DISCLOSEABLE AND CONNECTED TRANSACTION THE ... - · PDF file“GDP” has the meaning...

If you are in doubt as to any aspect of this circular, you should consult your licensed securities dealer orregistered institution in securities, bank manager, solicitor, professional accountant or other professionaladviser.

If you have sold or transferred all your shares in Guangdong Investment Limited, you should at once hand thiscircular and the accompanying form of proxy to the purchaser or the transferee or to the bank, licensed securitiesdealer, registered institution in securities or other agent through whom the sale or transfer was effected fortransmission to the purchaser or the transferee.

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

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

(Incorporated in Hong Kong with limited liability)

(Stock Code: 0270)

DISCLOSEABLE AND CONNECTED TRANSACTION

THE ACQUISITION OF THE SALE SHARESINVOLVING THE ISSUE OF CONSIDERATION SHARES UNDER

THE SPECIFIC MANDATERE-ELECTION OF DIRECTOR

ANDNOTICE OF EXTRAORDINARY GENERAL MEETING

Financial Adviser to Guangdong Investment Limited

Independent Financial Adviser tothe Independent Board Committee and the Independent Shareholders

SOMERLEY CAPITAL LIMITED

A letter from the Board (as defined in this circular) is set out on pages 7 to 27 of this circular. A letter from theIndependent Board Committee (as defined in this circular) to the Independent Shareholders (as defined in thiscircular) is set out on pages 28 and 29 of this circular. A letter from the Independent Financial Adviser (as definedin this circular) containing its advice to the Independent Board Committee and the Independent Shareholders isset out on pages 30 to 66 of this circular.

A notice convening the EGM (as defined in this circular) to be held at Concord Room, 8th Floor, RenaissanceHarbour View Hotel Hong Kong, One Harbour Road, Wanchai, Hong Kong on Monday, 20 March 2017 at 10:00a.m. is set out on pages 91 and 92 of this circular. A form of proxy for the EGM is enclosed with this circular.Whether or not you intend to attend the EGM in person, you are requested to complete the accompanying formof proxy in accordance with the instructions printed thereon and return it to the Company’s Share Registrar,Tricor Tengis Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible andin any event not less than 48 hours before the time scheduled for the EGM or any adjournment thereof.Completion and return of the form of proxy will not preclude you from attending and voting in person at theEGM or any adjournment thereof should you so wish.

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

24 February 2017

Page

DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

LETTER FROM THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . . . . 28

LETTER FROM SOMERLEY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

APPENDIX I — VALUATION REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

APPENDIX II — GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 77

APPENDIX III — DETAILS OF THE DIRECTOR TO BE RE-ELECTED . . . . 90

NOTICE OF EXTRAORDINARY GENERAL MEETING . . . . . . . . . . . . . . . . . . . . 91

CONTENTS

Terms or expressions used in this circular shall, unless the context otherwise requires, have

the meanings ascribed to them below:

“Acquisition” the proposed acquisition of the Sale Shares by the

Company from the Vendor pursuant to the Sale and

Purchase Agreement;

“ASP” has the meaning ascribed to it under the section

headed “A.4. Reasons for and benefits of the

Acquisition” in the Letter from the Board contained in

this circular;

“associate(s)” has the meaning ascribed to it under the Listing Rules;

“Board” the board of Directors of the Company;

“Business Day” a day (other than a Saturday, a Sunday, a public

holiday or a day on which a tropical cyclone warning

signal numbered 8 or above or a “black” rainstorm

warning signal is hoisted in Hong Kong at any time

between 9:00 a.m. and 5:00 p.m.) on which banks in

Hong Kong are normally open for banking business to

the public;

“Buxin Project” has the meaning ascribed to it under the section

headed “A.3. Information on the GDL Group — The

GDL Group” in the Letter from the Board contained in

this circular;

“Buyer” has the meaning ascribed to it under the section

headed “D. Listing Rules and Takeovers Code

Implications” in the Letter from the Board contained

in this circular;

“Cash Consideration” has the meaning ascribed to it under the section

headed “A.2. The Sale and Purchase Agreement —

Consideration and basis of determination of

Consideration” in the Letter from the Board contained

in this circular;

“Company” Guangdong Investment Limited (粵海投資有限公司), a

company incorporated in Hong Kong with limited

liability and the Shares of which are listed on the Main

Board of the Stock Exchange;

DEFINITIONS

– 1 –

“Completion” the completion of the Acquisition in accordance with

the terms and conditions of the Sale and Purchase

Agreement;

“Completion Date” the date on which Completion shall take place;

“Conditions Precedent” has the meaning ascribed to it under the section


Conditions Precedent” in the Letter from the Board

contained in this circular;

“connected person(s)” has the meaning ascribed to it under the Listing Rules;

“Consideration” has the meaning ascribed to it under the section




in this circular;

“Consideration Shares” 272,890,019 Shares to be issued by the Company to the

Vendor pursuant to the terms and conditions of the

Sale and Purchase Agreement;

“Deficient Amount” has the meaning ascribed to it under the section


Other terms” in the Letter from the Board contained

in this circular;

“Director(s)” the director(s) of the Company;

“Discount” has the meaning ascribed to it under the section




in this circular;

“EGM” the extraordinary general meeting of the Company to

be held on Monday, 20 March 2017 at 10:00 a.m. to

consider and, if thought fit, approve, among others,

the Acquisition, the Specific Mandate and the

re-election of Mr. Cai;

“Executive” the Executive Director of the Corporate Finance

Division of the SFC or any delegate thereof;

DEFINITIONS

– 2 –

“GDL” Guangdong Land Holdings Limited (粵海置地控股有限公司), a company incorporated in Bermuda with

limited liability and the shares of which are listed on

the Main Board of the Stock Exchange;

“GDL Group” GDL and its subsidiaries;

“GDP” has the meaning ascribed to it under the section

headed “A. 4. Reasons for and benefits of the

Acquisition” in the Letter from the Board contained in

this circular;

“GFA” gross floor area;

“Group” the Company and its subsidiaries;

“Guangdong Holdings” has the meaning ascribed to it under the section

headed “D. Listing Rules and Takeovers Code

Implications” in the Letter from the Board contained

in this circular;

“HK GAAP” the generally accepted accounting principles,

standards and practices in Hong Kong (including all

applicable Hong Kong Financial Reporting Standards

issued by the Hong Kong Institute of Certified Public

Accountants), as amended from time to time;

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

Kong;

“Hong Kong” the Hong Kong Special Administrative Region of the

PRC;

“Independent Board

Committee”

an independent board committee comprising all of

the independent non-executive Directors, namely

Dr. CHAN Cho Chak, John, Dr. the Honourable LI

Kwok Po, David, Mr. FUNG Daniel Richard, Dr. the

Honourable CHENG Mo Chi, Moses and Mr. WU Ting

Yuk, Anthony, to advise the Independent Shareholders

in respect of the Acquisition and the Specific

Mandate;

DEFINITIONS

– 3 –

“Independent Financial

Adviser” or “Somerley”

Somerley Capital Limited, a corporation licensed to

carry out Type 1 (dealing in securities) and Type 6

(advising on corporate finance) regulated activities

under the SFO, being the independent financial

adviser appointed by the Company to advise the

Independent Board Committee and the Independent

Shareholders in respect of the Acquisition and the

Specific Mandate;

“Independent Shareholders” shareholders of the Company other than those who

are required to abstain from voting at the EGM

pursuant to the Listing Rules;

“Indirect Intermediate Holding

Companies”

Guangdong Trust Ltd. (粵海信托有限公司), Guangdong

Assets Management Ltd. (粵海資產管理有限公司),

Guangdong Assets Management (BVI) No. 43 Limited,

GD Assets Management (Custodian) Limited and

Guangdong Assets Management (BVI) No. 62 Limited,

all being direct or indirect wholly owned subsidiaries

of Guangdong Holdings; and “Indirect Intermediate

Holding Company” means any one of them;

“Issue Price” has the meaning ascribed to it under the section headed

“A.2. The Sale and Purchase Agreement —

Consideration Shares” in the Letter from the Board

contained in this circular;

“Latest Practicable Date” 20 February 2017, being the latest practicable date prior

to the printing of this circular for ascertaining certain

information for inclusion herein;

“Letter from the Board” the letter from the Board contained in this circular;

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

Stock Exchange, as amended from time to time;

“Minimum Year-end NAV” has the meaning ascribed to it under the section headed

“A.2. The Sale and Purchase Agreement — Other

terms” in the Letter from the Board contained in this

circular

“Model Code” the Model Code for Securities Transactions by Directors

of Listed Issuers as set out in Appendix 10 to the Listing

Rules;

“Parties” the Vendor and the Company; and “Party” means any

one of them;

DEFINITIONS

– 4 –

“PRC” or “China” the People’s Republic of China and, for the purpose of

this circular, excludes Hong Kong, the Macau Special

Administrative Region of the PRC and Taiwan;

“Reassessed NAV” has the meaning ascribed to it under the section headed

“A.2. The Sale and Purchase Agreement —



in this circular

“RMB” Renminbi, the lawful currency of the PRC;

“Ruyingju Project” has the meaning ascribed to it under the section headed

“A.3. Information on the GDL Group — The GDL

Group” in the Letter from the Board contained in this

circular;

“Sale and Purchase Agreement” the sale and purchase agreement dated 19 January 2017

entered into between the Company and the Vendor in

respect of the Acquisition;

“Sale Shares” 1,263,494,221 ordinary shares of GDL representing

approximately 73.82% of the issued share capital of

GDL;

“Sale Shares Percentage” has the meaning ascribed to it under the section headed

“A.2. The Sale and Purchase Agreement — Subject

matter” in the Letter from the Board contained in this

circular;

“SFC” the Securities and Futures Commission of Hong Kong;

“SFO” the Securities and Futures Ordinance (Chapter 571 of

the Laws of Hong Kong);

“Shareholder(s)” the shareholder(s) of the Company;

“Shares” the ordinary shares in the share capital of the Company;

“Specific Mandate” the specific mandate proposed to be obtained from the

Independent Shareholders at the EGM to issue the

Consideration Shares to the Vendor;

“sq.m.” square metre(s);

“Stock Exchange” The Stock Exchange of Hong Kong Limited;

DEFINITIONS

– 5 –

“Takeovers Code” the Code on Takeovers and Mergers issued by the SFC;

“Vendor” or “GDH” GDH Limited (粵海控股集團有限公司), a company

incorporated in Hong Kong with limited liability and

the controlling Shareholder and a connected person of

the Company;

“Year-end NAV” has the meaning ascribed to it under the section headed

“A.2. The Sale and Purchase Agreement — Other

terms” in the Letter from the Board contained in this

circular; and

“%” per cent.

Remarks:

(1) For the purpose of this circular, unless otherwise indicated, the exchange rate of RMB1.00=HK$1.1258 has been

used, where applicable, for purpose of illustration only and it does not constitute any representation that any

amount has been, could have been or may be exchanged at that rate or at any other rate.

(2) In this circular, the English name of the PRC entity marked with an asterisk(*) is translation of its Chinese name,

and is included herein for identification purposes only. In the event of any inconsistency, the Chinese name shall

prevail.

(3) Consolidated net asset value of GDL referred to in this circular means the consolidated equity attributable to

owners of GDL.

DEFINITIONS

– 6 –


(Stock Code: 0270)

Executive Directors:Mr. HUANG Xiaofeng (Chairman)Mr. WEN Yinheng (Managing Director)Mrs. HO LAM Lai Ping, Theresa (Company Secretary)Mr. TSANG Hon Nam (Chief Financial Officer)

Non-executive Directors:Mr. CAI Yong

Mr. WU Jianguo

Mr. ZHANG Hui

Ms. ZHAO Chunxiao

Mr. LAN Runing

Mr. LI Wai Keung

Independent Non-Executive Directors:Dr. CHAN Cho Chak, John GBS, JP

Dr. the Honourable LI Kwok Po, David

GBM, GBS, OBE, JP

Mr. FUNG Daniel Richard SBS, QC, SC, JP

Dr. the Honourable CHENG Mo Chi, Moses

GBM, GBS, OBE, JP

Mr. WU Ting Yuk, Anthony

Standing Committee Member of CPPCC National Committee, GBS, JP

Registered office:28th and 29th Floors

Guangdong Investment Tower

148 Connaught Road Central

Hong Kong

24 February 2017

To the Shareholders

Dear Sir or Madam,



THE SPECIFIC MANDATERE-ELECTION OF DIRECTOR

ANDNOTICE OF EXTRAORDINARY GENERAL MEETING

LETTER FROM THE BOARD

– 7 –

A. THE ACQUISITION

1. Introduction

Reference is made to the announcement of the Company dated 19 January 2017 in

respect of the Acquisition. On 19 January 2017, the Company and the Vendor entered into

the Sale and Purchase Agreement, pursuant to which the Company has conditionally

agreed to acquire the Sale Shares from the Vendor.

2. The Sale and Purchase Agreement

A summary of the salient terms of the Sale and Purchase Agreement is set out below:

Date

19 January 2017

Parties

Vendor: GDH Limited (粵海控股集團有限公司)

Purchaser: The Company

Subject matter

Pursuant to the Sale and Purchase Agreement, the Company has conditionally

agreed to acquire the Sale Shares from the Vendor.

The Sale Shares represent approximately 73.82% (the “Sale Shares

Percentage”) of the issued share capital of GDL. Please refer to the section headed

“A.3. Information on the GDL Group — The GDL Group” in this letter from the

Board below for details of the GDL Group.

Consideration and basis of determination of Consideration

The consideration (the “Consideration”) for the Sale Shares in the amount of

RMB3,358,000,000 (equivalent to approximately HK$3,780,436,000) shall be settled

by the Company in the following manner:

(i) as to RMB2,518,500,000 (equivalent to approximately HK$2,835,327,000)

(being 75% of the Consideration) shall be settled by the allotment and

issue of the Consideration Shares by the Company to the Vendor on the

Completion Date and the difference between such amount and the value

of such Consideration Shares (being approximately RMB2.30) will be

settled in cash; and


– 8 –

(ii) as to RMB839,500,000 (equivalent to approximately HK$945,109,000)

(“Cash Consideration”, being 25% of the Consideration) shall be paid

by the Company in cash on the Completion Date.

Given the properties of GDL constitute the majority of its assets, the

Consideration was arrived at after arm’s length negotiations based on the net asset

value as adjusted with reference to the property valuation with a certain discount

and it represents a discount of approximately 28.2% to the unaudited consolidated

net asset value of GDL as at 30 September 2016 as adjusted by the said valuation (the

“Discount”).

RMB(million)

Approximate

The unaudited consolidated net asset value of GDL attributable

to the shareholders of GDL as at 30 September 2016 3,725.2*

Add: Revaluation surplus in the unaudited consolidated net

asset value of GDL attributable to the shareholders of

GDL (based on the market valuation of the properties

owned by the GDL Group as appraised by Vigers

Appraisal & Consulting Limited as of 30 November 2016

minus the related book value of the properties as of

30 November 2016), net of potential tax liabilities and

non-controlling interests of the Ruyingju Project 2,613.1

Reassessed net asset value of GDL attributable to the

shareholders of GDL 6,338.3

Less: Reassessed net asset value of GDL attributable to

non-controlling interests of GDL (1,659.4)

Reassessed net asset value of GDL attributable to the Vendor

(the “Reassessed NAV”) 4,678.9

Discount of the Consideration to the Reassessed NAV (Note) 28.2%

Consideration 3,358.0

* This is translated from approximately HK$4,326.8 million at the exchange rate of RMB1.00=HK$1.1615 as

quoted by the People’s Bank of China on 30 September 2016.

Note: With respect to the Discount, the Board has taken into account, among others, (i) the development

plan, quality and size of properties held by GDL; (ii) the future prospects of real estate business in

Shenzhen, the PRC; and (iii) the relevant market transactions concerning the property companies

listed on the Stock Exchange.


– 9 –

Having considered the above, the Board is of the view that the Consideration

is fair and reasonable and in the interest of the Company and its Shareholders as a

whole.

The Company has considered the market capitalisation of the GDL Group and

the prevailing trading prices of shares of GDL. The Consideration translates into

approximately HK$2.99 per Sale Share and represents a premium of approximately

47.3% over the per share closing trading price of GDL of HK$2.03 as of 18 January

2017 (the day before the date of the announcement of the Company in respect of the

Acquisition dated 19 January 2017). However, given the low trading volume of GDL

and the substantial discount of market capitalisation of the GDL Group to its net

asset value as adjusted with reference to the property valuation, the Company

believes that the market capitalisation does not reflect the intrinsic value of the

underlying assets of GDL Group and therefore prevailing trading prices of shares of

GDL was, in the Board’s opinion, not an appropriate benchmark in determining the

Consideration.

While the management of the Group considered that it was possible to satisfy

the entire Consideration in cash, after considering the funding requirements for

further investments in and development of the Group’s principal business segments

(i.e. namely, the water resources, property and infrastructure businesses), the

Group’s dividend policy and general working capital requirements, the

management of the Group was of the view that the Consideration should only be

satisfied as to one-fourth in cash and the remaining portion in other means. Having

considered (i) the disadvantages of other financing alternatives as discussed below;

and (ii) that the willingness of the Vendor to accept the Consideration Shares (as

opposed to pure cash or other form of consideration) demonstrates the confidence

of the Vendor and Guangdong Holdings in the prospects of both the Group and the

GDL Group and the Vendor ’s support to the Group in respect of the Acquisition, the

final form of payment of the Consideration comprising the Consideration Shares

and Cash Consideration was agreed amongst the Parties .

The Company has also considered other methods of equity financing.

Currently, the Issue Price of HK$10.39 per Consideration Share represents slight

discounts ranging from approximately 1.7% to 4.3% to the closing prices of the

Shares during the 10 consecutive trading days prior to the date of the Sale and

Purchase Agreement. In contrast, fund raising exercise by way of issue of new

Shares to independent third parties (e.g. new share placement) or to existing

Shareholders on a pro rata basis (e.g. rights issue or open offer) usually require a

deeper discount to the prevailing market prices of the Shares. Furthermore, fund

raising through rights issue or open offer would attract higher transaction costs

(such as underwriting and other fees) and the dilution effect on those

non-participating Shareholders would usually be greater as compared to the issue

of the Consideration Shares.

Debt financing would increase overall financing costs of the Group.


