivables and inventory level increased in 2013. We had a cash outflow
for trade receivables of RMB 35.1 million and cash outflow for inventory of RMB 40.2 million in 2013. In 2012, we had a cash inflow
for trade receivables of RMB 17.3 million and a cash outflow for inventory of RMB 3.1 million. The decrease in cash inflow in 2013
was offset by (i) an increase in trade payables (we had a cash inflow of trade payables of RMB 37.4 million in 2013 and a cash
outflow of trade payables of RMB 137.6 million in 2012); and (ii) a reduced income tax obligation as a result of lower profit in
2013 (we paid income taxes of RMB 6.2 million and RMB 120.2 million in 2013 and 2012, respectively).



Inventory and Accounts Receivable.



Our inventory turnover rate decreased from 3.65
times in 2012 to 2.94 times for the year ended December 31, 2013 and further decreased to 2.92 times for the year ended December
31, 2014. Based on our historical experience, except for the RMB 23.4 million and RMB 2.4 million ($0.4 million) of inventory that
was impaired for the years ended December 31, 2013 and 2014, respectively, we believe that the value of our current inventories
is realizable.



59







The average number of days in which we received
payment on our trade receivables, net of value-added tax, was increased from 100 days in 2012 to 158 days for the year ended December
31, 2013 and decreased to 156 days for the year ended December 31, 2014. Since the end of 2012, we had extended the collection
period from 90 days to 150 days to address funding pressures of our distributors. Other customers were granted a credit period
of 90 days in 2013 and 2012, and extended to 120 days in 2014. Based on our historical experience and current operation, we believe
that all our trade receivables are collectable in full.



Cash flows from investing activities.



Net cash generated from investing activities
in the year ended December 31, 2014 was RMB 13.0 million ($2.1 million), compared to RMB 128.7 million of net cash used in investing
activities in the same period of 2013. The investing cash inflows in 2014 were primary caused by the proceeds from disposal of
property, plant and equipment of Hengda.



Net cash used in investing
activities in the year ended December 31, 2013 was RMB 128.7 million, compared to RMB 18.9 million of net cash used in investing
activities in the year ended December 31, 2012. The increase in investing cash outflows was primary due to i) an increase in acquisition
of property, plant and equipment, modification of an existing production line of Hengda, acquisition of equipment at Hengda facility
that replaced coal with gas as the source of Hengda’s power supply and the completion and interior build-out of office; and
(ii) an increase in restricted cash in relation to the Company’s bank borrowings and foreign currency transactions agreements.



Cash flows from financing activities.



For the year ended December 31, 2014, net cash
used in financing activities was RMB 3.4 million ($0.5 million), primarily due to the net repayment of bank borrowings, compared
to net cash generated from financing activities of RMB16.0 million for the same period of 2013.



For the year ended December 31, 2013, net cash
generated from financing activities was RMB 16.0 million due to new bank borrowings, offset by the payment of dividends and deposit
to the stock transfer agent for dividend payment payment, as compared to net cash used in financing activities of RMB125.0 million
for the year ended December 31, 2012 caused by repayment of bank borrowings.



The major sources of our liquidity for fiscal
year 2012, 2013 and 2014 were cash generated from operations and bank borrowings. The cash generated in 2014 was primarily due
to the cash generated from operating activities of RMB 22.7 million ($3.7 million) and the cash generated from investing activities
of RMB 13.0 million ($2.1 million), offset primarily by repayment of bank loans. The cash generated in 2013 was primarily due to
the cash generated from operating activities of RMB 52.1 million and net new bank borrowings of RMB 40.0 million, offset primarily
by the cash payment of RMB 97.1 million for the acquisition of property, plant and equipment for the Hengdali facility and Hengda
facility, increase in restricted cash of RMB 37.4 million, deposit to the stock transfer agent for dividend payment RMB 11.8 million
and payment RMB 11.8 million for dividends. The cash generated in 2012 was primarily due to the cash generated from operating activities
of RMB 191.2 million, offset primarily by the cash payment of RMB 19.5 million for the acquisition of property, plant and equipment
for the replacement of old equipment at its Hengda facility and repayment of bank borrowing of RMB 125.0 million.



Cash and bank balances were RMB 61.2 million
($9.9 million) as of December 31, 2014, as compared to RMB 28.8 million as of December 31, 2013, and RMB 89.4 million at December
31, 2012.



60







As of December 31, 2014, our total outstanding
bank loans amounted to RMB 84.7 million ($13.7 million) with interest rates in the range of 2.48% to 8.16% per annum and maturity
dates in the range of January 22, 2015 to November 10, 2015.



Operating lease commitments totaled RMB 6.1
million ($1.0 million) as of December 31, 2014.



There were no capital commitments as of December
31, 2014.



There were commitments for advertising and insurance
expenditure totaling RMB 2.4 million ($0.4 million) as of December 31, 2014.



In our opinion, our working capital, including
our cash, income and cash flows from operations, and short-term borrowings, is sufficient for our present requirements.



However, we may sell additional equity or obtain
credit facilities to enhance our liquidity position or to increase our cash reserve for future acquisitions and capital equipment
expenditures. The sale of additional equity would result in further dilution to our shareholders. The incurrence in indebtedness
would result in increased fixed obligations and could result in operating covenants that would restrict our operations. We cannot
provide assurance that financing will be available in amounts or on terms acceptable to us, if at all.



Inventory Management



Our inventory is comprised of raw materials,
work in progress and finished goods. Raw materials are purchased from our suppliers located in Fujian, Guangdong and Jiangxi Provinces
and comprise mainly of clay, coal, colorings, and glazing materials.



We have sufficient raw materials to support,
on average, three weeks of production at any point in time. This helps to minimize any potential delays in our production process
which may arise due to insufficient raw materials. Our production of ceramic tiles is based on customers’ orders. In doing
so, we minimize storage space and maintain a relatively low inventory level of finished products. The inventory turnover in 2014
stayed stable as compared with that in 2013, but increased as compared with 2012. This reflects the decrease in sales volume of
ceramic titles in 2013 and 2014 as compared to 2012. Our inventory turnover for the years ended 2012, 2013 and 2014 are as follows:

|                             |  | FY2012 |         |  | FY2013 |  |         | FY2014 | 
|---------------------------- |  | ------ | ------- |  | ------ |  | ------- | ------ | 
|Inventories (RMB’000)        |  |        | 290,603 |  |        |  | 307,436 |        | 
|Inventory turnover (days)(1) |  |        | 100     |  |        |  | 124     |        | 



| | (1) | The average inventory turnover is computed based on the formula: (simple average opening and closing inventories balance in
a financial year / cost of sales) × 365 days.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In December 2012, the Company launched a sales
promotion which decreased some of the selling prices of the products, resulting in the carrying value of some of its inventory
being higher than their net realizable value. Provision for the declines in the value of inventory for the years ended December
31, 2012, 2013 and 2014 was RMB 4,237,000, RMB 23,414,000 and RMB 2,438,000 ($0.4 million), respectively, and was primarily charged
to Cost of Sales.



61







Credit Management



Credit terms to our customers



We typically extend credit terms of approximately
90 days to our customers. We will grant credit terms based on the reputation, creditworthiness, size of orders, payment records
and number of years we have done business with the customer. We do not have a goods return policy. Considering the challenging
market conditions in China’s real estate industry, we extended the collection period to 150 days to address funding pressures
of our distributors since the year ended December 31, 2012. Other customers were granted a credit period of 90 days in the years
ended December 31 2013 and 2012 and extended to 120 days in the year ended December 2014.



Personnel from our sales and marketing department
typically conduct visits to new customers to evaluate their credit worthiness before entering into any arrangements with them.
In addition, as Hengda was awarded the top 500 brand, we increased the deposit required from new distributors from RMB 0.4 million
to RMB 1.0 million.



Our average trade receivables’ turnover
days in the three years ended December 31, 2014 were as follows:



|                                     |  | FY2012 |         |  | FY2013 |  |         | FY2014 | 
|------------------------------------ |  | ------ | ------- |  | ------ |  | ------- | ------ | 
|Trade receivables (RMB’000)          |  |        | 455,885 |  |        |  | 490,989 |        | 
|Trade receivables turnover (days)(1) |  |        | 100     |  |        |  | 158     |        | 



| | (1) | The average trade receivables’ turnover is computed based on the formula: (simple average opening and closing trade receivables
balance, net of value-added tax in a financial year/revenue) × 365 days.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Credit terms from our suppliers



Our typical credit terms from our major suppliers
are from 1 to 4 months after the raw materials have been delivered. Our average trade payables’ turnover days in the last
three years ended December 31, 2014 were as follows:



|                                  |  | FY2012 |         |  | FY2013 |  |         | FY2014 | 
|--------------------------------- |  | ------ | ------- |  | ------ |  | ------- | ------ | 
|Trade payables (RMB’000)          |  |        | 115,123 |  |        |  | 152,572 |        | 
|Trade payables turnover (days)(1) |  |        | 78      |  |        |  | 68      |        | 



| | (1) | The average trade payables’ turnover is computed based on the formula: (simple average opening and closing trade payables
balance, net of value-added tax in a financial year / purchases ) × 365 days.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Trade payables turnover, net of value-added
tax, was 64 days as of December 31, 2014 compared with 68 days as of December 31, 2013. The year-over-year decrease in trade payables
turnover resulted from the lower average quarter-end trade balances in the trailing twelve month in 2014. The average turnover
days were within the Company’s normal credit period.



Capital Expenditures



Our capital expenditures primarily consist of
expenditures on property, plant and equipment.



62







We had no capital expenditures on property,
plant and equipment for the year ended December 31, 2014 compared to RMB 97.1 million for the same period in 2013.



Capital expenditures on property, plant and
equipment was RMB 97.1 million for the year ended December 31, 2013, compared to RMB 19.5 million for the same period in 2012.
In 2013, we expended RMB 51.7 million for the acquisition of equipment at our Hengda and Hengdali facilities to improve production
lines, expended RMB 28.4 million to modify an existing production line at the Hengda facility to enable the manufacture of products
that are in high demand, expended RMB 5.6 million for the acquisition of equipment at Hengda facility that replaced coal with gas
as the source of Hengda’s power supply and expended RMB11.4 million for the interior build-out of the completed office building
adjacent to the Hengdali facility.



Contractual Obligations



Our contractual obligations consist mainly of
debt obligations, operating lease obligations and other purchase obligations and commitments, and will be paid off with our cash
flow from operations. The following table sets forth a breakdown of our contractual obligations (including both interest and principal
cash flows) as of December 31, 2014:



|                                  |  | Payment Due by Period |       
|--------------------------------- |  | --------------------- | ------
|                                  |  | Total                 |       
|Short-term debt obligations(1)    |  |                       | 85,671
|Operating purchase obligations(2) |  |                       | 6,060 
|Other obligations(3)              |  |                       | 2,439 
|Total                             |  |                       | 94,170



| | (1) | Amounts represent principal and interest cash payments over the life of the bank loans, including anticipated interest payments
that are not recorded in the financial statements as of December 31, 2014.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | We lease plant buildings, production factories, warehouses and employees’ hostel from non-related parties under
non-cancellable operating lease arrangements.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | Includes advertising and insurance expenditure contracted but not provided for in the financial statements as of December 31,
2014
| | --- | ----------------------------------------------------------------------------------------------------------------------------------



The following table sets forth further details
regarding our loans outstanding as of December 31, 2014:



|Short-term debt obligations: |  | Amount of loans RMB’000 |        |  | Interest rates (p.a)
|---------------------------- |  | ----------------------- | ------ |  | --------------------
|China Citic Bank             |  |                         | 45,000 |  |                     
|Taishin International Bank   |  |                         | 39,704 |  |                     



Research and Development



We have devoted substantial resources to establishing
research and development capabilities in an effort to improve our products and diversify our product mix. Our research and development
team focuses on new products as well as developing energy and resource efficient production methods.



63







We focus our research and development efforts
on the following:



| | · | Expanding and improving production capacity;
| | - | --------------------------------------------



| | · | Improving and developing new production and processing techniques;
| | - | ------------------------------------------------------------------



| | · | Improving the use and selection of raw materials to lower costs; and
| | - | --------------------------------------------------------------------



| | · | Developing new products and designs to address changing market demands.
| | - | -----------------------------------------------------------------------



Our research and development expenses were approximately
RMB 1.2 million, RMB 1.1 million and RMB 1.3 million ($0.2 million), for fiscal years 2012, 2013 and 2014. From time to time, we
may enter into collaboration with other research institutes to develop new products or improve our production process.



Backlog



We typically receive orders from customers two
months in advance of production on a rolling basis. We enter into a dealership agreement with customers, and a sales or purchase
contract each time a customer places an order. If a customer makes any changes to an order after we have used any raw materials
in fulfilling the order, the customer bears the losses. Once we have delivered the products to the customer and the customer has
examined and accepted the products, we provide no quality guarantees. We confirm amounts payable with each customer on a monthly
basis. The products typically must be delivered to customers within 90 days of receipt of the sales order, and the customers typically
must pay for the products within 90 to 150 days of delivery.



As of December 31, 2014, our backlog was RMB
137.0 million ($22.1 million) which represents approximately the next two months of revenue at the time, compared to a backlog
of approximately RMB 136.6 million on December 31, 2013, a year-over-year increase of 0.3%.



Dividends



We
paid a cash dividend of $0.10 per share each on July 13, 2013 and January 14, 2014 to our shareholders, which totaled $4.1 million
(equivalent to RMB 24.9 million gross, RMB23.66 million net of 5% PRC withholding tax). In 2014, we paid a cash dividend of $0.0125
per share each on July 14, 2014 and January 14, 2015 to our shareholders, which totaled $0.5 million (equivalent to RMB 3.2 million
gross, RMB 3.0 million net of 5% PRC withholding tax).



Off-Balance Sheet Arrangements



We do not have any outstanding off-balance arrangements
and have not entered into any transactions that are established for the purpose of facilitating off-balance sheet arrangements.



Impact of Inflation



The general annual inflation rate in China was
approximately 2.6% in both 2012 and 2013 and 2.0% in 2014, according to the National Bureau of Statistics. Our results of operations
may be affected by inflation, particularly rising prices for energy, labor costs, raw materials and other operating costs. See
“Item 3. Key Information — Risk Factors — Risks relating to our business — If China’s inflation increases
or the prices of energy or raw materials increase, we may not be able to pass the resulting increased costs to our customers and
this may adversely affect our profitability or cause us to suffer operating losses.”



64







FINANCIAL RISK MANAGEMENT



We are exposed to financial risks arising from
our operations and the use of financial instruments. The key financial risks included credit risk, liquidity risk, interest rate
risk, foreign currency risk and market price risk.



Apart from the foreign currency forward contracts
that we have entered into during 2013 and 2014, we do not hold or issue derivative financial instruments for trading purposes or
to hedge against fluctuations, if any, in interest rates and foreign exchange rates.



Our exposure to these financial risks increased
substantially during 2013 and 2014 due to our execution of the foreign currency forward contracts. However, in July 2014 those
contracts were assumed by an affiliate of our Chairman and we were released from the liabilities that we incurred under those contracts.
We do not intend to enter into similar contracts in the future.



| | (i) | Credit risk
| | --- | -----------



Credit risk refers to the risk that a counterparty
will default on its contractual obligations resulting in financial loss to us. Our exposure to credit risk arises primarily from
bank balances and trade receivables. For trade receivables, we adopt the policy of dealing only with customers of appropriate credit
history to mitigate credit risk. For other financial assets, we adopt the policy of dealing only with high credit quality counterparties.



As we do not hold any collateral, the maximum
exposure to credit risk for each class of financial assets is the carrying amount of that class of financial assets presented on
the consolidated statements of financial position.



Cash and bank balances



Our bank deposits are placed with reputable
banks in the PRC, Hong Kong and the United States. The credit exposure of our cash and bank balances (including restricted cash)
as of December 31, 2012, 2013 and 2014 were RMB 89,448,000, RMB 66,207,000 and RMB 90,027,000 ($14,510,000), respectively.



Trade receivables



Our objective is to seek continual growth while
minimizing losses incurred due to increased credit risk exposure.



We have significant concentration of credit
risk as the Company’s top three largest trade receivables represent approximately 18%, 15% and 17% of the trade receivable
balance as of December 31, 2012, 2013 and 2014, respectively. Our five largest trade receivables represented approximately 23%,
21% and 25% of the trade receivable balance as of December 31, 2012, 2013 and 2014, respectively.



Our exposure to credit risks is influenced mainly
by the individual characteristics of each customer. We typically give our existing customers credit terms of approximately 120
days to 150 days. In deciding whether credit shall be extended, we will take into consideration factors such as the relationship
with the customer, its payment history and credit worthiness. In relation to new customers, the sales and marketing department
will prepare credit proposals for approval by the Chief Executive Officer.



65







We perform ongoing credit evaluation of our
customers’ financial condition and require no collateral from our customers. The provision for impairment loss for doubtful
debts is based upon a review of the expected collectability of all trade and other receivables.



The credit exposure of our trade receivables
as of December 31, 2012, 2013 and 2014 was RMB 455,885,000, RMB 490,989,000 and RMB 549,925,000 ($88,632,000), respectively.



| | (ii) | Liquidity risk
| | ---- | --------------



Liquidity risk is the risk that we will encounter
difficulty in raising funds to meet commitments associated with financial instruments. Liquidity risk may result from an inability
to sell a financial asset quickly at close to its fair value.



Our exposure to liquidity risk arises primarily
from mismatches of the maturities of financial assets and liabilities. Our objective is to maintain a balance between continuity
of funding and flexibility through the use of stand-by credit facilities.



The table below summarizes the maturity profile
of the liabilities based on contractual undiscounted payments:



|                                     |  | As of December 31, 2014 |        
|------------------------------------ |  | ----------------------- | -------
|                                     |  | Within 1 year           |        
|                                     |  | RMB’000                 |        
|Trade payables                       |  |                         | 122,168
|Amounts owed to related parties      |  |                         | 24,902 
|Interest-bearing bank borrowings (1) |  |                         | 85,671 
|Total                                |  |                         | 232,741

| | (1) | Includes contractual interest
payments
| | --- | --------------------------------------



We intend to ensure that there are adequate
funds to meet all our obligations in a timely and cost-effective manner. We intend to maintain sufficient levels of cash and cash
equivalents and have available an adequate amount of committed credit facilities from financial institutions to meet our liquidity
requirements in the short and longer term.



| | (iii) | Interest rate risk
| | ----- | ------------------



Interest rate risk is the risk that the fair
value or future cash flows of our financial instruments will fluctuate because of changes in market interest rates.



66







Our exposure to interest rate risk arises primarily
from our interest-bearing bank deposits and borrowings. As of December 31, 2014, RMB 10.0 million ($1.6 million) of our borrowings
were on a fixed rate basis and RMB 74.7 million ($12.0 million) were on a variable rate basis.



We are exposed to fair value interest rate risk
in relation to our fixed-rate bank borrowings. Bank borrowings subject to fixed interest rates are contractually repriced at intervals
of 12 months. We currently do not have an interest rate hedging policy. However, the management monitors interest rate exposure
and will consider other necessary actions when significant interest rate exposure is anticipated.



We are also exposed to cash flow interest rate
risk related to bank balances and cash held at financial institutions carried at prevailing market rate and variable-rate bank
borrowings.



At December 31, 2014, if average interest rate
on our variable-rate bank borrowings had been 50 basis point higher/lower, loss before tax for the year ended December 31, 2014
would have been increased/decreased by RMB 374,000/RMB 374,000 (2013: increased/decreased loss before tax by approximately RMB
448,000 /RMB 448,000, 2012: decreased/increased profit before tax by approximately RMB 300,000 /RMB 300,000).



| | (iv) | Foreign currency risk
| | ---- | ---------------------



Currency risk is the risk that the fair value
of future cash flows of a financial instrument will fluctuate due to changes in foreign exchange rates. Currency risk arises when
transactions are denominated in foreign currencies.



Our operations are primarily conducted in the
PRC. All the sales and purchases transactions are denominated in RMB. As such, the operations are not exposed to exchange rate
fluctuation.



As at December 31, 2012, 2013 and 2014, nearly
all of our monetary assets and monetary liabilities were denominated in RMB except that as of December 31, 2014, certain bank balances,
bank borrowings and other payables were denominated in US dollars.



During the second quarter of 2013 and the first
quarter of 2014, we entered into foreign currency forward contracts for investment purposes. The net fair value of foreign exchange
forward contracts entered into by us at December 31, 2013 was RMB 44,000 and have been recognized as derivative financial instruments.
On July 31, 2014, Sound Treasure Limited, our largest shareholder and an affiliate of our Chief Executive Officer, entered into
a three party agreement (the “Novation”) with the financial institution that originated the foreign currency transaction
agreements and us. Under the Novation, Sound Treasure Limited assumed these agreements and all assets (mainly deposits placed with
the financial institution) and all existing and future liabilities arising under these agreements, and we were released from the
liabilities arising under the foreign currency transaction agreements after July 31, 2014.



The Group’s foreign currency risk is mainly
concentrated on the fluctuation of US$ and HK$. The following table details the Group’s sensitivity to a 4% increase and
decrease in RMB against the relevant foreign currencies. The sensitivity analysis includes only outstanding foreign currency denominated
monetary items and adjusts their translation at the years end for a 4% change. On this basis, if RMB strengthens against foreign
currencies by 4%, the Group’s (loss)/profit before taxation for the year would decreased by the following amount, and vice
versa.



67







|                               |  | As of December 31, |      
|------------------------------ |  | ------------------ | -----
|                               |  | 2014               |      
|                               |  | RMB’000            |      
|(Loss) /Profit before taxation |  |                    | 1,855



1 Mainly as a result
of fair value (including foreign exchange) losses/gains on foreign currency forward contracts.



Critical Accounting Policies and Judgment



Our consolidated financial statements are prepared
in accordance with IFRS including related interpretations as issued by the IASB, and have been consistently applied throughout
the years ended December 31, 2012, 2013, and 2014. The preparation of these consolidated financial statements requires us to make
estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Estimates
and judgments are continually evaluated and are based on historical experiences and other factors, including expectations of future
events that are believed to be reasonable under the circumstances. Actual results may materially differ from these estimates under
different assumptions or conditions.



Inventories



Inventories are carried at the lower of cost
and net realizable value. Cost is determined using the weighted average basis, and in the case of work in progress and finished
goods, comprises direct materials, direct labor and an appropriate proportion of overhead.



Net realizable value is the estimated selling
price in the ordinary course of business less the estimated cost of completion and applicable selling expenses.



When inventories are sold, the carrying amount
of those inventories is recognized as an expense in the period in which the related revenue is recognized. The amount of any write-down
of inventories to net realizable value and all losses of inventories are recognized as an expense in the period the write-down
or loss occurs. The amount of any reversal of any write-down of inventories is recognized as a reduction in the amount of inventories
recognized as an expense in the period in which the reversal occurs.



Financial instruments



Recognition, initial measurement
and subsequent measurement



Financial assets and financial liabilities
are recognized when we become a party to the contractual provisions of the financial instrument and are measured initially at fair
value adjusted by transaction costs, except for those carried at fair value through profit or loss which are measured initially
at fair value. Subsequent measurement of financial assets and financial liabilities are described below.



Financial assets are derecognized when the
contractual rights to the cash flows from the financial asset expire, or when the financial asset and all substantial risks and
rewards are transferred. A financial liability is derecognized when it is extinguished, discharged, cancelled or expires.



Classification and subsequent
measurement of financial assets



For the purpose of subsequent measurement,
financial assets other than those designated and effective as hedging instruments are classified into the following categories
upon initial recognition:



| | - | Loans and receivables
| | - | ---------------------



| | - | Financial assets at fair value through profit or loss (“FVTPL”)
| | - | ---------------------------------------------------------------



| | - | Held-to-maturity (“HTM”) investments
| | - | ------------------------------------



| | - | Available-for-sale (“AFS”) financial assets
| | - | -------------------------------------------



68







All financial assets except for those at FVTPL
are subject to review for impairment at least at each reporting date to identify whether there is any objective evidence that a
financial asset or a group of financial assets is impaired. Different criteria to determine impairment are applied for each category
of financial assets, which are described below.



All income and expenses relating
to financial assets are recognized in profit and loss.



Loans and receivables



Loans and receivables are non-derivative financial
assets with fixed or determinable payments that are not quoted in an active market. They are initially recognized at fair value
plus transaction costs that are directly attributable to their acquisition or issue. After initial recognition, these are subsequently
measured at amortized cost using the effective interest method, less provision for impairment. Discounting is omitted where the
effect of discounting is immaterial. Our cash and trade receivables fall into this category of financial instruments.



Financial assets at FVTPL



Financial assets at FVTPL include financial
assets that are either classified as held for trading or that meet certain conditions and are designated at FVTPL upon initial
recognition. All derivative financial instruments fall into this category, except for those designated and effective as hedging
instruments, for which the hedge accounting requirements apply.



Assets in this category are measured at fair
value with net changes in fair value presented in the statement of profit or loss. Transaction costs are expensed as incurred.
The fair values of financial assets in this category are determined by reference to active market transactions or using a valuation
technique where no active market exists.



HTM investments



HTM investments are non-derivative financial
assets with fixed or determinable payments and fixed maturity other than loans and receivables. Investments are classified as HTM
if we have the intention and ability to hold them until maturity.



HTM investments are measured subsequently at
amortized cost using the effective interest method. We do not have any financial assets classified as HTM.



AFS financial assets



AFS financial assets are non-derivative financial
assets that are either designated to this category or do not qualify for inclusion in any of the other categories of financial
assets. We do not have any financial assets classified as AFS.



After initial measurement, AFS financial investments
are subsequently measured at fair value with unrealized gains or losses recognized in other comprehensive income and credited in
the AFS reserve until the investment is derecognized, at which time the cumulative gain or loss is recognized in other operating
income, or the investment is determined to be impaired. Interest is calculated using the effective interest method and dividends
are recognized in profit or loss within finance income.



Impairment of financial assets



We assess, at the end of each reporting period,
whether there is objective evidence that a financial asset or a group of financial assets is impaired. An impairment exists if
one or more events that has occurred since the initial recognition of the asset (an incurred ‘loss event’), has an
impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated.
Objective evidence of impairment could include:



| | • | significant financial difficulty of the issuer or counterparty;
or
| | - | ------------------------------------------------------------------

| | • | breach of contract, such as default or delinquency in interest
or principal payments; or
| | - | ----------------------------------------------------------------------------------------

| | • | it becoming probable that the borrower will enter bankruptcy
or financial re-organization; or
| | - | ---------------------------------------------------------------------------------------------

| | • | significant changes in the technological, market, economic or legal environment that have an adverse
effect on the debtor.
| | - | --------------------------------------------------------------------------------------------------------------------------



69







If any such evidence exists, the impairment
loss on trade and other financial assets carried at amortized cost is measured as the difference between the asset’s carrying
amount and the present value of estimated future cash flows. The present value of the estimated future cash flows is discounted
at the financial asset’s original effective interest rate, where the effect of discounting is material. This assessment is
made collectively where these financial assets share similar risk characteristics, such as similar past due status, and have not
been individually assessed as impaired. Future cash flows for financial assets which are assessed for impairment collectively are
based on historical loss experience for assets with credit risk characteristics similar to the collective group.



If in a subsequent period the amount of an
impairment loss decreases and the decrease can be linked objectively to an event occurring after the impairment loss was recognized,
the impairment loss is reversed through profit or loss. A reversal of an impairment loss shall not result in the asset’s
carrying amount exceeding that which would have been determined had no impairment loss been recognized in prior years.



Impairment losses are written off against the
corresponding assets directly, except for impairment losses recognized in respect of trade debtors included within trade and other
receivables, whose recovery is considered doubtful but not remote. In this case, the impairment losses for doubtful debts are recorded
using an allowance account. When we are satisfied that recovery is remote, the amount considered irrecoverable is written off against
trade debtors directly and any amounts held in the allowance account relating to that debt are reversed. Subsequent recoveries
of amounts previously charged to the allowance account are reversed against the allowance account. Other changes in the allowance
account and subsequent recoveries of amounts previously written off directly are recognized in profit or loss.



Classification and
subsequent - measurement of financial liabilities



Financial liabilities
are classified as FVTPL, or other financial liabilities, as appropriate upon initial recognition. A financial liability is derecognized
when the obligation under the liability is discharged, cancelled or expired.



| | i | Financial liabilities classified as other financial liabilities are initially recognized at fair value less directly attributable
transactioncosts. Subsequent to the initial recognition, other financial liabilities are measured at amortized cost using the effective
interest method. Our other financial liabilities include trade and other payables.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ii | Financial liabilities classified as FVTPL include financial liabilities held for trading and financial liabilities designated
uponinitial recognition as FVTPL. Financial liabilities are classified as held-for-trading if they are acquired for the purpose
of selling in the near term. This category includes derivative financial instruments (including separated embedded derivatives)
held for trading unless they are designated as effective hedging instruments. Gains or losses on liabilities held for trading are
recognized in profit or loss. We do not have any financial liabilities classified as FVTPL.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Derivative financial instruments



Initial recognition and subsequent
measurement



We use derivative financial instruments, such
as forward currency contracts, for investment purposes. Such derivative financial instruments are initially recognized at fair
value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Derivatives are
carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.



Any gains or losses arising from changes in
the fair value of derivatives are taken directly to profit or loss.



Leases



Finance leases refers to the situation that
the economic ownership of a leased asset is transferred to the lessee if the lessee bears substantially all the risks and rewards
of ownership of the leased asset.



70







All other leases are treated as operating leases.
Where we have use of assets under operating leases, payments made under the leases are charged to profit or loss on a straight
line basis over the lease terms except where an alternative basis is more representative of the time pattern of benefits to be
derived from the leased assets. Lease incentives received are recognized in profit or loss as an integral part of the aggregate
net lease payments made. Contingent rentals are charged to profit or loss in the accounting period in which they are incurred.



All of our leases are operating leases
for the years ended December 31, 2014, 2013 and 2012.



Revenue recognition



Revenue comprises the fair value of the consideration
received or receivable for the sale of goods, net of rebates and discounts. We paid rebates to some distributors on their annual
cash collections in 2012. No such rebates were paid to distributors since year 2013. Provided it is probable that the economic
benefits will flow to us and the revenue and costs, if applicable, can be measured reliably, revenue is recognized as follows:



| | · | Sales of goods are recognized upon transfer of the significant risks and rewards of ownership to the customer. This is usually
taken as the time when the goods are delivered and the customer has accepted the goods. Once goods are accepted by a customer,
there is no continuing management involvement with the goods and we do not have the obligation to accept the return of the goods
to us from the customer.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Interest income is recognized on a time-proportion basis using the effective interest method.
| | - | ---------------------------------------------------------------------------------------------



Impairment of non-financial assets



Impairment testing is made on our goodwill
at each reporting date. Property, plant and equipment and land use rights are tested for impairment if there is any indication
that the assets may be impaired at the balance sheet date.



If any indication exists, or when annual impairment
testing for an asset is required, we estimate the asset’s recoverable amount.



Calculation of recoverable amount



An asset’s recoverable amount is the
greater of an asset’s or cash-generating unit’s fair value less costs of disposal and its value in use. In assessing
value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset. Where an asset does not generate cash
inflows largely independent of those from other assets, the recoverable amount is determined for the smallest group of assets that
generates cash inflows independently (i.e. a cash-generating unit).



Recognition of impairment losses



An impairment loss is recognized in profit
or loss whenever the carrying amount of an asset, or the cash-generating unit to which it belongs, exceeds its recoverable amount.
Impairment losses recognized in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill
allocated to that cash-generating unit (or group of units), and then, to reduce on a pro rata basis the carrying amount of the
other assets in the unit (or group of units), except that the carrying amount of an asset will not be reduced below its individual
fair value less costs of disposal (if measurable) or value in use (if determinable).



Reversal of impairment losses



In respect of assets other than goodwill, an
impairment loss is reversed if there has been a favorable change in the estimates used to determine the recoverable amount. An
impairment loss in respect of goodwill is not reversed.



A reversal of an impairment loss is limited
to the asset’s carrying amount that would have been determined had no impairment loss been recognized in prior years. Reversals
of impairment losses are credited to profit or loss in the year in which the reversals are recognized.



71







Share-based employee remuneration



We operate equity-settled share-based remuneration
plans for its employees. None of our plans feature any options for a cash settlement.



The fair value of share options granted to
employees is recognized as an employee cost with a corresponding increase in the share-based payment reserve within equity. The
fair value is measured at the grant date using the Black Scholes Option Pricing Model, taking into account the terms and conditions
upon which the options were granted. Where the employees have to meet vesting conditions before becoming unconditionally entitled
to the share options, the total estimated fair value of the share options is spread over the vesting period, taking into account
the probability that the options will vest.



During the vesting period, the number of share
options expected to vest is reviewed. Any resulting adjustment to the cumulative fair value recognized in prior years is charged/credited
to the profit or loss for the year under review, unless the original employee expenses qualify for recognition as an asset, with
a corresponding adjustment to the share-based payment reserve. On the vesting date, the amount recognized as an expense is adjusted
to reflect the actual number of share options that vest (with a corresponding adjustment to the share-based payment reserve) except
where forfeiture is only due to not achieving vesting conditions that relate to the market price of our shares. The equity amount
is recognized in the share-based payment reserve until either the option is exercised (when it is transferred to the share premium
account) or the option expires (when it is released directly to retained earnings).



Accounting for income taxes



Income tax comprises current tax
and deferred tax.



Current tax and movements in deferred tax assets
and liabilities are recognized in profit or loss except to the extent that they relate to items recognized in other comprehensive
income or directly in equity, in which case the relevant amounts of tax are recognized in other comprehensive income or directly
in equity, respectively.



Current tax is the expected tax payable on
the taxable income for the year, using tax rates enacted or substantively enacted at the end of the reporting period, and any adjustment
to tax payable in respect of previous years.



Deferred tax is calculated using the liability
method on temporary differences at the reporting date between the carrying amounts of assets and liabilities in the financial statements
and their respective tax bases. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred
tax assets are recognized for all deductible temporary differences, tax losses available to be carried forward as well as other
unused tax credits, to the extent that it is probable that taxable profit, including existing taxable temporary differences, will
be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilized.



Deferred tax assets and liabilities are not
recognized if the temporary difference arises from goodwill or from initial recognition (other than in a business combination)
of assets and liabilities in a transaction that affects neither taxable nor accounting profit or loss.



Deferred tax liabilities are recognized for
taxable temporary differences arising on investments in subsidiaries, associates and joint ventures, except where we are able to
control the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable
future.



Deferred tax is calculated, without discounting,
at tax rates that are expected to apply in the period the liability is settled or the asset realized, based on tax rate (and tax
laws) that have been enacted or substantively enacted at the reporting date.



The carrying amount of a deferred tax asset
is reviewed at the end of each reporting period and is reduced to the extent that it is no longer probable that sufficient taxable
profits will be available to allow the related tax benefit to be utilized. Any such reduction is reversed to the extent that it
becomes probable that sufficient taxable profits will be available.



Additional income taxes that arise from the
distribution of dividends are recognized when the liability to pay the related dividends is recognized.



72







Current tax balances and deferred tax balances,
and movements therein, are presented separately from each other and are not offset. Current tax assets are offset against current
tax liabilities, and deferred tax assets are offset against deferred tax liabilities, if we have the legally enforceable right
to set off the recognized amounts and the following additional conditions are met:



| | a) | in the case of current tax assets and liabilities, we intend either to settle on a net basis, or
to realize the asset and settle the liability simultaneously; or
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) | in the case of deferred tax assets and liabilities, if they relate to income taxes levied by the
same taxation authority on either:
| | -- | -----------------------------------------------------------------------------------------------------------------------------------



| | (i) | the same taxable entity; or
| | --- | ---------------------------



| | (ii) | different taxable entities, which, in each future period in which significant amounts of deferred
tax liabilities or assets are expected to be settled or recovered, intend either to settle current tax liabilities and realize
the current tax assets on a net basis, or to settle the liabilities and realize the assets simultaneously.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Critical accounting estimates and assumptions



We make estimates and assumptions concerning
the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The key sources of
estimation uncertainty and key assumptions concerning the future at the end of the reporting period, that have a significant risk
of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed
below:



Useful lives and impairment assessment
of property, plant and equipment



Property, plant and equipment are stated at
cost less accumulated depreciation and identified impairment losses. The estimation of useful lives impacts the level of annual
depreciation expenses recorded. Property, plant and equipment are evaluated for possible impairment on a specific asset basis or
in groups of similar assets, as applicable. This process requires management’s estimate of future cash flows generated by
each asset or group of assets. For any instance where this evaluation process indicates impairment, the relevant asset’s
carrying amount is written down to the recoverable amount and the amount of the write-down is charged against profit or loss.



Impairment loss recognized in
respect of property, plant and equipment



As of December 31, 2014, the carrying amount
of property, plant and equipment was approximately RMB 718,418,000 ($115,788,000) (2013: RMB 802,578,000; 2012: RMB 795,983,000).
There was no impairment loss recognized for the years ended December 31, 2014, 2013 and 2012. Determining whether property, plant
and equipment are impaired requires an estimation of the recoverable amount of the property, plant and equipment. Such estimation
was based on certain assumptions, which are subject to uncertainty and might materially differ from the actual results.



Impairment loss recognized in
respect of land use rights



As of December 31, 2014, the carrying amount
of land use rights was approximately RMB 29,259,000 ($4,716,000) (2013: RMB 29,929,000; 2012: RMB 30,598,000). There was no impairment
loss recognized for the years ended December 31, 2014, 2013 and 2012. Determining whether land use rights are impaired requires
an estimation of the recoverable amount of the land use rights. Such estimation was based on certain assumptions, which are subject
to uncertainty and might materially differ from the actual results.



Impairment loss of goodwill



Determining whether goodwill is impaired requires
an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation
requires us to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order
to calculate present value. Where the actual future cash flows are less than expected, a material impairment loss may arise. We
performed goodwill impairment test annually. No impairment loss was recognized for the year ended December 31, 2014, 2013 and 2012.



73







Income tax



We have exposure to income taxes in the PRC.
Significant judgment is required in determining the provision for income taxes. There are certain transactions and computations
for which the ultimate tax determination is uncertain during the ordinary course of business. We recognize liabilities for expected
tax issues based on estimates of whether additional taxes will be due. When the final tax outcome of these matters is different
from the amounts that were initially recognized, such differences will impact the income tax and deferred tax provisions in the
period in which such determination is made. The carrying amounts of our income tax payable as of December 31, 2014, 2013 and 2012
were RMB 2,772,000 ($447,000), RMB 1,520,000, and RMB 869,000, respectively.