– 10 –

Thus, the current proposed financing structure proposal was arrived at after

due and careful consideration of the various alternatives by the management of the

Group, which considered that the proposed issue of the Consideration Shares under

the Specific Mandate and the payment of the Cash Consideration are suitable

financing/payment mechanisms for the Acquisition. While the issue of the

Consideration Shares will result in a minor dilution in the shareholdings in

percentage terms of the existing public Shareholders, having taken into account

various factors (details of which are set out in section 11 headed “Shareholding

structure of the Company before and after Completion” in the “Letter from

Somerley” contained in this circular), the dilution effects on the shareholding of the

existing public Shareholders are considered acceptable.

Consideration Shares

The Consideration Shares will be allotted and issued at the issue price of HK$10.39

per Consideration Share (the “Issue Price”), credited as fully paid, in the manner as set

out in the paragraph headed “Consideration and basis of determination of Consideration”

in this section above. The Consideration Shares, when allotted and issued, shall rank pari

passu in all respects with the Shares in issue on the date of allotment and issue of the

Consideration Shares.

The Consideration Shares comprise 272,890,019 Shares, which represent:

(i) approximately 4.36% of the existing issued share capital of the

Company as at the Latest Practicable Date; and

(ii) approximately 4.17% of the issued share capital of the Company as

enlarged by the allotment and issue of the Consideration Shares

(assuming there is no other change in the share capital of the Company

from the Latest Practicable Date to Completion).

The Consideration Shares will be issued pursuant to the Specific Mandate to

be obtained from the Independent Shareholders at the EGM. An application will be

made to the Listing Committee of the Stock Exchange for the listing of and

permission to deal in the Consideration Shares.

The Issue Price represents:

(i) a discount of approximately 4.3% to the closing price of HK$10.86 per

Share as quoted on the Stock Exchange on the date of the Sale and

Purchase Agreement;

(ii) a discount of approximately 2.7% to the average closing price of

HK$10.68 per Share as quoted on the Stock Exchange for the last 5

consecutive trading days immediately prior to the date of the Sale and

Purchase Agreement;


– 11 –

(iii) a discount of approximately 1.7% to the average closing price of



Purchase Agreement;

(iv) a premium of approximately 0.2% over the average closing price of



Purchase Agreement;

(v) the average closing price of HK$10.39 per Share as quoted on the Stock

Exchange for the last 30 consecutive trading days immediately prior to

the date of the Sale and Purchase Agreement;

(vi) a premium of approximately 0.7% over the closing price of HK$10.32

per Share as quoted on the Stock Exchange on the Latest Practicable

Date; and

(vii) a premium of approximately 101.7% over the net asset value per Share

of approximately HK$5.15 based on the net asset value attributable to

the Shareholders of approximately HK$32,233.6 million as at 30

September 2016 divided by 6,264,931,421 Shares in issue as at the Latest

Practicable Date.

The Issue Price was determined by the Board after arm’s length negotiations

with the Vendor with reference to, among others, the prevailing market prices of the

Shares and the current market conditions. The Directors (including the independent

non-executive Directors after taking into account the advice of the Independent

Financial Adviser), consider the Issue Price to be fair and reasonable and in the

interest of the Company and the Shareholders as a whole.

Conditions Precedent

Pursuant to the Sale and Purchase Agreement, the Acquisition is conditional

upon the fulfillment or, where applicable, waiver of the following conditions (the

“Conditions Precedent” and each of them a “Condition Precedent”):

(i) this circular having been approved by the Stock Exchange (or the Stock

Exchange having confirmed that it has no comment on this circular) and

despatched to the Shareholders, and there having been no requirement

by the Stock Exchange in respect of the Acquisition that is not

acceptable to the Company;


– 12 –

(ii) the relevant transactions under the Sale and Purchase Agreement,

including but not limited to the issue of the Consideration Shares,

having been approved by the Independent Shareholders of the

Company at the EGM in accordance with the requirements of the Listing

Rules;

(iii) the approval for the listing of and permission to deal in the

Consideration Shares by the Stock Exchange having been obtained by

the Company, and such approval not having been revoked or

withdrawn prior to the Completion Date;

(iv) the waiver having been obtained from the SFC by the Company from the

mandatory offer obligation of the Company under Rule 26.1 of the

Takeovers Code in respect of the relevant transactions under the Sale

and Purchase Agreement, and such waiver not having been revoked

prior to the Completion Date;

(v) the trading in the Shares not having been suspended for more than 20

consecutive days and on the Completion Date, except for the reason of

review of the announcement or this circular in relation to the

Acquisition by the relevant regulatory body;

(vi) the listing of the Shares on the Stock Exchange not having been

cancelled or withdrawn, and the SFC not having initiated any material

investigations that would lead to any suspension or cancellation or

withdrawal of the listing of the Shares on the Stock Exchange;

(vii) the Company having performed all relevant obligations, duties,

undertakings and warranties in accordance with the Sale and Purchase

Agreement on or before the Completion Date;

(viii) the representations and warranties by the Company being true, accurate

and not misleading in all material respects on or before the Completion

Date;

(ix) the Company having obtained all necessary approvals and

authorisations from any governmental or regulatory authorities for the

enforcement and completion of the transactions under the Sale and

Purchase Agreement, and the same remaining in full effect under the

applicable jurisdiction and the relevant laws and regulations;

(x) the trading in the shares of GDL not having been suspended for more

than 20 consecutive days and on the Completion Date, except for the

reason of the review of the announcement or this circular in relation to

the Acquisition by the relevant regulatory body;


– 13 –

(xi) the listing of the shares of GDL on the Stock Exchange not having been



withdrawal of the listing of the shares of GDL on the Stock Exchange;

(xii) the Vendor having performed all relevant obligations, duties,



(xiii) the representations and warranties by the Vendor being true, accurate


Date; and

(xiv) the Vendor having made the relevant application to the relevant

state-owned assets administration authority and obtained all necessary

approvals and authorisations from any governmental or regulatory

authorities (if necessary) for the enforcement and completion of the

transactions under the Sale and Purchase Agreement, and the same

remaining in full effect under the applicable jurisdiction and the

relevant laws and regulations.

The Conditions Precedent under sub-paragraph (v) to (ix) above may be

waived by the Vendor at its discretion and those sub-paragraph (x) to (xiv) above

may be waived by the Company at its discretion.

As at the Latest Practicable Date, in respect of the Condition Precedent under

sub-paragraph (i) above, the Stock Exchange had confirmed that it had no comment

on this circular; and in respect of the Condition Precedent under sub-paragraph (iv)

above, the waiver had been obtained from the SFC by the Company (for details,

please refer to the section headed “D. Listing Rules and Takeovers Code

Implications” in this letter from the Board below). Save as set out above, none of the

Conditions Precedents has been satisfied (or waived) as at the Latest Practicable

Date.

If the Conditions Precedent cannot be satisfied (or waived) before 30 June

2017 (or such other date as agreed by the Parties in writing), the Sale and Purchase

Agreement shall terminate unless the Parties otherwise agree.

Completion

Completion shall take place on the 15th Business Day after the date on which

the last Condition Precedent is satisfied (or waived) and the issue of the

announcement by GDL of its preliminary results for the year of 2016 (whichever is

later), or at such other time as the Vendor and the Company shall agree in writing.


– 14 –

Other terms

The Vendor undertakes to the Company that the RMB equivalent of the

audited consolidated net asset value of GDL as at 31 December 2016 to be disclosed

in the announcement of GDL on its preliminary results for the year of 2016 (such net

asset value shall be referred to as the “Year-end NAV”) shall not be less than

RMB3,704,835,000 (the “Minimum Year-end NAV”) and in the event that the RMB

equivalent of the Year-end NAV falls below such amount (such difference shall be

referred to as the “Deficient Amount”), the Vendor shall pay to the Company the

portion of the Deficient Amount attributable to the Sale Shares Percentage after

applying the Discount to the same, and in such event, the Company will comply

with the disclosure requirements under the Listing Rules. The Minimum Year-end

NAV was determined after arm’s length negotiation between the Company and the

Vendor. The Parties have agreed that with the amount of the Consideration being

RMB3,358 million, the Consideration should represent a discount of at least 28.00%

to the reassessed net asset value of GDL attributable to the Vendor as at 31 December

2016. This translates into a required minimum net asset value of GDL attributable to

the shareholders of GDL of approximately RMB3,704,835,000 as at 31 December 2016

(without taking into account the revaluation surplus as set out under the section

headed “A.2. The Sale and Purchase Agreement — Consideration and basis of

determination of Consideration” in this letter above in the amount of approximately

RMB2,613.1 million).

3. Information on the GDL Group

The GDL Group

GDL is a subsidiary of the Vendor held as to approximately 73.82% as at the

Latest Practicable Date. The GDL Group is principally engaged in property

development and investment.

GDL is listed on the Main Board of the Stock Exchange since August 1997 with

stock code: 0124. It was formerly known as Kingway Brewery Holdings Limited and

was then engaged in the brewery business. Following the completion of the disposal

of the brewery business and related assets in 2013 (as more particularly set out in the

announcements of GDL dated 5 February 2013, 11 August 2013 and 17 September

2013, respectively, and the circular of GDL dated 9 April 2013), the principal

business of the GDL Group has been changed to property development and

investment.

The property projects engaged by the GDL Group are (i) the development of a

multi-module commercial complex with the jewellery products industry as its main

theme (the “Buxin Project”, for details, please refer to the announcement of GDL

dated 27 October 2016 in respect of the unaudited financial information of GDL for

the nine months ended 30 September 2016 and the circular of GDL dated 22 June

2016); and (ii) a residential property project in Panyu District, Guangzhou, the PRC

(the “Ruyingju Project”, for details, please refer to the announcement of GDL dated

27 October 2016 in respect of the unaudited financial information of GDL for the

nine months ended 30 September 2016 and the circular of GDL dated 2 April 2015).


– 15 –

The Vendor acquired the Sale Shares from 2003 to 2011 at the aggregate cost of

approximately HK$2,284,185,000.

The simplified shareholding structure of the Vendor, the Company and GDL

as at the Latest Practicable Date is set out below for illustrative purpose:

The Vendor

GDL

54.60% 73.82%

TheCompany

Upon Completion, the Vendor ’s shareholding in the Company will increase to

approximately 56.49% of the issued share capital of the Company (as enlarged by

the issue of the Consideration Shares and assuming that there is no other change in

the share capital of the Company) and, GDL will become a subsidiary of the

Company.

The simplified shareholding structure of the Vendor, the Company and GDL

immediately after Completion (if the Acquisition is completed and assuming that,

other than the issue of the Consideration Shares, there is no other change in the

share capital of the Company) is set out below for illustrative purpose:

The Vendor

GDL

56.49%

73.82%

TheCompany


– 16 –

Financial information of the GDL Group

Set out below is certain financial information of the GDL Group (prepared in

accordance with the HK GAAP), for each of the financial years ended 31 December

2014 and 31 December 2015, respectively.

For the year ended31 December 2014

For the year ended31 December 2015

(audited) (audited)

Profit before tax Approximately

HK$90,898,000

Approximately

HK$176,362,000

Profit after tax Approximately

HK$81,773,000

Approximately

HK$172,250,000

According to the results of GDL for the nine months ended 30 September 2016,

the unaudited consolidated equity attributable to owners of GDL (prepared in

accordance with the HK GAAP) as at 30 September 2016 was HK$4,326,781,000.

4. Reasons for and benefits of the Acquisition

The Acquisition is expected to have certain benefits to the Group as set out below:

(i) Strategic fit with the Company’s long term business development

As one of its core business activities, the Company has a long history and

proven track record of investing in and developing quality commercial properties.

Properties in the Group’s existing property portfolio are all strategically located in

the core central business districts of Guangdong Province, Tianjin and Hong Kong.

Taking into account the prime location of the Buxin Project, the Company believes

that the Acquisition is in line with the Group’s ongoing strategy of its property

investment and development segment and will greatly supplement the Group’s

existing property portfolio by further extending its footprint into Shenzhen, one of

the four Tier 1 cities in the PRC, as more particularly explained in the paragraph

headed “(ii) Broadening the geographic exposure of the Group’s property holding

and investment business to Shenzhen” below.

As disclosed in the circular of GDL dated 22 June 2016, the Buxin Project was

expected to (i) commence pre-sale of the properties in the Northwestern Land (as

defined in the said circular) in 2018; (ii) commence pre-sale of the commercial office

premises in the Northern Land (as defined in the said circular) in 2019 and introduce

leasing of the commercial properties with jewellery as the main theme in the

Northern Land in 2021; and (iii) introduce leasing of the properties in the Southern

Land (as defined in the said circular) in 2023. Whilst the pre-sale of properties of the

Buxin Project will help finance part of its ongoing capital expenditure, the Company

believes that, upon completion of construction, the Buxin Project will generate


– 17 –

stable and continuing revenue and cash flow to the Group in the long run, and

therefore the Acquisition aligns with the Group’s overall strategy to invest in stable

income-generating assets.

In addition, taking into account the timelines of development plan and

income streams of Buxin Project, the Company is of the view that it is in the interest

of the Company and its Shareholders to proceed with the Acquisition at this

moment, as the Acquisition would enable the Company to capture the opportunity

in securing a scarce land resource in the prime location in Shenzhen with a

consideration at a reasonable discount to market valuation and allow the Company

the ability to contribute positively to the development theme and schedule as well

as the marketing strategies at the appropriate stage of the development of this

project.

(ii) Broadening the geographic exposure of the Group’s property holding andinvestment business to Shenzhen

Shenzhen is a city with population net inflow, surging urbanisation rate and

strong social net worth accumulation. The size of downtown Shenzhen is relatively

small as compared to other Tier 1 cities, and new land supply is quite scarce in

downtown after rapid economic growth and intensive infrastructure investment

during the past 30 years. Most of the city’s land parcels sold in recent years are

located in suburban areas, including Bao’an, Longguang, Longhua and Pingshan

Districts. The scarcity of land parcels in prime location has driven developers to

search for more property redevelopment opportunities in downtown area. Thus,

undertaking the Buxin Project will enable the Company to capture Shenzhen’s

economic fundamentals and its growing commercial property market.

(1) Shenzhen is one of the only four Tier 1 cities in the PRC and has

continued to undergo substantial economic development in recent

years, and was ranked number one in gross domestic product (“GDP”)

per capita among all Tier 1 and major Tier 2 cities in the PRC in 2015 as

illustrated in the chart below:

Leading GDP per capita in 2015

Shenzhen

Suzhou

Guangzhou

Hangzhou

Tianjin

Beijing

Wuhan

Shanghai

Chengdu

Chongqing

National

157,985

136,300

134,066

112,268

106,908

105,822

104,132

103,000

74,273

52,330

49,351

0 50,000

Per capita GDP (RMB)

100,000 150,000 200,000

Source of GDP, GDP per capita and population of China and the above cities: Bureau of Statisticsof China and the respective cities


– 18 –

(2) Shenzhen was also ranked number four in total GDP among all cities in

the PRC in 2015 shown in the chart below:

No. 4 city in total GDP in 2015

Shanghai

Beijing

Guangzhou

Shenzhen

Tianjin

Chongqing

Suzhou

Wuhan

Chengdu

Hangzhou

2,496

2,297

1,810

1,750

1,654

1,572

1,450

1,091

1,080

1,005

0 500 1,000 1,500

GDP (RMBbn)

2,000 2,500 3,000

Source of GDP of the above cities: Bureau of Statistics of the respective cities

(3) Shenzhen is China’s first special economic zone, a major container port

and a manufacturing centre with strong purchasing power. The

following chart illustrates the per capital disposable income of urban

residents in Shenzhen as compared to the national average in the PRC:

Leading city with strong purchasing power in China

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

2011

Shenzhen per capita disposable income of urban residents

36,50540,742

44,653

26,955

40,948

28,844

44,633

31,195

24,56521,810

2012 2013 2014 2015

National average

(RM

B)

Source of national and Shenzhen per capita disposable income of urban residents: Bureau of

Statistics of China and Shenzhen

(4) More importantly, since 2006, Shenzhen transited from “made in

Shenzhen” to “innovated by Shenzhen”, as it has been moving towards

a knowledge and technology-based development model. Shenzhen is

now home to the headquarters of a number of sizable and well-known

Chinese and global firms in high-tech, financial and logistics service

sectors.


– 19 –

The following chart illustrates the increasing contribution from tertiary

industries to the GDP of Shenzhen from 2005 to 2015:

Increasing contribution from tertiary industries in Shenzhen

% Shenzhen GDP by industries 2005 2015

Primary

Secondary

Tertiary

– Financial

– Real estate

– Whole and retail sales

– Info tech, info transfer and

software

0.2%

53.4%

46.4%

6.2%

9.0%

10.5%

3.4%

0.03%

41.2%

58.8%

14.5%

9.3%

11.5%

6.2%

Source of GDP by industries: Bureau of Statistics of Shenzhen

(5) The residential property market in Shenzhen has been booming for the

past five years with prices surging, particularly in 2016 where the

average selling price (“ASP”) rose to above RMB50,000 per sq.m., as

illustrated in the chart below:

Surging residential ASP in 2016

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

0

500

1,000

1,500

2,000

2,500

3,000

Q2

-12

Q3

-12

Q4

-12

Q1

-13

Q2

-13

Q3

-13

Q4

-13

Q1

-14

Q2

-14

Q3

-14

Q4

-14

Q1

-15

Q2

-15

Q3

-15

Q4

-15

Q1

-16

Q2

-16

Q3

-16

GFA sold (sq.m.) ASP (RMB/sq.m.)

Source: Vigers Research

Accordingly, the Company believes that Shenzhen’s property market will

continue to grow at a sustainable rate and the demand for high quality commercial

properties will likely increase in the foreseeable future.

(iii) Prime location of Buxin Project for further strategic growth

The land being redeveloped under the Buxin Project was previously the

largest plot of industrial land within the Buxin area in Shenzhen with a

well-established transportation network. In recent years, businesses engaging in

design, manufacture and sale of jewellery and costume jewellery products in the


– 20 –

PRC have congregated mainly in this area. The development of this area is also

currently supported by government initiatives which includes the 12th Five-Year

Plan for National Economic and Social Development in Luohu District. Therefore, a

demand has arisen for office space in the Buxin area for research, development and

exhibition purposes for jewellery businesses. Conversion of the uses of the land

under the Buxin Project has been substantially completed and the development of a

multi-module commercial complex with the jewellery products industry as its main

theme is underway. As such, the Company has reasons to believe that the

Acquisition would enable the Group to tap into the development opportunity of

Buxin area and enhance the Group’s future strategic growth.