Impairment of trade receivables



We assess the collectability of trade receivables.
This estimate is based on the credit history of our customers and the current market condition. We assess the collectability of
trade receivables at the balance sheet date and make the provision, if any. The identification of doubtful debts requires the use
of judgment and estimates. Judgment is required in assessing the ultimate realization of these receivables, including the current
creditworthiness, past collection history of each customer and on-going dealings with them. Where the expectation is different
from the original estimate, such difference will impact the carrying value of trade and other receivables and doubtful debts expenses
in the period in which such estimate has been changed. The carrying amounts of our trade receivables as of December 31, 2014, 2013
and 2012 were RMB 549,925,000 ($88,632,000), RMB 490,989,000 and RMB 455,885,000, respectively.



Net realizable value of inventories



Net realizable value of inventories is the
management’s estimation of future selling price in the ordinary course of business, less estimated costs of completion and
selling expenses. These estimates are based on the current market condition and the historical experience of selling products of
similar nature. It could change significantly as a result of various market factors. The carrying amounts of our inventories as
of December 31, 2014, 2013 and 2012 were RMB 330,763,000($53,309,000), RMB 307,436,000 and RMB 290,603,000, respectively.



Shares-based payment transaction



We measure the cost of equity-settled transactions
with employees by reference to the fair value of the equity instruments at the date at which they are granted. Estimating fair
value for share-based payment transactions requires determining the most appropriate valuation model, which is dependent on the
terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including
the expected life of the stock option, volatility and dividend yield and making assumptions about them.



| | ITEM 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
| | ------- | ------------------------------------------



| | A. | Directors and senior management
| | -- | -------------------------------



Our current directors and executive officers
are:



|Name                        |  | Age |  | Position                            
|--------------------------- |  | --- |  | ------------------------------------
|                            |  |     |  |                                     
|Huang Jia Dong              |  | 57  |  | Director and Chief Executive Officer
|                            |  |     |  |                                     
|Hen Man Edmund              |  | 42  |  | Chief Financial Officer             
|                            |  |     |  |                                     
|Cheng Yan Davis (1)(2)(3)   |  | 73  |  | Director                            
|                            |  |     |  |                                     
|Jianwei Liu (1)(2)(3)       |  | 43  |  | Director                            
|                            |  |     |  |                                     
|Shen Chiang Liang (1)(2)(3) |  | 59  |  | Director                            
|                            |  |     |  |                                     
|Su Wei Feng                 |  | 34  |  | Director and Corporate Secretary    



74







| | (1) | Member of audit committee
| | --- | -------------------------



| | (2) | Member of compensation committee
| | --- | --------------------------------



| | (3) | Member of nominations committee
| | --- | -------------------------------



Huang Jia Dong founded Hengda
in 1993 and has served as our director since November 20, 2009 and Chief Executive Officer since April 4, 2010. Mr. Huang was Chairman
of the Board from November 20, 2009 until April 4, 2010. Mr. Huang currently serves as Chairman of Hengda. Mr. Huang was previously
involved in the construction material distribution business. Mr. Huang has been appointed as the vice chairman of Fujian Province
Ceramic Industry Association since 2006 and the executive director of Jinjiang City Chamber of Import and Export Trade since 2007.
Mr. Huang has a diploma in corporate management from Xiamen University. We have chosen Mr. Huang to serve as director because of
his extensive experience in the ceramic tiles industry and his intimate knowledge of our company.



Hen Man Edmund has served as our
Chief Financial Officer since November 20, 2009. Mr. Hen joined Hengda in 2008 as the Chief Financial Officer. Mr. Hen is responsible
for the corporate finance function and oversees matters relating to compliance and reporting obligation of our company. Prior to
joining Hengda, Mr. Hen was a Financial Controller of a switchgear manufacturer in Sichuan PRC and was responsible for the corporate
finance function of the company. Prior to that, Mr. Hen was the accountant of Dickson Concepts (International) Ltd., a public listed
company in Hong Kong and oversaw the accounting and financial administration of the company. He also worked at a variety of international
accountancy firms, including Deloitte Touche Tohmatsu, in assurance and advisory services during the period from 1995 to 2001.
Mr. Hen graduated from the University of East Anglia, United Kingdom, with a Bachelor Degree in Science in 1995. He is a member
of the Institute of Chartered Accountants in England and Wales and a member of the Hong Kong Institute of Certified Public Accountants.



Cheng Yan Davis has been our director
since November 20, 2009 and was a board member of our predecessor, CHAC, since its inception. Since September 2010, Ms. Davis has
acted as a special advisor to the President of the Teacher’s College of Columbia University. From 1993 until September 2010,
Ms. Davis served as the Vice Dean of International Programs and Development at the University of Pennsylvania Graduate School of
Education (GSE International). GSE International was established by Ms. Davis in 1993, and was the first international programs
office among Ivy League graduate schools of education in the U.S. Since 1993, Ms. Davis has served as a Special Advisor to the
President of the University of Pennsylvania on internationalization efforts. GSE International has developed many specialized training
programs for groups ranging from government officials and university presidents to finance executives and corporate CEOs. Among
these programs are training programs for Chief Executive Officers and leading executives in the Chinese securities and mutual fund
industries, created in conjunction with the Wharton School. Over the past three years, the Penn-Securities Association of China
Program and the Penn-China Mutual Fund CEO Leadership Program have trained over one hundred Chinese executives in the latest theories
and practices of the U.S. finance sector. Since 1998, Ms. Davis has worked with Morgan Stanley on the International Conference
on Higher Education Management in Shanghai, the establishment of the China Center, which focuses on management training for U.S.-China
joint ventures, and the China Pension Program, which works with the state council of China in designing the architecture and training
of a senior workforce in comprehensive pension management. Ms. Davis has also worked with CIGNA and Lucent Technologies on various
professional education projects since 1997, designing a variety of training and professional development programs. Ms. Davis also
serves as an advisor on quality workforce standards for the Shanghai Municipal Government and the Shanghai Foreign Trade Commission.
Since 1997, Ms. Davis has been invited to the Shanghai’s Mayor’s International Advisory Council as a special observer
and to offer suggestions on Shanghai human resource development and workforce training. Ms. Davis has also been invited to custom
design new programs for China Telecom and China Industrial Commercial Bank. These programs were designed in preparation of China’s
entry into the World Trade Organization. Ms. Davis initiated former President Jiang Zemin’s visit to the University of Pennsylvania
in 1997. Ms. Davis is a board member of the New York Film Academy, Senior Advisor to Motorola and Oracle on international government
relations, and Advisor Professor to East China Normal University. In addition, she has served as the Senior Observer for the Shanghai
International Business Leaders Advisory Council for the past fifteen years. She has received numerous recognitions for her many
contributions, including the first-ever PennGSE Alumni Pioneers Award. Ms. Davis has a degree in Russian and English from Sichuan
Foreign Language University in China and an Ed D in Education from the Graduate School of Education at the University of Pennsylvania.
We have chosen Ms. Davis to serve as director because of her history with the Company, as a founder of CHAC.



75







Jianwei Liu has been our director
since January 7, 2014. Mr. Jianwei Liu has been a portfolio manager with China-based Bosera Asset Management Co., Ltd. since October
2004. Prior joining to Bosera, Mr. Liu worked at Shanghai AllBright Law Offices and ICBC (Industrial and Commercial Bank of China
Ltd.) at their main headquarters beginning in July 1999. Mr. Liu worked with China Holdings Acquisition Corp. (“CHAC”),
the Company’s predecessor, prior to its merger with the Company, and participated in the sourcing of targets for CHAC, the
performance of due diligence on potential acquisitions and the structuring of the Company’s acquisition of its operating
business in 2009. Mr. Liu resides in China and holds an MBA in finance from the Wharton School of the University of Pennsylvania,
and an MA degree in English and BA degrees in English and Law from Beijing University.



Shen Cheng Liang has been our
director since November 1, 2013. Mr. Shen Cheng Liang is a ceramics production expert with over 30 years of experience in the ceramics
industry in China. Prior to his retirement from the industry in 2012, he was a senior production engineer and general manager at
Fujian Yiyan Ceramics Ltd. where he worked from 1983 to 2012. Mr. Liang graduated with a Bachelor’s degree in material physics
from Jingdezhen Ceramics College in 1983.



Su Wei Feng has been our director
since April 1, 2010. Mr. Su joined us in March 2007. He currently acts as our general legal counsel and Secretary. Prior to working
with us, Mr. Su worked as a lawyer at Fujian Minrong Law Firm from 2005 to 2007. He graduated from the School of Law of Xiamen
University in 2004. We have chosen Mr. Su to serve as director because of his legal background.



The business address of each party
described above is c/o Jinjiang Hengda Ceramics Co., Ltd., Junbing Industrial Zone, Anhai, Jinjiang City, Fujian Province, People’s
Republic of China.



| | B. | Compensation
| | -- | ------------



Compensation Committee Interlocks and Insider
Participation



No member of our compensation committee has
at any time been our officer or employee, or our subsidiaries. No interlocking relationship exists between our board of directors
or compensation committee and the board of directors or compensation committee of any other company, nor has any interlocking relationship
existed in the past.



During the last fiscal year, none of our officers
and employees, and none of our former officers participated in deliberations of our Board of Directors concerning executive officer
compensation.



76







Director Compensation



Starting April 1, 2010, our Board of Directors
determined to provide its non-employee members annual compensation of $40,000 and to provide the Audit Committee Chair annual compensation
of $45,000.



The following table sets forth all of the compensation
paid by us or our significant subsidiaries in 2014 to each of our non-employee directors for such person’s service as a director
(including contingent or deferred compensation accrued during 2014):



|Name and Principal Position                        |  | Compensation RMB |         |  | Value of Options(1) RMB |  |   | Total RMB | 
|-------------------------------------------------- |  | ---------------- | ------- |  | ----------------------- |  | - | --------- | 
|Shen Cheng Liang                                   |  |                  | 231,000 |  |                         |  | - |           | 
|Cheng Yan Davis                                    |  |                  | 248,184 |  |                         |  | - |           | 
|William L. Stulginsky (resigned on April 27, 2014) |  |                  | 139,604 |  |                         |  | - |           | 
|Jianwei Liu                                        |  |                  | 268,870 |  |                         |  | - |           | 



| | (1) | No options were granted to non-employee directors in 2014.
| | --- | ----------------------------------------------------------



Executive Officers



The following table sets forth all of the compensation
paid by us or our significant subsidiaries in 2014 to each of our officers for such person’s service as an officer (including
contingent or deferred compensation accrued during 2014 but not including any amounts paid to such persons for their services as
directors):



The following table sets forth all of the compensation
paid by us or our significant subsidiaries in 2014 to each of our officers for such person’s service as an officer (including
contingent or deferred compensation accrued during 2014 but not including any amounts paid to such persons for their services as
directors):



|                                              |  | Salary |         |  | Bonus |  |   | Value ofOptions(1) |  |  | Total | 
|--------------------------------------------- |  | ------ | ------- |  | ----- |  | - | ------------------ |  |  | ----- | 
|Name and Principal Position                   |  | RMB    |         |  | RMB   |  |   | RMB                |  |  | RMB   | 
|Huang Jia Dong, Chief Executive Officer       |  |        | 128,956 |  |       |  | - |                    |  |  | -     | 
|Su Wei Feng, Director and Corporate Secretary |  |        | 86,327  |  |       |  | - |                    |  |  | -     | 
|Hen Man Edmund, Chief Financial Officer       |  |        | 363,337 |  |       |  | - |                    |  |  | -     | 
|Su Pei Zhi, Sales Deputy General Manager      |  |        | 152,061 |  |       |  | - |                    |  |  | -     | 



| | (1) | No options were granted to our executives in 2014.
| | --- | --------------------------------------------------



Retirement Benefits



As of December 31, 2014, we have contributed
to the government-mandated employee welfare and retirement benefit plan and provided pension, retirement or similar benefits to
its employees. The PRC regulations require us to pay the local labor administration bureau a monthly contribution at a stated contribution
rate based on the monthly basic compensation of qualified employees. The local labor administration bureau, which manages various
investment funds, will take care of employee retirement, medical and other fringe benefits. We have no further commitments beyond
our monthly contribution.



77







Employment Agreements



Upon consummation of the acquisition of Success
Winner, we entered into employment agreements with certain of our executive officers. The following discussion summarizes the material
terms of employment agreements entered into between us and our executive officers:



We entered into employment agreements with the
following officers: Huang Jia Dong, Chief Executive Officer, Su Pei Zhi, Sales Deputy General Manager, Hen Man Edmund, Chief Financial
Officer, and Su Wei Feng, Corporate Secretary.



| | · | The term of the employment agreements is three years (February 1, 2013 to January 31, 2016 for Huang Jia Dong and Su Wei Feng
and August 1, 2012 to July 31, 2015 for Hen Man Edmund) and August 1, 2013 to January 31, 2014 for Su Pei Zhi.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Since August 1, 2013, Huang Jia Dong received compensation of RMB 12,000 per month; Su Pei Zhi received compensation of RMB
16,000 per month; Hen Man Edmund received compensation of RMB 38,000 per month; and Su Wei Feng received compensation of RMB 8,100
per month.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | We may dismiss any of the above officers if any of the following events occurs with respect to the officer: (1) failure to
show up for work, (2) failure to provide required documents, (3) falsification of documents, criminal record, etc., (4) serious
violation of such officers’ labor rules and of regulations, (5) serious lapse of duties and responsibilities, (6) activities
that violate regulations, resulting in loss of more than RMB 4,000, (7) operation of his own business during the term of his employment,
(8) criminal prosecution and labor punishment, (9) request by the officer to resign, (10) causing us to sign or change any contract
through fraud, coercion and other fraudulent means, or (11) other situations stipulated by law and statutes.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Each officer is subject to the non-compete provisions of the agreement for a period of three years following termination of
the employment agreement and non-solicitation provisions of the agreement for a period of two years following termination of the
employment agreement.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Other Employees



Compensation for our senior executives is comprised
of four elements: a base salary, an annual performance bonus, equity and benefits.



In developing salary ranges, potential bonus
payouts, equity awards and benefit plans, it is anticipated that our compensation committee takes into account: 1) competitive
compensation among comparable companies and for similar positions in the market, 2) relevant ways to incentivize and reward senior
management for improving shareholder value while building a successful company, 3) individual performance, 4) how best to retain
key executives, 5) the overall performance of us and our various key component entities, 6) our ability to pay and 7) other factors
deemed to be relevant at the time.



Our senior management have discussed our above
mentioned planned process for executive compensation and the four compensation components. Specific compensation plans for our
key executives are negotiated and established by our compensation committee.



We have not entered into any service contracts
with any of our officers, directors or employees that contain any provisions for benefits upon termination of employment.



78







China Ceramics Co., Ltd. 2010 Incentive
Compensation Plan



On December 27, 2010, our shareholders approved
the 2010 Incentive Plan. The purpose of the 2010 Incentive Plan is to assist us and our subsidiaries in attracting, motivating,
retaining and rewarding high-quality executives and other employees, officers, directors, and independent contractors by enabling
such persons to acquire or increase a proprietary interest in us in order to strengthen the mutuality of interests between such
persons and our shareholders, and providing such persons with annual and long-term performance incentives to expand their maximum
efforts in the creation of shareholder value.  Awards under the 2010 Incentive Plan will be limited in the aggregate
to 1,200,000 shares. The 2010 Incentive Plan shall terminate at such time as no shares remain available for issuance under the
2010 Incentive Plan, when we have no further obligations with respect to outstanding awards under the 2010 Incentive Plan. As
of December 31, 2014, 1,130,000 stock options under the 2010 Incentive Plan have been granted.



Administration. The 2010 Incentive Plan
is administered by a committee (the “Committee”) designated by our board of directors (the “Board”), which
shall consist of at least two directors, each of whom is (i) a “non-employee director” within the meaning of Rule 16b-3
promulgated under the Exchange Act and (ii) an “outside director” within the meaning of Section 162(m) of the Internal
Revenue Code of 1986, as amended from time to time, including regulations thereunder and successor provisions and regulations thereto
(the “Code”); provided, however, that except as otherwise expressly provided in the 2010 Incentive Plan or in order
to comply with Code Section 162(m) or Rule 13b-3 under the Exchange Act, the Board may exercise any power or authority granted
to the Committee under the 2010 Incentive Plan. Among other things, the Committee has complete discretion, subject to the express
limits of the 2010 Incentive Plan, to determine the officers, directors, employees and independent contractors to be granted an
award, the type of award to be granted, the number of shares subject to each award, the terms and conditions of each award, the
exercise price of each award which is a stock option (“Option”) and the base price of each award which is a stock appreciation
right (“SAR”), the term of each award, the vesting schedule for an award, whether to accelerate award vesting, the
value of the Shares underlying an award, and the required withholdings, if any. The Committee is also authorized to construe the
award agreements, and may prescribe rules relating to the 2010 Incentive Plan. Notwithstanding the foregoing, neither the Committee
nor the Board has any authority to grant or modify an award under the 2010 Incentive Plan with terms or conditions that would cause
the award to be considered nonqualified “deferred compensation” subject to Code Section 409A.



Grant of Awards; Shares Available for Awards.
The 2010 Incentive Plan provides for the grant of Options (both incentive stock options and non-incentive stock options), SARs
(including limited SARs), restricted stock, deferred stock, stock granted as a bonus or in lieu of another award, dividend equivalents,
bonus stock, awards in lieu of obligations, and performance or annual incentive awards (each an “award”) to our executive
officers, directors and employees, and independent contractors (each a “participant”) (however, solely employees are
eligible for awards which are incentive stock options). We have reserved a total of 1,200,000 shares for issuance as or under awards
to be made under the 2010 Incentive Plan.  If any award lapses, expires, is cancelled, or terminates unexercised or ceases
to be exercisable for any reason, the number of shares subject thereto is again available for grant under the 2010 Incentive Plan.
The number of shares for which awards which are Options, SARs, performance awards or annual incentive awards may be granted to
a participant under the 2010 Incentive Plan in any fiscal year is limited to 350,000.



The number of awards to be granted to officers,
directors, employees and consultants cannot be determined at this time as the grant of awards is dependent upon various factors
such as hiring requirements and job performance.



79







Options. The exercise price per share
purchasable under an Option shall be determined by the Committee or the Board, provided that such per share exercise price shall
not be less than 100% of the fair market value of a share on the date of grant of the Option and shall not, in any event, be less
than the par value of a share on the date of grant of such option. The Committee or the Board shall determine the time or times
at which or the circumstances under which an Option may be exercised in whole or in part, the time or times at which Options shall
cease to be or become exercisable following termination of employment or upon other conditions, the methods by which such exercise
price may be paid or deemed to be paid, the form of such payment, and the methods by or forms in which shares will be delivered
or deemed to be delivered to participants who exercise Options.



Options which are incentive stock options (“ISOs”)
granted under the 2010 Incentive Plan shall comply in all respects with Code Section 422. In the case of ISOs, if an employee owns
or is deemed to own (by reason of the attribution rules applicable under Code Section 424(d)) more than 10% of the combined voting
power of all classes of our shares or the shares of any parent or subsidiary (a “ten percent shareholder”) and an ISO
is granted to such employee, the per share exercise price under such ISO (to the extent required by the Code at the time of grant)
shall be no less than 110% of the fair market value of a share on the date such ISO is granted. The term of an ISO may not exceed
10 years (5 years in the case of an ISO granted to a ten percent shareholder). ISOs may be granted to solely employees. In addition,
the aggregate fair market value of the shares subject to an ISO (determined at the time of grant) which are exercisable for the
first time by an employee during any calendar year may not exceed $100,000.



Stock Appreciation Rights. A SAR provides
the participant to whom it is granted the right to receive, upon its exercise, the excess of (A) the fair market value of the number
of shares subject to the SAR on the date of exercise (or, in the case of a “Limited SAR” (as defined in the 2010 Incentive
Plan) which may be exercised only in the event of a “change in control” (as defined in the 2010 Incentive Plan), the
fair market value determined by reference to the change in control price, as defined in the 2010 Incentive Plan), over (B) the
product of the number of shares subject to the SAR multiplied by the grant price under the SAR, as determined by the Committee
or the Board. The per share grant price of a SAR shall not be less than the fair market value of a share on the date of grant.



Restricted Stock Awards. A restricted
stock award is a grant or sale of shares to the participant, subject to such restrictions on transferability, risk of forfeiture
and other restrictions, if any, as the Committee or the Board may impose, which restrictions may lapse separately or in combination
at such times, under such circumstances (including based on achievement of performance goals and/or future service requirements),
in such installments or otherwise, as the Committee or the Board may determine at the date of grant or purchase or thereafter.
Except to the extent restricted under the terms of the 2010 Incentive Plan and any agreement relating to the restricted stock award,
a participant who is granted or has purchased restricted stock shall have all of the rights of a shareholder, including the right
to vote the restricted stock and the right to receive dividends thereon (subject to any mandatory reinvestment or other requirement
imposed by the Committee or the Board). During the restricted period applicable to the restricted stock, subject to certain exceptions,
the restricted stock may not be sold, transferred, pledged, hypothecated, margined or otherwise encumbered by the participant.



Deferred Stock. A deferred stock award
is a right to receive shares, cash, or a combination thereof at the end of a specified deferral period, subject to certain terms
and conditions, and in compliance with Code Section 409A. Payment under an award of deferred stock shall occur upon expiration
of the deferral period specified for such deferred stock award by the Committee or the Board (or, if permitted by the Committee
or the Board, as elected by the participant). In addition, deferred stock awards shall be subject to such restrictions (which may
include a risk of forfeiture) as the Committee or the Board may impose, if any, which restrictions may lapse at the expiration
of the deferral period or at earlier specified times (including based on achievement of performance goals and/or future service
requirements), separately or in combination, in installments or otherwise, as the Committee or the Board may determine. Payments
under deferred stock awards may be by delivery of Shares, cash equal to the fair market value of the specified number of shares
covered by the deferred stock award, or a combination thereof, as determined by the Committee or the Board at the date of grant
or thereafter. Prior to the end of the specified deferral period for a deferred stock award, the award carries no voting or dividend
or other rights associated with share ownership.



80







Bonus Shares and Awards in Lieu of Obligations.
The Committee and the Board are each authorized to grant shares as a bonus, or to grant shares or other awards in lieu of our obligations
to pay cash or deliver other property under the 2010 Incentive Plan or under other plans or compensatory arrangements, provided
that, in the case of participants subject to Section 16 of the Exchange Act, the amount of such grants remains within the discretion
of the Committee to the extent necessary to ensure that acquisitions of shares or other awards are exempt from liability under
Section 16(b) of the Exchange Act. These bonus shares or awards granted under the 2010 Incentive Plan shall be subject to such
other terms as shall be determined by the Committee or the Board.



Dividend Equivalents. The Committee and
the Board are each authorized to grant dividend equivalents to a participant, entitling the participant to receive cash, shares,
other awards, or other property equal in value to dividends paid with respect to a specified number of Shares, or other periodic
payments. Dividend equivalents may be awarded on a free-standing basis or in connection with another award. The Committee or the
Board may provide that dividend equivalents shall be paid or distributed when accrued or shall be deemed to have been reinvested
in additional shares, awards, or other investment vehicles, and subject to such restrictions on transferability and risks of forfeiture,
as the Committee or the Board may specify.



Other Stock-Based Awards. The Committee
and the Board are each authorized, subject to limitations under applicable law, to grant to participants such other awards that
may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, shares, as
deemed by the Committee or the Board to be consistent with the purposes of the 2010 Incentive Plan, including, without limitation,
convertible or exchangeable debt securities, other rights convertible or exchangeable into shares, purchase rights for shares,
awards with value and payment contingent upon our performance or any other factors designated by the Committee or the Board, and
awards valued by reference to the book value of shares or the value of securities of or the performance of our specified subsidiaries
or business units.



Performance and Annual Incentive Awards.  The
Committee and the Board (except for such awards to be made to participants who are “covered employees” for purposes
of Code Section 162(m), which awards must be made by the Committee) are each authorized to grant (i) performance awards, under
which participants will receive cash payments, shares or other awards upon the satisfaction of pre-specified (generally, other
than annual) performance criteria, and (ii) annual incentive awards, under which participants will receive cash payments, shares
or other awards upon the satisfaction of pre-specified annual performance criteria.  The performance criteria which may
be used for performance awards or annual incentive awards made to participants who are “covered employees” for purposes
of Code Section 162(m) may solely include, for us, on a consolidated basis and/or our specified subsidiaries or business units
(except with respect to total shareholder return and earnings per share criteria) - total shareholder return; total shareholder
return as compared to total return (on a comparable basis) of a publicly available index such as, but not limited to, the Standard
& Poor’s 500 Stock Index or the S&P Specialty Retailer Index; net income; pretax earnings; earnings before interest
expense, taxes, depreciation and amortization; pretax operating earnings after interest expense and before bonuses, service fees,
and extraordinary or special items; operating margin; earnings per share; return on equity; return on capital; return on investment;
operating earnings; working capital or inventory; and ratio of debt to shareholders’ equity.



81







Change in Control Provisions. In the
event of a change in control (as defined in the 2010 Incentive Plan), (i) any award subject to vesting and exercisability requirements
that was not previously vested and exercisable shall become fully vested and exercisable as of the occurrence of the change in
control, subject to certain restrictions; (ii) Limited SARs (and other SARs if so provided by their terms) shall become exercisable
for amounts, in cash, determined by reference to the change in control price; (iii) the restrictions, deferral of settlement, and
forfeiture conditions applicable to any other award shall lapse and such awards shall be deemed fully vested as of the occurrence
of the change in control, except to the extent of any waiver by the participant and subject to certain restrictions; (iv) with
respect to any outstanding award subject to achievement of performance goals and conditions under the 2010 Incentive Plan, such
performance goals and other conditions will be deemed to be met if and to the extent so provided by the Committee in the award
agreement relating to such award; (v) the Board may in its sole and absolute discretion, provide on a case by case basis that Options
shall terminate, provided however, that a participant holding a terminating Option shall have the right, immediately prior to the
occurrence of such change in control and during such period as the Board in its sole discretion shall determine and designate,
to exercise that Option, to the extent exercisable, in whole or in part; and (vi) the Board may in its sole and absolute discretion,
provide on a case by case basis that any award entitled to be settled in shares shall instead be entitled to be settled, during
such period as the Board in its sole discretion shall determine and designate, by means of a cash payment equal to the fair market
value of such award immediately prior to the occurrence of such change in control, as determined in good faith by the Board.



Amendment and Termination. The Board
may amend, alter, suspend, discontinue or terminate the 2010 Incentive Plan, or the Committee’s authority to grant awards
under the 2010 Incentive Plan, without the consent of shareholders or participants, except that any amendment or alteration to
the 2010 Incentive Plan shall be subject to the approval of the Company’s shareholders not later than the annual meeting
next following such Board action if such shareholder approval is required by any federal or state law or regulation (including,
without limitation, Rule 16b-3 or Code Section 162(m)) or the rules of any stock exchange or automated quotation system on which
the Shares may then be listed or quoted, and the Board may otherwise, in its discretion, determine to submit other such changes
to the 2010 Incentive Plan to shareholders for approval; provided that, without the consent of an affected participant, no such
Board action may materially and adversely affect the rights of such participant under any previously granted and outstanding award.
The Committee or the Board may waive any conditions or rights under, or amend, alter, suspend, discontinue or terminate any award
theretofore granted and any award agreement relating thereto, except as otherwise provided in the 2010 Incentive Plan; provided
that, without the consent of an affected participant, no such Committee or the Board action may materially and adversely affect
the rights of such participant under such award.



Compensation Committee.The shareholders
of the Company approved the 2010 Incentive Plan at the annual meeting held on December 27, 2010. In accordance with the 2010 Incentive
Plan, the Board of Directors of the Company has appointed the Compensation Committee (the “Committee”) to administer
the 2010 Incentive Plan. The Company granted an aggregate of 1,130,000 stock options to Huang Jia Dong, Su Pei Zhi, Su Wei Feng,
Hen Man Edmund, Paul K. Kelly, Cheng Yan Davis, Ding Wei Dong and William L. Stulginsky, upon the approval by the Board of Directors
on January 27, 2011, the grant date. The exercise price of the share options granted is $7.65 per share and the share options are
valid for a period of 5 years from January 27, 2011 to January 27, 2016. One-fourth of options granted will vest in every year
from the grant date. As at the grant date of January 27, 2011, the estimated total fair value of the options granted is $3,977,600.



82







Certain U.S. Federal Income Tax
Consequences of the 2010 Incentive Plan



The following is a general summary of the U.S.
federal income tax consequences under current tax law to China Ceramics, were it subject to U.S. federal income taxation on a net
income basis, and to participants under the 2010 Incentive Plan who are individual citizens or residents of the United States for
U.S. federal income tax purposes (“U.S. participants”) of Options, which include ISOs and Options that are not ISOs,
SARs, restricted stock, deferred stock, performance shares, performance units, restricted stock units, dividend equivalent rights
and bonus stock. It does not purport to cover all of the special rules that may apply, including special rules relating to limitations
on the ability of China Ceramics to deduct certain compensation, special rules relating to deferred compensation, golden parachutes,
participants subject to Section 16(b) of the Exchange Act and the exercise of an Option with previously-acquired shares. This summary
assumes that U.S. participants will hold their shares as capital assets within the meaning of Section 1221 of the Code. This summary
does not address the application of the passive foreign investment company rules of the Code to U.S. participants. These rules
are discussed generally under the section below entitled “Taxation–United States Federal Income Taxation–U.S.
Holders–Passive Foreign Investment Company Rules”. In addition, this summary does not address the foreign, state or
local income or other tax consequences, or any U.S. federal non-income tax consequences, inherent in the acquisition, ownership,
vesting, exercise, termination or disposition of an award under the 2010 Incentive Plan or shares issued pursuant thereto. Participants
are urged to consult their own tax advisors concerning the tax consequences to them of an award under the 2010 Incentive Plan or
shares issued pursuant thereto.



A U.S. participant generally does not recognize
taxable income upon the grant of an option. Upon the exercise of an Option that is not an ISO, the participant generally recognizes
ordinary income in an amount equal to the excess, if any, of the fair market value of the shares acquired on the date of exercise
over the exercise price therefor, and China Ceramics would be entitled to a deduction for such amount at that time. If the U.S.
participant later disposes of the shares acquired under an Option that is not an ISO, the U.S. participant generally recognizes
a long-term or short-term gain or loss, depending upon the period for which the shares were held thereby. A long-term capital gain
generally is subject to more favorable tax treatment than ordinary income or a short-term capital gain. The deductibility of capital
losses is subject to certain limitations.



Upon the exercise of an ISO, a U.S. participant
generally does not recognize taxable income. If the U.S. participant disposes of the shares acquired pursuant to the exercise of
an ISO more than two years after the date of grant and more than one year after the transfer of the shares to the participant,
the U.S. participant generally recognizes a long-term capital gain or loss, and China Ceramics would not be entitled to a deduction.
However, if the U.S. participant disposes of such shares prior to the end of the required holding period, all or a portion of the
gain is treated as ordinary income, and China Ceramics generally would be entitled to deduct such amount.



In addition to the U.S. federal income tax consequences
described above, the U.S. participant may be subject to the alternative minimum tax (“AMT”), which is payable to the
extent it exceeds the participant’s regular income tax. For this purpose, upon the exercise of an ISO, the excess of the
fair market value of the shares for which the ISO is exercised over the exercise price thereunder for such shares is a preference
item for purposes of the AMT. In addition, the U.S. participant’s basis in such shares is increased by such excess for purposes
of computing the gain or loss on the disposition of the shares for AMT purposes. If a U.S. participant is required to pay any AMT,
the amount of such tax which is attributable to deferral preferences (including any ISO adjustment) generally may be allowed as
a credit against the participant’s regular income tax liability (and, in certain cases, may be refunded to the participant)
in subsequent years. To the extent the credit is not used, it may be carried forward.



83







A U.S. participant who receives a restricted
stock award or who purchases shares of restricted stock, which shares, in either case, are subject to a substantial risk of forfeiture
and certain transfer restrictions, generally does not recognize income on the receipt of the award or the purchased restricted
shares and generally recognizes ordinary compensation income at the time the restrictions lapse in an amount equal to the excess,
if any, of the fair market value of the shares at such time over any amount paid by the U.S. participant for the shares. Alternatively,
the U.S. participant may elect to be taxed upon receipt of the restricted shares based on the value of the shares at the time of
receipt. China Ceramics generally would be entitled to deduct such amount at the same time as ordinary compensation income is required
to be included by the U.S. participant and in the same amount. Dividends received with respect to restricted shares generally are
treated as compensation, unless the U.S. participant elects to be taxed on the receipt (rather than the vesting) of the restricted
shares.



A U.S. participant generally does not recognize
income upon the grant of an SAR. The U.S. participant recognizes ordinary compensation income upon the exercise of the SAR equal
to the increase in the value of the underlying shares, and China Ceramics generally would be entitled to a deduction for such amount.



A U.S. participant generally does not recognize
income on the receipt of a deferred stock award or a bonus stock award and generally recognizes income when the shares are received.
At such time, the U.S. participant recognizes ordinary compensation income equal to the excess, if any, of the fair market value
of the shares over any amount paid for the shares, and China Ceramics generally would be entitled to deduct such amount at such
time.



A U.S. participant generally does not recognize
income on the receipt of a performance award, annual incentive award or dividend equivalent right award until a payment is received
under the award.  At such time, the U.S. participant recognizes ordinary compensation income equal to the amount of any
cash payments and the fair market value of any shares received, and China Ceramics generally would be entitled to deduct such amount
at such time.



| | C. | Board Practices
| | -- | ---------------



The term of each director is until their resignation
or removal.



Our board of directors has established an audit
committee, a compensation committee and a governance and nominating committee.



Audit Committee.  The audit
committee consists of Jianwei Liu, Cheng Yan Davis and Shen Chiang Liang. Mr. Liu is the chair of the audit committee, and our
board of directors believes that Mr. Liu qualifies as an “audit committee financial expert”, as such term is defined
in the rules of the Securities and Exchange Commission.



The board of directors has adopted an audit
committee charter, providing for the following responsibilities of the audit committee:



| | · | appointing and replacing our independent auditors and pre-approving all auditing and permitted non-auditing services to be
performed by the independent auditors;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | reviewing and discussing the annual audited financial statements with management and the independent auditors;
| | - | --------------------------------------------------------------------------------------------------------------



| | · | annually reviewing and reassessing the adequacy of our audit committee charter;
| | - | -------------------------------------------------------------------------------



84







| | · | such other matters that are specifically delegated to our audit committee by our board of directors from time to time;
| | - | ----------------------------------------------------------------------------------------------------------------------



| | · | meeting separately and periodically with management, the internal auditors and the independent auditors; and
| | - | ------------------------------------------------------------------------------------------------------------



·reporting
regularly to the board of directors.



A copy of the audit committee charter
is available on our website at http://cceramics.com/Corporate-Governance.html.



Compensation Committee.  Our
compensation committee consists of Jianwei Liu, Shen Cheng Liang and Cheng Yan Davis. Shen Cheng Liang is the chair of our compensation
committee. Jianwei Liu, Shen Cheng Liang and Cheng Yan Davis do not have any direct or indirect material relationship with us other
than as a director.



Our board of directors adopted a compensation
committee charter, providing for the following responsibilities of the compensation committee:



| | · | reviewing and making recommendations to the board regarding our compensation policies and forms of compensation provided to
our directors and officers;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | reviewing and making recommendations to the board regarding bonuses for our officers and other employees;
| | - | ---------------------------------------------------------------------------------------------------------



| | · | administering our incentive-compensation plans for our directors and officers;
| | - | ------------------------------------------------------------------------------



| | · | reviewing and assessing the adequacy of the charter annually;
| | - | -------------------------------------------------------------



| | · | administering our share option plans, if they are established in the future, in accordance with the terms thereof; and
| | - | ----------------------------------------------------------------------------------------------------------------------



| | · | such other matters that are specifically delegated to the compensation committee by our board of directors from time to time.
| | - | -----------------------------------------------------------------------------------------------------------------------------



A copy of the compensation committee
charter is available on our website at http://cceramics.com/Corporate-Governance.html.



Governance and Nominating Committee.  Our
governance and nominating committee consists of Jianwei Liu, Shen Cheng Liang and Cheng Yan Davis. Shen Cheng Liang is the chair
of our governance and nominating committee. Jianwei Liu, Shen Cheng Liang and Cheng Yan Davis do not have any direct or indirect
material relationship with us other than as a director.



Our board of directors adopted a governance
and nominating committee charter, providing for the following responsibilities of the governance and nominating committee:



| | · | overseeing the process by which individuals may be nominated to our board of directors;
| | - | ---------------------------------------------------------------------------------------



| | · | identifying potential directors and making recommendations as to the size, functions and composition of our board of directors
and its committees;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------



| | · | reviewing candidates proposed by our shareholders;
| | - | --------------------------------------------------



| | · | developing the criteria and qualifications for the selection of potential directors; and
| | - | ----------------------------------------------------------------------------------------



| | · | making recommendations to the board of directors on new candidates for board membership.
| | - | ----------------------------------------------------------------------------------------



85







A copy of the governance and nominating
committee charter is available on our website at http://cceramics.com/Corporate-Governance.html.



In making nominations, the governance and nominating
committee is required to submit candidates who have the highest personal and professional integrity, who have demonstrated exceptional
ability and judgment and who shall be most effective, in conjunction with the other nominees to the board, in collectively serving
the long-term interests of the shareholders. In evaluating nominees, the governance and nominating committee is required to take
into consideration the following attributes, which are desirable for a member of the board: leadership, independence, interpersonal
skills, financial acumen, business experiences, industry knowledge, and diversity of viewpoints.



Code of Ethics



In May 2010, our board of directors adopted
a code of ethics that applies to our directors, officers and employees. Our code of ethics is available on our website at http://cceramics.com/Corporate-Governance.html.