(iv) Well-established asset on listed platform for future expansion of the Group

In order to formulate the strategic business and investment decision, the

Company has taken into account a number of factors including, among others, the

uncertainty in the PRC property market and the associated potential increase in

business risk as a result of the Acquisition. However, after conducting a

comprehensive risk and benefit assessment, in particular the positive factors and

potential benefits outlined above, the Company considers that the Acquisition is

complementary to its existing business and in line with the interest of the Company

and its Shareholders as a whole.

The Acquisition will bring into the fold a well-established listed platform,

with a valuable asset in a prime location of the PRC. As part of its broader

investment strategy, the Company continues to search for strategic acquisition

opportunities in order to enhance its long-term profit growth and expand its

investment portfolio that generates stable and continuing income. Upon

Completion, GDL, which is principally engaged in property investment and

development with the Buxin Project, will become a subsidiary of the Company.

As at 30 June 2016, GDL had approximately HK$2.6 billion cash on hand and

no financial borrowing, with the further cash inflow from the selling of the

remaining portion of Ruyingju Project at market value of approximately RMB327

million as at 30 November 2016, together with the phase by phase development plan

of Buxin Project and presale of properties planned in 2018 and 2019, the Company

believes that GDL can finance the development of Buxin Project by its internal

resources and/or bank borrowing, without relying on financial support by the

Company.

(v) Consolidation of management expertise and better deploy of resources for theproperty sector

The Group has extensive experience in property investment and development

in the PRC. Upon Completion, the Company is able to enjoy the benefits from the

growth potential of the Buxin Project whereas GDL may leverage on the Company’s

management expertise in property investment and development as well as

enhancing its brand name within the region to facilitate its development of the

Buxin Project. Subsequent to Completion, the Company will review the feasibility of


– 21 –

further integration of the resources of GDL with a view to improving the operational

quality, optimising internal allocation of resources, expanding the Group’s

operational scale and profitability in the property segment, and driving for

sustainable rapid growth in the coming years.

The Board (including the independent non-executive Directors after taking

into account the advice of the Independent Financial Adviser), considers that the

terms and conditions of the Acquisition are fair and reasonable, on normal

commercial terms or better and are in the interests of the Company and the

Shareholders as a whole.

Mr. HUANG Xiaofeng, Mr. CAI Yong, Mr. WU Jianguo, Mr. ZHANG Hui,

Ms. ZHAO Chunxiao, Mr. LAN Runing and Mr. LI Wai Keung, being Directors, are

also directors of the Vendor. All of the abovementioned Directors present at the

relevant Board meeting were not counted in the quorum and did not vote on the

Directors’ resolutions approving, among others, the entering into of the Sale and

Purchase Agreement by the Company. The Vendor and any of the abovementioned

Directors (if any) who shall be entitled to vote at the EGM, with a material interest in

the Acquisition, and the associates of each of them (who in aggregate held

3,428,911,137 Shares, representing approximately 54.73% of the issued share capital

of the Company as at the Latest Practicable Date), will abstain from voting at the

EGM in respect of the proposed resolutions relating to the Acquisition and the

Specific Mandate.

5. Corporate Strategy

Among the Group’s various business segments, the water resources segment,

comprising water distribution and sewage treatment in the Mainland China, has always

been a core business segment with strategic focus. Notwithstanding the Acquisition, the

Group will continue to source business opportunities in and expand the scale of the area

of water resources so as to enhance the long-term profit growth.

Furthermore, the Group has always strived to create long-term value for its

Shareholders and considers that dividend distribution forms an integral part of

shareholders’ return. The Company expects to continue with its stable dividend

distribution policy following the Completion.

B. INFORMATION ON THE GROUP

The Group is principally engaged in investment holding, water resources, property

holding and investment, hotel ownership and operation, hotel management, department

store operation and investments in other infrastructure projects.

C. INFORMATION ON THE VENDOR

The Vendor is the controlling Shareholder holding (directly and through various

wholly owned subsidiaries) approximately 54.60% of the issued share capital of the

Company as at the Latest Practicable Date, and, hence, a connected person of the

Company under Chapter 14A of the Listing Rules. The Vendor is principally engaged in

investment holding.


– 22 –

D. LISTING RULES AND TAKEOVERS CODE IMPLICATIONS

Since certain of the applicable percentage ratios in respect of the Acquisition exceed

5% but all of them are less than 25% as determined in accordance with Rule 14.07 of the

Listing Rules, the Acquisition constitutes a discloseable transaction of the Company for

the purpose of Chapter 14 of the Listing Rules. Further, since the Vendor is the controlling

Shareholder and, hence, a connected person of the Company, the Acquisition also

constitutes a connected transaction of the Company, which is subject to the reporting,

announcement and Independent Shareholders’ approval requirements under Chapter 14A

of the Listing Rules.

The Acquisition would lead to a mandatory offer obligation of the Company under

Rule 26.1 of the Takeovers Code unless it is waived by the Executive. As outlined under

the section headed “A.4. Reasons for and benefits of the Acquisition”, the Company

considers that the Acquisition represents a strategic and positive step of the Company’s

long term business development and it is in the interest of the Company and its

Shareholders that GDL maintains its well established listed platform after Completion. In

order to avoid any potential material change in the public float of GDL and increase in

acquisition cost as a result of a mandatory offer, the Company has applied to the Executive

for a waiver to dispense with its obligation to make a mandatory offer for all ordinary

shares of GDL pursuant to Rule 26.1 of the Takeovers Code in relation to the Acquisition

and the said waiver has been granted by the Executive pursuant to Note 6(a) to Rule 26.1

of the Takeovers Code.

In connection with the said waiver application and as a condition to the grant of the

said waiver, 廣東粵海控股集團有限公司 (Guangdong Holdings Limited*) (“Guangdong

Holdings”, the direct holding company of the Vendor) has undertaken to the SFC that,

unless with the prior written consent from the Executive, within three years from

Completion:

(i) Guangdong Holdings will not transfer or otherwise dispose of, or enter into

any agreement to transfer or otherwise dispose of, any shares of the Vendor to

any parties not acting in concert with Guangdong Holdings;

(ii) Guangdong Holdings will procure that none of the shares of the Indirect

Intermediate Holding Companies will be transferred or otherwise disposed of

to any parties not acting in concert with Guangdong Holdings, the Vendor

and/or the Company;

(iii) Guangdong Holdings will procure that the Vendor will not transfer or

otherwise dispose of, or enter into any agreement to transfer or otherwise

dispose of, any Shares to any parties not acting in concert with Guangdong

Holdings, the Vendor and/or the Company;


– 23 –

(iv) Guangdong Holdings will procure that Guangdong Trust Ltd. (粵海信托有限公司) (an Indirect Intermediate Holding Company) will not transfer or




(v) Guangdong Holdings will procure that GD Assets Management (Custodian)

Limited (an Indirect Intermediate Holding Company) will not transfer or




(vi) Guangdong Holdings will procure that Guangdong Assets Management (BVI)

No. 62 Limited (an Indirect Intermediate Holding Company) will not transfer

or otherwise dispose of, or enter into any agreement to transfer or otherwise



(vii) Guangdong Holdings will procure that the Company will not transfer or


dispose of, any shares of GDL to any parties not acting in concert with

Guangdong Holdings, the Vendor and/or the Company; and

(viii) Guangdong Holdings will procure that the Company, the Vendor and the

Indirect Intermediate Holding Companies will not issue any new shares or

any convertible securities to any parties not acting in concert with Guangdong

Holdings, the Vendor and/or the Company,

which will lead to any person (the “Buyer”), who is not a concert party of Guangdong

Holdings, the Vendor and/or the Company obtaining statutory control of the Vendor

and/or the Indirect Intermediate Holding Companies and/or the Company, unless the

Buyer extends a general offer to acquire all relevant securities of GDL in compliance with

the Takeovers Code from shareholders who are not acting in concert with the Buyer.

After Completion, the Vendor will maintain statutory control over both GDL and the

Company on terms of the said undertaking. There is also no proposed change in the

composition of board of directors of GDL in connection with the Acquisition immediately

after Completion.

The said undertakings, among others, will restrict the Company from transferring

or disposing of shares of GDL or issuing new shares or convertible securities to any parties

not acting in concert with Guangdong Holdings, the Vendor and/or the Company, which

will lead to the Buyer obtaining statutory control, within three years from Completion.


– 24 –

Taking into account the development plan and income streams of the Buxin Project,

the Company views the Acquisition as a medium to long-term strategic investment and

therefore has planned to maintain statutory control over GDL on the terms of the said

undertakings. On the other hand, in view of the strong financial position of the Company

and the long-standing support from the Vendor, the Company considers that, among the

various possible options of financing alternatives, issuing new shares or convertible

shares to the extent where the Vendor will lose statutory control over the Company, is not

likely to happen during the term of the said undertakings. Having considered the above,

in the Board’s opinion, the said undertakings would not have any material impact on the

future corporate decision making process of the Company and/or any negative impact on

the Company’s future business plan on GDL.

In light of the abovementioned importance of the said waiver to the Acquisition

while the said undertakings given by Guangdong Holdings is a condition to the grant of

the said waiver by SFC, the Board considers that the said undertakings are in line with the

strategy of the Company and the interest of the Company and its Shareholders as a whole.

E. INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL

ADVISER

An Independent Board Committee comprising all the independent non-executive

Directors (namely, Dr. CHAN Cho Chak, John, Dr. the Honourable LI Kwok Po, David,

Mr. FUNG Daniel Richard, Dr. the Honourable CHENG Mo Chi, Moses and Mr. WU Ting

Yuk, Anthony) has been formed to consider the Acquisition and the Specific Mandate.

Somerley Capital Limited has been appointed by the Company as the Independent

Financial Adviser to advise the Independent Board Committee and the Independent

Shareholders on the same matters.

F. DIRECTOR PROPOSED TO BE RE-ELECTED AT THE EGM

Pursuant to Article 73 of the Articles of Association of the Company, the Board shall

have power at any time and from time to time to appoint any person to be a Director,

either to fill a casual vacancy or as an addition to the existing Board. Any Director so

appointed by the Board shall hold office only until the first general meeting after his

appointment and shall then be eligible for re-election at that meeting.

Mr. CAI Yong, who was appointed as a Non-Executive Director of the Company on

25 August 2016, will retire at the EGM in accordance with Article 73 of the Articles of

Association of the Company. Being eligible, he will offer himself for re-election.

Particulars of Mr. Cai who will retire at the EGM and being eligible, offer himself for

re-election are set out in Appendix III to this circular.

A separate resolution will be put forward at the EGM for the re-election of Mr. Cai.


– 25 –

G. EGM

A notice of the EGM is set out on pages 91 and 92 of this circular. The EGM will be

convened at Concord Room, 8th Floor, Renaissance Harbour View Hotel Hong Kong, One

Harbour Road, Wanchai, Hong Kong on Monday, 20 March 2017 at 10:00 a.m., at which,

the resolutions in respect of the Acquisition, the Specific Mandate and the re-election of

Mr. Cai will be proposed to the Shareholders to consider and, if thought fit, approve.

Pursuant to Rule 13.39(4) of the Listing Rules, all votes to be taken at the EGM will be

taken by way of poll.

A form of proxy for use at the EGM is accompanied with this circular. Whether or

not you intend to attend the EGM in person, please complete and return the enclosed form

of proxy in accordance with the instructions printed thereon to the Company’s share

registrar, Tricor Tengis Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East,

Hong Kong as soon as possible but in any event not later than 48 hours before the time of

the EGM or any adjournment thereof. Completion and return of the form of proxy will not

preclude you from attending and voting in person at the EGM or any adjourned meeting

should you so wish.

The register of members will be closed and no transfer of shares will be effected for

one day on Monday, 20 March 2017 for determining the Shareholders’ eligibility to attend

and vote at the EGM.

H. RECOMMENDATION

Your attention is drawn to:

(i) the letter from the Independent Board Committee comprising all of the

independent non-executive Directors, namely Dr. CHAN Cho Chak, John,

Dr. the Honourable LI Kwok Po, David, Mr. FUNG Daniel Richard, Dr. the

Honourable CHENG Mo Chi, Moses and Mr. WU Ting Yuk, Anthony set out

on pages 28 and 29 of this circular which contains the recommendation of the

Independent Board Committee to the Independent Shareholders concerning

the fairness and reasonableness of the Acquisition and the Specific Mandate;

and

(ii) the letter from the Independent Financial Adviser set out on pages 30 to 66 of

this circular which contains its recommendations to the Independent Board

Committee and the Independent Shareholders on whether the terms of the

Acquisition and the Specific Mandate are fair and reasonable, on normal

commercial terms and are in the interests of the Company and the

Shareholders as a whole, and the principal factors and reasons taken into

account by the Independent Financial Adviser in arriving at its

recommendations.


– 26 –

Based on the reasons set out hereinabove, the Board recommends the Independent

Shareholders to vote in favour of the proposed ordinary resolution no.1 set out in the

notice convening the EGM.

The Board believes that the re-election of Mr. Cai is in the best interests of the

Company as well as the Shareholders. Accordingly, the Board also recommends that

Shareholders vote in favour of the proposed ordinary resolution no. 2 set out in the notice

convening the EGM.

I. ADDITIONAL INFORMATION

Your attention is drawn to the additional information set out in the appendices to

this circular.

Yours faithfully,

By Order of the Board

Guangdong Investment LimitedHUANG Xiaofeng

Chairman


– 27 –


(Stock Code: 0270)

24 February 2017

To the Independent Shareholders

Dear Sir or Madam,


THE ACQUISITION OF THE SALE SHARESINVOLVING THE ISSUE OF CONSIDERATION SHARES

UNDER THE SPECIFIC MANDATE

We refer to the circular of the Company to the Shareholders dated 24 February 2017

(the “Circular”), of which this letter forms part. Unless the context otherwise requires,

capitalised terms used in this letter will have the same meanings as defined in the

Circular.

We, CHAN Cho Chak, John, LI Kwok Po, David, FUNG Daniel Richard, CHENG Mo

Chi, Moses and WU Ting Yuk, Anthony, being Independent Non-Executive Directors of

the Company, have been appointed by the Board as the Independent Board Committee to

consider the Acquisition, being a connected transaction, pursuant to the terms and

conditions of the Sale and Purchase Agreement, and to advise the Independent

Shareholders as to whether, in our opinion, the Acquisition and the Specific Mandate are

fair and reasonable so far as the Independent Shareholders are concerned.

Somerly Capital Limited has been appointed as the Independent Financial Adviser

to advise the Independent Board Committee and the Independent Shareholders in respect

of the Acquisition and the Specific Mandate.

We wish to draw your attention to the letter from the Board set out on pages 7 to 27

of the Circular which contains, among others, information on the Acquisition and the

Specific Mandate and the letter from the Independent Financial Adviser set out on pages

30 to 66 of the Circular which contains its advice in respect of the Acquisition and the

Specific Mandate.

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

– 28 –

Having taken into account the principal factors and reasons underlying the

Acquisition and the Specific Mandate as well as the advice of the Independent Financial

Adviser as set out in the Circular, we consider the terms and conditions of the Acquisition

and the Specific Mandate to be fair and reasonable, on normal commercial terms, and in

the interests of the Company and the Shareholders as a whole.

Accordingly, we recommend the Independent Shareholders to vote in favour of the

ordinary resolution no. 1 in respect of the Acquisition and the Specific Mandate to be

proposed at the EGM.

Yours faithfully,

For and on behalf of

the Independent Board Committee

Dr. Chan Cho Chak, JohnIndependent Non-Executive Director

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

– 29 –

Set out below is the text of the letter of advice from Somerley to the Independent BoardCommittee and the Independent Shareholders in respect of the Acquisition and the SpecificMandate, which has been prepared for the purpose of inclusion in this circular.

SOMERLEY CAPITAL LIMITED20th Floor

China Building

29 Queen’s Road Central

Hong Kong

24 February 2017

To: The Independent Board Committee and the Independent Shareholders of GuangdongInvestment Limited

Dear Sirs,



THE SPECIFIC MANDATE

INTRODUCTION

We refer to our appointment as the independent financial adviser to advise the

Independent Board Committee and the Independent Shareholders in relation to the

Acquisition and the Specific Mandate. Details of the Acquisition are contained in the

circular issued by the Company to the Shareholders dated 24 February 2017 (the

“Circular”), of which this letter forms part. Unless the context otherwise requires,

capitalised terms used in this letter shall have the same meanings as those defined in the

Circular.

On 19 January 2017, the Company entered into the Sale and Purchase Agreement

with GDH, pursuant to which the Company conditionally agreed to acquire the Sale

Shares from GDH for the Consideration of RMB3,358 million.

Since certain of the applicable percentage ratios in respect of the Acquisition exceed

5% but all of them are less than 25% as determined in accordance with Rule 14.07 of the

Listing Rule, the Acquisition constitutes a discloseable transaction of the Company for the

purpose of Chapter 14 of the Listing Rules. Further, since GDH is the controlling

shareholder of the Company holding approximately 54.6% of the issued share capital of

the Company as at the Latest Practicable Date and hence is a connected person of the

Company, the Acquisition also constitutes a connected transaction of the Company, which

is subject to the reporting, announcement and Independent Shareholders’ approval

requirements under Chapter 14A of the Listing Rules.

LETTER FROM SOMERLEY

– 30 –

The Independent Board Committee comprising all of the independent

non-executive Directors, namely Dr. Chan Cho Chak, John, Dr. the Honourable Li Kwok

Po, David, Mr. Fung Daniel Richard, Dr. the Honourable Cheng Mo Chi, Moses and Mr.

Wu Ting Yuk, Anthony, has been established to give advice and recommendation to the

Independent Shareholders in respect of the Acquisition and the Specific Mandate. We,

Somerley Capital Limited, have been appointed as the Independent Financial Adviser to

advise the Independent Board Committee and the Independent Shareholders in the same

regard.

We are not associated with the Company, GDL, GDH, Guangdong Holdings or their

respective core connected persons, close associates or associates and accordingly are

considered eligible to give independent advice on the terms of the Acquisition and the

Specific Mandate. Apart from normal professional fees payable to us in connection with

this appointment, no arrangement exists whereby we will receive any fees or benefits from

the Company, GDL, GDH, Guangdong Holdings or their respective core connected

persons, close associates or associates.

In formulating our opinion and recommendation, we have reviewed, among other

things, the Sale and Purchase Agreement, the announcement of the unaudited financial

information of the Company for the nine months ended 30 September 2016 (the “GDI 20163Q Announcement”), the interim report of the Company for the six months ended 30 June

2016 (the “GDI 2016 Interim Report”), the annual report of the Company for the year

ended 31 December 2015 (the “GDI 2015 Annual Report”), the announcement of the

unaudited financial information of GDL for the nine months ended 30 September 2016 (the

“GDL 2016 3Q Announcement”), the interim report of GDL for the six months ended 30

June 2016 (the “GDL 2016 Interim Report”), the annual report of GDL for the year ended

31 December 2015 (the “GDL 2015 Annual Report”), the valuation report on the

properties held by the GDL Group as at 30 November 2016 prepared by Vigers Appraisal &

Consulting Limited (“Vigers”), the independent professional valuer appointed by the

Company, and the information as set out in the Circular.

In addition, we have relied on the information and facts supplied, and the

statements, representations and opinions made, by the Directors and the management of

the Group and have assumed that they are true, accurate and complete in all material

respects at the time they were made. We have no reason to believe that any of such

information, facts, statements, representations or opinions relied on by us in forming our

opinion is untrue, inaccurate or misleading, nor are we aware of any material omissions

which would render the information, facts, statements, representations or opinions

supplied or expressed to us untrue, inaccurate or misleading. We have assumed that all

such information, facts, statements, representations or opinions for matters relating to the

Group supplied or expressed to us by the Directors and the management of the Group

have been reasonably made after due and careful enquiry. We have relied on such

information, facts, statements, representations and opinions and consider these sufficient

for us to reach our advice and recommendation as set out in this letter. However, we have

not conducted any independent investigation into the business, financial conditions,

affairs and future prospects of any member of the Group or the GDL Group.


– 31 –

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion and recommendation, we have considered the principal

factors and reasons set out below.

1. Principal business activities and financials of the Group



store operation and investments in other infrastructure projects.

The water resources segment is the largest segment of the Group and contributed

the majority of the revenue and the profit to the Group in recent years. This segment

mainly comprises the Dongshen water supply project, which provides water supply to

Hong Kong, Shenzhen and Dongguan. The water resources segment will remain the key

operating segment and the strategic focus of the Group upon completion of the

Acquisition.

The property investment and development segment is the Company’s second

largest segment. The Group has a long history of developing and holding

mall/commercial/office properties. The property holding and investment segment

currently has four property projects in the PRC and Hong Kong, namely Teem Plaza,

Tianjin Teem Shopping Mall, Panyu Wanbo Central Business District (“CBD”) Project and

Guangdong Investment Tower. Teem Plaza comprises a shopping mall, an office building

and a hotel located in Guangzhou and the shopping mall and the office building are held

for investment purposes by the Group. Tianjin Teem Shopping Mall and Panyu Wanbo

CBD Project, located in Tianjin and Panyu respectively, are being developed into a modern

shopping mall and an integrated commercial project respectively. Guangdong Investment

Tower is a commercial property located in Hong Kong held by the Group for investment

purposes.

In the hotel ownership and operation and hotel management segment, as at 30

September 2016, the Group’s hotel team managed a total of 39 hotels, of which a

significant majority were located in the PRC. On the same date, the Group also owned or

lease-owned seven hotels, five of which are situated in the PRC and the remaining two are

located in Hong Kong. The department store operation owned majority stakes in eight

department stores and a minority interest in one department store in the PRC as at 30

September 2016. The investments in other infrastructure projects consist of certain

interests in power plants and an expressway in the PRC.


– 32 –

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– 33 –

The revenue increase in 2015 was mainly attributable to a better performance in

water resources and department store operation as well as returns from the toll road

acquired during 2015. The consolidated profit before tax and consolidated net profit

attributable to the Shareholders, however, decreased by approximately 14.0% and 11.2% to

HK$5,246.2 million and HK$3,905.3 million for 2015 respectively, mainly attributable to a

number of one-off charges for 2015.

For the six months ended 30 June 2016 and nine months ended 30 September 2016,

there was growth in revenue, profit before tax and profit attributable to the Shareholders,

mainly attributable to a better performance in both water resources and electric power

generation businesses, and additional returns from the toll road business and certain

water resources projects acquired during the last quarter of 2015. The increase was

partially offset by, among other things, and the unsatisfactory performance in department

store operation and hotel operation and management businesses.

The financial performance of the property holding and investment segment was

satisfactory. Rental income from Teem Plaza and Guangdong Investment Tower improved

by approximately 3% and 5% respectively during the nine months ended 30 September

2016 before currency translation and these properties had very high occupancy rates in

such period.

While the majority of revenue and profit contributions came from the water

resources segment, the property investment and development segment also provides

considerable amount of revenue and profit to the Group. For the year ended 31 December

2015, the property investment and development segment contributed approximately

12.8% of total revenue and approximately 22.1% of total profit to the Group. For the six

months ended 30 June 2016, this segment contributed approximately 10.6% of total

revenue and 18.2% of total profit to the Group. Furthermore, as set out in the table below,

the investment properties had a total balance of approximately HK$12,528 million, which

was over 25% of total assets less cash and cash equivalents of the Group as at 30 June 2016.

On this basis, the property investment and development segment, though not the largest

segment of the Group, is nevertheless a significant part of the business.


– 34 –

Set out below is a summary of the financial position of the Group as at 30 June 2016,

31 December 2015 and 31 December 2014 as extracted from the GDI 2016 Interim Report

and the GDI 2015 Annual Report.

As at30 June

As At31 December

As at31 December

2016 2015 2014HK$ million HK$ million HK$ million

NON-CURRENT ASSETS

Property, plant and equipment 6,918.2 7,083.4 3,649.6

Investment properties 12,527.7 12,326.8 12,113.8

Operating concession rights 14,685.9 15,218.7 12,858.0

Others 2,820.9 2,989.4 2,985.6

Total non-current assets 36,952.7 37,618.3 31,607.0

CURRENT ASSETS

Available-for-sale financial assets 4,899.1 6,228.8 8,207.9

Cash and cash equivalents 10,122.8 9,295.2 7,001.9

Others 1,514.2 967.7 798.6

Total current assets 16,536.1 16,491.7 16,008.4

CURRENT LIABILITIES

Payables and accruals (4,011.4) (4,385.3) (3,163.8)

Others (1,154.1) (1,393.1) (2,969.8)

Total current liabilities (5,165.5) (5,778.4) (6,133.6)

NET CURRENT ASSETS 11,370.6 10,713.3 9,874.8

NON-CURRENT LIABILITIES

Bank and other borrowings (6,559.0) (7,016.0) (1,975.2)

Others (3,928.9) (4,048.2) (3,842.4)

Total non-current liabilities (10,487.9) (11,064.2) (5,817.6)

Net assets 37,835.4 37,267.4 35,664.2

EQUITY

Equity attributable to owners of

the Company 31,968.2 31,472.1 30,266.8

Non-controlling interests 5,867.2 5,795.3 5,397.4

Total equity 37,835.4 37,267.4 35,664.2


– 35 –

The majority of assets of the Group relate to the water resources segment, such as

the water distribution operating concession rights, and the investment properties held for

rental purposes under the property holding and investment segment.

The Group maintained a healthy working capital (i.e. net current assets) of

approximately HK$11,370.6 million as at 30 June 2016. The Group’s net cash position as at

30 June 2016 was approximately HK$1,434.2 million, representing cash and cash

equivalents of approximately HK$10,122.8 million after netting off (i) short-term and

long-term bank and other borrowings of approximately HK$6,938.3 million; and (ii)

receipt in advance from Hong Kong Government of approximately HK$827.4 million and

amounts due to related companies of approximately HK$922.9 million. The Group’s net

cash position as at 30 June 2016 represents an increase from HK$710.3 million as at 31

December 2015. The increase in net cash position is attributable to the strong net cash

inflows from operating activities during the period of approximately HK$2,718.3 million.

The Group’s liquidity position is also backed by its available-for-sale financial

assets. As at 30 June 2016, the available-for-sale financial assets of the Group was

HK$4,899.1 million, placed by the Group with a number of licensed banks in the PRC for

terms not exceeding one year. The principal sums of these financial assets were

denominated in RMB and were principal protected upon the maturity date.

Based on the GDI 2016 3Q Announcement, the Company had unaudited

consolidated net asset value (the “NAV”) attributable to the Shareholders of

approximately HK$32,233.6 million as at 30 September 2016, equivalent to approximately

HK$5.15 per Share.

2. Information on the GDL Group

(i) Business of the GDL Group

Formerly known as Kingway Brewery Holdings Limited (金威啤酒集團有限公司), GDL was mainly engaged in the brewery business until September 2013, when it

disposed of its brewery business and related assets to China Resources Snow

Breweries Limited (華潤雪花啤酒有限公司) and pivoted its principal businesses

toward property development and investment. It currently has two main property

portfolios located in the PRC.

GDL is a subsidiary of GDH held as to approximately 73.82% as at the Latest

Practicable Date. The Vendor acquired the Sale Shares from 2003 to 2011 at the

aggregate cost of approximately HK$2,284.2 million.

(ii) Properties of the GDL Group

The main properties held by the GDL Group are (i) the Buxin Project, being the

development of a multi-module commercial complex in Luohu District, Shenzhen,

the PRC with the jewellery products industry as the project’s main theme; (ii)

certain unsold apartment units and car-parking spaces of the Ruyingju Project,

being a residential property project in Panyu District, Guangzhou, the PRC; and (iii)

certain residential units of the Buxin Garden in Luohu District, Shenzhen, the PRC

used as staff quarters by the GDL Group. Details of these properties held by the GDL

Group as at 30 November 2016 are set out in the table below. We have also provide

detailed overviews of the Buxin Project and the Ruyingju Project below.


– 36 –

Prop

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s.


– 37 –

(a) Buxin Project

After the disposal of the brewery and related assets in 2013, the GDL

Group retained the Buxin Land, being three land parcels located at the Buxin

Area, Luohu District, Shenzhen, the PRC. In mid-2016, the GDL Group

acquired the land use rights of the Buxin Land from the Shenzhen Luohu

Renewal Authority (深圳市羅湖區城市更新局) by paying an aggregate land

premium of approximately RMB2,267.0 million pursuant to the land use

rights transfer agreements (the “Land Use Rights Transfer Agreements”)

with an intention to redevelop the Buxin land into the Buxin Project for

commercial use and new industry related use (新型產業用地) pursuant to the

urban renewal unit planning proposal (城市更新單元規劃方案) for the Buxin

Project approved (the “Buxin Project Approval”) by the Shenzhen Urban

Planning Committee (深圳市城市規劃委員會) in November 2015. The Buxin

Land, being one of the largest plots of industrial land in the Buxin area of

Shenzhen, is expected to be developed into an industrial and commercial

complex with jewelry as the main theme. It has a planned total development

site area for the Buxin Project of approximately 66,526 sq. m. with a planned

GFA of approximately 462,051 sq. m. (inclusive of underground area with a

GFA of 30,000 sq.m. for commercial use). Phase I of the Buxin Project is

expected to be completed by September 2021 with pre-sale commencing in

April 2018, and Phase II of the Buxin Project is expected to be completed by

July 2023.

The Buxin Project is surrounded by a well-established road network and

is near several trunk roads, which provides easy access to other districts in

Shenzhen. It takes around 15 minutes to reach the Luohu control point from

the Buxin Project by car under normal traffic conditions. The Buxin Project is

also within walking distance to the Buxin station (布心站) of the Shenzhen

metro Line 5 (a circle metro line connecting major areas in the eastern, central

and western parts of Shenzhen) and the Shuibei station (水貝站) of the

Shenzhen metro Line 3 (a line which connects the outer eastern area with the

central business district of Shenzhen). In recent years, businesses engaging in

the design, manufacture and sale of jewellery and costume jewellery products

in the PRC have congregated mainly in this area. We conducted a site visit to

the Buxin Project on 25 January 2017.


– 38 –

Set out below is the site-map of the Buxin Project for illustration

purpose.

★ The Buxin Project

Conversion of the uses of the land under the Buxin Project has been

substantially completed and the development of a multi-module commercial

complex with the jewellery products industry as its main theme is underway.

As disclosed in the circular of GDL dated 22 June 2016, the Buxin Project was

expected to (i) commence pre-sale of the properties in the Northwestern Land

(as defined in the said circular) in 2018; (ii) commence pre-sale of the

commercial office premises in Phase I of the Buxin Project in 2019 and

introduce leasing of the commercial properties with jewellery as the main

theme in Phase I of the Buxin Project in 2021; and (iii) introduce leasing of the

properties in the Phase II of the Buxin Project in 2023. Whilst the pre-sale of

properties of the Buxin Project will help finance part of its ongoing capital

expenditure, the Company believes that, upon completion of construction, the

Buxin Project will generate stable and continuing revenue and cash flow to the

Group in the long run.

As at 30 June 2016, the Buxin Project incurred preliminary development

costs in the amount of approximately HK$2,762 million in aggregate (31

December 2015: HK$97 million), representing a net increase of HK$2,665

million in the period under review, and such net increase was substantially

due to the addition of the costs of land premium for the Buxin land acquired

during the year. Approximately HK$1,694 million and HK$1,068 million were

classified as “properties under development” under current assets and

“investment properties” under non-current assets of GDL, respectively as at

30 June 2016.

The total site area of the Buxin Land for development pursuant to the

Buxin Project Approval is approximately 67,903 sq. m. Pursuant to the Land

Use Rights Transfer Agreements, the Company shall acquire the land use

rights as to an aggregate site area of approximately 66,526 sq. m., with


– 39 –

approximately 1,377 sq. m. shortfall when compared to the total site area

approved under the Buxin Project Approval. Ongoing negotiations between

the GDL Group and the municipal government of Shenzhen are underway in

respect of the acquisition of (including the land premium payable for) the land

use rights to such remaining area.

It is worthwhile noting that certain portion of the Buxin Project with an

aggregate GFA of approximately 192,108 sq. m. (i.e. note 1 in the property

table above) has been designated for investment purpose as stipulated under

the Land Use Rights Transfer Agreements. After including such portion,

equivalent to an investment value of approximately RMB2,228.4 million, the

aggregate value of the Buxin Project is approximately RMB6,496.4 million.

The Buxin Project’s aggregate value accounted for more than 90% of both the

total GFA and the total market value of the property portfolio held by the GDL

Group. As such, GDL is essentially a one-property company.

(b) Ruyingju Project

The Ruyingju Project is a residential property project situated in the

south of Sanzhi Xiangshui Road, Dashi Town, Panyu District, Guangzhou, the

PRC. The total site area of the Ruyingju Project is approximately 38,771 sq. m.

and the total aggregate GFA is approximately 128,947 sq. m. with 917

residential units and 651 car-parking spaces for sale. In April 2015, the GDL

Group acquired from GDH an 80% interest in the Ruyingju Project. The

Ruyingju Project was completed in November 2015. As at 30 September 2016,

the accumulated sale contracts signed under the Ruyingju Project represented

an aggregate GFA of approximately 84,900 sq. m., representing approximately

90.2% of the total saleable area of the residential units of the Ruyingju Project.

As at 30 November 2016, there remained 80 unsold apartment units and 651

car-parking spaces.

(iii) Listed status of GDL

GDL was listed on the Stock Exchange in 1997. Following the disposal of the

brewery business in 2013, the share price has traded in the range HK$1.68 to

HK$3.48 during 2013. In 2016, the high/low closing prices were HK$2.42 and

HK$1.55 respectively. The shares are not actively traded, averaging 648,450 shares

per day in 2016, and only rarely exceeding 2,000,000 shares (worth about HK$4

million). No dividend has been paid since 2013. Like most small/medium-size Hong

Kong listed property companies, the shares of GDL have been traded at a discount

to net asset value, even before taking into account property revaluation. The reasons

for such discount may be due to external factors which are not in the control of GDL,

and it does not reflect the intrinsic value of the underlying assets of GDL.


– 40 –

The Acquisition essentially involves the transfer of controlling stake of GDL’s

business comprising principally property assets instead of the transfer of a small

volume of shares. As noted in section headed “7.(ii) Comparable transactions –

Listed Property Company Takeovers Comparable Transactions” in this letter below,

a premium over revalued net assets is normally required to purchase control of a

Hong Kong listed property company. The Consideration, which is largely based on

the Reassessed NAV (as defined below) and the application of the Discount (as

defined below), on a per Sale Share basis, is approximately HK$2.99, which

represents premiums of approximately 47.3% and 59.9% over the last trading prices

of GDL prior to the date of the Sale and Purchase Agreement of HK$2.03 and as at

the Latest Practicable Date of HK$1.87 respectively. As the share price of GDL

relates to low trading volume without any element of control, we do not consider

the market share prices of GDL relevant to the appropriate price payable for a

controlling block of over 70% of GDL. What matters more should be a measure more

reflective of the intrinsic value of GDL, in our opinion, is the Reassessed NAV.

(iv) Financial information of the GDL Group

Set out below are the consolidated revenue, consolidated profit before

taxation and consolidated profit after taxation attributable to the shareholders of

GDL for the nine months ended 30 September 2015 and 2016 and the two years

ended 31 December 2014 and 2015.

For the nine months ended30 September

For the year ended31 December

2016 2015 2015 2014(HK$ million) (HK$ million) (HK$ million) (HK$ million)

Consolidated revenue 1,064.2 0.2 857.9 3.4

Consolidated profit before taxation 112.5 206.2 176.4 90.9

Consolidated profit after taxation

attributable to the shareholders of

GDL 12.1 207.6 174.8 81.8

The sale of properties under the Ruyingju Project is currently the main source

of revenue to the GDL Group for 2015 and the nine months ended 30 September

2016. As the sale of properties of the Ruyingju Project did not commence until the

fourth quarter of 2015, the GDL Group did not record any revenue or profit in

relation to the Ruyingju Project for the year ended 31 December 2014.

Apart from the sale of properties under the Ruyingju Project since the fourth

quarter of 2015, the profit in 2015 was mainly attributable to a one-off non-operating

gain items amount to approximately HK$319 million (which included a gain on

bargain purchase of 80% of the Ruyingju Project of approximately HK$234 million)

(the “2015 Non-Operating Gain Items”).


– 41 –

For the nine months ended 30 September 2016, owing to the continuing sale of

properties under the Ruyingju Project and average selling price of the units being

higher than that of 2015, the unaudited consolidated revenue of the GDL Group was

approximately HK$1,064.2 million, representing a significant increase compared to

the corresponding period in 2015 as there had been no residential units delivered

under the Ruyingju Project for the first nine months of 2015. However, the

unaudited profit attributable to the shareholders of GDL was approximately

HK$12.1 million, which represented a decrease of approximately 94.2% from the

same period last year of approximately HK$207.6 million. The reason for such

decrease in profit was mainly due to, among others, (i) an aggregate income tax

expense of approximately HK$91.9 million recorded during the nine months ended

30 September 2016 comprising corporate income tax, land appreciation tax and

reversal of deferred tax liabilities; and (ii) the absence of the 2015 Non-Operating

Gain Items. If the combined effect of the 2015 Non-Operating Gain Items was

excluded, the GDL Group would have recorded an unaudited loss attributable to

shareholders of GDL for the nine months ended 30 September 2015.