Director Independence



Our board of directors has determined that Messrs.
Jianwei Liu, Shen Cheng Liang and Ms. Cheng Yan Davis qualify as independent directors under the rules of the Nasdaq Marketplace
Rules because they are not currently employed by us, and do not fall into any of the enumerated categories of people who cannot
be considered independent in the Nasdaq Marketplace Rules.



| | D. | Employees
| | -- | ---------



The table below provides information as to the
total number of employees at the end of the last three fiscal years. We reduced our employees in 2014 due to the reduction in the
facilities that were being operated. We have no contracts or collective bargaining agreements with labor unions and have never
experienced work stoppages due to labor dispute. We consider our relations with our employees to be good.



|                    |  | 2012 |       |  | 2013 |  |       | 2014 | 
|------------------- |  | ---- | ----- |  | ---- |  | ----- | ---- | 
|Number of Employees |  |      | 2,297 |  |      |  | 1,710 |      | 



| | E. | Share Ownership
| | -- | ---------------



See Item 7 below.



| | ITEM 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
| | ------- | -------------------------------------------------



| | A. | Major shareholders
| | -- | ------------------



The following table sets forth, as of
April 17, 2015, certain information regarding beneficial ownership of our shares by each person who is known by us to
beneficially own more than 5% of our shares. The table also identifies the share ownership of each of our directors, each of
our named executive officers, and all directors and officers as a group. Except as otherwise indicated, the shareholders
listed in the table have sole voting and investment powers with respect to the shares indicated. Our major shareholders do
not have different voting rights than any other holder of our shares.



86







Shares which an individual or group has a right
to acquire within 60 days pursuant to the exercise or conversion of options, warrants or other similar convertible or derivative
securities are deemed to be outstanding for the purpose of computing the percentage ownership of such individual or group, but
are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person shown in the table.



Beneficial ownership is determined in accordance
with the rules of the Securities and Exchange Commission and generally includes voting and investment power. Except as otherwise
indicated below, each beneficial owner holds voting and investment power directly. The percentage of ownership is based on 20,430,838
shares issued and outstanding as of April 17, 2015.



|Name(1)                                                         |  | Number of Shares Beneficially Owned |           |     | Percentage of Ownership | 
|--------------------------------------------------------------- |  | ----------------------------------- | --------- | --- | ----------------------- | 
|Shen Cheng Liang                                                |  |                                     | 0         |     |                         | 
|Cheng Yan Davis (2)                                             |  |                                     | 109,750   | (3) |                         | 
|Huang Jia Dong                                                  |  |                                     | 8,345,308 | (4) |                         | 
|Jianwei Liu                                                     |  |                                     | 0         |     |                         | 
|Su Wei Feng                                                     |  |                                     | 200,000   | (5) |                         | 
|Hen Man Edmund                                                  |  |                                     | 358,000   | (6) |                         | 
|All directors and executive officers as a group (8 individuals) |  |                                     | 9,013,058 |     |                         | 
|Sound Treasure Limited                                          |  |                                     | 5,212,905 | (7) |                         | 
|James D. Dunning, Jr.                                           |  |                                     | 1,101,251 | (8) |                         | 
|Alan G. Hassenfeld                                              |  |                                     | 1,101,251 | (8) |                         | 
|Gregory E. Smith                                                |  |                                     | 1,101,251 | (8) |                         | 
|Prescott Group Capital Management, L.L.C.                       |  |                                     | 1,857,677 | (9) |                         | 
|Prescott Group Aggressive Small Cap, L.P.                       |  |                                     | 1,857,677 | (9) |                         | 
|Prescott Group Aggressive Small Cap II, L.P.                    |  |                                     | 1,857,677 | (9) |                         | 
|Phil Frohlich                                                   |  |                                     | 1,857,677 | (9) |                         | 



| | * | Less than 1%
| | - | ------------



| | (1) | Unless otherwise indicated, the business address of each of the individuals is c/o Jinjiang Hengda Ceramics Co., Ltd.; Junbing
Industrial Zone; Anhai, Jinjiang City; Fujian Province, PRC.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | Cheng Yan Davis’s address is 160 Riverside Blvd, New York NY.
| | --- | -------------------------------------------------------------



| | (3) | Includes 40,000 shares underlying options. The options are currently exercisable for $7.65 per ordinary share and expire on
January 27, 2016.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------



| | (4) | Includes (i) an aggregate of 2,682,403 ordinary shares owned by Mr. Huang’s spouse and children for which Mr. Huang may
be deemed to be the beneficial owner but for which Mr. Huang disclaims any beneficial ownership, (ii) 5,212,905 shares owned by
Sound Treasure Limited, an entity of which Mr. Huang is the sole director and shareholder, and (iii) 300,000 shares underlying
options that are currently exercisable for $7.65 per ordinary share and expire on January 27, 2016.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (5) | Consists of 200,000 shares underlying options. The options are currently exercisable for $7.65 per ordinary share and expire
on January 27, 2016.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------



| | (6) | Includes 350,000 shares underlying options. The options are currently exercisable for $7.65 per ordinary share and expire on
January 27, 2016.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------



| | (7) | Huang Jia Dong is the sole director and shareholder of Sound Treasure Limited.
| | --- | ------------------------------------------------------------------------------



87







| | (8) | Based on a Schedule 13D/A filed with the Securities and Exchange Commission on October 28, 2011 filed by James D. Dunning,
Alan G. Hassenfeld, and Gregory E. Smith, who are parties to a voting agreement dated November 20, 2009. Consists of 663,693 shares
owned by Mr. Dunning, 348,656 shares owned by Mr. Hassenfeld, and 88,902 shares owned by Mr. Smith. The business address of Mr.
Dunning is 2 Sutton Place South, Apt. 17D, New York, NY 10022. The business address of Mr. Hassenfeld is c/o Hassenfeld Family
Initiatives; The Owen Building; 101 Dyer Street, Suite 401; Providence, RI 02903. The business address of Mr. Smith is 1401 NE
70th Street; Oklahoma City, OK 73111.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (9) | Based on a Schedule 13G filed with the Securities and Exchange Commission on February 14, 2014 filed Prescott Group Capital
Management, L.L.C., an Oklahoma limited liability company (“Prescott Capital”), Prescott Group Aggressive Small Cap,
L.P., an Oklahoma limited partnership (“Prescott Small Cap”), Prescott Group Aggressive Small Cap II, L.P., an Oklahoma
limited partnership (“Prescott Small Cap II” and, together with Prescott Small Cap, the “Small Cap Funds”),
and Mr. Phil Frohlich, the principal of Prescott Capital. The Small Cap Funds and Mr. Phil Frohlich are the beneficial owners of
1,857,677 Shares. The business address of each of the beneficial owners is 1924 South Utica, Suite 1120 Tulsa, Oklahoma 74104-6529.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Our officers, directors, employees and independent
contractors are eligible to receive awards under the 2010 Incentive Plan, as described under the section titled “6.B Compensation–China
Ceramics Co., Ltd. 2010 Incentive Compensation Plan.”



| | B. | Related Party Transactions
| | -- | --------------------------



Related Party Transactions of CHAC



Pursuant to a registration rights agreement
between us and certain of our officers and directors, we must use our best efforts to cause a registration statement relating to
the resale of certain securities owned by them to be declared effective and, once effective, only to use our best efforts to maintain
the effectiveness of the registration statement. A registration statement pursuant to these rights is currently effective.



Related Party Transactions of
China Ceramics and Operating Predecessor



Mr. Huang Jia Dong, the founder and Chairman
of Hengda and our Chief Executive Officer and one of our directors, and a holder approximately 40.3% of our shares as of April
17, 2015, and Mr. Wong Kung Tok, formerly one of our significant shareholders, provide working capital loans to us from time to
time during the normal course of our business. These loans amounted to RMB 4,796,000, RMB 8,539,000, and RMB 24,902,000 ($4,013,000)
in 2012, 2013, and 2014, respectively. These loans are interest free, unsecured and repayable on demand. Mr. Huang and Mr. Wong
are brothers-in-law. In July 2014, an entity affiliated with Mr. Huang assumed RMB 20.7 million in loans due from us to Mr. Wong
and then forgave those loans (see below).



Pursuant to an administrative services agreement
dated as of December 1, 2009 between us and Stuart Management Co., an affiliate of Paul K. Kelly, an ex-director who resigned on
Nov 27, 2013, we paid $7,000 (equivalent to RMB 44,000) a month plus out-of-pocket expenses to Stuart Management Co. for administrative
services. The initial one-year term began on December 1, 2009, and the agreement automatically renews for successive one-year terms
unless either party notifies the other of its intent not to renew. During the term of the agreement, Stuart Management Co. will
provide us with general administrative services, including acting as our administrative agent in the United States and the British
Virgin Islands, and allow us to utilize certain of its office space for meetings. The agreement was renewed to reduce the amount
to $4,900 (equivalent to RMB 30,000) a month in December 2013. The amount was further reduced to $1,000 (equivalent to RMB 6,000)
a month commencing from October 2014.



Mr. Huang Jia Dong and Su Pei Zhi, a sales
deputy general manager whose wife is Mr. Huang’s second cousin, provide guarantees to us for certain bank loans. The guarantees
amounted to RMB 180,000,000, RMB 102,800,000 and RMB 102,800,000 ($16,568,000) as of December 31, 2012, 2013 and 2014, respectively.



88







Other Related Party Transactions



During 2013 and 2014, we entered into certain
foreign currency transaction agreements with an unaffiliated financial institution related to the fluctuation in value of the Renminbi
against the U.S. dollar. We recorded fair value gains on these agreements totaling RMB 3,346,000 for the year ended December 31,
2013. However, in 2014, as the Renminbi depreciated against the U.S. dollar, we incurred realized and unrealized losses totaling
RMB 59,477,000 ($9,586,000) from January 1 to July 31, 2014 in connection with these agreements.



In June 2014, we, our Chief Executive Officer
and the Audit Committee set out to attempt to terminate the foreign currency transaction agreements; and to reach a resolution
that would preclude the depletion of our liquid assets by virtue of our having entered into the foreign currency transaction agreements.
Ultimately our Chief Executive Officer agreed to cause an entity controlled by him to assume those agreements. On July 31, 2014,
Sound Treasure Limited, our largest shareholder and an affiliate of our Chief Executive Officer, executed an agreement (the “Novation”)
with us and the financial institution that originated the foreign currency transaction agreements pursuant to which Sound Treasure
Limited assumed the foreign currency transaction agreements and all assets (mainly deposits placed with the financial institution)
and all existing and future liabilities arising under these agreements, and we were released from the liabilities arising under
the foreign currency transaction agreements. As a result, we will not be required to fund any losses related to these agreements,
and will neither suffer any future liabilities arising under those agreements nor enjoy any benefits arising under those agreements.



At the time that each of the foreign currency
transaction agreements was established with the financial institution, we were required to deposit monies with the financial institution
that was the counterparty to the agreements. RMB 6.7 million of a total of RMB 15.6 million in deposits that we made were funded
on our behalf by Wong Kung Tok (who is the brother-in-law of our Chief Executive Officer), and were included in a total of RMB
40.2 million in loans owing by us to Wong Kung Tok as of July 9, 2014. In connection with the Novation discussed above, our Chief
Executive Officer, Sound Treasure Limited and Wong Kung Tok executed an agreement with the Company on July 31, 2014 (the “Offset
Agreement”) pursuant to which loans totaling RMB 20.7 million owed by us to Wong Kung Tok were transferred to Sound Treasure
Limited and then were forgiven by Sound Treasure Limited, and in return the Company agreed to forego any claim to RMB 15.6 million
in deposits under the foreign currency transaction agreements which were transferred to Sound Treasure Limited pursuant to the
Novation.



Except as disclosed above, neither our Chief
Executive Officer nor any affiliate of our Chief Executive Officer received any remuneration for agreeing to assume the foreign
currency transaction agreements.



| | C. | Interests of Experts and Counsel
| | -- | --------------------------------



Not required.



| | ITEM 8. | FINANCIAL INFORMATION
| | ------- | ---------------------



| | A. | Consolidated Statements and Other Financial Information.
| | -- | --------------------------------------------------------



See Item 18. for our audited consolidated financial
statements.



Legal Proceedings



On June 6, 2014, a putative class action complaint
(the “Pollock Complaint”) was filed in the United States District Court for the Southern District of New York against
us and various current and former directors and officers asserting claims of violations of Section 10(b) of the Securities Exchange
Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder against all defendants, and asserting claims
for violations of Section 20(a) of the Exchange Act against the individual defendants; and pursuing remedies under the Exchange
Act. The complaint is captioned Robert Pollock, Individually and On Behalf Of All Others Similarly Situated v. Huang Jia Dong,
Su Pei Zhi, Hen Man Edmund, Ding Wei Dong, Paul K. Kelly, Cheng Yan Davis, William L. Stulginsky, Su Wei Feng, Shen Cheng Liang,
Jianwei Liu, And China Ceramics Co., Ltd. (Case No. 14-cv-4100).



89







On June 16, 2014, a putative class action complaint
(the “Artinoff Complaint”) was filed in the United States District Court for the Southern District of New York against
us and various current and former directors and officers asserting claims of violations of Section 10(b) of the Securities Exchange
Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder against all defendants, and asserting claims
for violations of Section 20(a) of the Exchange Act against the individual defendants; and pursuing remedies under the Exchange
Act. The complaint is captioned Roger Artinoff, Individually and On Behalf Of All Others Similarly Situated v. China Ceramics Co.
Ltd., Huang Jia Dong, Su Pei Zhi, Hen Man Edmund, Ding Wei Dong, Paul K. Kelly, Cheng Yan Davis, William L. Stulginsky And Su Wei
Feng. (Case No. 14-cv-4312).



On July 2, 2014, a putative class action complaint
(the “Finlayson Complaint”) was filed in the United States District Court for the Southern District of New York against
us and various current and former directors and officers asserting claims for violations of Section 10(b) of the Exchange Act and
Rule 10b-5 promulgated thereunder against all defendants, and claims for violations of Section 20(a) of the Exchange Act against
the individual defendants; and pursuing remedies under the Exchange Act. The complaint is captioned Richard Finlayson, Individually
and On Behalf Of All Others Similarly Situated v. Huang Jia Dong, Su Pei Zhi, Hen Man Edmund, Ding Wei Dong, Paul K. Kelly, Cheng
Yan Davis, William L. Stulginsky, Su Wei Feng, Shen Cheng Liang, Jianwei Liu, and China Ceramics Co., Ltd. (Case No. 14-cv-4997).



On February 6, 2015, we and the individual defendants
reached an agreement in principle to settle the above-described cases as against all defendants in consideration of the payment
by us of a combination of cash and our common stock. The settlement is subject to the execution of a mutually acceptable settlement
agreement and the approval of the settlement by the Court.



Dividend Policy



Our Board of Directors has the discretion to
pay dividends. The form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus,
general financial condition, contractual restrictions and other factors that our Board of Directors may deem relevant. Although
we have paid dividends in the past, there is no assurance that we will continue to pay dividends in the future.



On February 25, 2014, we announced two semi-annual
cash dividends of $0.0125 per share each. The first dividend of $0.0125 per share was paid on July 14, 2014 and the second of $0.0125
per share was paid on January 14, 2015, with record dates of June 13, 2014 and December 12, 2014, respectively.



We are a holding company incorporated in the
British Virgin Islands. We rely on dividends paid by our Hong Kong and Chinese subsidiaries for our cash needs. The payment of
dividends by entities organized in China is subject to limitations. If the Boards of our Chinese subsidiaries decide to pay dividends
in the future, these restrictions may impede our ability to pay dividends and/or the amount of dividends we could pay. In addition,
if our Chinese subsidiaries incur debt on their own behalf in the future, the instruments governing the debt may restrict their
ability to pay dividends or make other distributions to us.



90







| | B. | Significant Changes
| | -- | -------------------



Except as disclosed elsewhere in this Annual
Report, we have not experienced any significant changes since the date of our audited consolidated financial statements included
in this Annual Report.



| | ITEM 9. | THE OFFER AND LISTING
| | ------- | ---------------------



| | A. | Offer and Listing Details
| | -- | -------------------------



The following tables set forth, for
the calendar quarters indicated and through March 31, 2015, the quarterly high and low sale prices for our shares, as reported
on NASDAQ Stock Market, the OTC Bulletin Board or the NYSE Amex, as applicable. The OTC Bulletin Board market quotations
reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily reflect actual
transactions.



|                         |  | Shares |      
|------------------------ |  | ------ | -----
|                         |  | High   |      
|Annual Highs and Lows    |  |        |      
|2010                     |  |        | 10.10
|2011                     |  |        | 8.48 
|2012                     |  |        | 4.25 
|2013                     |  |        | 4.06 
|2014                     |  |        | 2.50 
|Quarterly Highs and Lows |  |        |      
|2013                     |  |        |      
|First Quarter            |  |        | 3.44 
|Second Quarter           |  |        | 2.53 
|Third Quarter            |  |        | 3.34 
|Fourth Quarter           |  |        | 4.06 
|2014                     |  |        |      
|First Quarter            |  |        | 2.41 
|Second Quarter           |  |        | 1.69 
|Third Quarter            |  |        | 1.33 
|Fourth Quarter           |  |        | 0.99 
|2015                     |  |        |      
|First Quarter            |  |        | 1.24 
|Monthly Highs and Lows   |  |        |      
|September 2014           |  |        | 1.14 
|October 2014             |  |        | 0.99 
|November 2014            |  |        | 0.94 
|December 2014            |  |        | 0.94 
|January 2015             |  |        | 0.90 
|February 2015            |  |        | 1.04 
|March 2015               |  |        | 1.24 



| | B. | Plan of Distribution
| | -- | --------------------



Not Applicable.



91







| | C. | Markets
| | -- | -------



Our shares have been listed on the NASDAQ Global
Market under the symbols CCCL, since January 18, 2011. Our shares were listed on the NASDAQ Capital Market from November 3, 2010
through January 17, 2011. The shares were previously quoted on the OTC Bulletin Board from December 29, 2009 through November 2,
2010. Prior to December 29, 2009, our shares were traded on NYSE Amex, under the symbols “HOL.” CHAC’s shares
commenced to trade on December 17, 2007.



| | D. | Selling Shareholders
| | -- | --------------------



Not Applicable.



| | E. | Dilution
| | -- | --------



Not Applicable.



| | F. | Expenses of the Issue
| | -- | ---------------------



Not Applicable.



| | ITEM 10. | ADDITIONAL INFORMATION
| | -------- | ----------------------



| | A. | Share Capital
| | -- | -------------



Not Applicable.



| | B. | Memorandum and Articles of Association
| | -- | --------------------------------------



The information required by Item 10.B of Form
20-F is included in the section titled “Description of Securities–Memorandum and Articles of Association” in
our Registration Statement on Form F-1 initially filed with the SEC on October 29, 2010 (File No.: 333-170237), which section is
incorporated herein by reference.



| | C. | Material Contracts
| | -- | ------------------



During 2013 and 2014, we entered into certain
foreign currency transaction agreements with an unaffiliated financial institution related to the fluctuation in value of the Renminbi
against the U.S. dollar. We recorded fair value gains on these agreements totaling RMB 3,346,000 for the year ended December 31,
2013. However, in 2014, as the Renminbi depreciated against the U.S. dollar, we incurred realized and unrealized losses totaling
RMB 59,477,000 ($9,586,000) from January 1 to July 31, 2014 in connection with these agreements. On July 31, 2014, Sound Treasure
Limited, our largest shareholder and an affiliate of our Chief Executive Officer, executed an agreement (the “Novation”)
with us and the financial institution that originated the foreign currency transaction agreements pursuant to which Sound Treasure
Limited assumed these agreements and all assets (mainly deposits placed with the financial institution) and all existing and future
liabilities arising under these agreements, and we were released from the liabilities arising under the foreign currency transaction
agreements. As a result, we will not be required to fund any losses related to these agreements, and will neither suffer any future
liabilities arising under those agreements nor enjoy any benefits arising under those agreements.



At the time that each of the foreign currency
transaction agreements was established with the financial institution, we were required to deposit monies (the “Deposits”)
with the financial institution that was the counterparty to the agreements. RMB 6.7 million of a total of RMB 15.6 million in deposits
that we made were funded on our behalf by Wong Kung Tok (who is the brother-in-law of our Chief Executive Officer), and were included
in a total of RMB 40.2 million in loans owing by us to Wong Kung Tok as of July 9, 2014. In connection with the Novation discussed
above, our Chief Executive Officer, Sound Treasure Limited and Wong Kung Tok executed an agreement with the Company on July 31,
2014 (the “Offset Agreement”) pursuant to which loans totaling RMB 20.7 million owed by us to Wong Kung Tok were transferred
to Sound Treasure Limited and then were forgiven by Sound Treasure Limited, and in return the Company agreed to forego any claim
to RMB 15.6 million in Deposits under the foreign currency transaction agreements which were transferred to Sound Treasure Limited
pursuant to the Novation.



92







The Novation and the Offset Agreement
became effective on July 31, 2014.



Except for the above, we did not enter into
any other material contracts during fiscal years 2013 or 2014.



| | D. | Exchange controls
| | -- | -----------------



Under British Virgin Islands law, there are
currently no restrictions on the export or import of capital, including foreign exchange controls or restrictions that affect the
remittance of dividends, interest or other payments to nonresident holders of our shares.



| | E. | Taxation
| | -- | --------



The following summary of the material PRC and
U.S. federal income tax consequences of the acquisition, ownership and disposition of China Ceramics shares, sometimes referred
to as “securities,” is based upon laws and relevant interpretations thereof in effect as of the date of this Annual
Report, all of which are subject to change. This summary does not deal with all possible tax consequences relating to an investment
in China Ceramics’ securities, such as the tax consequences under state, local and other tax laws. For purposes of this discussion,
references to “China Ceramics,” “we,” “us” or “our” refer only to China Ceramics
Co., Ltd.



PRC Taxation



The following discussion summarizes the material
PRC income tax considerations relating to the acquisition, ownership and disposition of China Ceramics’ securities.



You should consult with your own tax adviser
regarding the PRC tax consequences of the acquisition, ownership and disposition of China Ceramics’ securities.



Resident Enterprise Treatment



On March 16, 2007, the Fifth Session of the
Tenth National People’s Congress passed the Enterprise Income Tax Law of the PRC (“EIT Law”), which became effective
on January 1, 2008. Under the EIT Law, enterprises are classified as “resident enterprises” and “non-resident
enterprises.” Pursuant to the EIT Law and its implementing rules, enterprises established outside China whose “de facto
management bodies” are located in China are considered “resident enterprises” and subject to the uniform 25%
enterprise income tax rate on their worldwide taxable income. According to the implementing rules of the EIT Law, “de facto
management body” refers to a managing body that in practice exercises overall management control over the production and
business, personnel, accounting and assets of an enterprise.



On April 22, 2009, the State Administration
of Taxation issued the Notice on the Issues Regarding Recognition of Enterprises that are Domestically Controlled as PRC Resident
Enterprises Based on the De Facto Management Body Criteria, which was retroactively effective as of January 1, 2008. This notice
provides that an overseas incorporated enterprise that is controlled by PRC domestic companies will be recognized as a “tax-resident
enterprise” if it satisfies all of the following conditions: (i) the senior management responsible for daily production/business
operations are primarily located in the PRC, and the location(s) where such senior management execute their responsibilities are
primarily in the PRC; (ii) strategic financial and personnel decisions are made or approved by organizations or personnel located
in the PRC; (iii) major properties, accounting ledgers, company seals and minutes of board meetings and stockholder meetings, etc.,
are maintained in the PRC; and (iv) 50% or more of the board members with voting rights or senior management habitually reside
in the PRC.



93







Given the short history of the EIT Law and lack
of applicable legal precedent, it remains unclear how the PRC tax authorities will determine the resident enterprise status of
a company organized under the laws of a foreign (non-PRC) jurisdiction, such as China Ceramics, Success Winner and Stand Best.
If the PRC tax authorities determine that China Ceramics, Success Winner and/or Stand Best is a “resident enterprise”
under the EIT Law, a number of tax consequences could follow. First, China Ceramics, Success Winner and/or Stand Best could be
subject to the enterprise income tax at a rate of 25% on their worldwide taxable income, as well as PRC enterprise income tax reporting
obligations. Second, the EIT Law provides that dividend income between “qualified resident enterprises” is exempt from
income tax. As a result, if China Ceramics, Success Winner and Stand Best are each treated as a “qualified resident enterprise,”
all dividends paid from Hengda to China Ceramics, through Success Winner and Stand Best, should be exempt from the PRC enterprise
income tax.



As of the date of this Annual Report, there
has not been a definitive determination by China Ceramics, Success Winner, Stand Best or the PRC tax authorities as to the “resident
enterprise” or “non-resident enterprise” status of China Ceramics, Success Winner and Stand Best. However, since
it is not anticipated that China Ceramics, Success Winner and/or Stand Best would receive dividends or generate other income in
the near future, China Ceramics, Success Winner and Stand Best are not expected to have any income that would be subject to the
25% enterprise income tax on worldwide taxable income in the near future. China Ceramics, Success Winner and Stand Best will make
any necessary tax payment if China Ceramics, Success Winner or Stand Best (based on future clarifying guidance issued by the PRC),
or the PRC tax authorities, determine that China Ceramics, Success Winner or Stand Best is a resident enterprise under the EIT
Law, and if China Ceramics, Success Winner or Stand Best were to have income in the future.



Dividends From Hengda



If Stand Best is not treated as a resident enterprise
under the EIT Law, then dividends that Stand Best receives from Hengda may be subject to PRC withholding tax. The EIT Law and the
implementing rules of the EIT Law provide that (A) an income tax rate of 25% will normally be applicable to investors that are
“non-resident enterprises” which (i) have an establishment or place of business inside the PRC, and (ii) have income
in connection with their establishment or place of business that is sourced from the PRC or is earned outside the PRC but has an
actual connection with their establishment or place of business inside the PRC, and (B) a PRC withholding tax at a rate of 10%
will normally be applicable to dividends payable to non-resident enterprises that (i) do not have an establishment or place of
business in the PRC or (ii) have an establishment or place of business in the PRC, but the relevant income is not effectively connected
with such establishment or place of business, to the extent such dividends are derived from sources within the PRC.



As described above, the PRC tax authorities
may determine the resident enterprise status of entities organized under the laws of foreign jurisdictions on a case-by-case basis.
China Ceramics, Success Winner and Stand Best are holding companies and substantially all of China Ceramics’, Success Winner’s
and Stand Best’s income may be derived from dividends. Thus, if China Ceramics, Success Winner and/or Stand Best are considered
a “non-resident enterprise” under the EIT Law and the dividends paid to China Ceramics, Success Winner and/or Stand
Best are considered income sourced within the PRC, such dividends received may be subject to PRC withholding tax as described in
the foregoing paragraph.



94







The State Council of the PRC or a tax treaty
between China and the jurisdiction in which the non-resident enterprise resides may reduce such income or withholding tax, with
respect to a non-resident enterprise. Pursuant to the Arrangement between the Mainland of China and the Hong Kong Special Administrative
Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (the “PRC-Hong
Kong Tax Treaty”), if the Hong Kong resident enterprise that is not deemed to be a conduit by the PRC tax authorities owns
more than 25% of the equity interest in a PRC resident enterprise, the 10% PRC withholding tax on the dividends the Hong Kong resident
enterprise receives from such PRC resident enterprise is reduced to 5%.



China Ceramics is a British Virgin Islands holding
company, and it has a British Virgin Islands subsidiary (Success Winner), which owns a 100% equity interest in a subsidiary in
Hong Kong (Stand Best), which in turns owns a 100% equity interest in Hengda, a PRC company. As a result, if Stand Best were treated
as a “non-resident enterprise” under the EIT Law, then dividends that Stand Best receives from Hengda (assuming such
dividends were considered sourced within the PRC) (i) may be subject to a 5% PRC withholding tax, if the PRC-Hong Kong Tax Treaty
were applicable, or (ii) if such treaty does not apply (i.e., because the PRC tax authorities may deem Stand Best to be a conduit
that is not entitled to treaty benefits), may be subject to a 10% PRC withholding tax. Similarly, if Success Winner were treated
as a PRC “non-resident enterprise” under the EIT Law and Stand Best were treated as a PRC “resident enterprise”
under the EIT Law, then dividends that Success Winner receives from Stand Best (assuming such dividends were considered sourced
within the PRC) may be subject to a 10% PRC withholding tax. A similar situation may arise if China Ceramics were treated as a
“non-resident enterprise” under the EIT Law, and Success Winner were treated as a “resident enterprise”
under EIT Law. Any such taxes on dividends could materially reduce the amount of dividends, if any, China Ceramics could pay to
its shareholders.



As of the date of this Annual Report, there
has not been a definitive determination by China Ceramics, Success Winner, Stand Best or the PRC tax authorities as to the “resident
enterprise” or “non-resident enterprise” status of China Ceramics, Success Winner and Stand Best. As described
above, however, Hengda, Stand Best and Success Winner are not expected to pay any dividends in the near future. Hengda, Stand Best
and Success Winner will make any necessary tax withholding if, in the future, Hengda, Stand Best or Success Winner were to pay
any dividends and Hengda, Stand Best or Success Winner (based on future clarifying guidance issued by the PRC), or the PRC tax
authorities, determine that Stand Best, Success Winner or China Ceramics is a non-resident enterprise under the EIT Law.



Dividends that Non-PRC Resident Investors
Receive From China Ceramics; Gain on the Sale or Transfer of China Ceramics’ Securities



If we are determined to be a resident enterprise
under the EIT Law and dividends payable to (or gains realized by) China Ceramics’ investors that are not tax residents of
the PRC (“non-resident investors”) are treated as income derived from sources within the PRC, then the dividends that
the non-resident investors receive from us and any such gain derived by such investors on the sale or transfer of China Ceramics’
securities may be subject to income tax under the PRC tax laws.



Under the PRC tax laws, PRC withholding tax
at the rate of 10% is applicable to dividends payable to non-resident investors that are enterprises, but not individuals, and
that (i) do not have an establishment or place of business in the PRC or (ii) have an establishment or place of business in the
PRC but the relevant income is not effectively connected with the establishment or place of business, to the extent that such dividends
are deemed to be sourced within the PRC. Similarly, any gain realized on the transfer of China Ceramics’ securities by such
investors also is subject to 10% PRC income tax if such gain is regarded as income derived from sources within the PRC.



95







The dividends paid by us to such non-resident
investors with respect to China Ceramics’ securities, or gain such non-resident investors may realize from the sale or transfer
of China Ceramics’ securities, may be treated as PRC-sourced income and, as a result, may be subject to PRC tax at a rate
of 10%. In such event, China Ceramics may be required to withhold a 10% PRC tax on any dividends paid to such non-resident investors.
In addition, such non-resident investors in China Ceramics’ securities may be responsible for paying PRC tax at a rate of
10% on any gain realized from the sale or transfer of China Ceramics’ securities if such non-resident investors and the gain
satisfy the requirements under the PRC tax laws. However, under the PRC tax laws, China Ceramics would not have an obligation to
withhold PRC income tax in respect of the gains that such non-resident investors (including U.S. enterprise investors) may realize
from the sale or transfer of China Ceramics’ securities. Also, if China Ceramics is determined to be a “resident enterprise,”
its non-resident investors who are individuals may also be subject to potential PRC individual income tax at a rate of 20% with
respect to dividends received from China Ceramics and/or gains derived by them from the sale or transfer of China Ceramics’
securities.



If China Ceramics were to pay any dividends
in the future, and if China Ceramics (based on future clarifying guidance issued by the PRC), or the PRC tax authorities, determine
that China Ceramics must withhold PRC tax on any dividends payable by China Ceramics under the PRC tax laws, China Ceramics will
make any necessary tax withholding on dividends payable to its non-resident investors. If non-resident investors as described under
the PRC tax laws (including U.S. investors) realize any gain from the sale or transfer of China Ceramics’ securities and
if such gain were considered as PRC-sourced income, such non-resident investors would be responsible for paying the applicable
PRC income tax on the gain from the sale or transfer of China Ceramics’ securities. As indicated above, under the PRC tax
laws, China Ceramics would not have an obligation to withhold PRC income tax in respect of the gains that non-resident investors
(including U.S. investors) may realize from the sale or transfer of China Ceramics’ securities.



On December 10, 2009, the SAT released Circular
Guoshuihan No. 698 (“Circular 698”) that reinforces the taxation of certain equity transfers by non-resident investors
through overseas holding vehicles. Circular 698 addresses indirect equity transfers as well as other issues. Circular 698 is retroactively
effective from January 1, 2008. According to Circular 698, where a non-resident investor who indirectly holds an equity interest
in a PRC resident enterprise through a non-PRC offshore holding company indirectly transfers an equity interest in the PRC resident
enterprise by selling an equity interest in the offshore holding company, and the latter is located in a country or jurisdiction
where the actual tax burden is less than 12.5% or where the offshore income of its residents is not taxable, the non-resident investor
is required to provide the PRC tax authority in charge of that PRC resident enterprise with certain relevant information within
30 days of the execution of the equity transfer agreement. The tax authorities in charge will evaluate the offshore transaction
for tax purposes. In the event that the PRC tax authorities determine that such transfer is abusing forms of business organization
and a reasonable commercial purpose for the offshore holding company other than the avoidance of PRC income tax liability is lacking,
the PRC tax authorities will have the power to re-assess the nature of the equity transfer under the doctrine of substance over
form. A reasonable commercial purpose may be established when the overall international (including U.S.) offshore structure is
set up to comply with the requirements of supervising authorities of international (including U.S.) capital markets. If the SAT’s
challenge of a transfer is successful, it may deny the existence of the offshore holding company that is used for tax planning
purposes and subject the seller to PRC tax on the capital gain from such transfer. Since Circular 698 has a short history, there
is uncertainty as to its application. China Ceramics (or a non-resident investor) may become at risk of being taxed under Circular
698 and may be required to expend valuable resources to comply with Circular 698 or to establish that China Ceramics (or such non-resident
investor) should not be taxed under Circular 698, which could have a material adverse effect on China Ceramics’ financial
condition and results of operations (or such non-resident investor’s investment in China Ceramics).



96







In additional, the PRC
resident enterprise may be required to provide necessary assistance to support the enforcement of Circular 698.



On February 3, 2015, the
State Administration of Tax issued a Public Notice Regarding Certain Corporate Income Tax Matters on Indirect Transfer of Properties
by Non-tax Resident Enterprise, or Public Notice 7. Public Notice 7 has introduced a new tax regime that is significantly different
from that under Circular 698. Public Notice 7 extends its tax jurisdiction to not only indirect transfers set forth under Circular
698 but also transactions involving transfer of other taxable assets, through the offshore transfer of a foreign intermediate holding
company. In addition, Public Notice 7 provides clearer criteria the Circular 698 on how to assesss reasonable commercial purposes
and has introduced safe harbors for internal group restructurings and the purchase and sale of equity through a public securities
market. Public Notice 7 also brings challenges to both the foreign transferor and transferee (or other person who is obligated
to pay for the transfer) of the taxable assets. Where a non-resident erterprise conducts an “indirect transfer” by
transferring the taxable assets indirectly by disposing of the equity interests of an overseas holding company, the non-resident
enterprise being the transferor, or the transferee, or the PRC entity which directly owned the taxable assets may report to the
relevant tax authority such indirect transfer. Using a “substance over form” principle, the PRC tax authority may re-characterize
such indirect transfer as a dirct transfer of the equity intersts in the PRC tas resident enterprise and other properties in China,
As a result, gains derived from such indirect transfer may be subject on PRC enterprise income tax, and the transferee or other
person who is obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at a rate of up to 10%
for the transfer of equity interests in a PRC resident enterprise. Both the transferor and the transferee may be subject to penalties
under PRC tax laws if transferee fails to withhold the taxes and the transferor fails to pay the taxes.



We face uncertainties with
respect to the reporting and consequences of private equity financing transactions, share exchange or other transactions involving
the transfer of shares in our company by investors that are non-PRC resident enterprises, or sale or purchase of shares in other
non-PRC resident companies or other taxable assetsby us. Our company and other non-resident enterprises in our group may be subject
to filing obligations or being taxed if our company and other non-resident enterprises in our group are transferors in such transactions,
and may be subject to withholding obligations if our company and other non-resident enterprises in our group are transferees in
such transactions, under Circular 698 and Public Notice 7. For the transfer to shares in our company by investors that are non-PRC
resident enterprises, our PRC subsidiaries may be requested to assist in the filing under Circular 698 and Public Notice 7. As
a result, we may be required to expend valuable resources to comply with Circular 698 and Public Notice 7 to request the relevant
transferors from whom we purchase taxable assets to comply with thiese circulars, or to establish that our company and other non-resdient
entreprises in our group should not be taxed under thers circulars, which may have a material adverseeffect on our financial condition
and results of operations.



The PRC tax authorities
have the discretion under Circular 698 and Public Notice 7 to make adjustments to the taxable capital gains based on the difference
between the fair value of the taxable assets transferred and the cost of investment. If the PRC tax authorities make adjustments
to the taxable incomen of the transactions under Circular 698 and Public Notice 7, our income tax costs associated with such potential
acquisitions will be increased, which may have an advers effect on our financial condition and results of operations.



97







Penalties for Failure to Pay Applicable
PRC Income Tax



A non-resident investor in us may be responsible
for paying PRC tax on any gain realized from the sale or transfer of China Ceramics’ securities if such non-resident investor
and the gain satisfy the requirements under the PRC tax laws, as described above.



According to the EIT Law and its implementing
rules, the PRC Individual Income Tax Law and its implementing rules, the PRC Tax Administration Law (the “Tax Administration
Law”) and its implementing rules, the Provisional Measures for the Administration of Withholding of Enterprise Income Tax
for Non-resident Enterprises (the “Administration Measures”) and other applicable PRC laws or regulations (collectively
the “Tax Related Laws”), where any gain derived by a non-resident investor from the sale or transfer of China Ceramics’
securities is subject to any income tax in the PRC, and such non-resident investor fails to file any tax return or pay tax in this
regard pursuant to the Tax Related Laws, such investor may be subject to certain fines, penalties or punishments, including without
limitation: (1) if the non-resident investor fails to file a tax return and present the relevant information in connection with
tax payments, the competent tax authorities shall order it to do so within the prescribed time limit and may impose a fine up to
RMB 2,000, and in egregious cases, may impose a fine ranging from RMB 2,000 to RMB 10,000; (2) if the non-resident investor fails
to file a tax return or fails to pay all or part of the amount of tax payable, the non-resident investor shall be required to pay
the unpaid tax amount payable, a surcharge on overdue tax payments (the daily surcharge is 0.05% of the overdue amount, beginning
from the day the deferral begins) and a fine ranging from 50% to 500% of the unpaid amount of the tax payable; (3) if the non-resident
investor fails to file a tax return and to pay the tax within the prescribed time limit according to the order by the PRC tax authorities,
the PRC tax authorities may collect and check information about the income receivable by the non-resident investor in the PRC from
other payers (the “Other Payers”) who will pay amounts to such non-resident investor, and send a “Notice of Tax
Issues” to the Other Payers to collect and recover the tax payable and overdue fines imposed on such non-resident investor
from the amounts otherwise payable to such non-resident investor by the Other Payers; (4) if the non-resident investor fails to
pay the tax payable within the prescribed time limit as ordered by the PRC tax authorities, a fine may be imposed on the non-resident
investor ranging from 50% to 500% of the unpaid tax payable, and the PRC tax authorities may, upon approval by the director of
the tax bureau (or sub-bureau) of, or higher than, the county level, take the following compulsory measures: (i) notify in writing
the non-resident investor’s bank or other financial institution to withhold from the account thereof for payment of the amount
of tax payable, and (ii) detain, seal off, or sell by auction or on the market the non-resident investor’s commodities, goods
or other property in a value equivalent to the amount of tax payable; or (5) if the non-resident investor fails to pay all or part
of the amount of tax payable or surcharge for overdue tax payment, and cannot provide a guarantee to the PRC tax authorities, the
tax authorities may notify the frontier authorities to prevent the non-resident investor or its legal representative from leaving
the PRC.



United States Federal Income Taxation



General



The following is a summary of the material U.S.
federal income tax consequences of the acquisition, ownership and disposition of China Ceramics’ securities.



The discussion below of the U.S. federal income
tax consequences to “U.S. Holders” will apply to a beneficial owner of China Ceramics’ securities that is for
U.S. federal income tax purposes:



| | · | an individual citizen or resident of the United States;
| | - | -------------------------------------------------------



| | · | a corporation (or other entity treated as a corporation) that is created or organized (or treated as created or organized)
in or under the laws of the United States, any state thereof or the District of Columbia;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



98







| | · | an estate whose income is includible in gross income for U.S. federal income tax purposes regardless of its source;
| | - | -------------------------------------------------------------------------------------------------------------------



| | · | a trust if (i) a U.S. court can exercise primary supervision over the trust’s administration and one or more U.S. persons
are authorized to control all substantial decisions of the trust, or (ii) it has a valid election in effect under applicable U.S.
Treasury regulations to be treated as a U.S. person.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



A beneficial owner of our securities that is
described above is referred to herein as a “U.S. Holder.” If a beneficial owner of China Ceramics’ securities
is not described as a U.S. Holder and is not an entity treated as a partnership or other pass-through entity for U.S. federal income
tax purposes, such owner will be considered a “Non-U.S. Holder.” The material U.S. federal income tax consequences
applicable specifically to Non-U.S. Holders are described below under the heading “Non-U.S. Holders.”



This summary is based on the Internal Revenue
Code of 1986, as amended, or the “Code,” its legislative history, Treasury regulations promulgated thereunder, published
rulings and court decisions, all as currently in effect. These authorities are subject to change or differing interpretations,
possibly on a retroactive basis.



This discussion does not address all aspects
of U.S. federal income taxation that may be relevant to any particular holder of China Ceramics’ securities based on such
holder’s individual circumstances. In particular, this discussion considers only holders that own and hold China Ceramics’
securities as capital assets within the meaning of Section 1221 of the Code. This discussion also does not address the alternative
minimum tax. In addition, this discussion does not address the U.S. federal income tax consequences to holders that are subject
to special rules, including:



| | · | financial institutions or financial services entities;
| | - | ------------------------------------------------------



| | · | broker-dealers;
| | - | ---------------



| | · | persons that are subject to the mark-to-market accounting rules under Section 475 of the Code;
| | - | ----------------------------------------------------------------------------------------------



| | · | tax-exempt entities;
| | - | --------------------



| | · | governments or agencies or instrumentalities thereof;
| | - | -----------------------------------------------------



| | · | insurance companies;
| | - | --------------------



| | · | regulated investment companies;
| | - | -------------------------------



| | · | real estate investment trusts;
| | - | ------------------------------



| | · | certain expatriates or former long-term residents of the United States;
| | - | -----------------------------------------------------------------------



| | · | persons that actually or constructively own 5% or more of China Ceramics’ voting shares;
| | - | ----------------------------------------------------------------------------------------



| | · | persons that acquired China Ceramics’ securities pursuant to an exercise of employee share options, in connection with
employee share incentive plans or otherwise as compensation;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | persons that hold China Ceramics’ securities as part of a straddle, constructive sale, hedging, conversion or other integrated
transaction;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------



| | · | persons whose functional currency is not the U.S. dollar;
| | - | ---------------------------------------------------------



| | · | controlled foreign corporations; or
| | - | -----------------------------------



| | · | passive foreign investment companies.
| | - | -------------------------------------



99







This discussion does not address any aspect
of U.S. federal non-income tax laws, such as gift or estate tax laws, or state, local or non-U.S. tax laws, or, except as discussed
herein, any tax reporting obligations of a holder of China Ceramics’ securities. Additionally, this discussion does not consider
the tax treatment of partnerships or other pass-through entities or persons who hold China Ceramics’ securities through such
entities. If a partnership (or other entity classified as a partnership for U.S. federal income tax purposes) is the beneficial
owner of China Ceramics’ securities, the U.S. federal income tax treatment of a partner in the partnership will generally
depend on the status of the partner and the activities of the partnership. This discussion also assumes that any distribution made
(or deemed made) in respect to the China Ceramics’ securities and any consideration received (or deemed received) by a holder
in connection with the sale or other disposition of such securities will be in U.S. dollars.



China Ceramics has not sought, and will not
seek, a ruling from the Internal Revenue Service, or “IRS,” or an opinion of counsel, as to any U.S. federal income
tax consequence described herein. The IRS may disagree with the description herein, and its determination may be upheld by a court.
Moreover, there can be no assurance that future legislation, regulations, administrative rulings or court decisions will not adversely
affect the accuracy of the statements in this discussion.



THIS DISCUSSION IS ONLY A SUMMARY OF THE
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF CHINA CERAMICS’ SECURITIES.
EACH HOLDER OF CHINA CERAMICS’ SECURITIES IS URGED TO CONSULT ITS OWN TAX ADVISOR WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES
TO SUCH HOLDER OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF CHINA CERAMICS’ SECURITIES, INCLUDING THE APPLICABILITY AND
EFFECT OF ANY STATE, LOCAL AND NON-U.S. TAX LAWS, AS WELL AS U.S. FEDERAL TAX LAWS AND APPLICABLE TAX TREATIES.



Tax Treatment of China Ceramics After the
Redomestication and the Business Combination



Section 7874(b) of the Code generally provides
that a corporation organized outside the United States that acquires, directly or indirectly, pursuant to a plan or series of related
transactions, substantially all of the assets of a corporation organized in the United States will be treated as a domestic corporation
for U.S. federal income tax purposes if shareholders of the acquired corporation, by reason of owning shares of the acquired corporation,
own at least 80% of either the voting power or the value of the stock of the acquiring corporation after the acquisition. Under
regulations promulgated under Section 7874, a warrant holder of either the acquired corporation or the acquiring corporation generally
is treated for this purpose as owning stock of the acquired corporation or the acquiring corporation, as the case may be, with
a value equal to the excess of the value of the shares underlying the warrant over the exercise price of the warrant. If Section
7874(b) were to have applied to the Redomestication, then, among other things, China Ceramics, as the surviving entity, would have
been subject to U.S. federal income tax on its worldwide taxable income following the Redomestication and the Business Combination
as if it were a domestic corporation.



100







After the completion of the Business Combination,
which occurred immediately after and as part of the same integrated transaction as the Redomestication, the former stockholders
of CHAC (including warrant holders treated as owning stock of CHAC pursuant to the regulations under Section 7874) should have
been considered as owning, by reason of owning (or being treated as owning) stock of CHAC, less than 80% of the voting power and
the value of the shares of China Ceramics (including any warrants treated as shares of China Ceramics pursuant to the regulations
promulgated under Section 7874). Accordingly, Section 7874(b) should not have applied to treat China Ceramics as a domestic corporation
for U.S. federal income tax purposes. However, due to the absence of full guidance on how the rules of Section 7874(b) applied
to the transactions completed pursuant to the Redomestication and the Business Combination, this result is not entirely free from
doubt. If, for example, the Redomestication were ultimately determined for purposes of Section 7874(b) as having occurred prior
to, and separate from, the Business Combination for U.S. federal income tax purposes, the share ownership threshold for applicability
of Section 7874(b) generally would have been satisfied (and China Ceramics would have been treated as a domestic corporation for
U.S. federal income tax purposes) because the former stockholders of CHAC (including warrant holders treated as owning stock of
CHAC), by reason of owning (or being treated as owning) stock of CHAC, would have owned all of the shares (including any warrants
treated as shares) of China Ceramics immediately after the Redomestication. Although normal “step transaction” tax
principles supported the view that the Redomestication and the Business Combination should have been viewed together for purposes
of determining whether Section 7874(b) was applicable, because of the absence of guidance under Section 7874(b) directly on point,
this result is not entirely free from doubt. The balance of this discussion assumes that China Ceramics has been and will be treated
as a foreign corporation for U.S. federal income tax purposes.



U.S. Holders



Taxation of Cash Distributions Paid
on Shares



Subject to the passive foreign investment company,
or “PFIC,” rules discussed below, a U.S. Holder generally will be required to include in gross income as ordinary income
the amount of any cash dividend paid on the shares of China Ceramics. A cash distribution on such shares generally will be treated
as a dividend for U.S. federal income tax purposes to the extent the distribution is paid out of current or accumulated earnings
and profits of China Ceramics (as determined for U.S. federal income tax purposes). Such dividend generally will not be eligible
for the dividends received deduction generally allowed to U.S. corporations in respect of dividends received from other U.S. corporations.
The portion of such cash distribution, if any, in excess of such earnings and profits will be applied against and reduce (but not
below zero) the U.S. Holder’s adjusted basis in its shares in China Ceramics. Any remaining excess generally will be treated
as gain from the sale or other taxable disposition of such shares.



With respect to non-corporate U.S. Holders,
such dividends may be subject to U.S. federal income tax at the lower applicable regular long-term capital gains tax rate (see
“—Taxation on the Disposition of Securities” below) provided that (1) the shares of China Ceramics are readily
tradable on an established securities market in the United States or, in the event China Ceramics is deemed to be a Chinese “resident
enterprise” under the EIT Law, China Ceramics is eligible for the benefits of the Agreement between the Government of the
United States of America and the Government of the People’s Republic of China for the Avoidance of Double Taxation and the
Prevention of Tax Evasion with Respect to Taxes on Income, or the “U.S.-PRC Tax Treaty,” (2) China Ceramics is not
a PFIC, as discussed below, for either the taxable year in which the dividend was paid or the preceding taxable year, and (3) certain
holding period requirements are met. Under published IRS authority, shares are considered for purposes of clause (1) above to be
readily tradable on an established securities market in the United States only if they are listed on certain exchanges, which presently
include the NASDAQ Global Market. Although China Ceramics’ shares are currently listed on the NASDAQ Global Market, it cannot
guarantee that its shares will continue to be listed on the NASDAQ Global Market. U.S. Holders should consult their own tax advisors
regarding the availability of the lower rate for any dividends paid with respect to the shares of China Ceramics.



If a PRC income tax applies to any cash
dividends paid to a U.S. Holder on the shares of China Ceramics, such tax may be treated as a foreign tax eligible for a deduction
from such holder’s U.S. federal taxable income or a foreign tax credit against such holder’s U.S. federal income tax
liability (subject to applicable conditions and limitations). In addition, if such PRC tax applies to such dividends, such U.S.
Holder may be entitled to certain benefits under the U.S.-PRC Tax Treaty if such holder is considered a resident of the United
States for purposes of, and otherwise meets the requirements of, the U.S.-PRC Tax Treaty. U.S. Holders should consult their own
tax advisors regarding the deduction or credit for any such PRC tax and their eligibility for the benefits of the U.S.-PRC Tax
Treaty.



101







Taxation on the Disposition of Securities



Upon a sale or other taxable disposition of
the securities in China Ceramics, and subject to the PFIC rules discussed below, a U.S. Holder generally will recognize capital
gain or loss in an amount equal to the difference between the amount realized and the U.S. Holder’s adjusted tax basis in
the securities.



The regular U.S. federal income tax rate on
capital gains recognized by U.S. Holders generally is the same as the regular U.S. federal income tax rate on ordinary income,
except that long-term capital gains recognized by non-corporate U.S. Holders are generally subject to U.S. federal income tax at
a maximum regular rate of 20%. Capital gain or loss will constitute long-term capital gain or loss if the U.S. Holder’s holding
period for the securities exceeds one year. The deductibility of capital losses is subject to various limitations.



If a PRC income tax applies to any gain from
the disposition of the securities in China Ceramics by a U.S. Holder, such tax may be treated as a foreign tax eligible for a deduction
from such holder’s U.S. federal taxable income or a foreign tax credit against such holder’s U.S. federal income tax
liability (subject to applicable conditions and limitations). In addition, if such PRC tax applies to any gain, such U.S. Holder
may be entitled to certain benefits under the U.S.-PRC Tax Treaty if such holder is considered a resident of the United States
for purposes of, and otherwise meets the requirements of, the U.S.-PRC Tax Treaty. U.S. Holders should consult their own tax advisors
regarding the deduction or credit for any such PRC tax and their eligibility for the benefits of the U.S.-PRC Tax Treaty.



Additional Taxes



U.S. Holders that are individuals, estates or
trusts and whose income exceeds certain thresholds generally will be subject to a 3.8% Medicare contribution tax on unearned income,
including, without limitation, dividends on, and gains from the sale or other taxable disposition of, China Ceramics’ securities,
subject to certain limitations and exceptions. Under regulations, in the absence of a special election, such unearned income generally
would not include income inclusions under the qualified electing fund, or QEF, rules discussed below under “ –Passive
Foreign Investment Company Rules,” but would include distributions of earnings and profits from a QEF. U.S. Holders should
consult their own tax advisors regarding the effect, if any, of such tax on their ownership and disposition of China Ceramics’
securities.



Passive Foreign Investment Company
Rules



A foreign (i.e., non-U.S.) corporation will
be a PFIC if at least 75% of its gross income in a taxable year of the foreign corporation, including its pro rata share of the
gross income of any corporation in which it is considered to own at least 25% of the shares by value, is passive income. Alternatively,
a foreign corporation will be a PFIC if at least 50% of its assets in a taxable year of the foreign corporation, ordinarily determined
based on fair market value and averaged quarterly over the year, including its pro rata share of the assets of any corporation
in which it is considered to own at least 25% of the shares by value, are held for the production of, or produce, passive income.
Passive income generally includes dividends, interest, rents and royalties (other than certain rents or royalties derived from
the active conduct of a trade or business) and gains from the disposition of passive assets.



102







Based on the composition (and estimated values)
of the assets and the nature of the income of China Ceramics and its subsidiaries during its 2014 taxable year, China Ceramics
does not believe that it was treated as a PFIC for such year. However, because China Ceramics has not performed a definitive analysis
as to its PFIC status for its 2014 taxable year, there can be no assurance in respect to its PFIC status for such year. There also
can be no assurance with respect to China Ceramics’ status as a PFIC for its current (2015) taxable year or any future taxable
year.



If China Ceramics is determined to be a PFIC
for any taxable year (or portion thereof) that is included in the holding period of a U.S. Holder of China Ceramics’ shares
and, the U.S. Holder did not make a timely QEF election for China Ceramics’ first taxable year as a PFIC in which the U.S.
Holder held (or was deemed to hold) shares, a QEF election along with a purging election or a mark-to-market election, each as
described below, such holder generally will be subject to special rules for regular U.S. federal income tax purposes with respect
to:



| | · | any gain recognized by the U.S. Holder on the sale or other disposition of its shares; and
| | - | ------------------------------------------------------------------------------------------



| | · | any “excess distribution” made to the U.S. Holder (generally, any distributions to such U.S. Holder during a taxable
year of the U.S. Holder that are greater than 125% of the average annual distributions received by such U.S. Holder in respect
of the shares of China Ceramics during the three preceding taxable years of such U.S. Holder or, if shorter, such U.S. Holder’s
holding period for the shares).
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Under these rules:



| | · | the U.S. Holder’s gain or excess distribution will be allocated ratably over the U.S. Holder’s holding period for
the shares;
| | - | -----------------------------------------------------------------------------------------------------------------------------



| | · | the amount allocated to the U.S. Holder’s taxable year in which the U.S. Holder recognized the gain or received the excess
distribution or to the period in the U.S. Holder’s holding period before the first day of the first taxable year of China
Ceramics in which China Ceramics qualified as a PFIC will be taxed as ordinary income;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the amount allocated to other taxable years (or portions thereof) of the U.S. Holder and included in its holding period will
be taxed at the highest tax rate in effect for that year and applicable to the U.S. Holder; and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the interest charge generally applicable to underpayments of tax will be imposed in respect of the tax attributable to each
such other taxable year of the U.S. Holder.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



In general, if we are determined to be a PFIC,
a U.S. Holder may avoid the PFIC tax consequences described above in respect to its shares in China Ceramics by making a timely
QEF election (or a QEF election along with a purging election). Pursuant to the QEF election, a U.S. Holder generally will be required
to include in income its pro rata share of China Ceramics’ net capital gains (as long-term capital gain) and other earnings
and profits (as ordinary income), on a current basis, in each case whether or not distributed, in the taxable year of the U.S.
Holder in which or with which China Ceramics’ taxable year ends if China Ceramics is treated as a PFIC for that taxable year.
A U.S. Holder may make a separate election to defer the payment of taxes on undistributed income inclusions under the QEF rules,
but if deferred, any such taxes will be subject to an interest charge.



The QEF election is made on a shareholder-by-shareholder
basis and, once made, can be revoked only with the consent of the IRS. A U.S. Holder generally makes a QEF election by attaching
a completed IRS Form 8621 (Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund),
including the information provided in a PFIC annual information statement, to a timely filed U.S. federal income tax return for
the taxable year to which the election relates. Retroactive QEF elections generally may be made only by filing a protective statement
with such return and if certain other conditions are met or with the consent of the IRS.



103







In order to comply with the requirements of
a QEF election, a U.S. Holder must receive certain information from China Ceramics. Upon request from a U.S. Holder, China Ceramics
will endeavor to provide to the U.S. Holder, no later than 90 days after the request, such information as the IRS may require,
including a PFIC annual information statement, in order to enable the U.S. Holder to make and maintain a QEF election. However,
there is no assurance that China Ceramics will have timely knowledge of its status as a PFIC in the future or of the required information
to be provided.



If a U.S. Holder has made a QEF election with
respect to its shares in China Ceramics, and the special tax and interest charge rules do not apply to such shares (because of
a timely QEF election for China Ceramics’ first taxable year as a PFIC in which the U.S. Holder holds (or is deemed to hold)
such shares or a QEF election, along with a purge of the PFIC taint pursuant to a purging election, as described below), any gain
recognized on the sale or other taxable disposition of such shares generally will be taxable as capital gain and no interest charge
will be imposed. As discussed above, for regular U.S. federal income tax purposes, U.S. Holders of a QEF generally are currently
taxed on their pro rata shares of the QEF’s earnings and profits, whether or not distributed. In such case, a subsequent
distribution of such earnings and profits that were previously included in income generally should not be taxable as a dividend
to such U.S. Holders. The adjusted tax basis of a U.S. Holder’s shares in a QEF will be increased by amounts that are included
in income, and decreased by amounts distributed but not taxed as dividends, under the above rules. Similar basis adjustments apply
to property if by reason of holding such property the U.S. Holder is treated under the applicable attribution rules as owning shares
in a QEF.



Although a determination as to China Ceramics’
PFIC status will be made annually, an initial determination that it is a PFIC generally will apply for subsequent years to a U.S.
Holder who held shares of China Ceramics while it was a PFIC, whether or not it met the test for PFIC status in those subsequent
years. A U.S. Holder who makes the QEF election discussed above for China Ceramics’ first taxable year as a PFIC in which
the U.S. Holder holds (or is deemed to hold) shares in China Ceramics, however, will not be subject to the PFIC tax and interest
charge rules discussed above in respect to such shares. In addition, such U.S. Holder will not be subject to the QEF inclusion
regime with respect to such shares for any taxable year of China Ceramics that ends within or with a taxable year of the U.S. Holder
and in which China Ceramics is not a PFIC. On the other hand, if the QEF election is not effective for each of the taxable years
of China Ceramics in which China Ceramics is a PFIC and during which the U.S. Holder holds (or is deemed to hold) shares in China
Ceramics, the PFIC rules discussed above will continue to apply to such shares unless the holder files on a timely filed U.S. income
tax return (including extensions) a QEF election and a purging election to recognize under the rules of Section 1291 of the Code
any gain that the U.S. Holder would otherwise recognize if the U.S. Holder had sold its shares for their fair market value on the
“qualification” date. The qualification date is the first day of China Ceramics’ tax year in which it qualifies
as a QEF with respect to such U.S. Holder. The purging election can only be made if such U.S. Holder held shares on the qualification
date. The gain recognized by the purging election will be subject to the special tax and interest charge rules treating the gain
as an excess distribution, as described above. As a result of the purging election, the U.S. Holder will increase the adjusted
tax basis in its shares by the amount of the gain recognized and will also have a new holding period in the shares for purposes
of the PFIC rules.



104







Alternatively, if a U.S. Holder, at the close
of its taxable year, owns shares in a PFIC that are treated as marketable stock, the U.S. Holder may make a mark-to-market election
with respect to such shares for such taxable year. If the U.S. Holder makes a valid mark-to-market election for the first taxable
year of the U.S. Holder in which the U.S. Holder holds (or is deemed to hold) shares in China Ceramics and for which China Ceramics
is determined to be a PFIC, such holder generally will not be subject to the PFIC rules described above in respect to its shares
as long as such shares continue to be treated as marketable stock. Instead, in general, the U.S. Holder will include as ordinary
income for each year that China Ceramics is treated as a PFIC, the excess, if any, of the fair market value of its shares at the
end of its taxable year over the adjusted tax basis in its shares. The U.S. Holder also will be allowed to take an ordinary loss
in respect of the excess, if any, of the adjusted tax basis of its shares over the fair market value of its shares at the end of
its taxable year (but only to the extent of the net amount of previously included income as a result of the mark-to-market election).
The U.S. Holder’s adjusted tax basis in its shares will be adjusted to reflect any such income or loss amounts, and any further
gain recognized on a sale or other taxable disposition of the shares in a taxable year in which China Ceramics is treated as a
PFIC generally will be treated as ordinary income. Special tax rules may apply if a U.S. Holder makes a mark-to-market election
for a taxable year after the U.S. Holder holds (or is deemed to hold) the shares and for which China Ceramics is determined to
be a PFIC.



The mark-to-market election is available only
for stock that is regularly traded on a national securities exchange that is registered with the Securities and Exchange Commission,
including the NASDAQ Global Market, or on a foreign exchange or market that the IRS determines has rules sufficient to ensure that
the market price represents a legitimate and sound fair market value. Although China Ceramics’ shares are currently listed
on the NASDAQ Global Market, it cannot guarantee that its shares will continue to be listed or will be traded on the NASDAQ Global
Market. U.S. Holders should consult their own tax advisors regarding the availability and tax consequences of a mark-to-market
election in respect to the shares of China Ceramics under their particular circumstances.



If China Ceramics is a PFIC and, at any time,
has a foreign subsidiary that is classified as a PFIC, a U.S. Holder of China Ceramics’ shares generally should be deemed
to own a portion of the shares of such lower-tier PFIC, and generally could incur liability for the deferred tax and interest charge
described above if China Ceramics receives a distribution from, or disposes of all or part of its interest in, or the U.S. Holder
were otherwise deemed to have disposed of an interest in, the lower-tier PFIC. Upon request, China Ceramics will endeavor to cause
any lower-tier PFIC to provide to a U.S. Holder no later than 90 days after the request the information that may be required to
make or maintain a QEF election with respect to the lower- tier PFIC. However, there is no assurance that China Ceramics will have
timely knowledge of the status of any such lower-tier PFIC or will be able to cause the lower-tier PFIC to provide the required
information. A mark-to-market election generally would not be available with respect to such a lower-tier PFIC. U.S. Holders are
urged to consult their own tax advisors regarding the tax issues raised by lower-tier PFICs.



A U.S. Holder that owns (or is deemed to own)
shares in a PFIC during any taxable year of the U.S. Holder may have to file an IRS Form 8621 (whether or not a QEF election or
mark-to-market election is or has been made) with such U.S. Holder’s U.S. federal income tax return and provide such other
information as may be required by the U.S. Treasury Department.



The rules dealing with PFICs and with the QEF
and mark-to-market elections are very complex and are affected by various factors in addition to those described above. Accordingly,
U.S. Holders of shares in China Ceramics should consult their own tax advisors concerning the application of the PFIC rules to
such shares under their particular circumstances.



105







Non-U.S. Holders



Cash dividends paid or deemed paid to a Non-U.S.
Holder in respect to its securities in China Ceramics generally will not be subject to U.S. federal income tax, unless the dividends
are effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States (and, if required
by an applicable income tax treaty, are attributable to a permanent establishment or fixed base that such holder maintains or maintained
in the United States).



In addition, a Non-U.S. Holder generally will
not be subject to U.S. federal income tax on any gain attributable to a sale or other taxable disposition of securities in China
Ceramics unless such gain is effectively connected with its conduct of a trade or business in the United States (and, if required
by an applicable income tax treaty, is attributable to a permanent establishment or fixed base that such holder maintains or maintained
in the United States) or the Non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable
year of such sale or other disposition and certain other conditions are met (in which case, such gain from U.S. sources generally
is subject to U.S. federal income tax at a 30% rate or a lower applicable tax treaty rate).



Dividends and gains that are effectively connected
with the Non-U.S. Holder’s conduct of a trade or business in the United States (and, if required by an applicable income
tax treaty, are attributable to a permanent establishment or fixed base that such holder maintains or maintained in the United
States) generally will be subject to regular U.S. federal income tax at the same regular U.S. federal income tax rates applicable
to a comparable U.S. Holder and, in the case of a Non-U.S. Holder that is a corporation for U.S. federal income tax purposes, may
also be subject to an additional branch profits tax at a 30% rate or a lower applicable tax treaty rate.



Backup Withholding and Information Reporting



In general, information reporting for U.S. federal
income tax purposes should apply to distributions made on the securities of China Ceramics within the United States to a U.S. Holder
(other than an exempt recipient) and to the proceeds from sales and other dispositions of securities of China Ceramics by a U.S.
Holder (other than an exempt recipient) to or through a U.S. office of a broker. Payments made (and sales and other dispositions
effected at an office) outside the United States will be subject to information reporting in limited circumstances. In addition,
certain information concerning a U.S. Holder’s adjusted tax basis in its securities and adjustments to that tax basis and
whether any gain or loss with respect to such securities is long-term or short-term also may be required to be reported to the
IRS, and certain holders may be required to file an IRS Form 8938 (Statement of Specified Foreign Financial Assets) to report their
interest in our securities.



Moreover, backup withholding of U.S. federal
income tax at a rate of 28% generally will apply to dividends paid on the securities of China Ceramics to a U.S. Holder (other
than an exempt recipient) and the proceeds from sales and other dispositions of securities of China Ceramics by a U.S. Holder (other
than an exempt recipient), in each case who (a) fails to provide an accurate taxpayer identification number; (b) is notified by
the IRS that backup withholding is required; or (c) in certain circumstances, fails to comply with applicable certification requirements.



A Non-U.S. Holder generally may eliminate the
requirement for information reporting and backup withholding by providing certification of its foreign status, under penalties
of perjury, on a duly executed applicable IRS Form W-8 or by otherwise establishing an exemption.



Backup withholding is not an additional tax.
Rather, the amount of any backup withholding will be allowed as a credit against a U.S. Holder’s or a Non-U.S. Holder’s
U.S. federal income tax liability and may entitle such holder to a refund, provided that certain required information is timely
furnished to the IRS. Holders are urged to consult their own tax advisors regarding the application of backup withholding and the
availability of and procedures for obtaining an exemption from backup withholding in their particular circumstances.



106







| | F. | Dividends and paying agents
| | -- | ---------------------------



Not required.



| | G. | Statement by experts
| | -- | --------------------



Not required.



| | H. | Documents on display
| | -- | --------------------



Documents concerning us that are referred to
in this document may be inspected at Junbing Industrial Zone, Anhai, Jinjiang City, Fujian Province, PRC.



In addition, we file annual reports and other
information with the Securities and Exchange Commission. We file annual reports on Form 20-F and submit other information under
cover of Form 6-K. As a foreign private issuer, we are exempt from the proxy requirements of Section 14 of the Exchange Act and
our officers, directors and principal shareholders are exempt from the insider short-swing disclosure and profit recovery rules
of Section 16 of the Exchange Act. Annual reports and other information we file with the Commission may be inspected at the public
reference facilities maintained by the Commission at Room 1024, 100 F. Street, N.E., Washington, D.C. 20549, and copies of all
or any part thereof may be obtained from such offices upon payment of the prescribed fees. You may call the Commission at 1-800-SEC-0330
for further information on the operation of the public reference rooms and you can request copies of the documents upon payment
of a duplicating fee, by writing to the Commission. In addition, the Commission maintains a web site that contains reports and
other information regarding registrants (including us) that file electronically with the Commission which can be assessed at http://www.sec.gov.



| | I. | Subsidiary Information
| | -- | ----------------------



Not required.



| | ITEM 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
| | -------- | ---------------------------------------------------------



Interest Rate Risk



Our exposure to interest rate risk primarily
relates to our outstanding debts and interest income generated by excess cash, which is mostly held in interest-bearing bank deposits.
Interest-earning instruments carry a degree of interest rate risk. As of December 31, 2014, our total outstanding loans for the
continuing operations amounted to RMB 84.7 million ($13.7 million) with interest rates in the range of 2.48% to 8.16% per annum.
We have not been exposed, nor do we anticipate being exposed, to material risks due to changes in market interest rates.



Foreign Currency Risk



During 2013 and 2014, we entered into certain
foreign currency transaction agreements with an unaffiliated financial institution related to the fluctuation in value of the Renminbi
against the U.S. dollar, for investment and not hedging purposes. The Company recorded fair value gains on these agreements totaling
RMB 3,346,000 for the year ended December 31, 2013. However, in 2014, as the Renminbi depreciated against the U.S. dollar, we incurred
realized and unrealized losses totaling RMB 54,977,000 ($9,586,000) for the year ended December 31, 2014 in connection with these
agreements. We do not intend to enter into similar investment transactions in the future.



107







In June 2014, we, our Chief Executive Officer
and the Audit Committee set out to attempt to terminate the foreign currency transaction agreements; and to reach a resolution
that would preclude the depletion of our liquid assets by virtue of its having entered into the foreign currency transaction agreements.
Ultimately our Chief Executive Officer agreed to cause an entity controlled by him to assume those agreements. On July 31, 2014,
Sound Treasure Limited, our largest shareholder and an affiliate of our Chief Executive Officer, executed an agreement (the “Novation”)
with us and the financial institution that originated the foreign currency transaction agreements pursuant to which Sound Treasure
Limited assumed these agreements and all assets (mainly deposits placed with the financial institution) and all existing and future
liabilities arising under these agreements, and we were released from the liabilities arising under the foreign currency transaction
agreements. As a result, we will not be required to fund any losses related to these agreements, and will neither suffer any future
liabilities arising under those agreements nor enjoy any benefits arising under those agreements.



At the time that each of the foreign currency
transaction agreements was established with the financial institution, we were required to deposit monies (the “Deposits”)
with the financial institution that was the counterparty to the agreements. RMB 6.7 million of a total of RMB 15.6 million in deposits
that we made were funded on our behalf by Wong Kung Tok (who is the brother-in-law of our Chief Executive Officer), and were included
in a total of RMB 40.2 million in loans owing by us to Wong Kung Tok as of July 9, 2014. In connection with the Novation discussed
above, our Chief Executive Officer, Sound Treasure Limited and Wong Kung Tok executed an agreement with the Company on July 31,
2014 (the “Offset Agreement”) pursuant to which loans totaling RMB 20.7 million owed by us to Wong Kung Tok were transferred
to Sound Treasure Limited and then were forgiven by Sound Treasure Limited, and in return the Company agreed to forego any claim
to RMB 15.6 million in Deposits under the foreign currency transaction agreements which will be transferred to Sound Treasure Limited
pursuant to the Novation.



The Novation and the Offset Agreement became
effective on July 31, 2014. As a result of these transactions, Sound Treasure Limited released us from liabilities aggregating
RMB 76.8 million and we transferred ownership of RMB 15.6 million in deposits held at the financial institution from us to Sound
Treasure Limited. As a result of the Novation and the Offset Agreement, approximately RMB 76.8 million in liabilities on our books
were extinguished in 2014 and the Capital Reserve account was increased by approximately RMB 61.3 million.



Except as disclosed above, we do not currently
have any significant foreign exchange exposure as our sales and purchases are predominantly denominated in RMB. As of December
31, 2014, nearly all of our monetary assets and monetary liabilities were denominated in RMB except for certain bank balances,
bank borrowings and other payables which were denominated in US dollars. However, in the future, a proportion of our sales may
be denominated in other currencies as we expand into overseas markets. In such circumstances, we anticipate our primary market
risk, if any, to be related to fluctuations in exchange rates. Exchange rate risk may arise if we are required to use different
currencies for various aspects of its operations.



The Renminbi’s exchange rate with the
U.S. dollar and other currencies is affected by, among other things, changes in China’s political and economic conditions.
The exchange rate for conversion of Renminbi into foreign currencies is heavily influenced by intervention in the foreign exchange
market by the People’s Bank of China. From 1995 until July 2005, the People’s Bank of China intervened in the foreign
exchange market to maintain an exchange rate of approximately 8.3 Renminbi per U.S. dollar. On July 21, 2005, the PRC government
changed this policy and began allowing modest appreciation of the Renminbi versus the U.S. dollar. However, the Renminbi is restricted
to a rise or fall of no more than 0.5% per day versus the U.S. dollar, and the People’s Bank of China continues to intervene
in the foreign exchange market to prevent significant short-term fluctuations in the Renminbi exchange rate. On March 17, 2014,
the People’s Bank of China announced that the RMB exchange rate flexibility increased to 2% in order to proceed further with
reform of the RMB exchange rate regime. These could result in a further and more significant floatation in the RMB’s value
against the U.S. dollar. The international reaction to the RMB revaluation has generally been positive. But, international pressure
continues to be placed on the Chinese government to adopt an even more flexible currency policy, which could result in significant
fluctuation of the RMB against the U.S. dollar.



Very limited hedging transactions are available
in China to reduce our exposure to exchange rate fluctuations. While we have no present intention to enter into currency hedging
transactions in the future. we may decide to enter into hedging transactions if we are exposed to foreign currency risk. The availability
and effectiveness of these hedging transactions may be limited and we may not be able to successfully hedge our exposure at all.
In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert
Renminbi into foreign currency.



108







| | ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
| | -------- | ------------------------------------------------------



Not required.



PART
II



| | ITEM 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
| | -------- | -----------------------------------------------



There has been no default of any indebtedness
nor is there any arrearage in the payment of dividends.



| | ITEM 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
| | -------- | ----------------------------------------------------------------------------



On November 20, 2009, pursuant to the terms
of a merger and stock purchase agreement dated August 19, 2009, CHAC merged with and into China Ceramics, resulting in the Redomestication
of CHAC to the British Virgin Islands as China Ceramics. At the time of the merger, each outstanding ordinary share of CHAC converted
automatically into one share of China Ceramics, and each right to purchase ordinary shares in CHAC automatically converted into
an equivalent right to purchase shares in China Ceramics. Accordingly, the shares and warrants became governed by China Ceramics’
Amended and Restated Memorandum and Articles of Association. The rights and duties attaching to each share remained substantially
equivalent. Immediately following the merger and Redomestication, and as part of the same integrated transaction, China Ceramics
acquired all of the outstanding securities of Success Winner.



There are no restrictions on working capital
and no removal or substitution of assets securing any class of our registered securities.



| | ITEM 15. | CONTROLS AND PROCEDURES
| | -------- | -----------------------



Disclosure Controls and Procedures



Our management, with the participation of our
Chief Executive Officer and Chief Financial Officer, has performed an evaluation of the effectiveness of the design and operation
of our disclosure controls and procedures within the meaning of Rules 13a-15(e) and 15d-15(e) of the Exchange Act as of December
31, 2014. Based on such evaluation, our management has concluded that our disclosure controls and procedures as of December 31,
2014 were not effective. The conclusion was reached primarily due to the material weakness in our internal control over financial
reporting described below.



Disclosure controls and procedures are designed
to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act i) is recorded,
processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and
ii) is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding
required disclosures.



Based on that evaluation, management, including
our Chief Executive Officer and Chief Financial Officer, has concluded that our disclosure controls and procedures as of December
31, 2014 were not effective for the reasons set forth below.



Notwithstanding the material weakness described
below, management has concluded that the consolidated financial statements included in this form 20-F present fairly, in all material
respects, the Company’s financial position, results of operations and cash flows for the periods in conformity with IFRS.



109







Management’s annual report
on internal control over financial reporting



Our management is responsible for establishing
and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities
and Exchange Act of 1934. Our internal control over financial reporting is a process designed by, or under the supervision of,
our Chief Executive Officer and Chief Financial Officer and effected by our management and other personnel to provide reasonable
assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external reporting
purposes in accordance with IFRS. Internal control over financial reporting includes policies and procedures that pertain to the
maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of our financial statements in accordance
with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with the
authorization of our board of directors and management; and provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.



Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatement. Also, projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with our policies and procedures may deteriorate.



Our management, including our Chief Executive
Officer and Chief Financial Officer, has conducted an evaluation of the effectiveness of our internal control over financial reporting
as of December 31, 2014, based on the updated framework in the Internal Control — Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission in 1992 and updated in May 2013. Management has concluded that our internal
control over financial reporting was not effective as of December 31, 2014.