As at 30 September 2016, the unaudited consolidated NAV attributable to the

shareholders of GDL was approximately HK$4,326.8 million. The GDL Group was

cash rich and it had cash and cash equivalents of approximately HK$2,561.6 million

as at 30 June 2016. The operation of GDL was largely funded by equity with no

long-term borrowings.

3. Reasons for and benefits of the Acquisition

As set out in the Letter from the Board, the Acquisition is expected to have the

benefits to the Group as set out below.

(i) Given the prime location of the Buxin Project, the Acquisition is in line with

the Group’s ongoing strategy of its property investment and development

segment where properties in the Group’s existing property portfolios are all

strategically located in local core central business districts. Upon completion

of construction, the Buxin Project will also generate stable and continuing

revenue and cash flow to the Group in the long run.

(ii) Undertaking the Buxin Project in downtown Shenzhen will broaden the

geographic exposure of the Group’s property business to Shenzhen, a Tier 1

city with scarcity of land in prime locations, population net inflow and a

strong urbanisation rate and social net worth accumulation.

(iii) The Buxin Project is located in a prime location in the Buxin area in Shenzhen

with well-established transportation network and the development of that

area is currently supported by government initiatives. The development of the

Buxin Project is already underway and the Company believes the Acquisition

would enable the Group to tap into the development opportunity of the Buxin

area and enhance the Group’s future strategic growth.

(iv) The Acquisition will bring into the Group a well-established listed platform,

with a valuable asset in a prime location of the PRC and with a strong


– 42 –

financing capability to finance the development of the Buxin Project by its

internal resources and/or bank borrowing, without relying on financial

support by the Company.

(v) The Group has extensive experience in property investment and development

in the PRC. Upon Completion, the Company is able to enjoy the benefits from

the growth potential of the Buxin Project whereas GDL may leverage on the

Company’s management expertise in property investment and development

as well as enhancing its brand name within the region to facilitate its

development of the Buxin Project.

Facing with the decision to expand the Company’s property investment and

development segment by way of the Acquisition and a long development window of the

Buxin Project, we understand in order to formulate such strategic business and

investment decision, the Company has taken into account a number of factors including,

among others, the uncertainty in the PRC property market and the associated potential

increase in business risk as a result of the Acquisition. However, after conducting a

comprehensive risk and benefit assessment, in particular the positive factors and potential

benefits outlined above, the Company considers that the Acquisition is complementary to

its existing business and in line with the interests of the Company and the Shareholders as

a whole.

In addition, taking into account the timelines of development plan and income

streams of the Buxin Project, the Company is of the view that it is in the interests of the

Company and the Shareholders as a whole to proceed with the Acquisition at this

moment, as the Acquisition would enable the Company to capture the opportunity in

securing a scarce land resource in the prime location in Shenzhen with a consideration at

a reasonable discount to market valuation and allow the Company the ability to

contribute positively to the development theme and schedule as well as the marketing

strategies at the appropriate stage of the development of this project.

Based on the reasons and benefits as set out above, we concur with the Company’s

strategic business and investment decision. We also consider the Acquisition, given its

positive prospects and risk differentials, is likely to provide diversification benefits to the

Group’s business.

For a more detailed version of the reasons for and benefits of the Acquisition, the

Independent Shareholders’ attention is drawn to the section headed “A.4. Reasons for and

benefits of the Acquisition” in the Letter from the Board.

4. Industry overview

According to the National Bureau of Statistics, China recorded a 6.7% year-on-year

gross domestic product (“GDP”) growth in the third quarter of 2016 which is on par with

first two quarters of 2016 and on target to achieve the PRC Government’s full-year target

of 6.5% to 7%. Structural reform introduced by the PRC Government continued to

progress which resulted in a growing service sector accounting for approximately 52.8%

of the GDP growth. Retail sales growth have been strong, with year-on-year growth of

approximately 9.8% in real terms for the first nine months of 2016.


– 43 –

Our review has concentrated on the economic development and the property market

in Shenzhen, where the Buxin Project is located. Being a Tier 1 city and the first Special

Economic Zone of China in 1980, Shenzhen has enjoyed special economic policies and

flexible government measures. Since the beginning of the economic reform in 1980,

Shenzhen’s annual GDP growth has averaged over 20% per year, making it one of the

world’s fastest developing cities during this period. Apart from being the financial center

of Southern China where the Shenzhen Stock Exchange is located, science and technology

are the main engines behind Shenzhen’s rapid development. Shenzhen has over 30,000

science/technology enterprises and is earning a reputation as “China’s Silicon Valley”.

According the preliminary statistics of the Guangdong Bureau of Statistics, Shenzhen’s

GDP for 2016 exceeded approximately RMB1.9 trillion, representing a year-on-year

growth of approximately 9.0%. Such growth rate surpassed the national average and

topped all other cities of the Guangdong Province. Notably, the service sector of Shenzhen

has been strong, growing at the rate of approximately 10.4% in 2016.

According to the Guangdong Bureau of Statistics, the total investment in fixed

assets in Shenzhen in 2016 increased to approximately RMB407.8 billion, representing a

growth rate of approximately 24.2% as compared to the previous year, which was the

highest level since 1994. Total investment in fixed assets of the tertiary sector was the main

growth engine, with approximately RMB338.3 billion and a year-on-year growth of

approximately 24.6%.

For further details of Shenzhen’s economic fundamentals, please refer to the section

headed “A.4. Reasons for and benefits of the Acquisition” in the Letter from the Board.

Taking into account the above, we concur with the view of the management of the

Group that the growth prospect of the property market of Shenzhen is positive.

5. Principal terms of the Sale and Purchase Agreement

Set out below is the summary of the salient terms of the Sale and Purchase

Agreement:

(i) Subject matter

On 19 January 2017, the Company and GDH entered into the Sale and

Purchase Agreement, pursuant to which the Company conditionally agreed to

acquire the Sale Shares, representing approximately 73.82% of the issued share

capital of GDL, from GDH. Details of the GDL Group is set out in the section headed

“2. Information on the GDL Group” in this letter above.

(ii) Consideration

The Consideration for the Sale Shares amounted to RMB3,358 million

(equivalent to approximately HK$3,780.4 million), to be settled by the Company in

the following manner:

a) as to RMB2,518.5 million (equivalent to approximately HK$2,835.3

million) (being 75% of the Consideration) by the allotment and issue of


– 44 –

the Consideration Shares by the Company to GDH on the Completion

Date and the difference between such amount and the value of such

Consideration Shares (based on our understanding, being the amount of

a fractional Share, which will not be issued as part of the Consideration

Shares, in the amount of approximately RMB2.30) will be settled in cash;

and

b) as to RMB839.5 million (equivalent to approximately HK$945.1 million)

(i.e. the Cash Consideration, being 25% of the Consideration) in cash on

the Completion Date.

Given the properties of GDL constitute the majority of its assets, the

Consideration was arrived at after arm’s length negotiations based on the NAV as

adjusted with reference to the property valuation with a certain discount and it

represents a discount of approximately 28.2% to the unaudited consolidated NAV of

GDL as at 30 September 2016 as adjusted by the said valuation (the “Discount”).

With respect to the Discount, the Board has taken into account, among others, (i) the

development plan, quality and size of properties held by GDL; (ii) the future

prospects of real estate business in Shenzhen, the PRC; and (iii) the relevant market

transactions concerning the property companies listed on the Stock Exchange. For

details of the determination of the Consideration, please refer to the sections headed

“A.2. The Sale and Purchase Agreement” in the Letter from the Board and “6.(i) The

Reassessed NAV” in this letter below.

The Company has considered the market capitalisation of the GDL Group and

the prevailing trading prices of shares of GDL. The Consideration translates into

approximately HK$2.99 per Sale Share and represents a premium of approximately

47.3% over the per share closing trading price of GDL of HK$2.03 as of 18 January

2017 (the day before the date of the announcement of the Company in respect of the

Acquisition dated 19 January 2017). However, given the low trading volume of GDL

and the substantial discount of market capitalisation of the GDL Group to its net

asset value as adjusted with reference to the property valuation, the Company

believes that the market capitalisation does not reflect the intrinsic value of the

underlying assets of GDL Group and therefore prevailing trading prices of shares of

GDL was, in the Board’s opinion, not an appropriate benchmark in determining the

Consideration. The Board’s opinion is not dissimilar to our view as set out in the

section headed “2.(iii) Listed status of GDL” in this letter above.

(iii) Consideration Shares

The Consideration Shares will be allotted and issued at the Issue Price of

HK$10.39 per Consideration Share, credited as fully paid. The Consideration

Shares, when allotted and issued, shall rank pari passu in all respects with the

Shares in issue on the date of allotment and issue of the Consideration Shares.

The Consideration Shares comprise 272,890,019 Shares, which represent: (i)

approximately 4.36% of the existing issued share capital of the Company as at the

Latest Practicable Date; and (ii) approximately 4.17% of the issued share capital of


– 45 –

the Company as enlarged by the allotment and issue of the Consideration Shares

(assuming there is no other change in the share capital of the Company from the

Latest Practicable Date to Completion).

The Consideration Shares will be issued pursuant to the Specific Mandate to

be obtained from the Independent Shareholders at the EGM. An application will be

made by the Company to the Listing Committee of the Stock Exchange for the listing

of and permission to deal in the Consideration Shares.

(iv) Conditions Precedent

Completion is conditional upon the fulfillment or, where applicable, waiver of

the following Conditions Precedent:

(a) the Circular having been approved by the Stock Exchange (or the Stock

Exchange having confirmed that it has no comment on the Circular) and

despatched to the Shareholders, and there having been no requirement

by the Stock Exchange in respect of the Acquisition that is not

acceptable to the Company;

(b) the relevant transactions under the Sale and Purchase Agreement,

including but not limited to the issue of the Consideration Shares,

having been approved by the Independent Shareholders of the

Company at the EGM in accordance with the requirements of the Listing

Rules;

(c) the approval for the listing of and permission to deal in the

Consideration Shares by the Stock Exchange having been obtained by

the Company, and such approval not having been revoked or

withdrawn prior to the Completion Date;

(d) the waiver having been obtained from the SFC by the Company from the

mandatory offer obligation of the Company under Rule 26.1 of the

Takeovers Code in respect of the relevant transactions under the Sale

and Purchase Agreement, and such waiver not having been revoked

prior to the Completion Date;

(e) the trading in the Shares not having been suspended for more than 20

consecutive days and on the Completion Date, except for the reason of

review of the announcement in relation to the Acquisition or the

Circular by the relevant regulatory body;

(f) the listing of the Shares on the Stock Exchange not having been



withdrawal of the listing of the Shares on the Stock Exchange;

(g) the Company having performed all relevant obligations, duties,




– 46 –

(h) the representations and warranties by the Company being true, accurate


Date;

(i) the Company having obtained all necessary approvals and

authorisations from any governmental or regulatory authorities for the

enforcement and completion of the transactions under the Sale and

Purchase Agreement, and the same remaining in full effect under the

applicable jurisdiction and the relevant laws and regulations;

(j) the trading in the shares of GDL not having been suspended for more

than 20 consecutive days and on the Completion Date, except for the

reason of the review of the announcement in relation to the Acquisition

or the Circular by the relevant regulatory body;

(k) the listing of the shares of GDL on the Stock Exchange not having been



withdrawal of the listing of the shares of GDL on the Stock Exchange;

(l) GDH having performed all relevant obligations, duties, undertakings

and warranties in accordance with the Sale and Purchase Agreement on

or before the Completion Date;

(m) the representations and warranties by GDH being true, accurate and not

misleading in all material respects on or before the Completion Date;

and

(n) GDH having made the relevant application to the relevant state-owned

assets administration authority and obtained all necessary approvals

and authorisations from any governmental or regulatory authorities (if

necessary) for the enforcement and completion of the transactions

under the Sale and Purchase Agreement, and the same remaining in full

effect under the applicable jurisdiction and the relevant laws and

regulations.

The Conditions Precedent under sub-paragraph (e) to (i) above may be

waived by GDH at its discretion and those sub-paragraph (j) to (n) above may be

waived by the Company at its discretion.

As at the Latest Practicable Date, in respect of the Condition Precedent under

sub-paragraph (a) above, the Stock Exchange had confirmed that it had no comment

on the Circular; and in respect of the Condition Precedent under sub-paragraph (d)

above, the waiver had been obtained from the SFC by the Company (for details,

please refer to the section headed “D. Listing Rules and Takeovers Code

Implications” in the Letter from the Board). None of the other Conditions Precedent

has been satisfied (or waived) as at the Latest Practicable Date.


– 47 –

If the Conditions Precedent cannot be satisfied (or waived) before 30 June

2017 (or such other date as agreed by the Parties in writing), the Sale and Purchase

Agreement shall terminate unless the Parties otherwise agree.

(v) Completion

Completion shall take place on the 15th Business Day after the date on which

the last Condition Precedent is satisfied (or waived) and the issue of the

announcement by GDL of its preliminary results for the year ended 31 December

2016 (whichever is later), or at such other time as GDH and the Company shall agree

in writing.

(vi) Minimum Year-end NAV of GDL

GDH undertakes to the Company that the RMB equivalent of the audited

consolidated NAV of GDL as at 31 December 2016 to be disclosed in the

announcement of GDL on its preliminary results for the year of 2016 (i.e. the

Year-end NAV) shall not be less than RMB3,704,835,000 (i.e. the Minimum Year-end

NAV) and in the event that the RMB equivalent of the Year-end NAV falls below

such amount (i.e. the Deficient Amount), GDH shall pay to the Company the portion

of the Deficient Amount attributable to the Sale Shares Percentage after applying the

Discount to the same, and in such event, the Company will comply with the

disclosure requirements under the Listing Rules. The Minimum Year-end NAV was

determined after arm’s length negotiation between the Company and the Vendor.

The Parties have agreed that with the amount of the Consideration being RMB3,358

million, the Consideration should represent a discount of at least 28.00% to the

reassessed NAV of GDL attributable to the Vendor as at 31 December 2016. This

translates into a required minimum NAV of GDL attributable to the shareholders of

GDL of approximately RMB3,704,835,000 of consolidated NAV of GDL as at 31

December 2016.

Having considered (i) the Year-end NAV is not available as at the Latest

Practicable Date; and (ii) setting the Minimum Year-end NAV will effectively ensure

that the Consideration represents a discount of at least 28.00% to the Reassessed

NAV and any Deficient Amount attributable to the Sale Shares Percentage after

applying the Discount to the same shall be refunded by GDH to the Company, we

consider the undertaking by GDH is a reasonable measure to safeguard the

Shareholders’ interest by making a guarantee on the minimum net asset value to be

consolidated to the financial statements of the Company upon Completion.

(vii) Undertakings by Guangdong Holdings

Guangdong Holdings has given several undertakings to the SFC, details of

which are set out in the paragraph headed “D. Listing rules and Takeovers Code

Implication” in the Letter from the Board. In particular, Guangdong Holding has

undertaken, among others, that it will procure the Company not to transfer or

dispose of any shares of GDL or issue new shares or convertible securities to any

parties not acting in concert with Guangdong Holdings, GDH and/or the Company,


– 48 –

which will lead to any person obtaining statutory control of the Company within

three years from Completion. As set out in the Letter from the Board, having taken

into account the development plan and income streams of the Buxin Project, the

Company views the Acquisition as a medium to long-term strategic investment and

therefore has planned to maintain statutory control over GDL during the term of

such undertakings. Also, in view of the strong financial position of the Company

and the long-standing support from GDH, the Company considers that, among the

various possible options of financing alternatives, issuing new shares or convertible

shares to the extent where GDH will lose statutory control over the Company, is not

likely to happen during the term of such undertakings.

Having taken into account the above, we concur with the Board’s view that

such undertakings would not have any material impact on the future corporate

decision making process of the Company and/or any negative impact on the

Company’s future business plan on GDL. Moreover, the said undertakings

committed by Guangdong Holdings represents a long-term commitment in

maintaining its corporate strategy of developing the property investment and

development segment and at the same time, protects the Shareholders’ interest from

potential dilution of shareholdings. Also, the said undertakings are pre-requisite of

the grant of the waiver application pursuant to Note 6(a) to Rule 26.1 of the

Takeovers Code and one of the conditions precedent to Completion, without which

will lead to a mandatory offer obligation of the Company that would result in a

higher acquisition cost as a result of a mandatory offer obligation and a potential

material change in public float of GDL. Notwithstanding the abovementioned

restrictions, we concur with the Company’s view that the Acquisition represents a

strategic and positive step of the Company’s long-term business development and it

is in the interests of the Company and its Shareholders that GDL maintains its well

established listed platform after Completion.


– 49 –

6. The valuation of the properties held by the GDL Group

(i) Reassessed NAV

We note that the total consideration of RMB3,358 million was determined after

arm’s length negotiation based on, among other things, the Reassessed NAV and the

Discount, which are set out in more detail in the table below.

RMB (million)Approximate

The unaudited consolidated NAV of GDL attributable to

the shareholders of GDL as at 30 September 2016 (Note 1)3,725.2

(Note 2)

Add: Revaluation surplus in the unaudited consolidated

NAV of GDL attributable to the shareholders of

GDL (based on the market valuation of the

properties owned by the GDL Group as appraised

by Vigers as at 30 November 2016 minus the

related book value of the properties as at 30

November 2016), net of potential tax liabilities and

non-controlling interests of the Ruyingju Project

(Notes 3, 4, 5 and 6) 2,613.1

Reassessed NAV of GDL attributable to the

shareholders of GDL 6,338.3

Less: Reassessed NAV of GDL attributable to

non-controlling interests of GDL (Note 7) (1,659.4)

Reassessed NAV of GDL attributable to GDH(i.e. the Reassessed NAV) 4,678.9

Consideration 3,358.0

Discount of the Consideration to theReassessed NAV (Note 8) 28.2%


– 50 –

Notes:

1. The unaudited consolidated NAV of GDL attributable to the shareholders of GDL as at 30

September 2016 of approximately HK$4,326.8 million is extracted from the GDL 2016 3Q

Announcement.