The specific material weakness we identified
in our internal control over financial reporting related to the lack of sufficient qualified accounting personnel with appropriate
understanding of IFRS and SEC reporting requirements commensurate with our financial reporting requirements.



We have taken, and are taking, certain actions
to remediate the material weakness to our lack of IFRS and SEC reporting experience. We plan to hire additional credentialed professional
staff and consulting professionals with greater knowledge and experience of IFRS, SEC reporting and other relevant securities laws.
In addition, we plan to provide additional training to our accounting personnel on IFRS, SEC reporting and other regulatory requirements
regarding the preparation of financial statements.



We are still in the process of strengthening
our controls and procedures in order to eliminate inadvertent errors, deficiencies and deviations that can appear in the normal
course of business and achieve full compliance with Section 404 of the Sarbanes-Oxley Act of 2002. We believe that the measures
described above will remediate the material weakness identified above. As we continue to evaluate and work to improve our internal
control over financial reporting, we may determine that additional measures are necessary to address any future control deficiencies.



110







Attestation report of the registered
public accounting firm



This Annual Report does not include an attestation
report of our registered public accounting firm regarding internal control over financial reporting. Management’s report
was not subject to attestation by our registered public accounting firm pursuant to the rules of the Securities and Exchange Commission.



Changes in Internal Controls over
Financial Reporting



During its evaluation of the effectiveness of
internal control over financial reporting as of December 31, 2013, management identified that in our internal control over financial
reporting there was a lack of sufficient qualified accounting personnel with appropriate understanding of IFRS and SEC reporting
requirements commensurate with our financial reporting requirements, and concluded that to meet the requirements of being a U.S.
public company, we need to enhance our supervision, monitoring and review of the financial statements preparation processes. We
did the following in an attempt to remediate the material weaknesses:



| | 1. | We adopted additional internal review procedures with respect to required disclosures in the reports that we file with, or
submit to, the SEC under the Exchange Act.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | On July 24, 2014, we contracted with a US internal control consulting firm to act as our consultant to conduct a separate and
independent review of our financial reporting.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. | Our finance and accounting staff members have attended seminars organized by professional accountancy bodies.
| | -- | -------------------------------------------------------------------------------------------------------------



Notwithstanding the foregoing changes, our management
determined that the material weakness still existed as of December 31, 2014.



Other than as set forth above, there have not
been any changes in internal control over financial reporting that occurred during the period covered by this annual report that
have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.



| | ITEM 16. | RESERVED
| | -------- | --------



| | ITEM 16A. | AUDIT COMMITTEE FINANCIAL EXPERT.
| | --------- | ---------------------------------



Our Board of Directors has determined that Mr.
Jianwei Liu is an audit committee financial expert as that term is defined in Item 16A(b) of Form 20-F, and “independent”
as that term is defined in the NASDAQ listing standards.



| | ITEM
                          16B. | CODE OF ETHICS.
| | ----------------------------------- | ---------------



We have adopted a Code of Business Conduct and
Ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial officer,
and principal accounting officer. A copy of the Code of Business Conduct and Ethics is available on our website, http://www.cceramics.com
/Corporate-Governance.html.



111







| | ITEM
                          16C. | PRINCIPAL ACCOUNTANT FEES AND SERVICES.
| | ----------------------------------- | ---------------------------------------



The following table represents the approximate
aggregate fees for services rendered by Grant Thornton Shanghai, PRC and Crowe Horwath (HK) CPA Limited for the periods indicated:



|                                            |  | December 31, 2013 |       |  | December 31, 2014 | 
|------------------------------------------- |  | ----------------- | ----- |  | ----------------- | 
|                                            |  | RMB’000           |       |  | RMB’000           | 
|Audit Fees - Grant Thornton Shanghai, PRC   |  |                   | 3,245 |  |                   | 
|Audit Fees - Crowe Horwath (HK) CPA Limited |  |                   | -     |  |                   | 
|Audit Related Fees                          |  |                   | -     |  |                   | 
|Tax Fees                                    |  |                   | -     |  |                   | 
|Total Fees                                  |  |                   | 3,245 |  |                   | 



Audit Fees



“Audit fees” means the aggregate
fees billed in each of the fiscal years listed for professional services rendered by our auditors for the audits of our annual
financial statements and assistance with and review of documents filed with the SEC, and fees for services that are normally incurred
in connection with statutory and regulatory filings or engagements, such as comfort letters, consents, and review of documents
filed with the SEC.



Audit Related Fees



There were no audit-related fees.



Tax Fees



There were no tax fees.



Pre-Approval of Services



Our audit committee evaluated and approved in
advance the scope and cost of the engagement of an auditor before the auditor rendered its audit and non-audit services.



| | ITEM
                          16D. | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES.
| | ----------------------------------- | -----------------------------------------------------------



None.



| | ITEM
                          16E. | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.
| | ----------------------------------- | -----------------------------------------------------------------------



No purchase of our securities were made by us
or our affiliates in 2014



| | ITEM
                          16F. | CHANGES IN REGISTRANT’S CERTIFYING ACCOUNTANT.
| | ----------------------------------- | ----------------------------------------------



On May 1, 2014, we announced that the Audit
Committee of the Board had terminated the engagement of Grant Thornton (Shanghai, PRC), our principal independent registered public
accountants (“GT”), and approved the engagement of Crowe Horwath (HK) CPA Limited (“Crowe HK”), as our
principal independent registered public accountant to audit our financial statements for each of the years in the three years period
ended December 31, 2013. During fiscal years 2012 and 2013, and any subsequent interim period prior to engaging Crowe HK, neither
we nor anyone on our behalf consulted Crowe HK regarding the application of accounting principles, the type of audit opinion that
might be rendered on our financial statements, or any matter that was either the subject of a disagreement or a reportable event
(each as defined in Item 16F (a)(1)(iv) of Form 20-F).



112







On June 4, 2014, GT informed us that reliance
should no longer be placed on its audit opinions for the years ended December 31, 2010 through 2012.



During the course of its audit of our 2013 financial
statements, GT raised certain questions with our management. GT raised questions regarding (i) a discrepancy related to a bank
confirmation from one bank, (ii) a difference between the taxation information posted on a local PRC government website and our
own records, (iii) what GT perceived to be certain hand writing similarities on envelopes relating to a few confirmations received
from our distributors, and (iv) one of our distributors that had an outstanding balance owed to us at year end had ceased operations.
We provided explanations in response to each of the questions, and the Audit Committee discussed these questions with GT, but the
questions were not resolved to GT’s satisfaction at the time we terminated GT based on what we felt was an absence of effective
communication.



With respect to the specific items raised by
GT, we believe each item has been addressed as follows:



| | (i) | Bank Confirmation Received from Pingan Bank. GT informed us that it received a bank confirmation from Pingan Bank, and that
the bank’s teller at Pingan Bank made a notation on the confirmation stating that we also had a RMB30 million bank acceptance
note issued by us (similar to a post-dated check) outstanding as of December 31, 2013. We responded to GT that this was a clerical
error committed by the bank. In turn, GT asked us to request that the bank provide an explanation for the erroneous confirmation
and that the bank send that explanation directly to GT. We made a written request that the bank provide an explanation directly
to GT, and understand that approximately one week later, GT received a letter from the bank explaining that the previous confirmation
was a mistake and that there was no outstanding bank acceptance note. GT has never provided a copy of that correspondence to us,
but we understand that the correspondence was duly “chopped” and that it was issued by a different department at the
bank. GT questioned the validity of the bank’s correction of its initial confirmation, and informed us that a bank teller
at Pingan Bank told a GT representative that she would have been the person at the bank responsible for issuing any such follow-on
correspondence and that she did not generate the correspondence that explained that the initial confirmation contained an erroneous
reference to an outstanding bank acceptance note.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | Taxation Information from Local Government Website. GT notified us that it had noticed a posting on a local district government
website that indicated that we are one of the top taxpayers in that district and that we had paid RMB10-20 million in taxes (income
tax and VAT) for 2012. However, GT raised the concern that our records and financial statements reflect that we paid in excess
of RMB100 million in taxes in 2012. We cautioned GT that the local government’s calculation is different from the tax bureau’s
calculation, and also shared our belief that the local government website might only reflect the tax paid to the domestic tax bureau
and not the tax paid to the national tax bureau. We thereafter sought and received a certification from the tax bureau that all
taxes due and owing by us for the subject periods have been paid.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | Similar Hand Writing on Three Accounts Receivable Confirmation Envelopes. GT informed us that it noticed that there were accounts
receivable confirmations sent to GT from three customers that appeared to have “very similar hand writing” on their
envelopes. According to GT, the three confirmations are from three different companies in three different locations in China. When
so informed by GT, we checked with our distributors and customers and confirmed that each sent out its own confirmation to GT.
We offered to assist GT in obtaining additional comfort regarding the status of the amounts confirmed. We are aware that certain
of our employees did assist their customers with the process to assure that the confirmations were received by GT in a timely fashion.
That assistance involved the preparation of the return envelopes in which certain customer confirmations were deposited and transmitted.
Said employees did not complete the confirmations, and there has been no indication that the confirmations were anything but accurate.
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



113







| | (iv) | Customer Closed Its Business. GT informed us that it noticed in March 2014 that one of our distributors is listed as “de-registered”
on the government website. That particular distributor purchased RMB23 million in product from us in 2013 and had a RMB13 million
accounts receivable balance at the end of the year. We notified GT that the distributor informed us of its intent to close its
business and paid its outstanding balance with us before the distributor closed.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In addition to the foregoing explanations provided
by our management, the Audit Committee discussed with GT implementing additional special procedures or conducting an internal investigation
in order to address GT’s concerns. GT rejected these suggestions and, instead, insisted that we conduct an independent investigation
of the concerns outline above, which, in turn, would have rendered the timely completion of the 2013 audit and timely filing of
the 2013 Annual Report all but impossible. The Audit Committee and the Company also believe that GT’s request for an independent
investigation was premature and disproportionate given the nature of the concerns raised. In addition, a majority of the Audit
Committee believed that communications between GT and our management and the Audit Committee had become significantly impaired.
In light of the foregoing, the Audit Committee and the Board voted to dismiss GT and to engage Crowe HK to implement additional
procedures in the audit of the Company’s financial statements for the fiscal year ended December 31, 2013 and to re-audit
of the prior fiscal years ended December 31, 2012 and 2011 to address the questions raised by GT.



The Company previously provided GT with a copy
of the foregoing disclosures and requested that GT review such disclosures and provide a letter addressed to the SEC as specified
by Item 16.F of Form 20-F. GT’s letter was filed with the Company’s Form 20-F for fiscal year 2013.



We also requested our new independent registered
public accountants, Crowe HK, to review the foregoing disclosures regarding them. We offered Crowe HK the opportunity to furnish
us with a letter addressed to the SEC containing any new information, clarification of our expression of our views or the respects
in which it does not agree with our statements in response to Item 16F of Form 20-F.



Crowe HK informed us that it had no disagreement
with the disclosure regarding them. Consequently, it declined the opportunity to furnish us with such a letter.



| | ITEM
                          16G. | CORPORATE GOVERNANCE
| | ----------------------------------- | --------------------



Pursuant to the home country rule exemption set
forth under Nasdaq Listing Rule 5615(a)(3), we are not required to hold an annual meeting because neither our Memorandum and Articles
of Association nor the law of the British Virgin Islands require us to hold an annual meeting of shareholders.



| | ITEM 16H. | MINE SAFETY DISCLOSURE
| | --------- | ----------------------



Not applicable.



PART
III



| | ITEM 17. | FINANCIAL STATEMENTS
| | -------- | --------------------



We have elected to provide financial statements
pursuant to Item 18.



| | ITEM 18. | FINANCIAL STATEMENTS
| | -------- | --------------------



The financial statements are filed as part of
this annual report beginning on page F-1.



114







| | ITEM 19. | EXHIBITS
| | -------- | --------



|Exhibit No. |  | Description                                                                                                                                                                                                                               
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1.1         |  | Amended and Restated Memorandum and Articles of Association of China Ceramics Co., Ltd.(1)                                                                                                                                                
|1.2         |  | Memorandum and Articles of Association of Success Winner Limited(2)                                                                                                                                                                       
|1.3         |  | Memorandum and Articles of Association of Stand Best Creation Limited(2)                                                                                                                                                                  
|1.4         |  | Operation Charter of Jinjiang Hengda Ceramics Co., Ltd.(2)                                                                                                                                                                                
|2.1         |  | Specimen Unit Certificate(3)                                                                                                                                                                                                              
|2.2         |  | Specimen Common Stock Certificate(3)                                                                                                                                                                                                      
|3.1         |  | Form of Voting Agreement(2)                                                                                                                                                                                                               
|4.1         |  | Merger and Stock Purchase Agreement among CHAC, China Ceramics Co., Ltd., Hengda, Success Winner and the Seller(2)                                                                                                                        
|4.2         |  | Form of Registration Rights Agreement among CHAC and the founders(3)                                                                                                                                                                      
|4.3         |  | Form of Earn-Out Escrow Agreement(2)                                                                                                                                                                                                      
|4.4         |  | Form of Indemnity Escrow Agreement(2)                                                                                                                                                                                                     
|4.6         |  | Form of Lock-Up Agreement for CHAC founders(2)                                                                                                                                                                                            
|4.7         |  | Form of Lock-Up Agreement(2)                                                                                                                                                                                                              
|4.8         |  | Acquisition Agreement, dated November 19, 2009, by and between Jinjiang Hengda Ceramics Co., Ltd., all of the shareholders of Jiangxi Hengdali Constructional Ceramics Co., Ltd., and Jiangxi Hengdali Constructional Ceramics Co., Ltd(8)
|4.9         |  | Administrative Services Agreement by and between China Ceramics Co., Ltd. and Stuart Management Co., dated December 1, 2009(8)                                                                                                            
|4.10        |  | License Agreement between Huang Jia Dong and Jinjiang Hengda Ceramics Co., Ltd.(6)                                                                                                                                                        
|4.11        |  | China Ceramics Co., Ltd. 2010 Incentive Compensation Plan(7)                                                                                                                                                                              
|4.12        |  | Employment Agreement, dated as of February 1, 2013, by and between China Ceramics and Huang Jia Dong(9)                                                                                                                                   
|4.13        |  | Employment Agreement, dated as of February 1, 2013, by and between China Ceramics and Su Pei Zhi(9)                                                                                                                                       
|4.14        |  | Employment Agreement, dated as of February 1, 2013, by and between China Ceramics and Su Wei Feng(9)                                                                                                                                      
|4.15        |  | Employment Agreement, dated as of August 1, 2012, by and between China Ceramics and Hen Man Edmund(9)                                                                                                                                     
|4.16        |  | Term sheets relating to agreemens for derivative instruments(10)                                                                                                                                                                          
|4.17        |  | Agreement between Taishin International Bank, Co., Ltd., Stand Best Creation Limited and Sound Treasure Limited, dated July 31, 2014(10)                                                                                                  
|4.18        |  | Agreement between Stand Best Creation Limited, Huang Jia Dong, Wong Kung Tok, Mr. Huang’s brother-in-law, and Sound Treasure Limited, dated July 31, 2014(10)                                                                             
|8.1         |  | List of Subsidiaries(5)                                                                                                                                                                                                                   
|11.1        |  | Code of Business Conduct and Ethics(8)                                                                                                                                                                                                    
|12.1        |  | Certification of the Chief Executive Officer (Principal Executive Officer) pursuant to Rule 13a-14(a) of the Securities Exchange Act, as amended                                                                                          
|12.2        |  | Certification of the Chief Financial Officer (Principal Financial Officer) pursuant to Rule 13a-14(a) of the Securities Exchange Act, as amended                                                                                          
|13.1        |  | Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                 
|            |  |                                                                                                                                                                                                                                           
|99.1        |  | Press Release dated April 14, 2015                                                                                                                                                                                                        



| | (1) | Incorporated by reference to Annexes C and D of China Ceramics’ Prospectus on Form 424B3 filed with the SEC on November
13, 2009.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------



| | (2) | Incorporated by reference to China Ceramics’ Registration Statement on Form F-4 (File No. 333-161557).
| | --- | ------------------------------------------------------------------------------------------------------



115







| | (3) | Incorporated by reference to exhibits of the same number filed with CHAC’s Registration Statement on Form F-1 or amendments
thereto (File No. 333-145085).
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| | (4) | Incorporated by reference to CHAC’s Form 8-K, dated November 21, 2007.
| | --- | ----------------------------------------------------------------------



| | (5) | Incorporated by reference to exhibits of the same number filed with China Ceramics’ Registration Statement on Form F-1
(File No. 333-164784).
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------



| | (6) | Incorporated by reference to exhibits of the same number filed with China Ceramics’ Registration Statement on Form F-1
(File No. 333-170237).
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------



| | (7) | Incorporated by reference to Annex A to Exhibit 99.1 filed with China Ceramics’ Report of Foreign Private Issuer on Form
6-K filed with the SEC on November 20, 2010
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (8) | Incorporated by reference to China Ceramics’ Annual Report on Form 20-F filed with the SEC on May 17, 2010.
| | --- | -----------------------------------------------------------------------------------------------------------



| | (9) | Incorporated by reference to China Ceramics’ Annual Report on Form 20-F filed with the SEC on April 24, 2013.
| | --- | -------------------------------------------------------------------------------------------------------------



| | (10) | Incorporated by reference to China Ceramics’ Annual Report on Form 20-F filed with the SEC on July 31, 2014.
| | ---- | ------------------------------------------------------------------------------------------------------------



116







SIGNATURES



The Registrant hereby certifies that it meets
all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual
report on its behalf.



|               | CHINA CERAMICS CO., LTD.
|-------------- | ------------------------
|               |                         
|April 20, 2015 | By:                     
|               |                         
|               |                         
|               |                         
|               | CHINA CERAMICS CO., LTD.
|               |                         
|April 20, 2015 | By:                     
|               |                         
|               |                         



117







China Ceramics Co., Ltd. and Its Subsidiaries



Index to Consolidated Financial Statements



|                                                                                                                              | Page    
|----------------------------------------------------------------------------------------------------------------------------- | --------
|Report of Independent Registered Public Accounting Firm                                                                       | F-2     
|Consolidated Statements of Profit or Loss and Other Comprehensive Income for the years ended December 31, 2014, 2013 and 2012 | F-3     
|Consolidated Statements of Financial Position as of December 31, 2014, 2013 and 2012                                          | F-4     
|Consolidated Statements of Changes in Equity for the years ended December 31, 2014, 2013 and 2012                             | F-5     
|Consolidated Statements of Cash Flows for the years ended December 31, 2014, 2013 and 2012                                    | F-6     
|Notes to Consolidated Financial Statements                                                                                    | F-7~F-42











China Ceramics Co., Ltd. and Its Subsidiaries



REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM



To the Board of Directors and Shareholders
of China Ceramics Co., Ltd.



We have audited the accompanying
consolidated statements of financial position of China Ceramics Co., Ltd. and its subsidiaries (the “Company”) as of
December 31, 2014, 2013 and 2012, and the related consolidated statements of profit or loss and other comprehensive income, changes
in equity and cash flows for each of the years in the three-year period ended December 31, 2014. These financial statements are
the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements
based on our audits.



We conducted our audits
in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.
The Company is not required to have, nor were we engaged to perform an audit, of the Company’s internal control over financial
reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.



In our opinion, the
consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position
of the Company and its subsidiaries as of December 31, 2014, 2013 and 2012, and the consolidated results of their operations and
their cash flows for each of the years in the three-year period ended December 31, 2014, in conformity with International Financial
Reporting Standards as issued by the International Accounting Standards Board.



/s/ Crowe Horwath (HK) CPA Limited



Hong Kong, China



April 20, 2015



F-2







China Ceramics Co., Ltd. and Its Subsidiaries

Consolidated Statements of Profit or
Loss and Other Comprehensive Income

For the Years Ended December 31, 2014,
2013 and 2012





|                                                                                   |  |       |  | For the years ended December 31, |          
|---------------------------------------------------------------------------------- |  | ----- |  | -------------------------------- | ---------
|                                                                                   |  | Notes |  | 2014 RMB'000                     |          
|Revenue                                                                            |  | 5     |  |                                  | 1,037,651
|                                                                                   |  |       |  |                                  |          
|Cost of sales                                                                      |  |       |  |                                  | (933,220 
|                                                                                   |  |       |  |                                  |          
|Gross profit                                                                       |  |       |  |                                  | 104,431  
|                                                                                   |  |       |  |                                  |          
|Other income                                                                       |  | 5     |  |                                  | 429      
|Selling and distribution expenses                                                  |  |       |  |                                  | (14,251  
|Administrative expenses                                                            |  |       |  |                                  | (29,529  
|Finance costs                                                                      |  | 6     |  |                                  | (4,556   
|Realized and unrealized fair value (loss)/gain on derivative financial instruments |  | 7     |  |                                  | (59,477  
|Other expenses                                                                     |  |       |  |                                  | (10,937  
|                                                                                   |  |       |  |                                  |          
|(Loss)/profit before taxation                                                      |  | 8     |  |                                  | (13,890  
|Income tax (expense)/credit                                                        |  | 9     |  |                                  | (16,463  
|                                                                                   |  |       |  |                                  |          
|(Loss)/profit attributable to shareholders                                         |  |       |  |                                  | (30,353  
|                                                                                   |  |       |  |                                  |          
|Other comprehensive income for the year, net of tax:                               |  |       |  |                                  |          
|Items that may be reclassified subsequently to profit or loss:                     |  |       |  |                                  |          
|Exchange differences on translation of financial statements of foreign operations  |  |       |  |                                  | 1        
|                                                                                   |  |       |  |                                  |          
|Total comprehensive (loss)/income for the year                                     |  |       |  |                                  | (30,352  
|                                                                                   |  |       |  |                                  |          
|(Loss)/earnings per share                                                          |  |       |  |                                  |          
|Basic (RMB)                                                                        |  | 10    |  |                                  | (1.49    
|Diluted (RMB)                                                                      |  | 10    |  |                                  | (1.49    



The accompanying notes are an integral part
of these consolidated financial statements.



F-3







China Ceramics Co., Ltd. and Its Subsidiaries

Consolidated Statements of Financial
Position



|                                       |  |           |  | As of December 31, |          
|-------------------------------------- |  | --------- |  | ------------------ | ---------
|                                       |  | Notes     |  | 2014 RMB’000       |          
|ASSETS AND LIABILITIES                 |  |           |  |                    |          
|Non-current assets                     |  |           |  |                    |          
|Property, plant and equipment          |  | 12        |  |                    | 718,418  
|Land use rights                        |  | 13        |  |                    | 29,259   
|Goodwill                               |  | 11 and 26 |  |                    | 3,735    
|Deferred tax assets                    |  | 9         |  |                    | 7,854    
|Long-term prepaid expenses             |  | 14        |  |                    | 1,404    
|                                       |  |           |  |                    |          
|                                       |  |           |  |                    | 760,670  
|                                       |  |           |  |                    |          
|Current assets                         |  |           |  |                    |          
|Inventories                            |  | 15        |  |                    | 330,763  
|Trade receivables                      |  | 16        |  |                    | 549,925  
|Other receivables and prepayments      |  | 17        |  |                    | 2,178    
|Derivative financial instruments       |  | 29        |  |                    | -        
|Restricted cash                        |  | 18        |  |                    | 28,872   
|Cash and bank balances                 |  | 18        |  |                    | 61,155   
|                                       |  |           |  |                    |          
|                                       |  |           |  |                    | 972,893  
|                                       |  |           |  |                    |          
|Current liabilities                    |  |           |  |                    |          
|Trade payables                         |  | 19        |  |                    | 122,168  
|Accrued liabilities and other payables |  | 20        |  |                    | 49,989   
|Interest-bearing bank borrowings       |  | 21        |  |                    | 84,704   
|Amounts owed to related parties        |  | 27        |  |                    | 24,902   
|Income tax payable                     |  |           |  |                    | 2,772    
|                                       |  |           |  |                    |          
|                                       |  |           |  |                    | 284,535  
|                                       |  |           |  |                    |          
|Net current assets                     |  |           |  |                    | 688,358  
|                                       |  |           |  |                    |          
|Non-current liabilities                |  |           |  |                    |          
|Interest-bearing bank borrowings       |  | 21        |  |                    | -        
|Deferred tax liabilities               |  | 9         |  |                    | 1,404    
|                                       |  |           |  |                    |          
|                                       |  |           |  |                    | 1,404    
|                                       |  |           |  |                    |          
|Net assets                             |  |           |  |                    | 1,447,624
|                                       |  |           |  |                    |          
|EQUITY                                 |  |           |  |                    |          
|Share capital                          |  | 22        |  |                    | 137      
|Reserves                               |  | 23        |  |                    | 1,447,487
|Total shareholder’s equity             |  |           |  |                    | 1,447,624



The accompanying notes are an integral part
of these consolidated financial statements.



F-4







China Ceramics Co., Ltd. and Its Subsidiaries

Consolidated Statements of Changes in
Equity

For the Years Ended December 31, 2014,
2013 and 2012





|                                                                                      |  | Outstanding |     |  |         |  |         | Reverse          |  |  |              |   |  | Share-based |        |  |             |  |         |              |  |  |          |  |  | Currency    |        |  |         | 
|------------------------------------------------------------------------------------- |  | ----------- | --- |  | ------- |  | ------- | ---------------- |  |  | ------------ | - |  | ----------- | ------ |  | ----------- |  | ------- | ------------ |  |  | -------- |  |  | ----------- | ------ |  | ------- | 
|                                                                                      |  | share       |     |  | Share   |  |         | recapitalization |  |  | Merger       |   |  | payment     |        |  | Statutory   |  |         | Capital      |  |  | Retained |  |  | translation |        |  | Total   | 
|                                                                                      |  | capital     |     |  | premium |  |         | reserve          |  |  | reserve      |   |  | reserve     |        |  | reserve     |  |         | reserve      |  |  | earnings |  |  | reserve     |        |  | Equity  | 
|                                                                                      |  | RMB’000     |     |  | RMB’000 |  |         | RMB’000          |  |  | RMB’000      |   |  | RMB’000     |        |  | RMB’000     |  |         | RMB’000      |  |  | RMB’000  |  |  | RMB’000     |        |  | RMB’000 | 
|                                                                                      |  | (Note 22)   |     |  |         |  |         | (Note23(e))      |  |  | (Note 23(c)) |   |  | (Note23(d)) |        |  | (Note23(a)) |  |         | (Note 23(f)) |  |  |          |  |  | (Note23(b)) |        |  |         | 
|Balance at January 1, 2012                                                            |  |             | 124 |  |         |  | 659,520 |                  |  |  | (507,235     | ) |  |             | 58,989 |  |             |  | 115,595 |              |  |  | 94,608   |  |  |             | -      |  |         | 
|Net profit for the year                                                               |  |             | -   |  |         |  | -       |                  |  |  | -            |   |  |             | -      |  |             |  | -       |              |  |  | -        |  |  |             | -      |  |         | 
|Exchange differences on translation of financial
    statements of foreign operations |  |             | -   |  |         |  | -       |                  |  |  | -            |   |  |             | -      |  |             |  | -       |              |  |  | -        |  |  |             | -      |  |         | 
|Total comprehensive income for the year                                               |  |             | -   |  |         |  | -       |                  |  |  | -            |   |  |             | -      |  |             |  | -       |              |  |  | -        |  |  |             | -      |  |         | 
|Issuance of new shares                                                                |  |             | 13  |  |         |  | (13     | )                |  |  | -            |   |  |             | -      |  |             |  | -       |              |  |  | -        |  |  |             | -      |  |         | 
|Transfer to statutory reserve                                                         |  |             |     |  |         |  |         |                  |  |  |              |   |  |             | -      |  |             |  | -       |              |  |  | 25,347   |  |  |             | -      |  |         | 
|Employee share-based payment options                                                  |  |             | -   |  |         |  | -       |                  |  |  | -            |   |  |             | -      |  |             |  | 5,651   |              |  |  | -        |  |  |             | -      |  |         | 
|Balance at December 31,
    2012                                                      |  |             | 137 |  |         |  | 659,507 |                  |  |  | (507,235     | ) |  |             | 58,989 |  |             |  | 121,246 |              |  |  | 119,955  |  |  |             | -      |  |         | 
|Net loss for the year                                                                 |  |             | -   |  |         |  | -       |                  |  |  | -            |   |  |             | -      |  |             |  | -       |              |  |  | -        |  |  |             | -      |  |         | 
|Exchange differences on translation of financial
    statements of foreign operations |  |             | -   |  |         |  | -       |                  |  |  | -            |   |  |             | -      |  |             |  | -       |              |  |  | -        |  |  |             | -      |  |         | 
|Total comprehensive loss for the year                                                 |  |             | -   |  |         |  | -       |                  |  |  | -            |   |  |             | -      |  |             |  | -       |              |  |  | -        |  |  |             | -      |  |         | 
|Transfer to statutory reserve                                                         |  |             | -   |  |         |  | -       |                  |  |  | -            |   |  |             | -      |  |             |  | -       |              |  |  | 3,057    |  |  |             | -      |  |         | 
|Employee share-based payment options                                                  |  |             | -   |  |         |  | -       |                  |  |  | -            |   |  |             | -      |  |             |  | 2,117   |              |  |  | -        |  |  |             | -      |  |         | 
|Dividends declared and paid (Note 24)                                                 |  |             | -   |  |         |  | -       |                  |  |  | -            |   |  |             | -      |  |             |  | -       |              |  |  | -        |  |  |             | -      |  |         | 
|Balance at December 31,
    2013                                                      |  |             | 137 |  |         |  | 659,507 |                  |  |  | (507,235     | ) |  |             | 58,989 |  |             |  | 123,363 |              |  |  | 123,012  |  |  |             | -      |  |         | 
|Net loss for the year                                                                 |  |             | -   |  |         |  | -       |                  |  |  | -            |   |  |             | -      |  |             |  | -       |              |  |  | -        |  |  |             | -      |  |         | 
|Exchange differences on translation of financial
    statements of foreign operations |  |             | -   |  |         |  | -       |                  |  |  | -            |   |  |             | -      |  |             |  | -       |              |  |  | -        |  |  |             | -      |  |         | 
|Total comprehensive loss for the year                                                 |  |             | -   |  |         |  | -       |                  |  |  | -            |   |  |             | -      |  |             |  | -       |              |  |  | -        |  |  |             | -      |  |         | 
|Transfer to statutory reserve                                                         |  |             | -   |  |         |  | -       |                  |  |  | -            |   |  |             | -      |  |             |  | -       |              |  |  | 4,893    |  |  |             | -      |  |         | 
|Employee share-based payment options                                                  |  |             | -   |  |         |  | -       |                  |  |  | -            |   |  |             | -      |  |             |  | 150     |              |  |  | -        |  |  |             | -      |  |         | 
|Dividends declared and paid (Note 24)                                                 |  |             | -   |  |         |  | -       |                  |  |  | -            |   |  |             | -      |  |             |  | -       |              |  |  | -        |  |  |             | -      |  |         | 
|Contribution from a related party (Note 23(f))                                        |  |             | -   |  |         |  | -       |                  |  |  | -            |   |  |             | -      |  |             |  | -       |              |  |  | -        |  |  |             | 61,266 |  |         | 
|Balance at December 31,
    2014                                                      |  |             | 137 |  |         |  | 659,507 |                  |  |  | (507,235     | ) |  |             | 58,989 |  |             |  | 123,513 |              |  |  | 127,905  |  |  |             | 61,266 |  |         | 





The accompanying notes are an integral part
of these consolidated financial statements.



F-5







China Ceramics Co., Ltd. and Its Subsidiaries
Consolidated Statements of Cash Flows

For the Years Ended December 31, 2014,
2013 and 2012





|                                                                                               |  |       |  | For the years ended December 31, |        
|---------------------------------------------------------------------------------------------- |  | ----- |  | -------------------------------- | -------
|                                                                                               |  | Notes |  | 2014 RMB’000                     |        
|Cash flows from operating activities                                                           |  |       |  |                                  |        
|(Loss)/profit before taxation                                                                  |  |       |  |                                  | (13,890
|Adjustments for                                                                                |  |       |  |                                  |        
|Amortization of land use rights                                                                |  | 13    |  |                                  | 670    
|Depreciation of property, plant and equipment                                                  |  | 12    |  |                                  | 69,450 
|Loss on disposal of property, plant and equipment                                              |  | 12    |  |                                  | 3,537  
|Realized and unrealized loss/(gain) from derivative financial instruments                      |  | 7     |  |                                  | 59,477 
|Write down of inventories                                                                      |  | 15    |  |                                  | 2,438  
|Share-based compensation                                                                       |  | 25    |  |                                  | 150    
|Finance costs                                                                                  |  | 6     |  |                                  | 4,556  
|Interest income                                                                                |  | 5     |  |                                  | (429   
|Foreign exchange loss                                                                          |  |       |  |                                  | 591    
|Operating cash flows before working capital changes                                            |  |       |  |                                  | 126,550
|Increase in inventories                                                                        |  |       |  |                                  | (25,765
|(Increase)/decrease in trade receivables                                                       |  |       |  |                                  | (58,937
|Decrease in other receivables and prepayments                                                  |  |       |  |                                  | 112    
|(Decrease)/increase in trade payables                                                          |  |       |  |                                  | (30,404
|Increase/(decrease) in accrued liabilities, other payables and amounts owed to related parties |  |       |  |                                  | 28,845 
|Cash generated from operations                                                                 |  |       |  |                                  | 40,401 
|Interest paid                                                                                  |  |       |  |                                  | (4,576 
|PRC income tax paid                                                                            |  |       |  |                                  | (13,108
|Net cash generated from operating activities                                                   |  |       |  |                                  | 22,717 
|                                                                                               |  |       |  |                                  |        
|Cash flows from investing activities                                                           |  |       |  |                                  |        
|Proceed from derivative financial instruments                                                  |  |       |  |                                  | 1,390  
|Proceed from disposal of property, plant and equipment                                         |  |       |  |                                  | 11,172 
|Acquisition of property, plant and equipment                                                   |  | 12    |  |                                  | -      
|Increase in restricted cash                                                                    |  |       |  |                                  | -      
|Interest received                                                                              |  |       |  |                                  | 429    
|Net cash generated from/(used in) investing activities                                         |  |       |  |                                  | 12,991 
|                                                                                               |  |       |  |                                  |        
|Cash flows from financing activities                                                           |  |       |  |                                  |        
|New bank borrowings                                                                            |  |       |  |                                  | 57,119 
|Repayment of short-term loans                                                                  |  |       |  |                                  | (73,064
|Dividend paid                                                                                  |  |       |  |                                  | (1,505 
|Deposit to stock transfer agent for dividend payment                                           |  |       |  |                                  | -      
|Advances from related party                                                                    |  |       |  |                                  | 14,048 
|Net cash (used in)/generated from financing activities                                         |  |       |  |                                  | (3,402 
|                                                                                               |  |       |  |                                  |        
|Net increase/(decrease) in cash and cash equivalents                                           |  |       |  |                                  | 32,306 
|Cash and cash equivalents, beginning of year                                                   |  |       |  |                                  | 28,848 
|Effect of foreign exchange rate differences                                                    |  |       |  |                                  | 1      
|Cash and cash equivalents, end of year                                                         |  |       |  |                                  | 61,155 
|Non-cash transactions:                                                                         |  |       |  |                                  |        
|Payments of dividends funded by deposit to stock transfer agent                                |  | 17    |  |                                  | 11,831 
|Restricted cash funded by a related party                                                      |  | 23(f) |  |                                  | 6,659  
|Loss on derivative financial instruments funded by a related party                             |  | 23(f) |  |                                  | 4,727  
|Transfer of restricted cash to a related party                                                 |  | 23(f) |  |                                  | 15,552 
|Release of liabilities under the Novation Agreement                                            |  | 23(f) |  |                                  | 56,095 
|Release of liabilities under the Offset Agreement                                              |  | 23(f) |  |                                  | 20,723 





The accompanying notes are an integral part
of these consolidated financial statements.



F-6







|CHINA CERAMICS CO. LTD. AND ITS SUBSIDIARIES              
|----------------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                
|For the Three Years Ended December 31, 2012, 2013 and 2014
|                                                          
|                                                          



| | 1. | GENERAL INFORMATION
| | -- | -------------------



China Ceramics Co.,
Ltd. (“China Ceramics” or the “Company”) is a British Virgin Islands company operating under the BVI Business
Companies Act (2004) with its shares listed on the NASDAQ (“symbol: CCCL”). Its predecessor company, China Holdings
Acquisition Corp. (“CHAC”), was incorporated in Delaware on June 22, 2007, and was organized as a blank check company
for the purpose of acquiring, through a stock exchange, asset acquisition or other similar business combination, or controlling,
through contractual arrangements, an operating business, that has its principal operations in Asia. The Company has no operations
and has no assets or liabilities of consequence outside its investments in its operating subsidiaries. The head office of the Company
is located at Junbing Industrial Zone, Jinjiang City, Fujian Province, the People’s Republic of China (“PRC”).



On November 20, 2009,
CHAC merged with and into China Ceramics, its wholly owned British Virgin Islands subsidiary, with China Ceramics surviving the
merger (the “Redomestication”). On the same day, pursuant to the terms of a merger and stock purchase agreement dated
August 19, 2009 (the “acquisition agreement”), China Ceramics acquired all of the outstanding securities of Success
Winner Limited (“Success Winner”) held by Mr. Wong Kung Tok in exchange for US$10.00 and 5,743,320 shares of China
Ceramics (the “Success Winner Acquisition”). The total number of issued and outstanding shares of China Ceramics immediately
after the acquisition was 8,950,171.



Prior to the Success
Winner Acquisition on November 20, 2009, neither CHAC nor China Ceramics had an operating business.



Jinjiang Hengda Ceramics
Co., Ltd. (“Hengda”), which became the operating entity of China Ceramics in connection with the Success Winner Acquisition,
was established on September 30, 1993 under the laws of PRC with 15% of its equity interest owned by Fujian Province Jinjiang City
Anhai Junbing Hengda Construction Material Factory (“Anhai Hengda”) and 85% owned by Chi Wah Trading Import and Export
Company (“Chi Wah”). Chi Wah is a sole proprietor under the laws of Hong Kong with its legal and equitable interest
solely owned by Mr. Wong Kung Tok. Anhai Hengda was owned by Mr. Wong Kung Tok’s family, which was considered an act-in-concert
party of Mr. Wong Kung Tok for accounting purposes.