2. This is translated from approximately HK$4,326.8 million at the exchange rate of RMB1.00

= HK$1.1615 as quoted by the People’s Bank of China on 30 September 2016.

3. Revaluation surplus in the unaudited consolidated NAV of GDL attributable to the

shareholders of GDL is calculated based on the market valuation of the properties owned

the GDL Group as appraised by Vigers as at 30 November 2016 of approximately

RMB7,031.0 million (comprising (a) the total market value of the three properties of the

GDL Group of approximately RMB4,778.8 million; (b) the investment value of the

self-owned portion of the Buxin Project of approximately RMB2,228.4 million, both of

which are shown in the Valuation Report (as defined below); and (c) the total market value

of other miscellaneous properties of the GDL Group of approximately RMB23.8 million

not shown in the Valuation Report (as defined below).) minus (i) the related book value of

the properties as at 30 November 2016 of approximately RMB2,672.2 million; (ii) the

relevant potential tax liabilities to be borne by the GDL Group upon disposal of the

properties owned by the GDL Group of approximately RMB1,742.1 million; and (iii)

non-controlling interests of the Ruyingju Project of approximately RMB3.6 million.

4. As there may be potential tax liabilities to be borne by the GDL Group upon disposal of the

properties owned by the GDL Group, in arriving at the Reassessed NAV, the unaudited

consolidated NAV of GDL attributable to the shareholders of GDL as at 30 November 2016

has been adjusted downwards by the estimated potential tax liabilities, which comprise

the estimated deferred taxation in respect of (i) land appreciation tax; and (ii) corporate

income tax.

5. As advised by the management of the Group, the deferred land appreciation tax is

calculated at applicable tax rates in the range of 30% and 60% on the “land value

appreciation amount”, being the excess of the estimated proceeds to be received from the

disposal of the properties over the deductible expenditures, which include borrowing

costs and property development expenditures, pursuant to the relevant PRC regulations

on land appreciation tax. The deferred corporate income tax is calculated at 25% (being the

applicable tax rate) on the estimated assessable profit generated from the disposal of the

properties, which in turn is based on the estimated proceeds to be received from the

disposal of the properties less, among others, the property development expenditures and

the land appreciation tax.

6. The non-controlling interests of the Ruyingju Project refer to the 20% equity interest in

Guangzhou Panyu Yuehai Real Estate Company Limited (廣州市番禺粵海房地產有限公司),

the project company of the Ruyingju Project, held by Guangzhou Panyu District

Properties Lianhe Kaifa Company (廣州市番禺區房地產聯合開發總公司), an independent

third party.

7. The non-controlling interests of GDL refer to the approximately 26.18% equity interest in

GDL held by shareholders of GDL other than GDH.

8. With respect to the Discount, the Board has taken into account, among others, (i) the

development plan, quality and size of properties held by GDL; (ii) the future prospects of

real estate business in Shenzhen, the PRC; and (iii) the relevant market transactions

concerning the property companies listed on the Stock Exchange.

As illustrated above, the Consideration represents the Discount of

approximately 28.2% to the Reassessed NAV.


– 51 –

Revaluation surplus of the GDL Group’s properties is essentially the excess of

the value of those properties owned by the GDL Group based on the valuation by

Vigers as at 30 November 2016 over their book values as at 30 September 2016, after

netting off principally the relevant potential tax liabilities. We concur with the

management of the Group that the above adjustments were the relevant adjustments

in arriving at the Reassessed NAV, as the unaudited consolidated NAV of GDL

attributable to the shareholders of GDL as at 30 September 2016 did not take into

account the latest market valuation of property projects held by the GDL Group and

the relevant potential tax liabilities.

We also consider the basis of the Consideration, which is based on, among

others, the Discount to the Reassessed NAV, is a commonly adopted approach in

assessing the fairness of the consideration for transactions of this type.

(ii) Valuation methodologies

GDL’s properties were valued by Vigers, an independent property valuer

appointed by the Company. We have interviewed Vigers regarding its expertise and

noted that Vigers is an established independent property valuer with a large

number of completed assignments acting for listed companies with property

interests in the PRC. We understand that the person-in-charge of the Vigers’

valuation team has over 22 years and 29 years of experience in the valuation of

properties in the PRC and Hong Kong respectively. We have also reviewed the terms

of Vigers’ engagement letter and noted that the scope of their work is to prepare a

property valuation report and provide the Company with the opinion of value on

the property interests held by GDL.

The full text of the valuation report and certificate of the property interests

attributable to GDL as at 30 November 2016 (the “Valuation Report”) is set out in

Appendix I to the Circular. In particular, we note that in performing the valuation

for the property interests attributable to GDL, Vigers has categorised the various

groups of properties held by GDL and adopted the following valuation

methodologies for each of the groups (details of the properties under each group of

properties held by GDL can be found in Appendix I to the Circular):

(a) For the Buxin Project other than the Restricted GFA (as defined below)

held for future development, Vigers has valued such property interests

on the basis that it will be developed and completed in accordance with

the permitted use and plot ratio stipulated by the relevant government

authorities. Vigers has adopted the direct comparison approach by

making reference to comparable sales evidences as available in the

relevant market (the “Direct Comparison Approach”) and has taken

into account the costs that will be expended to complete the

redevelopment to reflect the quality of the completed redevelopment.


– 52 –

(b) For the Restricted GFA (as defined below), Vigers has adopted the

income approach by taking into account the reversionary potential of

the property interest (the “Income Approach”) and has also taken into

account the costs that will be expended to complete the redevelopment

to reflect the quality of the completed redevelopment.

(c) For the residential units of the Buxin Garden and the unsold portion of

the Ruyingju Project, which are completed properties, Vigers has also

adopted the Direct Comparison Approach by assuming sale of the

properties in their existing states with the benefit of vacant possession

and by making reference to comparable sales transactions as available

in the relevant market.

We have discussed with Vigers the rationale of adopting the abovementioned

valuation methodologies for valuing the properties held by GDL. According to

Vigers, the Direct Comparison Approach is the most appropriate valuation method

for assessing the market value of the Buxin Project, the residential properties of the

Buxin Garden and the unsold portion of the Ruyingju Project as the majority of these

properties are residential and commercial properties with transparent and readily

available market price information. The Restricted GFA, due to the legal

requirement of the relevant government authorities, is restricted to leasing or

self-use only. In this regard, Vigers considered the Income Approach which takes

into account the rental transactions of the market comparables to be more

appropriate to reflect the actual usage complying with the legal requirements.

After considering the reasons for Vigers’ choice of adopting the valuation

methodologies for valuing the abovementioned properties held by GDL, we are of

the opinion that the valuation methodologies used are reasonable and acceptable in

establishing the market values of the properties attributable to GDL as at 30

November 2016.

(iii) Valuation bases and assumptions

In arriving at the appraised value for the Buxin Project using the Direct

Comparison Approach, we note that the Buxin Project was primarily valued on the

basis that the Buxin Project will be developed and completed in accordance with

GDL’s latest development proposals and development programme provided to

Vigers assuming all consents, approvals and licences from relevant government

authorities for the development proposals have been obtained without onerous

conditions or delays. In arriving at its opinion of value, Vigers generally starts the

process by collecting and analysing the recent transactions of the market

comparables located in the vicinity of the Buxin Project. The collected comparables

were then adjusted to reflect the difference between the comparables and the Buxin

Project in terms of, among others, location, age, size and building quality. We have

reviewed and discussed about Vigers’ workings on the selection of the market

comparables and the relevant adjustments made. We are of the view that the basis of

selection of market comparables and the adjustments, including various factors (i.e.


– 53 –

date of transaction, location, nature and quality of properties) taken into account,

made for reflecting the difference between the selected comparables and the Buxin

Project are reasonable and relevant for the purpose of establishing the market value

of the Buxin Project. The appraised value of the Buxin Project after applying the

Direct Comparison Approach was then derived from the estimated average unit

price and GFA of the Buxin Project after deduction of estimated outstanding

construction cost and the profit margin. We have also reviewed the research report

published by an independent quantitative surveyor (the “QS Report”) adopted by

Vigers regarding the approximate building costs of different types of building for

major cities in China and noted that the parameters in relation to the estimated

outstanding construction cost is within the range stipulated in the QS Report.

As disclosed in note 4 to valuation of the Buxin Project in the Valuation

Report, due to the legal requirement of the relevant government authorities, a GFA

of approximately 75,583 sq.m. for industry related office use, approximately 36,803

sq.m. portion of land for commercial use, approximately 12,050 sq.m. for innovative

industry related office use and approximately 20,632 sq.m. for underground

commercial use of Southern Land (as defined in the Valuation Report) and a GFA of

approximately 38,198 sq.m. for commercial use and approximately 8,842 sq.m. for

underground commercial use of the Northern Land (as defined in the Valuation

Report), totaling approximately 192,108 sq.m. was restricted for self-use or leasing

only (the “Restricted GFA”). In this regard, the Restricted GFA are not freely

transferable and therefore Vigers has assigned no market value to the Restricted

GFA. However, given that the Restricted GFA are still able to be leased for rental

income and for self-use by the Group, Vigers has assigned an investment value as at

30 November 2016 of approximately RMB2,228.4 million for the Restricted GFA.

In arriving the investment value of the Restricted GFA, as with to the rest of

the Buxin Project, Vigers has also adopted the Income Approach by collecting and

analysing the recent rental transactions of the market comparables located in the

vicinity of the Restricted GFA. Vigers then estimated the average price per sq. m. of

the Restricted GFA by adjusting the rental income of the market comparables with

other factors including location, nature and quality of properties to arrive at the net

rental income (i.e. gross rental income after deducting the estimated maintenance

expense, management fee and insurance expense). The net rental income was then

divided by the capitalisation rate to arrive the investment value, from which is

deducted the estimated outstanding construction cost and the developer ’s profit

margin. We have reviewed and discussed with Vigers their workings on the

selection of the market comparables and the relevant adjustments made. On the

basis that (i) GDL has possessed the legal title of the Buxin Project (including the

Restricted GFA); and (ii) it is the Company’s plan to lease out the properties situated

in the Restricted GFA, we are of the view that the basis of selection of market

comparables and the adjustments, including various factors (i.e. date of transaction,

location, nature, quality of properties, the capitalisation rate and the total tenure)

taken into account, is reasonable and relevant for the purpose of determining the

investment value of the Restricted GFA. We have also reviewed the parameters in

estimated outstanding construction cost adopted by Vigers and noted that the

parameters are within the range stipulated in the QS Report.


– 54 –

For the avoidance of doubt, in measuring the revaluation surplus of the Buxin

Project, both the market value of the Buxin Project, which refers to the portion of

land other than the Restricted GFA (i.e. approximately RMB4,268.0 million) and the

investment value of the Restricted GFA (i.e. approximately RMB2,228.4 million)

have been taken into account. In this regard, the total appraised value of the Buxin

Project is approximately RMB6,496.4 million.

For the residential properties of the Buxin Garden and the unsold portion of

the Ruyingju Project, as with the Buxin Project, Vigers has collected and analysed

the recent transactions of the market comparables located in the vicinity of the

subject properties. We have also reviewed and discussed about Vigers’ workings on

the selection of the market comparables. We are of the view that the basis of

selection of market comparables is reasonable and relevant for the purpose of

determining the market value of the residential properties of the Buxin Garden and

the unsold portion of the Ruyingju Project.

Taking into account the above, we consider that the bases and assumptions

adopted by Vigers for the valuation methodologies discussed above are reasonable

and in line with market practice.

7. Analysis of the Consideration

(i) Comparable transactions – Asset Injection Comparable Transactions

GDL is principally engaged in property development and investment. Other

than certain restricted bank balances and cash and cash equivalents, majority of

GDL’s assets are investment properties, completed properties held for sale and

properties under development. Moreover, the Buxin Project accounted for more

than 90% of both the total GFA and the total market value of GDL’s property

portfolio. In other words, GDL is essentially a one-property company. The essence of

the Acquisition is the purchase of the Buxin Project.

Based on our experience, when Hong Kong-listed companies conduct asset

injections of property assets, normally the consideration would represent a discount

to the reassessed NAV of the property holding company. We understand, in

determining the Discount, the Board has taken into account, among others, (i) the

development plan, quality and size of properties held by GDL; (ii) the future

prospects of real estate business in Shenzhen, the PRC; and (iii) the relevant market

transactions concerning the property companies listed on the Stock Exchange. In

order to assess the fairness and reasonableness of the Discount of approximately

28.2% (i.e. the discount of the Consideration to the Reassessed NAV), we have

carried out a review of the acquisitions of property assets (the “Asset InjectionComparable Transactions”) by State-owned Hong Kong listed companies with

principal activities of property development and/or investment in the PRC and the

following criteria: (i) reassessed NAV of the Asset Injection Comparable

Transactions were not less than RMB2.3 billion (representing approximately half of

the Reassessed NAV); (ii) the Asset Injection Comparable Transactions excluded

acquisition through public auction or involving substantially completed property

assets; (iii) the announcement of the Asset Injection Comparable Transactions were

published in the period from 1 January 2015 up to the date of the announcement of

the Acquisition. Set out in the table below is a summary of the Asset Injection

Comparable Transactions.


– 55 –

Date

ofan

noun

cem

ent

Date

ofcir

cular

Nam

eofc

ompa

ny(st

ock

code

)Na

ture

oftar

geta

ssets

Cons

ider

ation

Disc

ount

tore

asse

ssed

NAV

6D

ecem

ber2

016

29D

ecem

ber2

016

Min

met

als

Land

Lim

ited

(230

)A

resi

dent

iald

evel

opm

entp

roje

ctlo

cate

din

Nan

jing,

Jiang

suPr

ovin

ce,t

hePR

C

RMB2

,238

mill

ion

25.2

%

12O

ctob

er20

164

Nov

embe

r201

6Ch

ina

Ove

rsea

sG

rand

Oce

ans

Gro

up

Lim

ited

(81)

Resi

dent

ialp

rope

rty

deve

lopm

entp

roje

cts

loca

ted

in

third

tierc

ities

inCh

ina

RMB3

,516

mill

ion

0.0%

19Se

ptem

ber2

016

25N

ovem

ber2

016

Shan

ghai

Indu

stri

alU

rban

Dev

elop

men

tGro

upLi

mite

d(5

63)

Two

resi

dent

ialv

illa

proj

ects

loca

ted

inSh

angh

ai,

Chin

a

RMB2

,350

mill

ion

18.7

%

26A

ugus

t201

615

Sept

embe

r201

6Ch

ina

Reso

urce

sLa

ndLi

mite

d(1

109)

Am

ixed

-use

inte

grat

edde

velo

pmen

tpro

ject

,

incl

udin

gre

side

ntia

lbui

ldin

gs,h

otel

,ser

vice

d

apar

tmen

tsan

dsh

oppi

ngm

alll

ocat

edin

Shen

zhen

and

carp

arks

inth

ePR

C

RMB6

,236

mill

ion

30.3

%

14M

arch

2016

30Ju

ne20

16Ch

ina

Ove

rsea

sLa

ndan

dIn

vest

men

t

Lim

ited

(688

)

Apo

rtfo

lioof

com

mer

cial

prop

ertie

san

dof

fices

mai

nly

loca

ted

inm

ajor

citie

sin

the

PRC

such

as

Shan

ghai

and

Nan

jing

HK

$37,

080

mill

ion

29.7

%

Aver

age

20.8%

Med

ian25

.2%M

axim

um30

.3%M

inim

um0.0

%

19Ja

nuar

y201

7Th

eAcq

uisit

ion

RMB3

,358m

illio

n28

.2%


– 56 –

As set out in the table above, the Discount of approximately 28.2% is within

the range of 0.0% and 30.3% of the discounts of the Asset Injection Comparable

Transactions and is higher the average and the median of the discounts of the Asset

Injection Comparable Transactions of approximately 20.8% and 25.2% respectively.

(ii) Comparable transactions – Listed Property Company Takeovers ComparableTransactions

Pursuant to the Sale and Purchase Agreement, the Company has conditionally

agreed to purchase the Sale Shares, which represent approximately 73.82% of the

issued shares of GDL. In this connection, the Executive has granted a waiver from

the Company’s obligation to make a mandatory general offer for all shares of GDL

pursuant to Rule 26.1 of the Takeovers Code. Nevertheless, in our view, the

Acquisition can be compared to the acquisition of a controlling stake in a listed

company. In this regard, as a secondary research, we have carried out an analysis of

completed takeovers of Hong Kong-listed companies with principal activities of

property development and/or investment set out in documents dated from 1

January 2015 to the date of the announcement of the Acquisition. Set out in the table

below is a list of takeover transactions (the “Listed Property Company TakeoversComparable Transactions”) involving the acquisition of controlling stakes of Hong

Kong-listed property companies (the “Takeover Property Companies”) with

reassessed NAV disclosed in the relevant composite documents.


– 57 –

As

inth

eca

seo

fth

eA

sse

tIn

ject

ion

Co

mp

ara

ble

Tra

nsa

ctio

ns,

we

com

pa

red

the

dis

cou

nt

of

the

off

er

pri

ceto

the

rea

sse

sse

d

NA

Vo

fth

eL

iste

dP

rop

ert

yC

om

pa

ny

Ta

ke

ov

ers

Co

mp

ara

ble

Tra

nsa

ctio

ns,

aft

er

tak

ing

into

acc

ou

nt

the

va

lue

of

the

pro

pe

rty

ass

ets

be

ing

acq

uir

ed

,a

ssu

mm

ari

sed

inth

efo

llo

win

gta

ble

:

Dat

eof

thec

ompo

site

docu

men

tTa

keov

erPr

oper

tyCo

mpa

nyna

me

Stoc

kco

dePr

inci

palb

usin

essa

ctiv

ities

Offe

rpric

eper

shar

e

Prem

ium

over

/(D

isco

untt

o)re

asse

ssed

NAV

20Ja

nuar

y20

15C

&D

Inte

rnat

iona

lInv

estm

entG

roup

Lim

ited

(for

mer

lykn

own

asSo

uth

Wes

tEco

Dev

elop

men

tLim

ited

)

1908

Sout

hW

estE

coD

evel

opm

entL

imit

edis

prin

cipa

llyen

gage

din

the

busi

ness

ofpr

oper

tyle

asin

g,pr

oper

tyde

velo

pmen

t,bu

ildin

gm

anag

emen

tser

vice

san

dpr

ovis

ion

ofad

viso

ryan

dco

nsul

tanc

yse

rvic

es.

HK

$3.2

668

per

shar

e15

.4%

16A

pril

2015

HK

C(H

oldi

ngs)

Lim

ited

(“H

KC”)

190

HK

C(H

oldi

ngs)

Lim

ited

ispr

inci

pally

enga

ged

inth

epr

oper

tyde

velo

pmen

t,pr

oper

tyin

vest

men

tand

leas

ing

and

infr

astr

uctu

rem

ainl

yin

the

PRC

.

HK

$0.2

5pe

rsh

are

(75.

3)%

(Not

e1)

6N

ovem

ber

2015

Win

foon

gIn

tern

atio

nalL

imit

ed63

Win

foon

gIn

tern

atio

nalL

imit

edis

prin

cipa

llyen

gage

din

prop

erty

rela

ted

busi

ness

es,t

hepr

ovis

ion

ofho

rtic

ultu

rals

ervi

ces

and

secu

riti

estr

adin

gbu

sine

ss.

HK

$0.3

619

per

shar

e12

0.4%

4N

ovem

ber

2016

Arm

ada

Hol

ding

sLi

mit

ed58

3A

rmad

aH

oldi

ngs

Lim

ited

ispr

inci

pally

enga

ged

inth

epr

oper

tyin

vest

men

tbus

ines

sH

K$1

.345

9pe

rsh

are

39.7

%

18N

ovem

ber

2016

Dan

Form

Hol

ding

sC

ompa

nyLi

mit

ed(“

Dan

Form

”)27

1D

anFo

rmH

oldi

ngs

Com

pany

Lim

ited

ispr

inci

pally

enga

ged

inpr

oper

tyin

vest

men

t,pr

oper

tyre

ntal

and

esta

tem

anag

emen

t.

HK

$2.7

5pe

rsh

are

(34.

0)%

(Not

e2)

Aver

age

13.2%

Med

ian

15.4%

Max

imum

120.4

%M

inim

um(7

5.3)%

TheA

cqui

sitio

n12

4Th

eGD

LG

roup

ispr

inci

pally

enga

ged

inpr

oper

tyde

velo

pmen

tand

inve

stm

ent.

(28.2

)%

Sour

ce:

Blo

om

be

rga

nd

the

Sto

ckE

xch

an

ge

’sw

eb

site


– 58 –

Notes:

1. The subject transaction involved the relevant offeror acquiring only a non-controlling stake of the

relevant offeree’s issued share capital (i.e. 13.7%) but doing so had triggered a mandatory

unconditional offer obligation on the part of the relevant offeror, which is arguably different from

those of the other Listed Property Company Takeovers Comparable Transactions and the

Acquisition where control stake is acquired.

2. The subject transaction involved the relevant offeror acquiring the relevant offeree with inherent

risk whereby a substantial portion (i.e. over 50%) of the relevant offeree’s NAV was attributable to

an associate. The relevant offeree did not have control over the operations and business of

associate nor was it able to dictate major business transactions (including material purchases,

sales or dividend payouts) of the associate historically.

As shown in the table above, the offer price compared to the reassessed NAV

of the Takeover Property Companies ranged from an approximately 75.3% discount

to an approximately 120.4% premium, with an average and a median of

approximately 13.2% premium and approximately 15.4% premium respectively.

Unlike these average premiums, the Acquisition reflects the Discount to the

Reassessed NAV of approximately 28.2%.

We consider that the Listed Property Company Takeovers Comparable

Transactions as represented by HKC and Dan Form may be outliers for reasons

stated in the notes in the table above. If we were to exclude HKC and Dan Form from

our analysis above, the premium of the offer price to the appraised value of the

property of the Takeover Property Companies would range from approximately

15.4% to 120.4% with an average and a median of approximately 58.5% and 15.4%

respectively.

Combining the Asset Injection Comparable Transactions and the Listed

Property Company Takeovers Comparable Transactions, it is worthwhile to note

that the Consideration represents a significant discount to the Reassessed NAV

compared to the market transaction precedents.

8. Financing/payment alternatives available to the Group

We have reviewed with the management of the Group the form of payment of the

Consideration and whether there were other financing/payment alternatives available to

the Group other than the issue of the Consideration Shares under the Specific Mandate

and the payment of the Cash Consideration.

As advised by the management of the Group, while it was possible to satisfy the

entire Consideration in cash, after considering the funding requirements for further

investments in and development of the Group’s principal business segments (namely,

water resources, property and infrastructure businesses), the Group’s dividend policy and

general working capital requirements, the management of the Group was of the view that

the Consideration should only be satisfied as to one-fourth in cash and the remaining

portion in other means. Having considered (i) the disadvantages of other financing

alternatives as discussed below; and (ii) the willingness of the Vendor to accept the

Consideration Shares (as opposed to pure cash or other form of consideration)


– 59 –

demonstrates the confidence of the Vendor and Guangdong Holdings in the prospects of

both the Group and the GDL Group and the Vendor ’s support to the Group in respect of

the Acquisition, the final form of payment of the Consideration comprising the

Consideration Shares and Cash Consideration was agreed amongst the parties to the Sale

and Purchase Agreement.

As advised by the management of the Group, the Company considered other

methods of equity financing. Currently, the Issue Price of HK$10.39 per Consideration

Share, represents slight discounts ranging from approximately 1.7% to 4.3% to the closing

prices of the Shares during the 10 consecutive trading days prior to the date of the Sale and

Purchase Agreement. In contrast, fund raising exercise by way of issue of new Shares to

independent third parties (e.g. new share placement) or to existing Shareholders on a pro

rata basis (e.g. rights issue or open offer) usually require a deeper discount to the

prevailing market price of the Shares. Furthermore, fund raising through rights issue or

open offer would attract higher transaction costs (such as underwriting and other fees)

and the dilution effect on those non-participating Shareholders would usually be greater

as compared to the issue of the Consideration Shares.

Debt financing would increase overall financing costs of the Group.

We understand that the current proposed financing structure proposal was arrived

at after due and careful consideration of various alternatives by the management of the

Group. We concur with the view of the management of the Group that the proposed issue

of the Consideration Shares under the Specific Mandate and the payment of the Cash

Consideration are suitable financing/payment mechanisms for the Acquisition. While the

issue of the Consideration Shares will result in a minor dilution in the shareholdings in

percentage terms of the existing public Shareholders, having taken into account various

factors (details of which are set out in section 11 headed “Shareholding structure of the

Company before and after Completion” in this letter below), we are of the view that the

dilution effect on the shareholding of the existing public Shareholders are acceptable.

9. Analysis of the Issue Price

The Issue Price was determined by the Board after arm’s length negotiations with

GDH with reference to, among others, the prevailing market prices of the Shares and the

current market conditions. The Issue Price represents:

(i) a premium of approximately 0.7% over the closing price of HK$10.32 per

Share as quoted on the Stock Exchange on the Latest Practicable Date;

(ii) a discount of approximately 4.3% to the closing price of HK$10.86 per Share as

quoted on the Stock Exchange on the date of the Sale and Purchase

Agreement;

(iii) a discount of approximately 1.7% to the average closing price of HK$10.57 per

Share as quoted on the Stock Exchange for the last ten consecutive trading

days immediately prior to the date of the Sale and Purchase Agreement;


– 60 –

(iv) a premium of approximately 0.2% over the average closing price of HK$10.37

per Share as quoted on the Stock Exchange for the last 20 consecutive trading

days immediately prior to the date of the Sale and Purchase Agreement;

(v) the average closing price of HK$10.39 per Share as quoted on the Stock

Exchange for the last 30 consecutive trading days immediately prior to the

date of the Sale and Purchase Agreement; and

(vi) a premium of approximately 101.7% over the NAV per Share of approximately

HK$5.15 based on the NAV attributable to the Shareholders of approximately

HK$32,233.6 million as at 30 September 2016 divided by 6,264,931,421 Shares

in issue as at the Latest Practicable Date.

Set out below is the Share price performance since the publication of the GDI 2016

3Q Announcement.

0

1

2

3

4

5

6

7

8

9

10

11

12

13

Issue Price at HK$10.39 Publication of the GDI 20163Q Announcement

26/10

/2016

26/11

/2016

26/1/

2017

26/12

/2016

The Late

st

Practi

cable

Date

Publication of theannouncement of the

Acquisition

Share price performance

Source: Website of the Stock Exchange

Since the publication of the GDI 2016 3Q Announcement in late October 2016, the

Share price has trended downwards. The Share price stablised in December 2016 in the

approximate range of HK$10.0 to HK$10.6 and increased slightly in early January 2017

before the publication of the announcement of the Acquisition.

In general, the Issue Price is in line with recent Share prices before the publication of

the announcement of the Acquisition.


– 61 –

10. Financial effects of the Acquisition on the Group

(i) NAV attributable to the Shareholders

Upon Completion, GDL will become a 73.82%-owned subsidiary of the

Company and, accordingly, all assets and liabilities of the GDL Group will be

consolidated into those of the Group.

As advised by the management of the Group and as set out in the GDI 2015

Annual Report, it is the Group’s accounting policy to account for business

combinations using the acquisition method and accounting for the Acquisition will

follow this policy. Though currently standing at RMB3,358.0 million (equivalent to

approximately HK$3,780.4 million), the fair value of the Consideration will be

finally detemined at the Completion Date. Likewise, the fair value of the Group’s

interests in the identifiable assets and liabilities of the GDL Group will also be

measured at Completion Date. Such fair value represents the Reassessed NAV,

which currently stands at approximately RMB4,678.9 million (equivalent to

approximately HK$5,267.5 million). Based on current circumstances, the

management of the Group considers that instead of recognising goodwill, the Group

is more likely to recognise a bargain gain on purchase in respect of the Acquisition,

which will be determined by, among other things, the difference between the fair

values of the Consideration and attributable proportion of reassessed NAV of the

GDL Group at the Completion Date.

For illustrative purpose only, assuming completion of the Acquisition took

place on 30 September 2016, the changes in the NAV attributable to the Shareholders

of the Group will be as follows:

The Group Per ShareHK$ (million) HK$

The NAV attributable to the Shareholders as

at 30 September 2016 32,233.6 5.15

Add: the Reassessed NAV 5,267.5

Less: Cash Consideration (945.1)

The NAV attributable to the Shareholders

of the enlarged Group as at

30 September 2016 36,556.0 5.59

The increase in the NAV attributable to theShareholders– in amount 4,322.4 0.44– in percentage 13.4% 8.5%


– 62 –

Independent Shareholders should note that the actual impact on the NAV

attributable to the Shareholders of the enlarged Group will be subject to relevant

calculations based on (i) fair value of the Consideration, which arguably can be

quite volatile depending on changes in Share prices; and (ii) the fair value of the

identifiable assets and liabilities of the GDL Group as at the Completion Date.

(ii) Earnings attributable to the Shareholders

Upon Completion, the consolidated financial results of the GDL Group will be

consolidated into the consolidated financial statements of the Group. As the

financial performance of the GDL Group has yet to reflect revenue to be recognized

when development properties are delivered and rental to be earned from the leasing

of investment properties until 2021 where it completes Phase I of the Buxin Project,

the GDL Group is not expected to make an immediate contribution to the earnings of

the Group.

A gain on purchase in respect of the Acquisition may be recognised when

Completion takes place. This gain on purchase in respect of the Acquisition would

be of a non-cash nature and not recurrent. The current estimate of the bargain gain is

based on the Discount of approximately 28.2% to the Reassessed NAV. In the event

that the fair value of the Consideration and the identifiable assets and liabilities of

the GDL Group vary at the Completion Date, the amount of the gain (if any) would

also vary.

(iii) Working capital and net cash position

The Group maintained a healthy working capital (i.e. net current assets) of

approximately HK$11,370.6 million as at 30 June 2016. The Group’s net cash position

as at 30 June 2016 was approximately HK$1,434.2 million, representing cash and

cash equivalents of approximately HK$10,122.8 million after netting off (i)

short-term and long-term bank and other borrowings of approximately HK$6,938.3

million; and (ii) receipt in advance from Hong Kong Government of approximately

HK$827.4 million and amounts due to related companies of approximately

HK$922.9 million.

For illustrative purpose only, assuming Completion took place on 30 June

2016 and after taking into account (i) the Group’s net cash position and working

capital as at 30 June 2016 of approximately HK$1,434.2 million and HK$11,370.6

million respectively; (ii) the GDL Group’s net cash position and working capital as

at 30 June 2016 of approximately HK$3,557.6 million and HK$3,539.0 million

respectively; and (iii) the Cash Consideration of approximately RMB839.5 million

(equivalent to approximately HK$945.1 million), both the enlarged Group’s net cash

position and working capital are expected to be enhanced. As advised by

management of the Group, there is an outstanding land premium payable of

approximately RMB1,350 million related to the Buxin Project which is expected to be

settled on or before 8 June 2017. Despite this significant cash payment, the

Acquisition is expected to have a positive effect on the net cash position and the

working capital of the enlarged Group.


– 63 –

11. Shareholding structure of the Company before and after Completion

The shareholding structure of the Company (i) as at the Latest Practicable Date; and

(ii) immediately upon Completion (assuming that there is no change in the issued share

capital of the Company from the Latest Practicable Date and up to Completion other than

the Acquisition), is summarised as follows:

Name of Shareholder As at the Latest Practicable Date Immediately after Completion

Number ofShares held

Approximatepercentage of

total issued sharecapital

Number ofShares held

Approximatepercentage of

total issued sharecapital

GDH 3,420,563,527 54.60% 3,693,453,546 56.49%

Public Shareholders 2,844,367,894 45.40% 2,844,367,894 43.51%

Total 6,264,931,421 100.00% 6,537,821,440 100.00%

As shown in the table above, the shareholding of the existing public Shareholders in

the Company will decrease from approximately 45.40% to approximately 43.51%

immediately after Completion (representing a dilution by approximately 4.16%).

Although the shareholding interest of the existing public Shareholders will be diluted,

having taken into account (i) the benefits of the Acquisition; (ii) the valuation of GDL

which we consider fair; (iii) the Issue Price being in line with recent Share prices before the

publication of the announcement of the Acquisition; and (iv) the positive financial effects

on the enlarged Group as a result of the Acquisition as summarised in section headed “10.

Financial effects of the Acquisition on the Group” above, we are of the opinion that the

dilution effects on shareholding of the existing public Shareholders are acceptable.

DISCUSSION AND ANALYSIS



store operation and investments in other infrastructure projects. The Group has a long

history of developing and holding mall/commercial/office properties and existing

property projects are located in prime locations of Guangzhou, Tianjin and Hong Kong.

The Acquisition is in line with the stated development strategy of the Group and is

expected to deliver growth potential to one of its existing core businesses. The

Acquisition, which is in essence the acquisition of the Buxin Project, will deliver a

multi-module property portfolio with a GFA of approximately 462,051 sq. m. located in a

prime location of Shenzhen, a Tier 1 Chinese city with growth potential. The Buxin Project

is expected to be financed from GDL’s own financial resources and will consolidate

property sector management expertise and resources for both the Group and the GDL

Group.


– 64 –

The Consideration is RMB3,358.0 million, representing a discount of approximately

28.2% to the Reassessed NAV, which took into account the appreciation of the GDL

Group’s properties as valued by Vigers as at 30 November 2016 and the relevant potential

tax liabilities. We consider the basis of the Consideration, which is based on, among

others, the Discount to the Reassessed NAV, is a commonly adopted measure in assessing

the fairness of the consideration for transactions of this type. The Discount compares well

with the comparable transactions, being higher than the average and the median of the

discounts of the Asset Injection Comparable Transactions of approximately 20.8% and

25.2% respectively. Also, unlike the premiums seen in the Listed Property Company

Takeovers Comparable Transactions, the Acquisition, on the other hand, reflects the

Discount.

The Consideration, on a per Sale Share basis, represents a premium of 59.9% over

the closing price of GDL on the Latest Practicable Date. However, as explained in section

headed “2.(iii) Listed status of GDL” above, the market price of GDL reflects illiquid

trades with no control element, consequently, we do not consider the market price of GDL

to be of material relevance in our assessment of the Consideration.

The Consideration will be settled by the Company as to three-fourths by way of

proposed issue of the Consideration Shares under the Specific Mandate and one-fourth by

way of the payment of the Cash Consideration. The Issue Price of HK$10.39 per

Consideration Share is at slight discounts ranging from approximately 1.7% to 4.3% to the

closing prices of the Shares during the 10 consecutive trading days prior to the date of the

Sale and Purchase Agreement. In addition, the issue of the Consideration Shares may

serve to demonstrate the Vendor and Guangdong Holdings’ confidence in the prospects of

the enlarged Group.

Other financing/payment alternatives for the Acquisition, including placing of new

Shares, rights issue, open offer and debt financing, have been considered by the

management of the Group. However, each of these alternatives has disadvantages in

terms of discount on issue, costs and timing compared with the terms of the proposed

issue of the Consideration Shares and the payment of the Cash Consideration. We

therefore concur with the management of the Group that the proposed issue of the

Consideration Shares under the Specific Mandate and the payment of the Cash

Consideration are suitable financing/payment mechanisms for the Acquisition.

The shareholding of the existing public Shareholders in the Company will be

diluted by approximately 4.16% as a result of Completion. We consider such dilution

relatively modest and justified by the factors set out in section 11 above.

We consider the financial effects of the Acquisition on the Group are positive. The

Acquisition is expected to deliver earnings as Phases I and II of the Buxin Project complete

in 2021 and following years. NAV attributable to the Shareholders of the enlarged Group

as at 30 September 2016 will increase by approximately HK$4,322.4 million or 13.4% to

approximately HK$36,556.0 million. On a per Share basis, the NAV per Share attributable

to the Shareholders of the enlarged Group as at 30 September 2016 will increase from

approximately HK$5.15 by approximately HK$0.44 or 8.5% to approximately HK$5.59.

The enlarged Group’s working capital and net cash position are also expected to be further

enhanced as a result of the Acquisition.


– 65 –

OPINION AND RECOMMENDATION

Having taken into account the above principal factors and reasons, we consider that

the terms of the Acquisition (including the issue of the Consideration Shares under the

Specific Mandate) are on normal commercial terms and are fair and reasonable and that

the Acquisition is in the ordinary and usual course of business of the Group and in the

interests of the Company and the Shareholders as a whole.

We therefore advise the Independent Board Committee to recommend, and we

ourselves recommend, the Independent Shareholders to vote in favour of the resolutions

to be proposed at the EGM to approve the Acquisition and the Specific Mandate.