Hengda is principally
engaged in the manufacture and sale of ceramic tiles used for exterior siding and for interior flooring and design in residential
and commercial buildings.



Hengda’s owners
reorganized the corporate structure in 2008 and 2009 (the “Hengda Reorganization” or the “Reorganization”),
as follows:



Stand Best Creation
Limited (“Stand Best”) was established on January 17, 2008 under the laws of Hong Kong with its paid-up share capital
being HK$1.00 divided into 1 ordinary share solely owned by Mr. Wong Kung Tok. Stand Best acquired 100% of Hengda’s equity
interest from Anhai Hengda and Chi Wah on April 1, 2008 at the consideration of RMB58,980,000.



Success Winner Limited
(“Success Winner”) was incorporated in the British Virgin Islands on May 29, 2009 as a limited liability company. Its
paid-up and issued capital is US$1 divided into 1 ordinary share solely owned by Mr. Wong Kung Tok.



On June 30, 2009,
through a capitalization agreement between Mr. Wong Kung Tok and Stand Best, Stand Best capitalized a shareholder loan due to Mr.
Wong Kung Tok in the amount of HK$67.9 million (equivalent to approximately RMB58.9 million) through the issuance of an aggregate
of 9,999 ordinary shares of HK$1.00 par value which Mr. Wong Kung Tok allotted to Success Winner.



On the same date,
Mr. Wong Kung Tok transferred his ownership of the remaining 1 ordinary share of Stand Best to Success Winner, thus making Success
Winner the sole parent company of Stand Best.



On January 8, 2010,
Hengda completed the acquisition of all voting equity interests of Jiangxi Hengdali Ceramic Materials Co., Ltd. (“Hengdali”
or the “Gaoan Facility”), located in Gaoan, Jiangxi Province (the “Hengdali Acquisition”). Hengdali manufactures
and sells ceramics tiles used for exterior siding and for interior flooring. In total, Hengda assumed loans of RMB 60.0 million
and paid cash consideration of RMB185.5 million for the acquisition.



On September 17, 2013,
Fujian Province Hengdali Building Materials Co., Ltd. (“Fujian Hengdali”) was incorporated in Pingtan, Fujian Province,
100% owned by Hengda. Fujian Hengdali’s approved scope of business includes sales of building materials and interior and
exterior decoration materials.



F-7







|CHINA CERAMICS CO. LTD. AND ITS SUBSIDIARIES              
|----------------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                
|For the Three Years Ended December 31, 2012, 2013 and 2014
|                                                          



| | 1. | GENERAL INFORMATION (Continued)
| | -- | -------------------------------



China Ceramics and
its subsidiaries’ (the “Company”) corporate structure as of December 31, 2014 is as follows:







|Name                                                            |  | Place and date of  incorporation
    or  establishment/  operations |  | Nominal value of  issued ordinary
     share  /registered  capital |  | Percentage of  equity
    
    attributable to the  Company |  | Principal activities
|--------------------------------------------------------------- |  | ------------------------------------------------------------------- |  | ------------------------------------------------------------------ |  | ----------------------------------------------------------- |  | --------------------
|                                                                |  |                                                                     |  |                                                                    |  | Direct                                                      |  | Indirect            
|Success Winner Limited                                          |  | British Virgin Islands, May
    29, 2009                            |  | US$1                                                               |  | 100                                                         |  | -                   
|                                                                |  |                                                                     |  |                                                                    |  |                                                             |  |                     
|Stand Best Creation Limited                                     |  | Hong Kong, January 17, 2008                                         |  | HK$10,000                                                          |  | -                                                           |  | 100                 
|                                                                |  |                                                                     |  |                                                                    |  |                                                             |  |                     
|Jinjiang Hengda Ceramics Co., Ltd. (note)                       |  | PRC, September 30, 1993                                             |  | RMB288,880,000                                                     |  | -                                                           |  | 100                 
|                                                                |  |                                                                     |  |                                                                    |  |                                                             |  |                     
|Jiangxi Hengdali Ceramic Materials Co., Ltd.
    (Note (note)   |  | PRC, May 4, 2008                                                    |  | RMB55,880,000                                                      |  | -                                                           |  | 100                 
|                                                                |  |                                                                     |  |                                                                    |  |                                                             |  |                     
|Fujian Province Hengdali Building Materials
    Co., Ltd (note) |  | PRC, September 17,2013                                              |  | RMB1,000,000                                                       |  | -                                                           |  | 100                 



Note: All The registered capital of Hengda,
Hengdali and Fujian Hengdali had been fully paid up.



F-8







|CHINA CERAMICS CO. LTD. AND ITS SUBSIDIARIES              
|----------------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                
|For the Three Years Ended December 31, 2012, 2013 and 2014
|                                                          



| | 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
| | -- | ------------------------------------------



| | 2.1 | Basis of preparation
| | --- | --------------------



The consolidated financial
statements have been prepared in accordance with International Financial Reporting Standards (“IFRSs”) as issued by
the International Accounting Standards Board (“IASB”), which collective term includes all applicable individual International
Financial Reporting Standards, International Accounting Standards and Interpretations issued by the IASB.



The significant accounting
policies that have been used in the preparation of these consolidated financial statements are summarized below. These policies
have been consistently applied to all the years presented unless otherwise stated. The adoption of new or amended IFRSs and the
impacts on the Company’s financial statements, if any, are disclosed in Note 3.



The consolidated financial
statements have been prepared on the historical cost basis, except for derivative financial instruments that have been measured
at fair value.



The preparation of
financial statements in conformity with IFRSs requires management to make judgments, estimates and assumptions that affect the
application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions
are based on historical experience and various other factors believed to be reasonable under the circumstances, the results of
which form the basis of making the judgements about carrying amounts of assets and liabilities not readily apparent from other
sources. Actual results may differ from these estimates.



The estimates and
underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which
the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision
affects both current and future periods.



Judgments made by
management in the application of IFRSs that have significant effect on the financial statements and major sources of estimation
uncertainty are discussed in Note 4.



The consolidated financial
statements were approved and authorized for issue by the Board of Directors on April 20, 2015.





| | 2.2 | Basis of consolidation
| | --- | ----------------------





The Success Winner
Acquisition on November 22, 2009 has been accounted for as a reverse recapitalization. The acquisition agreement resulted in the
former owner of Success Winner obtaining effective operating and financial control of the combined entity. Prior to the acquisition,
China Ceramics had no operating business. Accordingly, the acquisition does not constitute a business combination for accounting
purposes and is accounted for as a capital transaction. That is, the transaction is in substance a reverse recapitalization, equivalent
to the issuance of equity interests by Success Winner for the net monetary assets of China Ceramics accompanied by a recapitalization.
The consolidated financial statements are a continuation of the financial statements of Success Winner. The assets and liabilities
of China Ceramics are recognized at their carrying amounts at the date of acquisition with a corresponding credit to the consolidated
equity and no goodwill or other intangible assets are recognized. The equity of the combined entity recognized at the date of acquisition
represents the equity balances of Success Winner together with the deemed proceeds from the reverse recapitalization determined
as described above. However, the equity structure presented in the consolidated financial statements (number and values of equity
instruments issued) reflects the equity structure of the legal parent, China Ceramics. Costs directly attributable to the transaction
have been debited to equity to the extent of net monetary assets received.



Success Winner and
its subsidiaries as a group is regarded as a continuing entity resulting from the Hengda Reorganization since the management of
all the entities which took part in the Reorganization were controlled by the same director and shareholder before and immediately
after the Reorganization. Immediately after the Reorganization, there was a continuation of the control over the entities’
financial and operating policy decision and risk and benefits to the ultimate shareholders that existed prior to the Reorganization.
Accordingly, the reorganization has been accounted for as a reorganization under common control and the financial statements of
Success Winner, Stand Best and Hengda have been combined on the basis of merger accounting for all periods presented.



The assets and liabilities
of the combining entities or businesses are combined using the existing book values from the controlling party’s perspective.
No amount is recognized as consideration for goodwill or excess of the acquirer’s interest in the net fair values of the
acquiree’s identifiable assets, liabilities and contingent liabilities over cost at the time of the common control combination.
The consolidated statement of comprehensive income includes the results of each of the combining entities or businesses from the
earliest date presented or the date of their incorporation/establishment or since the date when the combining entities or businesses
first came under common control, where this is a shorter period, regardless of the date of the common control combination.



The Hengdali Acquisition
on January 8, 2010 has been accounted for as a business combination using the acquisition method. Hengdali is a subsidiary of the
Company, and the Company has the power to govern the financial and operating policies which accompanies its shareholding of 100%
of the voting rights in Hengdali. Therefore, Hengdali as a subsidiary is fully consolidated from January 8, 2010, the date on which
control was transferred to the Company.



F-9







|CHINA CERAMICS CO. LTD. AND ITS SUBSIDIARIES              
|----------------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                
|For the Three Years Ended December 31, 2012, 2013 and 2014
|                                                          



| | 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
| | -- | ------------------------------------------------------



| | 2.2 | Basis of consolidation (Continued)
| | --- | ----------------------------------



The accounting for
the Hengdali Acquisition under the acquisition method, treats the consideration transferred for the acquisition of Hengdali as
the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Company. The consideration
transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related
costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in this business
combination are measured initially at their fair values at the acquisition date.



The excess of the
consideration transferred over the fair value of the identifiable net assets acquired is recorded as goodwill.



The Company’s
financial statements consolidate those of the Company and all of its subsidiaries as of December 31, 2014. Subsidiaries are entities
controlled by the Company. The Company controls an entity when it is exposed, 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. When assessing whether the Company
has power, only substantive rights (held by the Company and other parties) are considered. All subsidiaries have a reporting date
of December 31.



An investment in a
subsidiary is consolidated into the consolidated financial statements form the date that control commences until the date that
control ceases. Inter-company transactions, balances and unrealized gains or losses on transactions between group companies are
eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted
by the Company.



| | 2.3 | Foreign currency translation
| | --- | ----------------------------



The financial statements
are presented in RMB (to the nearest thousand), being the currency that best reflects the economic substance of the underlying
events and circumstances relevant to the Company. The Company’s operations are conducted through the subsidiaries in the
People’s Republic of China (“PRC”). The functional currency of these subsidiaries is Renminbi (“RMB”).The
functional currency of China Ceramics is the United State dollars (US$).



In the individual
financial statements of the consolidated entities, foreign currency transactions are translated into the functional currency of
the individual entity using the exchange rates prevailing at the dates of the transactions. At the reporting date, monetary assets
and liabilities denominated in foreign currencies are translated at the foreign exchange rates ruling at that date. Foreign exchange
gains and losses resulting from the settlement of such transactions and from the reporting date retranslation of monetary assets
and liabilities are recognized in profit or loss.



Non-monetary items
carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the
fair value was determined and are reported as part of the fair value gain or loss. Non-monetary items that are measured in terms
of historical cost in a foreign currency are not retranslated.



In the consolidated
financial statements, all individual financial statements of foreign operations, originally presented in a currency different from
the Company’s presentation currency, have been converted into Renminbi. Assets and liabilities have been translated into
Renminbi at the closing rates at the reporting date. Income and expenses have been converted into Renminbi at the exchange rates
ruling at the transaction dates, or at the average rates over the reporting period provided that the exchange rates do not fluctuate
significantly. Any differences arising from this procedure have been recognized in other comprehensive income and accumulated separately
in the currency translation reserve in equity.



When a foreign operation
is sold, such exchange differences are reclassified from equity to profit or loss as part of the gain or loss on sale.



The translation of
certain RMB amounts as of and for the year ended December 31, 2014 into US$ is included in these financial statements solely for
the convenience of readers and was made at the rate of RMB6.2046 to US$1.00, which was based on the noon buying rate on December
31, 2014 in The City of New York cable transfers of RMB as certified for customers purposes by the Federal Reserve Bank of New
York. Such translation should be construed as representation that RMB amounts could be converted, realized or settled into US$
at the rate stated above or at any other rate.



| | 2.4 | Property, plant and equipment
| | --- | -----------------------------



Leasehold land
and buildings for own use



When a lease includes
both land and building elements, the Company assesses the classification of each element as a finance or an operating lease separately
based on the assessment as to whether substantially all the risks and rewards incidental to ownership of each element have been
transferred to the Company, unless it is clear that both elements are operating leases in which case the entire lease is classified
as an operating lease. Specifically, the minimum lease payments (including any lump sum upfront payments) are allocated between
the land and the building elements in proportion to the relative fair values of the leasehold interests in the land element and
building element of the lease at the inception of the lease.



F-10







|CHINA CERAMICS CO. LTD. AND ITS SUBSIDIARIES              
|----------------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                
|For the Three Years Ended December 31, 2012, 2013 and 2014
|                                                          



| | 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
| | -- | ------------------------------------------------------



| | 2.4 | Property, plant and equipment (Continued)
| | --- | -----------------------------------------



To the extent the
allocation of the lease payments can be made reliably, interest in leasehold land that is accounted for as an operating lease is
presented as "land use rights" in the consolidated statements of financial position and is amortized over the lease term
on a straight-line basis.



All buildings are
depreciated over their expected useful lives of 40 years.



Other property, plant and
equipment



Property, plant and
equipment are stated in the consolidated statements of financial position at cost less any accumulated depreciation and any accumulated
impairment losses.



Depreciation is provided
to write off the cost less their residual values over their estimated useful lives as follows, using the straight-line method:



|Plant and machinery | 10 years
|------------------- | --------
|Motor vehicles      | 10 years
|Office equipment    | 5 years 



The assets’
residual values, depreciation methods and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting
period, with the effect of any changes in estimate accounted for on a prospective basis.



Historical cost includes
expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying
amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with
the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is
derecognized. All other costs, such as repairs and maintenance, are charged to profit or loss during the financial period in which
they are incurred.



An asset’s carrying
amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated
recoverable amount.



The gain or loss arising
on retirement or disposal is determined as the difference between the sales proceeds and the carrying amount of the asset and is
recognized in profit or loss.



| | 2.5 | Land use rights
| | --- | ---------------



Upfront payments made
to acquire land held under an operating lease are stated at cost less accumulated amortization and any accumulated impairment losses.
Amortization is calculated on a straight line basis over the leasing period of 50 years.



| | 2.6 | Goodwill
| | --- | --------



Goodwill arising on
an acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment
losses, if any.



For the purposes of
impairment testing, goodwill is allocated to each of the Company’s cash-generating units, or groups of cash-generating units,
that is expected to benefit from the synergies of the combination.



A cash-generating
unit to which goodwill has been allocated is tested for impairment annually, or more frequently whenever there is indication that
the unit may be impaired. If some or all of the goodwill allocated to a cash-generating unit was acquired in a business combination
during the current annual period, that unit shall be tested for impairment before the end of the current annual period. If the
recoverable amount of the cash-generating unit is less than the carrying amount, the impairment loss is allocated first to reduce
the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit on a pro – rata basis
based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognized directly in profit or loss.
An impairment loss recognized for goodwill is not reversed in subsequent periods.



On disposal of the relevant
cash generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.



F-11







|CHINA CERAMICS CO. LTD. AND ITS SUBSIDIARIES              
|----------------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                
|For the Three Years Ended December 31, 2012, 2013 and 2014
|                                                          



| | 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
| | -- | ------------------------------------------------------



| | 2.7 | Inventories
| | --- | -----------



Inventories are carried
at the lower of cost and net realizable value. Cost is determined using the weighted average basis, and in the case of work in
progress and finished goods, comprises direct materials, direct labor and an appropriate proportion of overhead.



Net realizable value
is the estimated selling price in the ordinary course of business less the estimated cost of completion and applicable selling
expenses.



When inventories are
sold, the carrying amount of those inventories is recognized as an expense in the period in which the related revenue is recognized.
The amount of any write-down of inventories to net realizable value and all losses of inventories are recognized as an expense
in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories is recognized as a reduction
in the amount of inventories recognized as an expense in the period in which the reversal occurs.



| | 2.8 | Cash and cash equivalents
| | --- | -------------------------



Cash and cash equivalents
include cash at bank and in hand, demand deposits with banks and short term highly liquid investments with original maturities
of three months or less that are readily convertible into known amounts of cash and which are subject to an insignificant risk
of changes in value. For the purpose of the statement of cash flows presentation, cash and cash equivalents include bank overdrafts
which are repayable on demand and form an integral part of the Company’s cash management.



| | 2.9 | Financial instruments
| | --- | ---------------------



Financial assets and
financial liabilities are recognized when the Company becomes a party to the contractual provisions of the financial instrument
and are measured initially at fair value adjusted by transaction costs, except for those carried at fair value through profit or
loss which are measured initially at fair value. Subsequent measurement of financial assets and financial liabilities are described
below.



Financial assets are
derecognized when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and all
substantial risks and rewards are transferred. A financial liability is derecognized when it is extinguished, discharged, cancelled
or expires.



Classification
and subsequent measurement of financial assets



The Company’s
financial assets include cash and short-term deposits, trade receivables and derivative financial instruments.



For the purpose of
subsequent measurement, financial assets other than those designated and effective as hedging instruments are classified into the
following categories upon initial recognition:



- Loans and receivables



- Financial assets at fair value
through profit or loss (“FVTPL”)



- Held-to-maturity (“HTM”)
investments



- Available-for-sale (“AFS”)
financial assets



All financial assets
except for those at FVTPL are subject to review for impairment at least at each reporting date to identify whether there is any
objective evidence that a financial asset or a group of financial assets is impaired. Different criteria to determine impairment
are applied for each category of financial assets, which are described below.



All income and expenses
relating to financial assets are recognized in profit and loss.



Loans and receivables



Loans and receivables
are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are initially
recognized at fair value plus transaction costs that are directly attributable to their acquisition or issue. After initial recognition,
these are subsequently measured at amortized cost using the effective interest method, less provision for impairment. Discounting
is omitted where the effect of discounting is immaterial. The Company’s cash and trade receivables fall into this category
of financial instruments.



F-12







|CHINA CERAMICS CO. LTD. AND ITS SUBSIDIARIES              
|----------------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                
|For the Three Years Ended December 31, 2012, 2013 and 2014
|                                                          



| | 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
| | -- | ------------------------------------------------------



| | 2.9 | Financial instruments (Continued)
| | --- | ---------------------------------



Financial assets at FVTPL



Financial assets at
FVTPL include financial assets that are either classified as held for trading or that meet certain conditions and are designated
at FVTPL upon initial recognition. All derivative financial instruments fall into this category, except for those designated and
effective as hedging instruments, for which the hedge accounting requirements apply.



Assets in this category
are measured at fair value with net changes in fair value presented in the consolidated statements of profit or loss and other
comprehensive income. Transaction costs are expensed as incurred. The fair values of financial assets in this category are determined
by reference to active market transactions or using a valuation technique where no active market exists.



HTM investments



HTM investments are
non-derivative financial assets with fixed or determinable payments and fixed maturity other than loans and receivables. Investments
are classified as HTM if the Company has the intention and ability to hold them until maturity.



HTM investments are
measured subsequently at amortized cost using the effective interest method. The Company does not have any financial assets classified
as HTM.



AFS financial assets



AFS financial assets
are non-derivative financial assets that are either designated to this category or do not qualify for inclusion in any of the other
categories of financial assets. The Company does not have any financial assets classified as AFS.



After initial measurement,
AFS financial investments are subsequently measured at fair value with unrealized gains or losses recognized in other comprehensive
income and credited in the AFS reserve until the investment is derecognized, at which time the cumulative gain or loss is recognized
in other operating income, or the investment is determined to be impaired. Interest calculated using the effective interest method
and dividends are recognized in profit or loss within finance income.



Impairment of financial assets



The Company assesses,
at the end of each reporting period, whether there is objective evidence that a financial asset or a group of financial assets
is impaired. An impairment exists if one or more events that has occurred since the initial recognition of the asset (an incurred
‘loss event’), has an impact on the estimated future cash flows of the financial asset or the group of financial assets
that can be reliably estimated. Objective evidence of impairment could include:



| | • | significant financial difficulty of the issuer or counterparty; or
| | - | ------------------------------------------------------------------

| | • | breach of contract, such as default or delinquency in interest or principal payments; or
| | - | ----------------------------------------------------------------------------------------

| | • | it becoming probable that the borrower will enter bankruptcy or financial re-organization; or
| | - | ---------------------------------------------------------------------------------------------

| | • | significant changes in the technological, market, economic or legal environment that have an adverse
effect on the debtor.
| | - | --------------------------------------------------------------------------------------------------------------------------



If any such evidence
exists, the impairment loss on trade and other financial assets carried at amortized cost is measured as the difference between
the asset’s carrying amount and the present value of estimated future cash flows. The present value of the estimated future
cash flows is discounted at the financial asset’s original effective interest rate, where the effect of discounting is material.
This assessment is made collectively where these financial assets share similar risk characteristics, such as similar past due
status, and have not been individually assessed as impaired. Future cash flows for financial assets which are assessed for impairment
collectively are based on historical loss experience for assets with credit risk characteristics similar to the collective group.



If in a subsequent
period the amount of an impairment loss decreases and the decrease can be linked objectively to an event occurring after the impairment
loss was recognized, the impairment loss is reversed through profit or loss. A reversal of an impairment loss shall not result
in the asset’s carrying amount exceeding that which would have been determined had no impairment loss been recognized in
prior years.



Impairment losses
are written off against the corresponding assets directly, except for impairment losses recognized in respect of trade debtors,
whose recovery is considered doubtful but not remote. In this case, the impairment losses for doubtful debts are recorded using
an allowance account. When the Company is satisfied that recovery is remote, the amount considered irrecoverable is written off
against trade debtors directly and any amounts held in the allowance account relating to that debt are reversed. Subsequent recoveries
of amounts previously charged to the allowance account are reversed against the allowance account. Other changes in the allowance
account and subsequent recoveries of amounts previously written off directly are recognized in profit or loss.



F-13







|CHINA CERAMICS CO. LTD. AND ITS SUBSIDIARIES              
|----------------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                
|For the Three Years Ended December 31, 2012, 2013 and 2014
|                                                          



| | 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
| | -- | ------------------------------------------------------



| | 2.9 | Financial instruments (Continued)
| | --- | ---------------------------------



Classification
and subsequent measurement of financial liabilities



Financial liabilities
are classified as FVTPL, or other financial liabilities, as appropriate upon initial recognition. A financial liability is derecognized
when the obligation under the liability is discharged, cancelled or expired.



| | (i) | Financial liabilities classified as other financial liabilities are initially recognized at fair
value less directly attributable transaction costs. Subsequent to the initial recognition, other financial liabilities are measured
at amortized cost using the effective interest method. The Company’s other financial liabilities include trade and other
payables and bank borrowings.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | Financial liabilities classified as FVTPL include financial liabilities held for trading and financial
liabilities designated upon initial recognition as FVTPL. Financial liabilities are classified as held-for-trading if they are
acquired for the purpose of selling in the near term. This category includes derivative financial instruments (including separated
embedded derivatives) held for trading unless they are designated as effective hedging instruments. Gains or losses on liabilities
held for trading are recognized in profit or loss.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2.10 | Derivative financial instruments
| | ---- | --------------------------------



Initial recognition
and subsequent measurement



The Company uses derivative
financial instruments, such as forward currency contracts, for investment purposes. Such derivative financial instruments are initially
recognized at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value.
Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is
negative.



Any gains or losses
arising from changes in the fair value of derivatives are taken directly to profit or loss.



| | 2.11 | Leases
| | ---- | ------



Finance leases refers
to the situation that the economic ownership of a leased asset is transferred to the lessee if the lessee bears substantially all
the risks and rewards of ownership of the leased asset.



All other leases are
treated as operating leases. Where the Company has the use of assets under operating leases, payments made under the leases are
charged to profit or loss on a straight line basis over the lease terms except where an alternative basis is more representative
of the time pattern of benefits to be derived from the leased assets. Lease incentives received are recognized in profit or loss
as an integral part of the aggregate net lease payments made. Contingent rental are charged to profit or loss in the accounting
period in which they are incurred.



All the leases of
the Company are operating leases for the years ended December 31, 2014, 2013 and 2012.



| | 2.12 | Provisions and contingencies
| | ---- | ----------------------------



Provisions for product
warranties, legal disputes, onerous contracts or other claims are recognized when the Company has a present obligation (legal or
constructive) as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the
obligation and a reliable estimate of the amount of the obligation can be made. Where the time value of money is material, provisions
are stated at the present value of the expenditure expected to settle the obligation.



All provisions are
reviewed at each reporting date and adjusted to reflect the current best estimate.



Where it is not probable
that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed
as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence
will only be confirmed by the occurrence or non-occurrence of one or more future uncertain events not wholly within the control
of the Company are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.



F-14







|CHINA CERAMICS CO. LTD. AND ITS SUBSIDIARIES              
|----------------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                
|For the Three Years Ended December 31, 2012, 2013 and 2014
|                                                          



| | 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
| | -- | ------------------------------------------------------



| | 2.13 | Share capital
| | ---- | -------------



Ordinary shares are
classified as equity. Share capital is determined using the nominal value of shares that have been issued.



Any transaction costs
associated with the issuing of shares are deducted from share premium (net of any related income tax benefit) to the extent they
are incremental costs directly attributable to the equity transaction.



| | 2.14 | Revenue recognition
| | ---- | -------------------



Revenue comprises
the fair value of the consideration received or receivable for the sale of goods, net of rebates and discounts. In 2012, the Company
paid rebates to some distributors on their annual cash collections. No such rebates were paid to distributors since year 2013.
Provided it is probable that the economic benefits will flow to the Company and the revenue and costs, if applicable, can be measured
reliably, revenue is recognized as follows:



Sales of goods are
recognized upon transfer of the significant risks and rewards of ownership to the customer. This is usually taken as the time when
the goods are delivered and the customer has accepted the goods. Once goods are accepted by a customer, there is no continuing
management involvement with the goods and the Company does not have the obligation to accept the return of the goods to the Company
from the customer.



Interest income is
recognized on a time- proportion basis using the effective interest method.



| | 2.15 | Impairment of non-financial assets
| | ---- | ----------------------------------



Impairment testing
is made on the Company’s goodwill at each reporting date. Property, plant and equipment and land use rights are tested for
impairment if there is any indication that the assets may be impaired at the balance sheet date.



If any indication
exists, or when annual impairment testing for an asset is required, the Company estimates the asset’s recoverable amount.



Calculation of recoverable
amount



An asset’s recoverable
amount is the greater of an asset’s or cash-generating unit’s fair value less costs of disposal and its value in use.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money and the risks specific to the asset. Where an asset does not
generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the smallest group
of assets that generates cash inflows independently (i.e. a cash-generating unit).



Recognition of impairment
losses



An impairment loss
is recognized in profit or loss whenever the carrying amount of an asset, or the cash-generating unit to which it belongs, exceeds
its recoverable amount. Impairment losses recognized in respect of cash-generating units are allocated first to reduce the carrying
amount of any goodwill allocated to that cash-generating unit (or group of units), and then, to reduce on a pro rata basis the
carrying amount of the other assets in the unit (or group of units), except that the carrying amount of an asset will not be reduced
below its individual fair value less costs of disposal (if measurable) or value in use (if determinable).



Reversal of impairment losses



In respect of assets
other than goodwill, an impairment loss is reversed if there has been a favorable change in the estimates used to determine the
recoverable amount. An impairment loss in respect of goodwill is not reversed.



A reversal of an impairment
loss is limited to the asset’s carrying amount that would have been determined had no impairment loss been recognized in
prior years. Reversals of impairment losses are credited to profit or loss in the year in which the reversals are recognized.



F-15







|CHINA CERAMICS CO. LTD. AND ITS SUBSIDIARIES              
|----------------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                
|For the Three Years Ended December 31, 2012, 2013 and 2014
|                                                          



| | 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
| | -- | ------------------------------------------------------



| | 2.16 | Employee benefits
| | ---- | -----------------



Retirement benefits



The employees of the
Company’s PRC subsidiaries are required to participate in a central pension scheme operated by the local municipal government.
Contributions are recognized as an expense in profit or loss as employees render services during the year. The Company’s
obligation under these plans is limited to the fixed percentage contributions payable.



Share-based employee remuneration



The Company operates
equity-settled share-based remuneration plans for its employees. None of the Company’s plans feature any options for a cash
settlement.



The fair value of
share options granted to employees is recognized as an employee cost with a corresponding increase in the share-based payment reserve
within equity. The fair value is measured at the grant date using the Black Scholes Option Pricing Model, taking into account the
terms and conditions upon which the options were granted. Where the employees have to meet vesting conditions before becoming unconditionally
entitled to the share options, the total estimated fair value of the share options is spread over the vesting period, taking into
account the probability that the options will vest.



During the vesting
period, the number of share options expected to vest is reviewed. Any resulting adjustment to the cumulative fair value recognized
in prior years is charged/credited to the profit or loss for the year under review, unless the original employee expenses qualify
for recognition as an asset, with a corresponding adjustment to the share-based payment reserve. On the vesting date, the amount
recognized as an expense is adjusted to reflect the actual number of share options that vest (with a corresponding adjustment to
the share-based payment reserve) except where forfeiture is only due to not achieving vesting conditions that relate to the market
price of the Company’s shares. The equity amount is recognized in the share-based payment reserve until either the option
is exercised (when it is transferred to the share premium account) or the option expires (when it is released directly to retained
earnings).



| | 2.17 | Borrowing costs
| | ---- | ---------------



Borrowing costs consist
of interest and other costs incurred in connection with the borrowing of funds. Borrowing costs directly attributable to the acquisition,
construction or production of qualifying asset which necessarily takes a substantial period of time to get ready for its intended
use or sale are capitalized as part of the cost of that asset until such time as the assets are substantially ready for their intended
use or sale. Other borrowing costs are expensed when incurred.



| | 2.18 | Accounting for income taxes
| | ---- | ---------------------------



Income tax comprises
current tax and deferred tax.



Current tax and movements
in deferred tax assets and liabilities are recognized in profit or loss except to the extent that they relate to items recognized
in other comprehensive income or directly in equity, in which case the relevant amounts of tax are recognized in other comprehensive
income or directly in equity, respectively.



Current tax is the
expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the end of the reporting
period, and any adjustment to tax payable in respect of previous years.



Deferred tax is calculated
using the liability method on temporary differences at the reporting date between the carrying amounts of assets and liabilities
in the financial statements and their respective tax bases. Deferred tax liabilities are generally recognized for all taxable temporary
differences. Deferred tax assets are recognized for all deductible temporary differences, tax losses available to be carried forward
as well as other unused tax credits, to the extent that it is probable that taxable profit, including existing taxable temporary
differences, will be available against which the deductible temporary differences, unused tax losses and unused tax credits can
be utilized.



Deferred tax assets
and liabilities are not recognized if the temporary difference arises from goodwill or from initial recognition (other than in
a business combination) of assets and liabilities in a transaction that affects neither taxable nor accounting profit or loss.



Deferred tax liabilities
are recognized for taxable temporary differences arising on investments in subsidiaries, associates and joint ventures, except
where the Company is able to control the reversal of the temporary differences and it is probable that the temporary differences
will not reverse in the foreseeable future.



Deferred tax is calculated,
without discounting, at the tax rates that are expected to apply in the period the liability is settled or the asset realized,
based on tax rate (and tax laws) that have been enacted or substantively enacted at the reporting date.



F-16







|CHINA CERAMICS CO. LTD. AND ITS SUBSIDIARIES              
|----------------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                
|For the Three Years Ended December 31, 2012, 2013 and 2014
|                                                          



| | 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
| | -- | ------------------------------------------------------



| | 2.18 | Accounting for income taxes (Continued)
| | ---- | ---------------------------------------



The carrying amount
of a deferred tax asset is reviewed at the end of each reporting period and is reduced to the extent that it is no longer probable
that sufficient taxable profits will be available to allow the related tax benefit to be utilized. Any such reduction is reversed
to the extent that it becomes probable that sufficient taxable profits will be available.



Additional income
taxes that arise from the distribution of dividends are recognized when the liability to pay the related dividends is recognized.



Current tax balances
and deferred tax balances, and movements therein, are presented separately from each other and are not offset. Current tax assets
are offset against current tax liabilities, and deferred tax assets are offset against deferred tax liabilities, if the Company
has the legally enforceable right to set off the recognized amounts and the following additional conditions are met:



| | (a) | in the case of current tax assets and liabilities, the Company intends either to settle on a net
basis, or to realize the asset and settle the liability simultaneously; or
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | in the case of deferred tax assets and liabilities, if they relate to income taxes levied by the
same taxation authority on either:
| | --- | -----------------------------------------------------------------------------------------------------------------------------------



| | (i) | the same taxable entity; or
| | --- | ---------------------------



| | (ii) | different taxable entities, which, in each future period in which significant amounts of deferred
tax liabilities or assets are expected to be settled or recovered, intend either to settle current tax liabilities and realize
the current tax assets on a net basis, or to settle the liabilities and realize the assets simultaneously.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2.19 | Research and development activities
| | ---- | -----------------------------------



Costs associated with
research activities are expensed in profit or loss as they incur. Costs that are directly attributable to development activities
are recognized as intangible assets if, and only if, all of the following have been demonstrated:



| | (i) | the technical feasibility of completing the intangible asset so that the asset will be available
for use or sale;
| | --- | -----------------------------------------------------------------------------------------------------------------



| | (ii) | the intention to complete the intangible asset and use or sell it;
| | ---- | ------------------------------------------------------------------



| | (iii) | the ability to use or sell the intangible asset;
| | ----- | ------------------------------------------------



| | (iv) | how the intangible asset will generate probable future economic benefits;
| | ---- | -------------------------------------------------------------------------



| | (v) | the availability of adequate technical, financial and other resources to complete the development
and to use or sell the intangible asset; and
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------



| | (vi) | the ability to measure reliably the expenditure attributable to the intangible asset during its
development.
| | ---- | ------------------------------------------------------------------------------------------------------------



The amount initially
recognized for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible
asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognized, development
expenditure is recognized in profit or loss in the period in which it is incurred.



Subsequent to initial
recognition, internally-generated intangible assets are reported at cost less accumulated amortization and accumulated impairment
losses, on the same basis as intangible assets that are acquired separately.



Gains and losses arising
from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount
of the asset, are recognized in profit or loss when the asset is derecognized.



F-17







|CHINA CERAMICS CO. LTD. AND ITS SUBSIDIARIES              
|----------------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                
|For the Three Years Ended December 31, 2012, 2013 and 2014
|                                                          



| | 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
| | -- | ------------------------------------------------------



| | 2.20 | Segment reporting
| | ---- | -----------------



The Company identifies
operating segments and prepares segment information based on the regular internal financial information reported to the Chief Executive
Officer and executive directors, who are the Company’s chief operating decision maker, for their decisions about the allocation
of resources to the Company’s business components and for their review of the performance of those components.



Business segment



The Company operates
principally in the manufacturing and sale of medium to high-end ceramic tiles. The Chief Executive Officer and executive directors
regularly review the Company’s business as one business segment.



Geographical segment



The business of the
Company is engaged entirely in the PRC. The Chief Executive Officer and executive directors regularly review the Company’s
business as one geographical segment.



| | 2.21 | Related parties
| | ---- | ---------------



| | (a) | A person, or a close member of that person’s
family, is related to the group if that person:
| | --- | --------------------------------------------------------------------------------------------



| | (i) | has control or joint control over the group;
| | --- | --------------------------------------------



| | (ii) | has significant influence over the group; or
| | ---- | --------------------------------------------



| | (iii) | is a member of the key management personnel of the group or the group’s parent.
| | ----- | -------------------------------------------------------------------------------



| | (b) | An entity is related to the group if any of the following
conditions applies:
| | --- | -----------------------------------------------------------------------------



| | (iv) | The entity and the group are members of the same group (which means that each parent, subsidiary
and fellow subsidiary is related to the others).
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------



| | (v) | One entity is an associate or joint venture of the other entity (or an associate or joint venture
of a member of a group of which the other entity is a member).
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (vi) | Both entities are joint ventures of the same third party.
| | ---- | ---------------------------------------------------------



| | (vii) | One entity is a joint venture of a third entity and the other entity is an associate of the third
entity.
| | ----- | ---------------------------------------------------------------------------------------------------------



| | (viii) | The entity is a post-employment benefit plan for the benefit of employees of either the group or
an entity related to the group.
| | ------ | --------------------------------------------------------------------------------------------------------------------------------



| | (ix) | The entity is controlled or jointly controlled by a person identified in (a).
| | ---- | -----------------------------------------------------------------------------



| | (x) | A person identified in (a)(i) has significant influence over the entity or is a member of the key
management personnel of the entity (or of a parent of the entity).
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



Close members of the
family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings
with the entity.



| | 3. | CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES
| | -- | ----------------------------------------------



| | 3.1 | Adoption of new or amended IFRSs
| | --- | --------------------------------



In 2014, the Company
has applied the following new or revised standards and amendments issued by the International Accounting Standards Board (“IASB”)
relevant to the Company’s financial statements:



IFRS 10
and 12 and IAS 27(as revised in 2011)(Amendments) Investment Entities

|IAS 32 (Amendments) | Offsetting Financial Assets and Financial Liabilities       
|------------------- | ------------------------------------------------------------
|IAS 36 (Amendments) | Recoverable Amount Disclosures for Non-Financial Assets     
|IAS 39 (Amendments) | Novation of Derivatives and Continuation of Hedge Accounting
|IFRIC – INT 21      | Levies                                                      



F-18







|CHINA CERAMICS CO. LTD. AND ITS SUBSIDIARIES              
|----------------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                
|For the Three Years Ended December 31, 2012, 2013 and 2014
|                                                          



| | 3. | CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES (Continued)
| | -- | ----------------------------------------------------------



| | 3.1 | Adoption of new or amended IFRSs (Continued)
| | --- | --------------------------------------------



Except as described
below, the application of the new and revised IFRSs in the current year has had no material impact on the Company’s financial
performance and positions for the current and prior years and/or disclosures set out in these consolidated financial statements.



| | (a) | Amendments to IFRS 10, IFRS 12 and IAS 27: Investment entities
| | --- | --------------------------------------------------------------



These amendments provide an
exception to the consolidation requirement for entities that meet the definition of an investment entity under IFRS 10. The exception
to consolidation requires investment entities to account for subsidiaries at fair value through profit or loss. These amendments
do not have an impact on the Company’s consolidated financial statements, since none of the entities in the Company qualify
to be an investment entity under IFRS 10.



| | (b) | Amendments to IAS 32: Offsetting financial assets and financial liabilities
| | --- | ---------------------------------------------------------------------------



These
amendments clarify the meaning of “currently has a legally enforceable right to set-off” and the criteria for non-simultaneous
settlement mechanisms of clearing houses to qualify for offsetting. The amendments to IAS32 have no impact on the Company’s
consolidated financial statements as they are consistent with the polices already adopted by the Company.



| | (c) | Amendments to IAS 36: Recoverable amount disclosures for non-financial assets
| | --- | -----------------------------------------------------------------------------



These
amendments remove the unintended consequences of IFRS 13 on the disclosures required under IAS 36 on the recoverable amount of
CGU which is not impaired. In addition, these amendments require disclosure of the recoverable amounts for the assets or CGUs for
which impairment loss has been recognized or reversed during the period, and expand the disclosure requirements regarding the fair
value measurement for these assets or units if their recoverable amounts are based on fair value less costs of disposal.



The directors
of the Company reviewed and assessed the disclosure requirement in relation to the impairment assessment of the Company’s
intangible assets with indefinite useful life in accordance with the requirements of IAS36. No disclosure of the recoverable amount
of the CGU to which goodwill or these intangible assets with indefinite useful lives has been made. See Note 11 and Note 13 for
details.



| | (d) | Amendments to IAS 39: Novation of derivatives and continuation of hedge accounting
| | --- | ----------------------------------------------------------------------------------



The amendments
to IAS 39 provide relief from discontinuing hedge accounting when novation of a derivative designated as a hedging instrument meets
certain criteria. The amendments also clarify that any change to the fair value of the derivative hedging instrument arising from
the novation should be included in the assessment of hedge effectiveness. The adoption of these amendments to IAS39 does not have
an impact on the Company’s consolidated financial statements as the Company does not have any derivatives that are subject
to novation.



| | (e) | IFRIC 21: Levies
| | --- | ----------------



IFRIC
21 clarifies that an entity recognizes a liability for a levy when the activity that triggers payment, as identified by the relevant
legislation, occurs. For a levy that is triggered upon reaching a minimum threshold, the interpretation clarifies that no liability
should be anticipated before the specified minimum threshold is reached. The adoption of IFRIC 21 does not have an impact on the
Company’s consolidated financial statements as the Company does not have any levy arrangements.



| | 3.2 | Accounting standards issued but not yet effective
| | --- | -------------------------------------------------



At the date of authorization
of these financial statements, certain new standards, amendments and interpretations to existing standards have been published
by the IASB but are not yet effective, and have not been adopted by the Company.



F-19







|CHINA CERAMICS CO. LTD. AND ITS SUBSIDIARIES              
|----------------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                
|For the Three Years Ended December 31, 2012, 2013 and 2014
|                                                          



| | 3. | CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES (Continued)
| | -- | ----------------------------------------------------------



| | 3.2 | Accounting standards issued but not yet effective (Continued)
| | --- | -------------------------------------------------------------



|IFRS 9                                   | Financial Instruments3                                                                
|---------------------------------------- | --------------------------------------------------------------------------------------
|IFRS 14                                  | Regulatory Deferral Accounts4                                                         
|IFRS 15                                  | Revenue from Contracts with Customers6                                                
|Amendments to IFRS 11                    | Accounting for Acquisitions of Interests in Joint Operations5                         
|Amendments to HKAS 1                     | Disclosure Initiative5                                                                
|Amendments to IAS 16 and IAS 38          | Clarification of Acceptable Methods of Depreciation and Amortisation5                 
|Amendments to IAS 27                     | Equity Method in Separate Financial Statements5                                       
|Amendments to IFRS 10,IFRS 12 and IAS 28 | Investment Entities: Applying the Consolidation Exception5                            
|Amendments to IFRS 10 and IAS 28         | Sale or Contribution of Assets between an Investor and its Associate or Joint Venture5
|Amendments to IFRSs                      | Annual Improvements to IFRSs 2010-2012 Cycle1                                         
|Amendments to IFRSs                      | Annual Improvements to IFRSs 2011-2013 Cycle2                                         
|Amendments to IFRSs                      | Annual Improvements to IFRSs 2012-2014 Cycle5                                         



1Effective for annual
periods beginning on or after July 1, 2014 with limited exceptions

2Effective for annual
periods beginning on or after July 1, 2014

3Effective for annual
periods beginning on or after January 1, 2018

4Effective for first
annual IFRS financial statements beginning on or after January 1, 2016

5Effective for annual
periods beginning on or after January 1, 2016

6Effective for annual
periods beginning on or after January 1, 2017



IFRS
9 Financial Instruments



IFRS 9
issued in 2009 introduced new requirements for the classification and measurement of financial assets. IFRS 9 was subsequently
amended in 2010 to include requirements for the classification and measurement of financial liabilities and for derecognition,
and further amended in 2013 to include the new requirements for general hedge accounting. Another revised version of IFRS 9 was
issued in 2014 mainly to include a) impairment requirements for financial assets and b) limited amendments to the classification
and measurement requirements by introducing a ‘fair value through other comprehensive income’ (FVTOCI) measurement
category for certain simple debt instruments.



Key requirements
of IFRS 9 are described below:



| | Ÿ | All recognized financial assets that are
within the scope of IAS 39 Financial Instruments Recognition and Measurement are subsequently measured at amortized cost or fair
value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash
flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are
generally measured at amortized cost at the end of subsequent accounting periods. Debt instruments that are held within a business
model whose objective is achieved both by collecting contractual cash flows and selling financial assets, and that have contractual
terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the
principal amount outstanding, are measured at FVTOCI. All other debt investments and equity investments are measured at their fair
value at the end of subsequent accounting periods. In addition, under IFRS 9, entities may make an irrevocable election to present
subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with
only dividend income generally recognized in profit or loss.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Ÿ | With regard to the measurement of financial
liabilities designated as at fair value through profit or loss, IFRS 9 requires that the amount of change in the fair value of
the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive
income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would
create or enlarge an accounting mismatch in profit or loss. Changes in fair value of financial liabilities attributable to changes
in the financial liabilities’ credit risk are not subsequently reclassified to profit or loss. Under IAS 39, the entire amount
of the change in the fair value of the financial liability designated as fair value through profit or loss was presented in profit
or loss.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Ÿ | In relation to the impairment of financial
assets, IFRS 9 requires an expected credit loss model, as opposed to an incurred credit loss model under IAS 39. The expected credit
loss model requires an entity to account for expected credit losses and changes in those expected credit losses at each reporting
date to reflect changes in credit risk since initial recognition. In other words, it is no longer necessary for a credit event
to have occurred before credit losses are recognized.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The directors anticipate
that the adoption of IFRS 9 in the future may not have significant impact on amounts reported in respect of the Group’s financial
assets and financial liabilities existing as at the end of the current year.



F-20







|CHINA CERAMICS CO. LTD. AND ITS SUBSIDIARIES              
|----------------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                
|For the Three Years Ended December 31, 2012, 2013 and 2014
|                                                          



| | 4. | CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
| | -- | --------------------------------------------



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



Estimates and judgments
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 Company makes
estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related
actual results. The key sources of estimation uncertainty and key assumptions concerning the future at the end of the reporting
period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within
the next financial year are discussed below:



Useful lives and
impairment assessment of property, plant and equipment



Property, plant and
equipment are stated at cost less accumulated depreciation and identified impairment losses. The estimation of useful lives impacts
the level of annual depreciation expenses recorded. Property, plant and equipment are evaluated for possible impairment on a specific
asset basis or in groups of similar assets, as applicable. This process requires management’s estimate of future cash flows
generated by each asset or group of assets. For any instance where this evaluation process indicates impairment, the relevant asset’s
carrying amount is written down to the recoverable amount and the amount of the write-down is charged against profit or loss.



Impairment loss
recognized in respect of property, plant and equipment



As of 31 December
2014, the carrying amount of property, plant and equipment was approximately RMB718,418,000 (2013: RMB802,578,000 ; 2012: RMB795,983,000).
There was no impairment loss recognized for the years ended December 31, 2014, 2013 and 2012. Determining whether property, plant
and equipment are impaired requires an estimation of the recoverable amount of the property, plant and equipment. Such estimation
was based on certain assumptions, which are subject to uncertainty and might materially differ from the actual results.



Impairment loss
recognized in respect of land use rights



As of 31 December
2014, the carrying amount of land use rights was approximately RMB29,259,000 (2013: RMB29,929,000; 2012: RMB30,598,000). There
was no impairment loss recognized for the years ended December 31, 2014, 2013 and 2012. Determining whether land use rights are
impaired requires an estimation of the recoverable amount of the land use rights. Such estimation was based on certain assumptions,
which are subject to uncertainty and might materially differ from the actual results.



Impairment of goodwill



Determining whether
goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated.
The value in use calculation requires the Company to estimate the future cash flows expected to arise from the cash-generating
unit and a suitable discount rate in order to calculate present value. Where the actual future cash flows are less than expected,
a material impairment loss may arise. No impairment was made on goodwill for the years ended December 31, 2014, 2013 and 2012.



Income tax



The Company has exposure
to income taxes in the PRC. Significant judgment is required in determining the provision for income taxes. There are certain transactions
and computations for which the ultimate tax determination is uncertain during the ordinary course of business. The Company recognizes
liabilities for expected tax issues based on estimates of whether additional taxes will be due. When the final tax outcome of these
matters is different from the amounts that were initially recognized, such differences will impact the income tax and deferred
tax provisions in the period in which such determination is made. The carrying amounts of the Company’s income tax payable
as of December 31, 2014, 2013 and 2012 were RMB2,772,000, RMB1,520,000 and RMB869,000, respectively.



F-21







|CHINA CERAMICS CO. LTD. AND ITS SUBSIDIARIES              
|----------------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                
|For the Three Years Ended December 31, 2012, 2013 and 2014
|                                                          



| | 4. | CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (Continued)
| | -- | --------------------------------------------------------



Impairment of trade
receivables



The Company’s
management assesses the collectability of trade receivables. This estimate is based on the credit history of the Company’s
customers and the current market conditions. Management assesses the collectability of trade receivables at the balance sheet dates
and makes the provision, if any. The identification of doubtful debts requires the use of judgment and estimates. Judgment is required
in assessing the ultimate realization of these receivables, including the current creditworthiness, past collection history of
each customer and on-going dealings with them. Where the expectation is different from the original estimate, such difference will
impact the carrying value of trade and other receivables and doubtful debts expenses in the period in which such estimate has been
changed. The carrying amounts of the Company’s trade receivables as of December 31, 2014, 2013 and 2012 were RMB549,925,000,RMB490,989,000
and RMB455,885,000, respectively.



Net realizable
value of inventories



Net realizable value
of inventories is the management’s estimation of future selling price in the ordinary course of business, less estimated
costs of completion and selling expenses. These estimates are based on the current market condition and the historical experience
of selling products of a similar nature. It could change significantly as a result of various market factors. The carrying amounts
of the Company’s inventories as of December 31, 2014, 2013 and 2012 were RMB330,763,000, RMB307,436,000 and RMB290,603,000,
respectively.



Share-based payment
transaction



The Company measures
the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at
which they are granted. Estimating fair value for share-based payment transactions requires determining the most appropriate valuation
model, which is dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate
inputs to the valuation model including the expected life of the stock option, volatility and dividend yield and making assumptions
about them. The assumptions and models used for estimating fair value for share-based payment transactions are disclosed in Note
25.



| | 5. | REVENUE AND OTHER INCOME
| | -- | ------------------------



Revenue comprises
the fair value of the consideration received or receivable for the sale of goods. An analysis of the Company’s revenue and
other income is as follows:



|                                |  | For the years ended December 31, |          
|------------------------------- |  | -------------------------------- | ---------
|                                |  | 2014                             |          
|                                |  | RMB’000                          |          
|Revenue                         |  |                                  |          
|Sale of goods                   |  |                                  | 1,037,651
|Other income                    |  |                                  |          
|Interest income                 |  |                                  | 429      
|Foreign exchange gains/(losses) |  |                                  | -        
|                                |  |                                  | 429      



| | 6. | FINANCE COSTS
| | -- | -------------



Finance costs comprise
interest expense on the Company’s bank borrowings:



|                            |  | For the years ended December 31, |      
|--------------------------- |  | -------------------------------- | -----
|                            |  | 2014                             |      
|                            |  | RMB’000                          |      
|Interest on bank borrowings |  |                                  | 4,556



F-22







|CHINA CERAMICS CO. LTD. AND ITS SUBSIDIARIES              
|----------------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                
|For the Three Years Ended December 31, 2012, 2013 and 2014
|                                                          



| | 7. | REALIZED AND UNREALIZED FAIR VALUE (LOSS)/GAIN ON DERIVATIVE FINANCIAL INSTRUMENTS
| | -- | ----------------------------------------------------------------------------------



|                                                                                                |  | For the years ended December 31, |        
|----------------------------------------------------------------------------------------------- |  | -------------------------------- | -------
|                                                                                                |  | 2014                             |        
|                                                                                                |  | RMB’000                          |        
|Realized and unrealized fair value (loss)/gain on derivative financial instruments (Note 29(d)) |  |                                  | (59,477



| | 8. | (LOSS)/PROFIT BEFORE TAXATION
| | -- | -----------------------------



The Company’s (loss)/profit
before taxation is arrived at after charging:



|                                                |  | For the years ended December 31, |        
|----------------------------------------------- |  | -------------------------------- | -------
|                                                |  | 2014                             |        
|                                                |  | RMB’000                          |        
|Cost of inventories recognized as expense(1)    |  |                                  | 928,823
|Depreciation expenses                           |  |                                  | 69,450 
|Amortization of land use rights                 |  |                                  | 670    
|Auditors’ remuneration                          |  |                                  |        
|–	        Audit fees                            |  |                                  | 5,992  
|–	        Audit-related fees                    |  |                                  | -      
|                                                |  |                                  | 5,992  
|Directors’ remuneration                         |  |                                  |        
|–	        salaries and related cost             |  |                                  | 888    
|–	        retirement scheme contribution        |  |                                  | -      
|–	        share-based payments                  |  |                                  | 21     
|Key management personnel (other than directors) |  |                                  |        
|–	        salaries and related cost             |  |                                  | 731    
|–	        retirement scheme contribution        |  |                                  | 19     
|–	        share-based payments                  |  |                                  | 129    
|Research and development personnel              |  |                                  |        
|–	        salaries and related cost             |  |                                  | 1,302  
|–	        retirement scheme contribution        |  |                                  | 55     
|Other personnel                                 |  |                                  |        
|–	        salaries and related cost             |  |                                  | 65,720 
|–	        retirement scheme contribution        |  |                                  | 7,783  
|Total employee benefit expenses                 |  |                                  | 76,648 



(1)	       Cost of inventories recognized as
expense included staff costs of RMB57,547,000, RMB53,027,000 and RMB55,961,000, retirement scheme contribution of RMB6,766,000,
RMB6,676,000 and RMB7,589,000, depreciation and amortization expense of RMB68,459,000, RMB68,737,000 and RMB65,659,000, operating
lease charges of RMB11,552,000, RMB11,552,000 and RMB11,552,000 and write-down of inventories of RMB2,181,000, RMB23,414,000 and
RMB4,237,000 for the years ended December 31, 2014, 2013 and 2012, respectively, which amounts are also included in the respective
total amounts disclosed separately for each of these types of expenses.



F-23







|CHINA CERAMICS CO. LTD. AND ITS SUBSIDIARIES              
|----------------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                
|For the Three Years Ended December 31, 2012, 2013 and 2014
|                                                          



| | 9. | INCOME TAX EXPENSE/(CREDIT)
| | -- | ---------------------------



|                                               |  | For the years ended December 31, |       
|---------------------------------------------- |  | -------------------------------- | ------
|                                               |  | 2014                             |       
|                                               |  | RMB’000                          |       
|Current Tax:                                   |  |                                  |       
|PRC Income Tax                                 |  |                                  | 14,403
|Over-provision of PRC Income Tax in prior year |  |                                  | (42   
|                                               |  |                                  | 14,361
|Deferred tax expense                           |  |                                  | 2,102 
|                                               |  |                                  | 16,463



Reconciliation between income
tax expense (credit) and (loss) profit before taxation at applicable tax rates is as follows:



|                                                                                     |  | For the years ended December 31, |        
|------------------------------------------------------------------------------------ |  | -------------------------------- | -------
|                                                                                     |  | 2014 RMB’000                     |        
|(Loss)/profit before taxation                                                        |  |                                  | (13,890
|Tax calculated at a tax rate of 25%                                                  |  |                                  | (3,473 
|Tax effect on non-deductible expenses                                                |  |                                  | 11,519 
|Tax effect on non-taxable income                                                     |  |                                  | -      
|Tax effect on different tax rates of group entities operating in other jurisdictions |  |                                  | 8,300  
|Withholding tax on profits retained by a PRC subsidiary                              |  |                                  | 159    
|Over-provision of PRC Income Tax in prior year                                       |  |                                  | (42    
|                                                                                     |  |                                  | 16,463 



British Virgin Islands Profits
Tax



The Company has not been subject
to any taxation in this jurisdiction for the years ended December 31, 2014, 2013 and 2012.



Hong Kong Profits Tax



The subsidiary in
Hong Kong is subject to tax charged on Hong Kong sourced income with a statutory tax rate of 16.5% for the years ended December
31, 2014, 2013 and 2012. No Hong Kong profits tax has been provided as the Company has no assessable profit arising in Hong Kong
for the years ended December 31, 2014, 2013 and 2012.



PRC Income Tax



The subsidiaries in
the PRC are subject to the enterprise income tax in accordance with “PRC Enterprise Income Tax Law” (“EIT Law”),
and the applicable income tax rate for the years ended December 31, 2014, 2013 and 2012 is 25%.



Under the prevailing
EIT Law and its relevant regulations, any dividends paid by the Company’s PRC subsidiaries to an overseas parent made out
of profits earned after January 1, 2008 to non-PRC corporate residents are subject to a 10% PRC dividend withholding tax, unless
reduced by tax treaties or arrangements. In addition, under the Sino-Hong Kong Double Tax Arrangement and its relevant regulations,
a qualified Hong Kong tax resident will be liable for withholding tax at the rate of 5% for dividend income derived from the PRC
if the Hong Kong tax resident is the “beneficial owner” and holds 25% or more of the equity interests of the PRC company.
Deferred tax liabilities have been provided for based on the expected dividends to be distributed from these subsidiaries in the
foreseeable future in respect of the profits generated since 1 January 2008.



Dividends withholding
tax represents tax charged/to be charged by the PRC tax authority on dividends distributed or intended to be distributed by the
Group’s subsidiaries in Mainland China during the years.



F-24







|CHINA CERAMICS CO. LTD. AND ITS SUBSIDIARIES              
|----------------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                
|For the Three Years Ended December 31, 2012, 2013 and 2014
|                                                          



| | 9. | INCOME TAX EXPENSE/(CREDIT) (Continued)
| | -- | ---------------------------------------



Deferred tax (assets)/liabilities
recognized in the consolidated statements of financial position and the movements during the years are as follows:



|                               |  | Dividend withholding |       |  | Inventory |  |        | Net operating |  |  | Depreciation and |   |  |         |      
|------------------------------ |  | -------------------- | ----- |  | --------- |  | ------ | ------------- |  |  | ---------------- | - |  | ------- | -----
|Deferred tax arising from:     |  | tax                  |       |  | provision |  |        | loss          |  |  | amortization     |   |  | Total   |      
|                               |  | RMB’000              |       |  | RMB’000   |  |        | RMB’000       |  |  | RMB’000          |   |  | RMB’000 |      
|As of January 1, 2012          |  |                      | -     |  |           |  | -      |               |  |  | -                |   |  |         | 1,087
|Credits for the year           |  |                      | -     |  |           |  | (1,059 | )             |  |  | -                |   |  |         | (35  
|As of December 31, 2012        |  |                      | -     |  |           |  | (1,059 | )             |  |  | -                |   |  |         | 1,052
|Charges/(credits) for the year |  |                      | 1,245 |  |           |  | (5,854 | )             |  |  | (3,901           | ) |  |         | (35  
|As of December 31, 2013        |  |                      | 1,245 |  |           |  | (6,913 | )             |  |  | (3,901           | ) |  |         | 1,017
|Charges/(credits) for the year |  |                      | 159   |  |           |  | (546   | )             |  |  | 2,524            |   |  |         | (35  
|As of December 31, 2014        |  |                      | 1,404 |  |           |  | (7,459 | )             |  |  | (1,377           | ) |  |         | 982  



For the purpose of
presentation in the consolidated statements of financial position, certain deferred tax assets and liabilities have been offset.
The following is the analysis of the deferred tax balances in the consolidated statements of financial position for financial presentation
purposes:



|                         |  | As of December 31, |       
|------------------------ |  | ------------------ | ------
|                         |  | 2014 RMB’000       |       
|Deferred tax assets      |  |                    | (7,854
|Deferred tax liabilities |  |                    | 1,404 
|                         |  |                    | (6,450



Hengda and Hengdali,
the Company’s PRC subsidiaries, have cumulative undistributed earnings of RMB1,126,612,000, RMB1,076,028,000 and RMB1,056,030,000,
as of December 31, 2014, 2013 and 2012, which are included in consolidated retained earnings. Deferred tax liabilities of RMB1,404,000,
RMB1,245,000 and nil have been recognized to the extent of distributable profits earned by Hengda as of December 31, 2014, 2013
and 2012. No provision has been made for deferred taxes related to future repatriation of the remaining earnings, as the Company
controls the dividend policy of these PRC subsidiaries and it has been determined that it is probable that these profits will not
be distributed in the foreseeable future. If the Company were to distribute these cumulated earnings in the foreseeable future,
the deferred tax liabilities of RMB56,331,000, RMB53,801,000 and RMB52,802,000 would be recognized as of December 31, 2014, 2013
and 2012, respectively.



| | 10. | (LOSS)/EARNINGS PER SHARE
| | --- | -------------------------



|                                                                                                                     |  | For the years ended December 31, |           
|-------------------------------------------------------------------------------------------------------------------- |  | -------------------------------- | ----------
|                                                                                                                     |  | 2014                             |           
|(Loss)/profit attributable to holders of ordinary shares (RMB’000):                                                  |  |                                  | (30,353   
|                                                                                                                     |  |                                  |           
|Weighted average number of ordinary shares outstanding used in computing basic and diluted (loss)/earnings per share |  |                                  | 20,430,838
|                                                                                                                     |  |                                  |           
|(Loss)/earnings per share - basic (RMB)                                                                              |  |                                  | (1.49     
|(Loss)/earnings per share - diluted (RMB)                                                                            |  |                                  | (1.49     



| | 11. | GOODWILL
| | --- | --------



|                   |  | As of December 31, |      
|------------------ |  | ------------------ | -----
|                   |  | 2014               |      
|                   |  | RMB’000            |      
|Carrying amount    |  |                    |      
|At end of the year |  |                    | 3,735



On January 8, 2010,
the Company consummated the acquisition of all voting equity interests of Hengdali (which is considered to be a CGU), and the excess
of the consideration transferred over the fair value of the identifiable net assets acquired is recorded as goodwill (Note 26).



The Company performs
a goodwill impairment test annually. No impairment loss was recognized for the years ended December 31, 2014, 2013 and 2012.



F-25







|CHINA CERAMICS CO. LTD. AND ITS SUBSIDIARIES              
|----------------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                
|For the Three Years Ended December 31, 2012, 2013 and 2014
|                                                          



12.
PROPERTY, PLANT AND EQUIPMENT



|                         |  | Buildings RMB'000 |         |  | Plant and machinery RMB'000 |  |         | Motor vehicles RMB'000 |  |  | Office equipment RMB'000 |   |  | Total RMB'000 |      
|------------------------ |  | ----------------- | ------- |  | --------------------------- |  | ------- | ---------------------- |  |  | ------------------------ | - |  | ------------- | -----
|Cost                     |  |                   |         |  |                             |  |         |                        |  |  |                          |   |  |               |      
|At January 1,2012        |  |                   | 332,563 |  |                             |  | 612,745 |                        |  |  | 6,548                    |   |  |               | 1,840
|Additions                |  |                   | -       |  |                             |  | 18,542  |                        |  |  | -                        |   |  |               | 978  
|Disposals                |  |                   | -       |  |                             |  | (14,542 | )                      |  |  | -                        |   |  |               | (875 
|At December 31,2012      |  |                   | 332,563 |  |                             |  | 616,745 |                        |  |  | 6,548                    |   |  |               | 1,943
|Additions                |  |                   | 11,272  |  |                             |  | 85,706  |                        |  |  | -                        |   |  |               | 90   
|Disposals                |  |                   | -       |  |                             |  | (28,302 | )                      |  |  | -                        |   |  |               | -    
|At December 31,2013      |  |                   | 343,835 |  |                             |  | 674,149 |                        |  |  | 6,548                    |   |  |               | 2,033
|Disposals                |  |                   | -       |  |                             |  | (21,483 | )                      |  |  | (197                     | ) |  |               | -    
|At December 31,2014      |  |                   | 343,835 |  |                             |  | 652,666 |                        |  |  | 6,351                    |   |  |               | 2,033
|                         |  |                   |         |  |                             |  |         |                        |  |  |                          |   |  |               |      
|Accumulated depreciation |  |                   |         |  |                             |  |         |                        |  |  |                          |   |  |               |      
|At January 1,2012        |  |                   | 10,708  |  |                             |  | 94,974  |                        |  |  | 3,384                    |   |  |               | 1,201
|Depreciation charge      |  |                   | 7,830   |  |                             |  | 57,576  |                        |  |  | 569                      |   |  |               | 211  
|Disposals                |  |                   | -       |  |                             |  | (13,806 | )                      |  |  | -                        |   |  |               | (831 
|At December 31, 2012     |  |                   | 18,538  |  |                             |  | 138,744 |                        |  |  | 3,953                    |   |  |               | 581  
|Depreciation charge      |  |                   | 8,014   |  |                             |  | 60,669  |                        |  |  | 562                      |   |  |               | 308  
|Disposals                |  |                   | -       |  |                             |  | (7,382  | )                      |  |  | -                        |   |  |               | -    
|At December 31, 2013     |  |                   | 26,552  |  |                             |  | 192,031 |                        |  |  | 4,515                    |   |  |               | 889  
|Depreciation charge      |  |                   | 8,197   |  |                             |  | 60,433  |                        |  |  | 520                      |   |  |               | 299  
|Disposals                |  |                   | -       |  |                             |  | (6,783  | )                      |  |  | (186                     | ) |  |               | -    
|At December 31, 2014     |  |                   | 34,749  |  |                             |  | 245,681 |                        |  |  | 4,849                    |   |  |               | 1,188
|                         |  |                   |         |  |                             |  |         |                        |  |  |                          |   |  |               |      
|Carrying amount          |  |                   |         |  |                             |  |         |                        |  |  |                          |   |  |               |      
|At December 31, 2012     |  |                   | 314,025 |  |                             |  | 478,001 |                        |  |  | 2,595                    |   |  |               | 1,362
|At December 31, 2013     |  |                   | 317,283 |  |                             |  | 482,118 |                        |  |  | 2,033                    |   |  |               | 1,144
|At December 31, 2014     |  |                   | 309,086 |  |                             |  | 406,985 |                        |  |  | 1,502                    |   |  |               | 845  



All property, plant
and equipment held by the Company are located in the PRC. The Company’s buildings are situated on land under medium-term
land use rights.



For the buildings
owned collectively by the Company and other three unrelated companies, the cost of buildings are stated according to the amounts
paid by the Company for its part of buildings, which represent the Company’s interests in the buildings. Buildings are depreciated
over their expected useful lives of 40 years. These buildings’ cost was RMB3,363,000, and accumulated depreciation of these
buildings was RMB1,418,000, RMB1,306,000 and RMB1,194,000 at December 31, 2014, 2013 and 2012, respectively. These buildings with
a carrying value of approximately RMB1,945,000, RMB2,057,000 and RMB2,169,000 were pledged to secure the Company’s interest-bearing
bank borrowings at December 31, 2014, 2013 and 2012, respectively (Note 21).



No impairment loss was made
to the carrying amounts of the property, plant and equipment for 2014, 2013 and 2012.



Loss on disposal of
property, plant and equipment in 2014, 2013 and 2012 was RMB3,537,000, RMB18,926,000 and RMB512,000, respectively.



F-26







|CHINA CERAMICS CO. LTD. AND ITS SUBSIDIARIES              
|----------------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                
|For the Three Years Ended December 31, 2012, 2013 and 2014
|                                                          



| | 13. | LAND USE RIGHTS
| | --- | ---------------



The Company’s land use rights are
under medium-term leases in the PRC, and are analyzed for reporting purposes as follows:



|                                                     |  | 2014    |        |   | 2013    |  |        | 2012    | 
|---------------------------------------------------- |  | ------- | ------ | - | ------- |  | ------ | ------- | 
|                                                     |  | RMB’000 |        |   | RMB’000 |  |        | RMB’000 | 
|Cost                                                 |  |         |        |   |         |  |        |         | 
|At January 1, 2012, December 31, 2012, 2013 and 2014 |  |         | 32,619 |   |         |  | 32,619 |         | 
|Accumulated amortization                             |  |         |        |   |         |  |        |         | 
|At beginning of the year                             |  |         | (2,690 | ) |         |  | (2,021 | )       | 
|Amortization                                         |  |         | (670   | ) |         |  | (669   | )       | 
|                                                     |  |         | (3,360 | ) |         |  | (2,690 | )       | 
|Carrying amount                                      |  |         |        |   |         |  |        |         | 
|At December 31                                       |  |         | 29,259 |   |         |  | 29,929 |         | 



All the land use
rights of the Company were pledged to the banks as securities for the Company’s interest-bearing bank borrowings at December
31, 2014, 2013 and 2012 respectively (Note 21).



| | 14. | LONG-TERM PREPAID EXPENSES
| | --- | --------------------------



|                         |  | As of December 31, |      
|------------------------ |  | ------------------ | -----
|                         |  | 2014               |      
|                         |  | RMB’000            |      
|Prepaid advertising fees |  |                    | 1,404



The amount represents
the advertising fees paid in advance covering periods over one year.



| | 15. | INVENTORIES
| | --- | -----------



|                 |  | As of December 31, |        
|---------------- |  | ------------------ | -------
|                 |  | 2014               |        
|                 |  | RMB’000            |        
|Raw materials    |  |                    | 38,405 
|Work in progress |  |                    | 5,657  
|Finished goods   |  |                    | 286,701
|                 |  |                    | 330,763



The analysis of the
amount of inventories recognized as an expense and included in profit or loss is as follows:



|                                                                |  | For the years ended December 31, |        
|--------------------------------------------------------------- |  | -------------------------------- | -------
|                                                                |  | 2014                             |        
|                                                                |  | RMB’000                          |        
|Carrying amount of inventories sold                             |  |                                  | 926,642
|Write down of inventories (included in cost of sales)           |  |                                  | 2,181  
|                                                                |  |                                  | 928,823
|                                                                |  |                                  |        
|Write down of inventories (included in administrative expenses) |  |                                  | 257    



F-27







|CHINA CERAMICS CO. LTD. AND ITS SUBSIDIARIES              
|----------------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                
|For the Three Years Ended December 31, 2012, 2013 and 2014
|                                                          



| | 16. | TRADE RECEIVABLES
| | --- | -----------------



|                               |  | As of December 31, |        
|------------------------------ |  | ------------------ | -------
|                               |  | 2014               |        
|                               |  | RMB’000            |        
|Trade receivables              |  |                    | 549,925
|Less: provision for impairment |  |                    | -      
|                               |  |                    | 549,925



The Company’s
trade receivables are denominated in Renminbi and non-interest bearing. In 2011, the credit period granted to distributors was
generally for a period within 90 days. Since the end of 2012, the Company had extended the collection period to 150 days to address
funding pressures of its distributors. Other customers were granted a credit period of 90 days in the years ended December 31 2013
and 2012 and extended to 120 days in the year ended December 2014.



All of the trade receivables
are expected to be recovered within one year. An aging analysis of the Company's trade receivables, based on the invoice date,
is as follows:



|                       |  | As of December 31, |        
|---------------------- |  | ------------------ | -------
|                       |  | 2014               |        
|                       |  | RMB’000            |        
|Within 90 days         |  |                    | 280,946
|Between 3 and 6 months |  |                    | 268,979
|                       |  |                    | 549,925



An aging analysis of trade receivables
that were neither past due nor impaired or past due but not impaired, is as follows:



|                  |  |                               |         |  | Past due but not impaired |  |   |                | 
|----------------- |  | ----------------------------- | ------- |  | ------------------------- |  | - | -------------- | 
|                  |  | Neither past due nor impaired |         |  | Less than 30 days         |  |   | 31 to 120 days | 
|                  |  | RMB'000                       |         |  | RMB'000                   |  |   | RMB'000        | 
|December 31, 2012 |  |                               | 455,885 |  |                           |  | - |                | 
|December 31, 2013 |  |                               | 490,989 |  |                           |  | - |                | 
|December 31, 2014 |  |                               | 549,925 |  |                           |  | - |                | 



Receivables that were
neither past due nor impaired relate to a large number of customers for whom there was no recent history of default. All amounts
are short-term. The Company does not hold any collateral over these receivables.



The net carrying value
of trade receivables is considered a reasonable approximation of fair value.



As of December 31,
2014, the Company is exposed to certain credit risks as 9% and 25% of the total trade receivables were due from the Company's largest
and the five largest customers, respectively.



As of December 31,
2013, the Company is exposed to certain credit risks as 8% and 21% of the total trade receivables were due from the Company's largest
and the five largest customers, respectively.



As of December 31,
2012, the Company is exposed to certain credit risks as 13% and 23% of the total trade receivables were due from the Company's
largest and the five largest customers, respectively.



F-28







|CHINA CERAMICS CO. LTD. AND ITS SUBSIDIARIES              
|----------------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                
|For the Three Years Ended December 31, 2012, 2013 and 2014
|                                                          



| | 17. | OTHER RECEIVABLES AND PREPAYMENTS
| | --- | ---------------------------------



|                                |  | As of December 31, |      
|------------------------------- |  | ------------------ | -----
|                                |  | 2014               |      
|                                |  | RMB’000            |      
|Prepayments                     |  |                    | 2,178
|Deposit to stock transfer agent |  |                    | -    
|VAT recoverable                 |  |                    | -    
|                                |  |                    | 2,178



An amount of RMB11,831,000
was paid to the stock transfer agent to meet dividend obligations declared before December 31, 2013 and paid in January 2014 (Note
24).



All of the other receivables
and prepayments are expected to be recovered or recognized as expense within one year. The net carrying value of these balances
is considered a reasonable approximation of fair value.



| | 18. | RESTRICTED CASH AND CASH AND BANK BALANCES
| | --- | ------------------------------------------



|                       |  | As of December 31, |       
|---------------------- |  | ------------------ | ------
|                       |  | 2014               |       
|                       |  | RMB’000            |       
|Cash on hand           |  |                    | 62    
|Cash at banks          |  |                    | 61,093
|Cash and bank balances |  |                    | 61,155
|Restricted cash        |  |                    | 28,872
|                       |  |                    | 90,027



Restricted cash and
cash and bank balances are denominated in the following currencies:



|                  |  | As of December 31, |       
|----------------- |  | ------------------ | ------
|                  |  | 2014               |       
|                  |  | RMB’000            |       
|Renminbi          |  |                    | 89,864
|Hong Kong dollars |  |                    | -     
|US dollars        |  |                    | 163   
|                  |  |                    | 90,027



Bank balances denominated
in Renminbi are deposited with banks in the PRC and are not freely convertible to foreign currencies. The conversion of these RMB
denominated balances into foreign currencies is subject to the foreign exchange control rules and regulations promulgated by the
PRC Government.



Bank balances denominated
in US dollars are mainly held in bank accounts in Hong Kong and the United States of America.



Cash at banks and
bank deposits comprise cash held by the Company and short-term bank deposits with an original maturity of three months or less.
The deposits carry interest at prevailing market rates.



As of December 31,
2014, the Company has restricted cash of RMB28,872,000 (2013: RMB37,359,000; 2012: nil), of which RMB28,872,000 (2013: RMB28,872,000;
2012: nil) was used as collateral for the Company’s bank borrowings (Note 21) and nil was used as collateral for the Company’s
financial derivatives (2013: RMB8,487,000; 2012: nil). They were temporarily not available for general use by the Company.



F-29







|CHINA CERAMICS CO. LTD. AND ITS SUBSIDIARIES              
|----------------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                
|For the Three Years Ended December 31, 2012, 2013 and 2014
|                                                          



| | 19. | TRADE PAYABLES
| | --- | --------------



|               |  | As of December 31, |        
|-------------- |  | ------------------ | -------
|               |  | 2014               |        
|               |  | RMB’000            |        
|Trade payables |  |                    | 122,168



Trade payables are
denominated in Renminbi, non-interest bearing and generally settled within 120-day terms. All of the trade payables are expected
to be settled within one year. The carrying value of trade payables is considered to be a reasonable approximation of fair value.



| | 20. | ACCRUED LIABILITIES AND OTHER PAYABLES
| | --- | --------------------------------------



|                                    |  | As of December 31, |       
|----------------------------------- |  | ------------------ | ------
|                                    |  | 2014               |       
|                                    |  | RMB’000            |       
|Deposits received from distributors |  |                    | 21,000
|VAT payables                        |  |                    | 9,076 
|Provision for litigation (Note 31)  |  |                    | 5,274 
|Accrued salary                      |  |                    | 5,177 
|Accrued rent, electricity and water |  |                    | 4,211 
|Accrued other taxes                 |  |                    | 1,901 
|Dividend payable (Notes 17 and 24)  |  |                    | 1,505 
|Others                              |  |                    | 1,845 
|                                    |  |                    | 49,989



Accrued liabilities
and other payables are denominated in the following currencies:



|           |  | As of December 31, |       
|---------- |  | ------------------ | ------
|           |  | 2014               |       
|           |  | RMB’000            |       
|Renminbi   |  |                    | 43,161
|US dollars |  |                    | 6,828 
|           |  |                    | 49,989



Deposits received
represent deposits from the Company’s distributors. The Company usually requests a deposit from RMB400,000 to RMB1,000,000
from new distributors upon signing a distributorship agreement as security for the performance of their obligations under the distributorship
agreement.



Accrued liabilities
consist mainly of accrued rental, wages and utility expenses.



The carrying value
of accrued liabilities and other payables is considered to be a reasonable approximation of fair value.



F-30







|CHINA CERAMICS CO. LTD. AND ITS SUBSIDIARIES              
|----------------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                
|For the Three Years Ended December 31, 2012, 2013 and 2014
|                                                          



| | 21. | INTEREST- BEARING BANK BORROWINGS (SECURED)
| | --- | -------------------------------------------



|                                                                                                                         |  | As of December 31, |       
|------------------------------------------------------------------------------------------------------------------------ |  | ------------------ | ------
|                                                                                                                         |  | 2014               |       
|                                                                                                                         |  | RMB’000            |       
|Short-term bank borrowings - repayable within one year – shown under current liabilities                                 |  |                    | 84,704
|Long-term bank borrowings - repayable more than one year but not more than 5 years - shown under non-current liabilities |  |                    | -     
|                                                                                                                         |  |                    | 84,704



Bank borrowings are
denominated in the following currencies:



|           |  | As of December 31, |       
|---------- |  | ------------------ | ------
|           |  | 2014               |       
|           |  | RMB’000            |       
|Renminbi   |  |                    | 45,000
|US dollars |  |                    | 39,704
|           |  |                    | 84,704



The exposure of the
Company’s loans is as follows:



|                          |  | As of December 31         
|------------------------- |  | --------------------------
|                          |  | 2014                      
|                          |  | Effective interest rates %
|Fixed rate borrowings:    |  | 8.16%                     
|Variable rate borrowings: |  | 2.48% - 7.80%             
|                          |  |                           



All of the Company’s
bank borrowings are carried at amortized cost. The carrying values of the Company’s bank borrowings approximate their fair
value.



The Company’s
banking facilities are pledged by bank deposits (Note 18), the Company’s buildings and land use rights (Notes 12 and 13),
land use rights of third parties and guaranteed by related parties (Note 27), a subsidiary of the Company and third parties. As
of December 31, 2014, 2013 and 2012, such banking facilities were utilized to the extent of RMB84,704,000, RMB99,652,000 and RMB60,000,000,
respectively.



As of the end of the reporting
periods, the Company has the following undrawn bank borrowing facilities:



|                                         |  | As of December 31, |       
|---------------------------------------- |  | ------------------ | ------
|                                         |  | 2014               |       
|                                         |  | RMB’000            |       
|Variable-rate - expiring within one year |  |                    | 98,365



F-31







|CHINA CERAMICS CO. LTD. AND ITS SUBSIDIARIES              
|----------------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                
|For the Three Years Ended December 31, 2012, 2013 and 2014
|                                                          



| | 22. | SHARE CAPITAL
| | --- | -------------



|                                 |  | As of December 31, |           
|-------------------------------- |  | ------------------ | ----------
|                                 |  | 2014               |           
|                                 |  | Number             |           
|                                 |  | of shares          |           
|Authorized:                      |  |                    |           
|Ordinary shares of US$0.001 each |  |                    |           
|At January 1 and December 31     |  |                    | 51,000,000



|                                                                           |  | As of December 31, |           
|-------------------------------------------------------------------------- |  | ------------------ | ----------
|                                                                           |  | 2014               |           
|                                                                           |  | Number             |           
|                                                                           |  | of shares          |           
|Issued:                                                                    |  |                    | 20,430,838
|Outstanding and fully paid:                                                |  |                    |           
|Ordinary shares of US$0.001 each                                           |  |                    |           
|At January 1                                                               |  |                    | 20,430,838
|Issuance to Mr. Wong Kung Tok for achieving the 2011 performance threshold |  |                    | -         
|                                                                           |  |                    |           
|At December 31                                                             |  |                    | 20,430,838



(1)	Equivalent
to US$20,000



On November 21, 2007,
CHAC consummated its initial public offering, or IPO, of 12,800,000 units, including 800,000 units subject to an over-allotment
option, with each unit consisting of one ordinary share, US$0.001 par value per share, and one warrant to purchase one ordinary
share at an exercise price of US$7.50 per share. The units were sold at an offering price of US$10.00 per unit, generating total
gross proceeds of US$128,000,000. Simultaneously with the consummation of the IPO, CHAC consummated the private sale of 2,750,000
warrants to CHAC’s founders at a price of US$1.00 per warrant, generating total proceeds of US$2,750,000. CHAC’s founders
had 3,200,000 ordinary shares as founding shares.



All ordinary shares are equally
eligible to receive dividends and represent one vote at shareholders’ meetings of the Company.



Each warrant entitled
the holder to purchase shares at US$7.50 per share, subject to adjustment in the event of stock dividends and splits, reclassifications,
combinations and similar events for a period commencing on the later of: (a) completion of the business combination and (b) one
year from the closing date of the IPO, and ending November 16, 2012. On November 16, 2012, all of the share purchase warrants expired
and ceased to trade.



On November 20, 2009,
pursuant to the acquisition agreement, China Ceramics acquired all of the issued and outstanding shares of Success Winner held
by Mr. Wong Kung Tok in exchange for US$10.00 and 5,743,320 shares of China Ceramics. In addition, 8,185,763 shares of China Ceramics
were placed in escrow (the “Contingent Shares”) and for release to Mr. Wong Kung Tok in the event certain earnings
and stock price thresholds are achieved. Of the Contingent Shares, up to 5,185,763 Contingent Shares could have been released based
on achieving growth in either net earnings before tax or net earnings after tax, following the completion of an annual audit. Additionally,
3,000,000 Contingent Shares could have been released if China Ceramics shares closed at or above certain share price targets for
any twenty trading days within a thirty trading day period prior to April 30, 2012. The Contingent Shares were to be released without
regard to continued employment and were only contingent on future earnings and the stock price of China Ceramics. On May 24, 2010,
the Company issued 1,214,127 shares to Mr. Wong Kung Tok based on the audited earnings before tax result for the fiscal year 2009.
On April 7, 2011, the Company issued 1,794,800 shares to Mr. Wong Kung Tok based on the audited earnings before tax result for
the fiscal year 2010. On April 3, 2012, the Company issued 2,176,836 shares to Mr. Wong Kung Tok based on the audited earnings
before tax result for the fiscal year 2011. No further Contingent Shares may be issued to Mr. Wong Kung Tok. The issuance of the
Contingent Shares is accounted for as a stock dividend.



F-32







|CHINA CERAMICS CO. LTD. AND ITS SUBSIDIARIES              
|----------------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                
|For the Three Years Ended December 31, 2012, 2013 and 2014
|                                                          



| | 22. | SHARE CAPITAL (Continued)
| | --- | -------------------------



The share price targets for
the issuance of the additional 3,000,000 Contingent Shares were not met by April 30, 2012.



Also, concurrent with
the Success Winner Acquisition, the Company purchased an aggregate of 11,193,149 ordinary shares from the public stockholders for
an aggregate purchase price of approximately RMB752.2 million in transactions intended to assure the successful completion of the
business combination. In connection with the closing of the Success Winner Acquisition, the CHAC’s founders forfeited 1,600,000
of their founders’ shares to CHAC for cancellation.



On May 25, 2010, the
Company purchased 996,051 public warrants from four warrant holders (all managed by a single entity) at a price of US$1.00 per
warrant in a privately negotiated transaction. The total amount paid to purchase the public warrants was US$996,051 (equivalent
to RMB6,803,000) and has been deducted from shareholders’ equity.



The Company initiated
an exchange offer (the “Offer”) pursuant to which holders of all 14,553,949 of the Company’s outstanding warrants
(the “Warrants”) had the opportunity to acquire the Company’s shares through a warrant for share exchange. The
Company issued one share for every four warrants tendered. On September 1, 2010, pursuant to the terms of the tender offer, 11,779,649
warrants were exchanged for 2,944,904 shares, which are freely tradable.



On November 24, 2010,
the Company closed an underwritten public offering of 3,350,000 shares at a price of US$7.75 per share for gross proceed of approximately
RMB172.7 million. The total net proceeds of the offering to the Company, after deduction of underwriters’ commissions and
discounts and estimated transaction expenses, were approximately RMB159.6 million.



| | 23. | RESERVES
| | --- | --------



| | (a) | Statutory reserve
| | --- | -----------------



In
accordance with the relevant laws and regulations of the PRC, the Company’s PRC subsidiaries are required to transfer 10%
of its profit after taxation prepared in accordance with the accounting regulation of the PRC to the statutory reserve until the
reserve balance reaches 50% of the respective registered capital. Such reserve may be used to offset accumulated losses or increase
the registered capital of these subsidiaries, subject to the approval from the Board of Directors, and are not available for dividend
distribution to the shareholders.



| | (b) | Currency translation reserve
| | --- | ----------------------------



The
reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations.



| | (c) | Merger reserve
| | --- | --------------



The
merger reserve of the Company represents the difference between the nominal value of the shares of the subsidiaries acquired in
the Hengda Reorganization (Note 1) over the nominal value of the shares of the Company issued in exchange thereof.



| | (d) | Share-based payment reserve
| | --- | ---------------------------



After
the successful consummation of the reverse recapitalization, Mr. Wong Kung Tok, the former sole shareholder of Success Winner,
allotted a total of 1,521,528 China Ceramics’ ordinary shares to two financial advisors for their financial advisory services
related to the recapitalization activities. The shared based payment reserve represents the fair value of these allotted shares
measured based on the average market price over the service periods.



The
share-based payment reserve also represents the equity-settled share options granted to employees (Note 25). The reserve is made
up of the cumulative value of services received from employees recorded over the vesting period commencing from the grant date
of equity-settled share options, and is reduced by the expiry or exercise of the share options.



| | (e) | Reverse recapitalization reserve
| | --- | --------------------------------



The
reverse recapitalization reserve arises as a result of the method of accounting for the Success Winner Acquisition. In accordance
with IFRS, the acquisition has been accounted for as a reverse recapitalization.



F-33







|CHINA CERAMICS CO. LTD. AND ITS SUBSIDIARIES              
|----------------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                
|For the Three Years Ended December 31, 2012, 2013 and 2014
|                                                          



| | 23. | RESERVES (Continued)
| | --- | --------------------



| | (f) | Capital reverse
| | --- | ---------------



On
July 31, 2014, Sound Treasure Limited, the Company’s largest shareholder and an affiliate of the Company’s Chief Executive
Officer, entered into a three party agreement (the “Novation”) with the financial institution that originated the foreign
currency transaction agreements and the Company. Under the Novation, Sound Treasure Limited assumed these agreements and all assets
(mainly deposits placed with the financial institution) and all existing and future liabilities arising under these agreements,
and the Company was released from the liabilities arising under the foreign currency transaction agreements. As a result, after
July 31, 2014, the Company is no longer required to fund any losses related to these agreements, and the Company will neither suffer
any future liabilities arising under those agreements nor enjoy any benefit arising under those agreements.



At
the time that each of the foreign currency transaction agreements was established with the financial institution, the Company was
required to deposit monies with the financial institution. RMB6.7 million of a total of RMB15.6 million in deposits were funded
on behalf of the Company by Wong Kung Tok (who is the brother-in-law of the Company’s Chief Executive Officer) at the request
of the Chief Executive Officer, and were included in a total of RMB40.2 million in loans owed by the Company to Wong Kung Tok as
of July 9, 2014. In connection with the Novation discussed above, the Company’s Chief Executive Officer, Sound Treasure Limited
and Wong Kung Tok entered into an agreement with the Company (the “Offset Agreement”) pursuant to which loans totaling
RMB20.7 million owed by the Company to Wong Kung Tok as of the date of the Offset Agreement were transferred to Sound Treasure
Limited and then were forgiven by Sound Treasure Limited; and in return the Company agreed to forego any claim to RMB15.6 million
in deposits under the foreign currency transaction agreements which were transferred to Sound Treasure Limited pursuant to the
Novation. As a result of these transactions, Sound Treasure Limited released the Company from liabilities aggregating RMB76.8 million
and the Company transferred ownership of RMB15.6 million in deposits held at the financial institution from the Company to Sound
Treasure Limited. Except as disclosed above, neither the Company’s Chief Executive Officer nor any affiliate of the Chief
Executive Officer received any remuneration for agreeing to assume the foreign currency transaction agreements. The material terms
of the Novation and the Sound Treasure Agreement were reviewed and approved by the Audit Committee of the Company. As a result
of the Novation and the Offset Agreement, approximately RMB76.8 million in liabilities on the Company’s books were extinguished
in 2014 and the Capital Reserve account was increased by approximately RMB61.3 million.



| | 24. | DIVIDENDS
| | --- | ---------



The Company paid a
cash dividend of US$0.10 (equivalent to RMB0.61) per share each on July 13, 2013 and January 14, 2014, respectively, to its shareholders
which totaled in aggregate US$4.1 million (equivalent to RMB24.9 million gross, RMB23.66 million net of 5% PRC withholding tax
(Note 9)).



The Company paid a
cash dividend of US$0.0125 (equivalent to RMB0.08) per share each on July 14, 2014 and January 14, 2015, respectively, to its shareholders
which totaled in aggregate US$0.5 million (equivalent to RMB3.2 million gross, RMB3.01 million net of 5% PRC withholding tax(Note
9)).



F-34







|CHINA CERAMICS CO. LTD. AND ITS SUBSIDIARIES              
|----------------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                
|For the Three Years Ended December 31, 2012, 2013 and 2014
|                                                          



| | 25. | SHARE-BASED EMPLOYEE REMUNERATION
| | --- | ---------------------------------



At the annual meeting
on December 27, 2010, the shareholders of the Company approved the 2010 Incentive Compensation Plan (“the Plan”), which
was designed to retain directors and senior management. In accordance with the Plan, the Company granted an aggregate of 1,130,000
stock options to the Company’s then directors (Huang Jia Dong, Su Wei Feng, Su Pei Zhi, Paul K. Kelly, Cheng Yan Davis, Ding
Wei Dong and William L. Stulginsky) and executives (Hen Man Edmund), upon the approval by the Board of Directors on January 27,
2011, the grant date. The exercise price of the share options granted is US$7.65 per share and the share options are valid for
a period of 5 years from January 27, 2011 to January 27, 2016. One-fourth of the options granted vested on the grant date and additional
one-fourth of the options will vest on the one-year anniversary of the grant date.



Share options and
weighted average exercise prices are as follows for the reporting periods presented:



|                                               |  | Number of shares |           |   | Weighted average exercise price US$ | 
|---------------------------------------------- |  | ---------------- | --------- | - | ----------------------------------- | 
|Outstanding at January 1 and December 31, 2012 |  |                  | 1,130,000 |   |                                     | 
|Granted                                        |  |                  | -         |   |                                     | 
|Forfeited                                      |  |                  | (20,000   | ) |                                     | 
|Exercised                                      |  |                  | -         |   |                                     | 
|Outstanding at December 31, 2013 and 2014      |  |                  | 1,110,000 |   |                                     | 
|                                               |  |                  |           |   |                                     | 
|Exercisable at December 31, 2012               |  |                  | 565,000   |   |                                     | 
|Exercisable at December 31, 2013               |  |                  | 832,500   |   |                                     | 
|Exercisable at December 31, 2014               |  |                  | 1,110,000 |   |                                     | 



The total fair value
of the share options granted under the Plan is RMB25,643,000. The fair values of options granted were determined using a variation
of the Black-Scholes Option Pricing Model that takes into account factors specific to the share incentive plans, such as the vesting
period. The following principal assumptions were used in the valuation:



|Grant date                                  |  |  | January 27, 2011 | 
|------------------------------------------- |  |  | ---------------- | 
|Vesting period ends                         |  |  | January 27, 2014 | 
|Share price at date of grant                |  |  | US$7.65          | 
|Exercise price at date of grant             |  |  | US$7.65          | 
|Volatility                                  |  |  | 65%              | 
|Option life                                 |  |  | 5 years          | 
|Dividend yield                              |  |  | 0%               | 
|Risk-free interest rate                     |  |  | 1.98%            | 
|Fair value at grant date                    |  |  | US$3.52          | 
|Weighted average remaining contractual life |  |  | 3.25 years       | 



The underlying expected
volatility was determined by reference to historical data of the Company’s shares over a period of time, adjusted for any
expected changes to future volatility based on publicly available information. Expected dividends are based on historical dividends.
Changes in the subjective input assumptions could materially affect the fair value estimate.



For the years ended
December 31, 2014, 2013 and 2012, employee remuneration expense (all of which related to equity-settled share-based payment transactions)
of RMB150,000, RMB2,117,000 and RMB5,651,000, respectively, has been included in profit or loss and credited to the share-based
payment reserve.



F-35







|CHINA CERAMICS CO. LTD. AND ITS SUBSIDIARIES              
|----------------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                
|For the Three Years Ended December 31, 2012, 2013 and 2014
|                                                          



| | 26. | BUSINESS COMBINATIONS
| | --- | ---------------------



On January 8, 2010,
the Company consummated the acquisition of all voting equity interests of Hengdali, a company that manufactures and sells ceramics
tiles used for exterior siding and for interior flooring, for a total cash consideration of RMB185,517,000. The acquisition is
intended to increase the Company’s production capacity and reduce costs through economies of scale.



Details of the purchase
consideration, the net assets acquired and goodwill are as follows:



|                                          |  | Fair value |        
|----------------------------------------- |  | ---------- | -------
|                                          |  | RMB’000    |        
|Cash and cash equivalents                 |  |            | 3,822  
|Property, plant and equipment             |  |            | 206,532
|Land use rights                           |  |            | 32,439 
|Inventories                               |  |            | 11,473 
|Receivables                               |  |            | 400    
|Payables                                  |  |            | (11,728
|Borrowings                                |  |            | (60,000
|Deferred tax liability                    |  |            | (1,156 
|Total identified assets                   |  |            | 181,782
|Goodwill                                  |  |            | 3,735  
|Purchase consideration, satisfied in cash |  |            | 185,517



The goodwill is attributable
to Hengdali’s strong production capacity, foreseeable profitability and synergies expected to arise from the economies of
scale after the acquisition. None of the goodwill is expected to be deductible for tax purposes.



| | 27. | SIGNIFICANT RELATED PARTY TRANSACTIONS
| | --- | --------------------------------------



| | (a) | Apart from those discussed elsewhere in these financial statements, the following are significant
related party transactions entered into between the Company and its related parties at agreed rates:
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                           |  | For the years ended December 31, |  
|------------------------------------------ |  | -------------------------------- | -
|                                           |  | 2014                             |  
|                                           |  | RMB’000                          |  
|Service fees paid to Stuart Management Co. |  |                                  | -



|                                |  | As of December 31, |       
|------------------------------- |  | ------------------ | ------
|                                |  | 2014               |       
|                                |  | RMB’000            |       
|Amounts owed to related parties |  |                    | 24,902



Pursuant to an administrative
services agreement dated as of December 1, 2009 between the Company and Stuart Management Co., an affiliate of Paul K. Kelly, an
ex-director who resigned on Nov 27, 2013, the Company paid US$7,000 (equivalent to RMB44,000) a month plus out-of-pocket expenses
to Stuart Management Co. for administrative services. The initial one-year term began on December 1, 2009, and the agreement automatically
renews for successive one-year terms unless either party notifies the other of its intent not to renew. During the term of the
agreement, Stuart Management Co. will provide the Company with general administrative services, including acting as the Company’s
administrative agent in the United States and the British Virgin Islands, and allow the Company to utilize certain of its office
space for meetings. The agreement was renewed to reduce the amount to US$4,900 (equivalent to RMB30,000) a month in December 2013.
The amount was further reduced to US$1,000 (equivalent to RMB6,000) a month commencing from October 2014.



Mr. Huang Jia Dong,
the founder and Chairman of Hengda and the Chief Executive Officer and one of the directors of the Company, and a holder of approximately
40.3% equity interests of the Company as of April 17, 2015 and Mr. Wong Kung Tok, formerly one of the Company’s significant
shareholders, provide working capital loans to the Company from time to time during the normal course of its business. These loans
amounted to RMB24,902,000, RMB8,539,000 and RMB4,796,000 as of December 31, 2014, 2013 and 2012, respectively. These loans are
interest free, unsecured and repayable on demand. Mr. Huang and Mr. Wong are brothers-in-law. Mr. Huang and Mr. Wong are brothers-in-law.
In July 2014, an entity affiliated with Mr. Huang assumed RMB20.7 million in loans due from the Company to Mr. Wong and then forgave
those loans (see Note 23(f)).



| | (b) | Mr. Huang Jia Dong and Su Pei Zhi provide personal guarantees to the Company for certain bank loans.
The guarantees amounted to RMB102,800,000, RMB102,800,000 and RMB180,000,000 as of December 31, 2014, 2013 and 2012, respectively.
Mr. Su resigned as a director on April 27, 2014 but remains as the Company’s sales deputy general manager.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-36







|CHINA CERAMICS CO. LTD. AND ITS SUBSIDIARIES              
|----------------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                
|For the Three Years Ended December 31, 2012, 2013 and 2014
|                                                          



| | 28. | COMMITMENTS
| | --- | -----------



| | (a) | Operating lease commitments
| | --- | ---------------------------



The Company leases
production factories, warehouses and employees’ hostel from unrelated parties under non-cancellable operating lease arrangements.
The leases have varying terms and the total future minimum lease payments of the Company under non-cancellable operating leases
are payable as follows:



|                                     |  | As of December 31, |      
|------------------------------------ |  | ------------------ | -----
|                                     |  | 2014               |      
|                                     |  | RMB’000            |      
|Within one year                      |  |                    | 5,607
|After one year and within five years |  |                    | 453  
|                                     |  |                    | 6,060



The leases typically
run for an initial period of three to five years, with an option to renew the lease when all terms are renegotiated. Lease payments
are usually increased every five years to reflect market rentals. None of the leases includes contingent rentals.



| | (b) | Capital commitments
| | --- | -------------------



The Company’s
capital expenditures consist of expenditures on property, plant and equipment and capital contribution. Capital expenditures contracted
for at the balance sheet date but not recognized in the financial statements are as follows:



|                                                                                                                        |  | As of December 31, |  
|----------------------------------------------------------------------------------------------------------------------- |  | ------------------ | -
|                                                                                                                        |  | 2014               |  
|                                                                                                                        |  | RMB’000            |  
|Contracted for capital commitment in respect of capital contribution to its wholly foreign owned subsidiary in the PRC: |  |                    |  
|– Hengda                                                                                                                |  |                    | -
|Contracted but not provided for in the financial statements – acquisition of property, plant and equipment              |  |                    | -





The Company paid up
the remaining capital of Hengda of RMB14,047,000 in 2014.



| | (c) | Other commitments
| | --- | -----------------



The Company had the
following other commitments:



|                                                                                    |  | Year ended December 31, |      
|----------------------------------------------------------------------------------- |  | ----------------------- | -----
|                                                                                    |  | 2014                    |      
|                                                                                    |  | RMB’000                 |      
|Advertising expenditure contracted but not provided for in the financial statements |  |                         | 2,439



F-37







|CHINA CERAMICS CO. LTD. AND ITS SUBSIDIARIES              
|----------------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                
|For the Three Years Ended December 31, 2012, 2013 and 2014
|                                                          



| | 29. | FINANCIAL RISK MANAGEMENT
| | --- | -------------------------



The Company’s
overall financial risk management program seeks to minimize potential adverse effects of financial performance of the Company.
Management has in place processes and procedures to monitor the Company’s risk exposures while balancing the costs associated
with such monitoring and management against the costs of risk occurrence. The Company’s risk management policies are reviewed
periodically for changes in market conditions and the Company’s operations.



The Company is exposed
to financial risks arising from its operations and the use of financial instruments. The key financial risks included credit risk,
liquidity risk, interest rate risk, foreign currency risk and market price risk.



Except as disclosed
in (d), the Company does not hold or issue derivative financial instruments for trading purposes or to hedge against fluctuations,
if any, in interest rates and foreign exchange rates.



| | (a) | Credit risk
| | --- | -----------



Credit risk refers
to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. The Company’s
exposure to credit risk arises primarily from bank balances and trade receivables. For trade receivables, the Company adopts the
policy of dealing only with customers of appropriate credit history to mitigate credit risk. For other financial assets, the Company
adopts the policy of dealing only with high credit quality counterparties.



As the Company does
not hold any collateral, the maximum exposure to credit risk for each class of financial assets is the carrying amount of that
class of financial assets presented on the consolidated statements of financial position.



Cash and bank balances



The Company’s
bank deposits are placed with reputable banks in the PRC, Hong Kong and the United States, which management believes are of high
credit quality. The Company performs periodic evaluations of the relative credit standing of these financial institutions.



Trade receivables



The Company’s
objective is to seek continual growth while minimizing losses incurred due to increased credit risk exposure.



The Company’s
exposure to credit risks is influenced mainly by the individual characteristics of each customer. The Company typically gives the
existing customers credit terms of approximately 120 days to 150 days. In deciding whether credit shall be extended, the Company
will take into consideration factors such as the relationship with the customer, its payment history and credit worthiness. In
relation to new customers, the sales and marketing department will prepare credit proposals for approval by the Chief Executive
Officer.



The Company performs
ongoing credit evaluations of its customers’ financial condition and requires no collateral from its customers. The provision
for impairment loss for doubtful debts is based upon a review of the expected collectability of all trade and other receivables.



The Company’s
concentration of credit risk by geographical location is wholly in the PRC as of December 31, 2014, 2013 and 2012. Further details
of the Company’s concentration of credit risk are set out in Note 16.



F-38







|CHINA CERAMICS CO. LTD. AND ITS SUBSIDIARIES              
|----------------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                
|For the Three Years Ended December 31, 2012, 2013 and 2014
|                                                          



| | 29. | FINANCIAL RISK MANAGEMENT (Continued)
| | --- | -------------------------------------



| | (b) | Liquidity risk
| | --- | --------------



The Company’s
policy is to regularly monitor current and expected liquidity requirements and its compliance with loan covenants to ensure that
it maintains a sufficient amount of cash and adequate committed lines of funding from major financial institutions to meet its
liquidity requirements in the short and longer term.



The following table
details the Company’s remaining contractual maturities for its financial liabilities. The table has been drawn up based on
undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay. The table
includes both interest and principal cash flows. To the extent that interest flows are at a floating rate, the undiscounted amount
is calculated based on interest rate at the end of the reporting periods:



|                                 |  | As of December 31,2014 |        
|-------------------------------- |  | ---------------------- | -------
|                                 |  |                        |        
|                                 |  |                        |        
|                                 |  | Within 1 year          |        
|                                 |  | RMB’000                |        
|Trade payables                   |  |                        | 122,168
|Amounts owed to related parties  |  |                        | 24,902 
|Interest-bearing bank borrowings |  |                        | 85,671 
|Total                            |  |                        | 232,741



|                                 |  | As of December 31,2013 |        
|-------------------------------- |  | ---------------------- | -------
|                                 |  |                        |        
|                                 |  |                        |        
|                                 |  | Within 1 year          |        
|                                 |  | RMB’000                |        
|Trade payables                   |  |                        | 152,572
|Amounts owed to related parties  |  |                        | 8,539  
|Interest-bearing bank borrowings |  |                        | 103,280
|Total                            |  |                        | 264,391



|                                 |  | As of December 31,2012 |        
|-------------------------------- |  | ---------------------- | -------
|                                 |  |                        |        
|                                 |  |                        |        
|                                 |  | Within 1 year          |        
|                                 |  | RMB’000                |        
|Trade payables                   |  |                        | 115,123
|Amounts owed to related parties  |  |                        | 4,796  
|Interest-bearing bank borrowings |  |                        | 14,096 
|Total                            |  |                        | 134,015



| | (c) | Interest rate risk
| | --- | ------------------



Interest rate risk
is the risk that the fair value or future cash flows of the Company’s financial instruments will fluctuate because of changes
in market interest rates.



The Company’s
exposure to interest rate risk arises primarily from the Company’s interest-bearing bank deposits and borrowings. The interest
rates and terms of repayment of the bank borrowings are disclosed in Note 21.



The Company is exposed
to fair value interest rate risk in relation to its fixed-rate bank borrowings. Bank borrowings subject to fixed interest rates
are contractually repriced at intervals of 12 months. The Company currently does not have an interest rate hedging policy. However,
the management monitors interest rate exposure and will consider other necessary actions when significant interest rate exposure
is anticipated.



F-39







|CHINA CERAMICS CO. LTD. AND ITS SUBSIDIARIES              
|----------------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                
|For the Three Years Ended December 31, 2012, 2013 and 2014
|                                                          



| | 29. | FINANCIAL RISK MANAGEMENT (Continued)
| | --- | -------------------------------------



(c)	Interest rate risk (Continued)



The Company is also
exposed to cash flow interest rate risk related to bank balances and cash held at financial institutions carried at the prevailing
market rates and variable-rate bank borrowings.



At December 31, 2014,
if average interest rate on the Company’s variable-rate bank borrowings had been 50 basis points higher/lower, loss before
tax for the year ended December 31, 2014 would have been increased/decreased by RMB374,000/RMB 374,000 (2013: increased/decreased
loss before tax by approximately RMB448,000/RMB448,000 2012: decreased/increased profit before tax by approximately RMB300,000/RMB300,000).
A 50 basis points (2013 and 2012: 50 basis points) increase or decrease in interest rates is used when reporting interest rate
risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest
rates. The analysis is performed on the same basis for 2013 and 2012.



| | (d) | Foreign currency risk
| | --- | ---------------------



Currency risk is the
risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in foreign exchange rates.
Currency risk arises when transactions are denominated in foreign currencies.



The Company is mainly
exposed to foreign exchange risk arising from future commercial transactions, recognized assets and liabilities denominated in
currencies other than the functional currency of the group entities to which they relate. The Company’s operations are primarily
conducted in the PRC. All the sales and purchases transactions are denominated in RMB. As such, the operations are not exposed
to exchange rate fluctuation.



As of December 31,
2014, 2013 and 2012, nearly all of the Company’s monetary assets and monetary liabilities were denominated in RMB except
that as of December 31, 2014 and 2013, certain bank balances (Note 18), bank borrowings (Note 21) and other payables (Note 20)
were denominated in US dollars.



The Company entered
into foreign currency forward contracts for investment purposes. The net fair value of foreign exchange forward contracts entered
into by the Company at December 31, 2013 was RMB44,000 and has been recognized as derivative financial instruments included under
current assets on the consolidated statements of financial position. In 2014, as the Renminbi depreciated against the U.S. dollar,
the Company incurred realized and unrealized losses totaling RMB59,477,000 from January 1 to July 31, 2014 in connection with these
agreements (Note 7).



On July 31, 2014,
Sound Treasure Limited, the Company’s largest shareholder and an affiliate of the Company’s Chief Executive Officer,
entered into a three party agreement (the “Novation”) with the financial institution that originated the foreign currency
transaction agreements and the Company. Under the Novation, Sound Treasure Limited assumed these agreements and all assets (mainly
deposits placed with the financial institution) and all existing and future liabilities arising under these agreements, and we
were released from the liabilities arising under the foreign currency transaction agreements. As a result, after July 31, 2014,
the Company is no longer required to fund any losses related to these agreements, and the Company will neither suffer any future
liabilities arising under those agreements nor enjoy any benefit arising under those agreements (Note 23(f)).



Sensitivity analysis



The Group’s
foreign currency risk is mainly concentrated on the fluctuation of US$ and HK$. The following table details the Group’s sensitivity
to a 4% increase and decrease in RMB against the relevant foreign currencies. The sensitivity analysis includes only outstanding
foreign currency denominated monetary items and adjusts their translation at the years end for a 4% change. On this basis, if RMB
strengthens against foreign currencies by 4%, the Group’s (loss)/profit before taxation for the year would decrease by the
following amount, and vice versa.



|                              |  | As of December 31, |      
|----------------------------- |  | ------------------ | -----
|                              |  | 2014               |      
|                              |  | RMB’000            |      
|(Loss)/profit before taxation |  |                    | 1,855



1 Mainly
as a result of fair value (including foreign exchange) losses/gains on foreign currency forward contracts.



The sensitivity analysis
has been determined assuming that the change in foreign exchange rates had occurred at the end of the reporting period and had
been applied to re-measure those financial instruments held by the Company which expose the Company to foreign currency risk at
the end of the reporting period. The stated changes represent management’s assessment of reasonably possible changes in foreign
exchange rates over the period until the end of next annual reporting period. The analysis is performed on the same basis for 2013
and 2012.



In management’s
opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk as the year end exposure at the end
of the reporting period does not reflect the exposure during the year.



F-40







|CHINA CERAMICS CO. LTD. AND ITS SUBSIDIARIES              
|----------------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                
|For the Three Years Ended December 31, 2012, 2013 and 2014
|                                                          



| | 29. | FINANCIAL RISK MANAGEMENT (Continued)
| | --- | -------------------------------------



| | (e) | Fair value measurements
| | --- | -----------------------



| | (i) | Financial instruments carried at fair value
Fair value hierarchy
| | --- | ----------------------------------------------------------------



The following table
presents the fair value of the Company’s financial instruments measured at the end of the reporting period on a recurring
basis, categorized into the three-level fair value hierarchy as defined in IFRS 13 Fair value measurement. The level into which
a fair value measurement is classified is determined with reference to the observability and significance of the inputs used in
the valuation technique 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)
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Level 3: inputs for the assets or liability
that are not based on observable market data (that is, unobservable inputs). The Company’s directors are responsible to determine
the appropriate valuation techniques and inputs for fair value measurements. The following table shows the fair value measurement
hierarchy for assets and liabilities as of December 31, 2013:
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Recurring fair value measurements                                     |  | Level 1 |   |  | Level 2 |  |    | Level 3 |  |  | Level 4 | 
|--------------------------------------------------------------------- |  | ------- | - |  | ------- |  | -- | ------- |  |  | ------- | 
|                                                                      |  | RMB’000 |   |  | RMB’000 |  |    | RMB’000 |  |  | RMB’000 | 
|Assets                                                                |  |         |   |  |         |  |    |         |  |  |         | 
|Derivative financial instruments – foreign exchange forward contracts |  |         | - |  |         |  | 44 |         |  |  | -       | 



There were no transfers
between instrument levels during the years ended December 31, 2014, 2013 and 2012.



As of December 31,
2014, 2013 and 2012, there were no other financial instruments measured on a recurring basis.



Derivative financial instruments
(Level 2)



During 2013, the Company
bought a CHN Target Redemption Forward from Taishin International Bank, a kind of financial product, for investing purpose. The
financial product meets the definition of derivative: No initial net investment, value changes in response to the change of exchange
rate (US$ vs RMB) and is settled at a future date.



The notional principal
amounts of the outstanding foreign exchange forward contracts at December 31, 2013 are US$14,000,000 and at 2014 are nil.



At December 31, 2013,
the Company recognized the fair value of the derivative based upon the MTM (Mark to market) report provided by Taishin International
Bank, determined using forward exchange market rates at the end of the reporting period.



(ii)	       Financial assets and
liabilities measured at other than fair value



The carrying amounts
of the Company’s other financial instruments carried at cost or amortized cost approximate their fair values as of December
31, 2014, 2013 and 2012.



F-41







|CHINA CERAMICS CO. LTD. AND ITS SUBSIDIARIES              
|----------------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                
|For the Three Years Ended December 31, 2012, 2013 and 2014
|                                                          



| | 30. | CAPITAL MANAGEMENT
| | --- | ------------------



The Company’s objectives
when managing capital are:



(i)	To safeguard the Company’s
ability to continue as a going concern and to be able to service its debts when they are due;



(ii)	To maintain an optimal
capital structure so as to maximize shareholder value; and



(iii)	To maintain a strong credit
rating and healthy capital ratios in order to support the Company’s stability and growth.



The Company actively
and regularly reviews and manages its capital structure to ensure optimal shareholder returns, taking into consideration the future
capital requirements of the Company and capital efficiency, prevailing and projected profitability, projected operating cash flows,
projected capital expenditures and projected strategic investment opportunities. The Company manages its common shares and stock
options as capital.



The Company is not
subject to externally imposed capital requirements, except for, as disclosed in Note 23(a), the Company’s PRC subsidiaries
are required by the Foreign Enterprise Law of the PRC to contribute to and maintain a non-distributable statutory reserve fund
whose utilization is subject to approval by the Board of Directors. This externally imposed capital requirement has been complied
with by the PRC subsidiaries for the years ended December 31, 2014, 2013 and 2012.



In order to maintain
or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders,
increase share capital, obtain new borrowings or sell assets to reduce debt.



There were no changes
in the Company’s overall approach to capital management during the report periods.



The capital structure
of the Company consists of debts (which include borrowings, less cash and cash equivalents) and equity attributable to shareholders
of the Company (comprising issued capital and reserves). The Company monitors capital on the basis of the debt to capital ratio,
which is calculated as net debts divided by equity attributable to shareholders of the Company.



|                                                                     |  | As of December 31, |          
|-------------------------------------------------------------------- |  | ------------------ | ---------
|                                                                     |  | 2014               |          
|                                                                     |  | RMB’000            |          
|Interest-bearing bank borrowings                                     |  |                    | 84,704   
|Amounts owed to related parties                                      |  |                    | 24,902   
|Total debt                                                           |  |                    | 109,606  
|Less: Cash and cash equivalents (excluding restricted bank balances) |  |                    | (61,155  
|Net debts                                                            |  |                    | 48,451   
|Equity attributable to shareholders of the Company                   |  |                    | 1,447,624
|Gearing ratio                                                        |  |                    | 3.3      



| | 31. | LITIGATIONS
| | --- | -----------



During 2014, several
putative class action complaints were filed in the United States District Court for the Southern District of New York against the
Company and various current and former directors and officers asserting claims of violations of Section 10(b) of the Securities
Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder against all defendants, and asserting
claims for violations of Section 20(a) of the Exchange Act against the individual defendants; and pursuing remedies under the Exchange
Act.



On February 6, 2015,
the Company and the individual defendants reached an agreement in principle to settle the above-described cases as against all
defendants in consideration of the payment by the Company of US$850,000 (equivalent to approximately RMB5,274,000)(Note 20), consisting
of a combination of cash and the Company’s common stock. The settlement is subject to the execution of a mutually acceptable
settlement agreement and the approval of the settlement by the Court. A charge for the settlement amount is included as an expense
item in the Company’s fiscal 2014 financial statements.



F-42