Yours faithfully,

for and on behalf of

SOMERLEY CAPITAL LIMITEDM.N. Sabine

Chairman


– 66 –

Vigers Appraisal & Consulting LimitedInternational Assets Appraisal Consultants

10th Floor, The Grande Building

398 Kwun Tong Road

Kowloon

Hong Kong

24 February 2017

The Directors

Guangdong Investment Limited

28th and 29th Floors,

Guangdong Investment Tower,

148 Connaught Road Central,

Hong Kong

Dear Sirs,

In accordance with your instructions of Guangdong Investment Limited (the

“Company”) and its subsidiaries (hereinafter referred to as the “Group”) to value the

property interests in the People’s Republic of China (the “PRC”), we confirm that we have

carried out inspections, made relevant enquiries and obtained such further information as

we consider necessary for the purpose of providing you with our opinion of the market

value of such property interests as at 30 November 2016 (“valuation date”) for the purpose

of incorporation in the circular.

Our valuation is our opinion of the market value of the property interest which we

would define market value as intended to mean “the estimated amount for which an asset

or liability should exchange on the valuation date between a willing buyer and a willing

seller in an arm’s-length transaction after proper marketing and where the parties had

each acted knowledgeably, prudently and without compulsion”.

In valuing the property No. 1, we have valued such property interest on

redevelopment basis that it will be developed and completed in accordance with the

permitted use and plot ratio in accordance with the three Land Use Rights Transfer

Agreements entered into between the Shenzhen City Luohu District Urban Renewal

Authority (“Shenzhen Luohu Renewal Authority”) and Guangdong Land (Shenzhen)

Limited (“Guangdong Land Shenzhen”). We have assumed that all consents, approvals

and licences from relevant government authorities for the redevelopment have been

obtained or will be obtained without onerous conditions or undue time delays. We have

also assumed that the design and construction of the redevelopment are in compliance

with the local planning regulations and have been approved by the relevant authorities. In

arriving at our opinion of value of freely transferred portion, we have adopted the direct

comparison approach by making reference to comparable sales evidences as available in

the relevant market and have also taken into account the costs that will be expended to

complete the redevelopment to reflect the quality of the completed redevelopment. In

arriving at our opinion of value of self-owned portion, we have adopted the income

APPENDIX I VALUATION REPORT

– 67 –

approach by taking into account the reversionary potential of the property interest and

have also taken into account the costs that will be expended to complete the

redevelopment to reflect the quality of the completed redevelopment.

In valuing the property Nos. 2 to 3, we have also valued the properties by the direct

comparison approach assuming sale of the properties in their existing states with the

benefit of vacant possession and by making reference to comparable sales transactions as

available in the relevant market.

Our valuation has been made on the assumption that the owner sells the property

interests on the open market in its existing state without the benefit of a deferred term

contract, leaseback, joint venture, management agreement or any similar arrangement

which would serve to increase the value of the property interests. In addition, no forced

sale situation in any manner is assumed in our valuation.

We have not caused title searches to be made for the property interests at the

relevant government bureau in the PRC. We have been provided with certain extracts of

title documents relating to the property interests. However, we have not inspected the

original documents to verify the ownership, encumbrances or the existence of any

subsequent amendments which may not appear on the copies handed to us. In

undertaking our valuation for the property interests, we have relied on the legal opinion

(the “PRC legal opinion”) provided by the Company’s PRC legal adviser, Zhong Lun Law

Firm.

We have relied to a considerable extent on information provided by the Group and

have accepted advice given to us by the Group on such matters as planning approvals or

statutory notices, easements, tenure, occupation, lettings, site and floor areas and in the

identification of the properties and other relevant matter. We have also been advised by

the Group that no material facts had been concealed or omitted in the information

provided to us. All documents have been used for reference only.

All dimensions, measurements and areas included in the valuation certificates are

based on information contained in the documents provided to us by the Group and are

approximations only. No on-site measurement has been taken.

We have inspected the exterior and, where possible, the interior of the properties.

However, we have not carried out a structural survey nor have we inspected woodwork or

other parts of the structures which are covered, unexposed or inaccessible and we are

therefore unable to report that any such parts of the properties are free from defect. No

tests were carried out on any of the services.

The site inspection of the property was carried out by Mr. Wilson Wu and Mr. Vinco

Huang in December 2016 and January 2017.

No allowance has been made in our valuation for any charges, mortgages or

amounts owing on the property interests nor for any expenses or taxation which may be

incurred in effecting a sale. Unless otherwise stated, it is assumed that the property

interests are free from encumbrances, restrictions and outgoings of an onerous nature

which could affect their values.


– 68 –

In valuing the property interests, we have complied with the requirements set out in

Chapter 5 and Practice Note 12 to the Rules Governing the Listing of Securities issued by

The Stock Exchange of Hong Kong Limited, Rule 11 of the Code on Takeovers and mergers

issued by the Securities and Futures Commission and the HKIS Valuation Standards (2012

Edition) published by the Hong Kong Institute of Surveyors (“HKIS”).

As advised by the Company, the potential tax liabilities which may arise from the

sale of the properties in the PRC mainly include corporation income tax (25%, business tax

(5%), stamp duty (0.005%, deed tax 3% to 5% and land appreciation tax (30% to 60)% on

the appreciation in property value.

As advided by the Company, there will be no likelihood of such liabilities being

crystallized as it is understood that the Group has no intention to dispose the properties as

at the Latest Practicable Date.

Unless otherwise stated, all money amounts stated are in Renminbi (RMB). The

exchange rate used in valuing the property interests in the PRC as at 30 November 2016

was RMB1.00 = HK$1.1258. There has been no significant fluctuation in the exchange rate

for Renminbi against Hong Kong Dollars (HK$) between that date and the date of this

letter.

We enclose herewith a summary of valuation and the valuation certificates for the

material properties as per your instructions.

Yours faithfully,

For and on behalf of

Vigers Appraisal & Consulting LimitedRaymond Ho Kai Kwong

Registered Professional Surveyor (GP)MRICS MHKIS MSc(e-com)

China Real Estate Appraiser

Managing Director

Note: Mr. Raymond Ho Kai Kwong, Chartered Surveyor, MRICS MHKIS MSc(e-com), has over twenty nine

years’ experiences in undertaking valuations of properties in Hong Kong and has over twenty two years’

experiences in valuations of properties in the PRC.


– 69 –

SUMMARY OF VALUATION

Property interests to be acquired by the Group in the PRC

Property

Market Valuein existing state as at

30 November 2016

1. Three land parcels (known as the Buxin Land),

No.1 Dongchang Road,

Buxin Area, Luohu District,

Shenzhen City,

Guangdong Province, the PRC

RMB4,267,990,000

(equivalent to

approximately

HK$4,804,900,000)

(Refer to Note 1 below)

2. 59 residential units,

BuXin Garden,

Buxin Road, Luohu District,

Shenzhen City,

Guangdong Province, the PRC

RMB183,800,000

(equivalent to

approximately

HK$206,920,000)

3. The unsold portion of Ruyingju Project,

the south of Sanzhi Xiangshui Road,

Dashi Town,

Panyu District,

Guangzhou City,

Guangdong Province,

the PRC

RMB326,970,000

(equivalent to

approximately

HK$368,100,000)

Total: RMB4,778,760,000

(equivalent toapproximately

HK$5,379,920,000)

Notes:

1. For reference purpose, according to the self-owned portion stated in 3 Land Use Rights Transfer

Agreements mentioned from Note (1) to Note (3) of Property No. 1, it stated a gross floor area

approximately 75,583 sq.m. for industry related office use, approximately 36,803 sq.m. for a portion of

commercial use, approximately 12,050 sq.m. for innovative industry related office use and approximately

20,632 sq.m. for underground commercial use of Southern Land and the self-owned portion of a gross

floor area of approximately 38,198 sq.m. for commercial use and approximately 8,842 sq.m. for

underground commercial use of Northern Land. In this regard, the self-owned portion could not be freely

transferred. However, as advised by the Company’s PRC legal advisers – Zhong Lun Law Firm,

Guangdong Land (Shenzhen) Limited cannot freely transfer non-commodity houses, self-owned portion

of land and buildings but they can be used for leasing. Therefore, we have attributed no market value to

the self-owned portion of the property. Given that the self-owned portion can be leased or self-used by

the Group, we have attributed an investment value to the self-owned portion, comprising a total gross

floor area of approximately 192,108 sq.m., as at the valuation date RMB2,228,430,000.


– 70 –

VALUATION CERTIFICATES

Property Description and TenureParticulars ofoccupancy

Market Value inexisting state as at 30

November 2016

1. Three land

parcels (known

as the Buxin

Land),

No.1 Dongchang

Road,

Buxin Area,

Luohu District,

Shenzhen City,

Guangdong

Province,

the PRC

The Buxin Land comprises three

parcels of land with a total site area

of approximately 66,525.90 sq.m.

(716,085 sq.ft.).

The Buxin Land is proposed to be

developed into a composite

development. The details of site

area and proposed gross floor area

are as follows:

As at the valuation

date, the

Northwestern Land

and the Northern

Land are bare sites,

whilst the Southern

Land with an

industrial building

erected thereon is

owner-occupied for

office use and the

whole Buxin Land is

pending for future

development.

RMB4,267,990,000

(equivalent to

approximately

HK$4,804,900,000)

(Refer to

Note 4 below)

Land Lot Site Area(sq.m.)

Northwestern Land 16,680.23

Southern Land 16,043.57

Northern Land 33,802.10

Total: 66,525.90

Northwestern Land:

Building Usage

ApproximateGross

Floor Area(sq.m.)

Commercial 8,018

Office 49,450

Commercial apartment 57,600

Property Service Room 232

Public Facilities 700

Total: 116,000


– 71 –

Property Description and TenureParticulars ofoccupancy

Market Value inexisting state as at 30

November 2016

Southern Land:

Building Usage

ApproximateGross

Floor Area(sq.m.)

Industry Related

Office 137,367

Commercial 37,460

Innovative Industry

Related Office 12,050

Public Facilities 423

Public Terminus 3,200

Underground

Commercial 21,000

Total: 211,500

Northern Land:

Building Usage

ApproximateGross

Floor Area(sq.m.)

Industry Related

Office 86,402

Property Service Room 269

Commercial 38,880

Underground

Commercial 9,000

Total: 134,551

100 car parking spaces is permitted

to be provided.

Notes:

1. According to a Land Use Rights Transfer Agreement (Document No.: Shen De He Zi (2016) No. H001 “深地合字(2016) H001號”) entered into between the Shenzhen City Luohu District Urban Renewal Authority

(“Shenzhen Luohu Renewal Authority”) (Party A) and Guangdong Land (Shenzhen) Limited

(“Guangdong Land Shenzhen”) (Party B) dated 13 June 2016, the northwestern part of the Buxin Land

(designated as land number H409-0078(1)) (the “Northwestern Land”), with a total site area of a total

approximately 16,680.23 sq.m. and a gross floor area of approximately 116,000 sq.m. of the property was

granted for a term expiring on 12 June 2056 for commercial uses from Party A to Party B.


– 72 –



(“Guangdong Land Shenzhen”) (Party B) dated 15 June 2016, the southern part of the Buxin Land

(designated as land number H409-0011) (the “Southern Land”), with a total site area of a total


granted for a term expiring on 14 June 2066 for new industry related uses from Party A to Party B.



(“Guangdong Land Shenzhen”) (Party B) dated 13 June 2016, the northern part of the Buxin Land

(designated as land number H409-0092) (the “Northern Land”), with a total site area of a total


granted for a term expiring on 12 June 2066 for new industry related uses from Party A to Party B.

4. For reference purpose, according to the self-owned portion stated in 3 Land Use Rights Transfer

Agreements mentioned from Note (1) to Note (3), it stated a gross floor area approximately 75,583 sq.m.

for industry related office use, approximately 36,803 sq.m. for a portion of commercial use,

approximately 12,050 sq.m. for innovative industry related office use and approximately 20,632 sq.m. for

underground commercial use of Southern Land and the self-owned portion of a gross floor area of

approximately 38,198 sq.m. for commercial use and approximately 8,842 sq.m. for underground

commercial use of Northern Land. In this regard, the self-owned portion could not be freely transferred.

However, as advised by the Company’s PRC legal advisers – Zhong Lun Law Firm, Guangdong Land

(Shenzhen) Limited cannot freely transfer non-commodity houses, self-owned portion of land and

buildings but they can be used for leasing. Therefore, we have attributed no market value to the

self-owned portion of the property. Given that the self-owned portion can be leased or self-used by the

Group, we have attributed an investment value to the self-owned portion, comprising a total gross floor

area of approximately 192,108 sq.m., as at the valuation date RMB2,228,430,000.

5. Guangdong Land (Shenzhen) Limited is a wholly-owned subsidiary of Guangdong Land Holdings

Limited.

6. The PRC legal opinion states, inter alia, the following:

(i) The practicing entity of GDL Kingway Brewery Urban Renewal Authority is entitled to enter into

the land grant contract as grantee;

(ii) Shenzhen Luohu Renewal Authority is entitled to enter into the land contract as grantor;

(iii) GDL legally owns the land use rights of three land parcels H409-0078(1), H409-0092 and

H409-0011 and shall apply for the land use right certificate with the real estate registration

authority upon payment of all land use right grant fee, land development fee and municipal

ancillary facilities fee; and

(iv) GDL shall settle the second instalment of the remaining land use right grant fee, land

development fee and municipal ancillary facilities fee before 8 June 2017 and commence

construction and complete construction within the stipulated time pursuant to the provisions of

the grant contract of land use rights. Prior to registering the land use rights and obtaining the real

estate ownership certificate, no disposal of land nor transfer of land and the structures thereon in

any manner for the purpose of non-commodity housing and own use is allowed.

7. The status of title and grant of major approvals and permits in accordance with the PRC legal opinion and

information provided by the Company are as follows:

(i) Land Use Rights Transfer Agreement Yes


– 73 –

Property Description and Tenure Particulars of occupancy

Market Value inexisting state asat 30 November

2016

2. 59 residential units,

BuXin Garden,

Buxin Road,

Luohu District,

Shenzhen City,

Guangdong Province,

the PRC

The property comprises

59 residential units of Bu

Xin Garden located at

various levels of a

8-storey building

completed in about 1988.

The property has a total

gross floor area of

approximately 4,634.33

sq.m.

The property is currently

occupied by the Group

for residential uses.

RMB183,800,000

(equivalent to

approximately

HK$206,920,000)

Notes:

1. According to 59 Real Estate Ownership Certificates (Document Nos.: Shen Fang Di Zi Nos., 2000132341,

2000132342, 2000132343, 2000132345, 2000132346, 2000132348, 2000132349, 2000132350, 2000132352,

2000132353, 2000132355, 2000132356, 2000132358, 2000132359, 2000132360, 2000132362, 2000132363,

2000132364, 2000132366, 2000132367, 2000132368, 2000132369, 2000132370, 2000132371, 2000132373,

2000132374, 2000132375, 2000132376, 2000132377, 2000132378, 2000132379, 2000132380, 2000132381,

2000132382, 2000132383, 2000132384, 2000132385, 2000132386, 2000132387, 2000132388, 2000132389,

2000132390, 2000132391, 2000132392, 2000132393, 2000132394, 2000132395, 2000132396, 2000132397,

2000132398, 2000132405, 2000132406, 2000132407, 2000132408, 2000132410, 2000132411, 2000132413,

2000132415 and 2000132497), the land use rights of the property have been granted to Shenzhen Brewery

Co., Ltd “深圳金威啤酒有限公司”for residential use for a term expiring on 28 October 2035 and the

building ownership rights of the property with a total gross floor area of approximately 4,634.33 sq.m. are

owned by Shenzhen Brewery Co., Ltd.

2. Shenzhen Brewery Co., Ltd. is now known as Yuehai Technology (Shenzhen) Co. Ltd. “粵海科技（深圳）有限公司”.


(i) The 59 units of BuXin Garden is not subject to seizure and mortgage; and

(ii) Yuehai Technology (Shenzhen) Co. Ltd. is entitled to transfer, lease, pledge or otherwise dispose

of the 59 units of BuXin Garden in accordance with the law.



(i) Real Estate Ownership Certificate Yes


– 74 –

Property Description and Tenure Particulars of occupancy

Market Value inexisting state asat 30 November

2016

3. The unsold portion of

Ruyingju Project,

the south of Sanzhi

Xiangshui Road,

Dashi Town,

Panyu District,

Guangzhou City,

Guangdong Province,

the PRC

The development

comprises a parcel of

land having a total site

area of approximately

38,771 sq.m. and a total

gross floor area of

approximately 128,947

sq.m. completed in about

2015.

According to the

information provided by

the Company, 80

apartment units with a

total gross floor area of

approximately 8,159.32

sq.m. of the unsold

portion and 651

carparking spaces of the

development will be

acquired.

The property is held with

the land use rights for

terms expiring on 24 May

2032 and 24 May 2062 for

commercial and

residential uses

respectively.

The unsold units of the

development was vacant

as at the valuation date.

RMB326,970,000

(equivalent to

approximately

HK$368,100,000)

Notes:

1. Pursuant to a State-owned Land Use Rights Certificate (Document No.: G04-002585) (the “State-owned

Land Use Certificate”), the land use rights of the property were granted to Guangzhou Panyu Yuehai Real

Estate Company Ltd. “廣州市番禺粵海房地產有限公司” (“Panyu Yuehai”) for terms expiring on 24 May

2032 and 24 May 2062 for commercial and residential uses respectively.

2. According to an Agreement To Modify State-owned Construction Land Use Rights Grant Contract

(Document No.: Sui Fan Guo Di Chu He (2012) No. 025-1 Agreement To Modify) (the “Land Modification

Agreement”) entered into between the State-owned Land Resources and Housing Management Bureau of

Guangzhou (Party A) and Panyu Yuehai (Party B) dated 21 February 2013, the land use rights of the

property with a site area of approximately 38,771 sq.m. were granted from Party A to Party B.

3. According to a Construction Work Planning Acceptance Certificate (Document No.: Sui Gui Yan Zheng

(2015) No. 572) issued on 14 October 2015, the development comprising a total gross floor area of

approximately 128,947 sq.m. was completed.

4. According to the information provided by the Group, 80 apartment units with a total gross floor area of

approximately 8,159.32 sq.m. of the unsold portion and 651 carparking spaces of the development will be

acquired.

5. Panyu Yuehai is a 80% owned subsidiary of Guangdong Land Holdings Limited.


– 75 –


(i) The unit situated at Room 3502, Block 4 (A2), No. 63 Yan Sha Road East, Luopu Street, Panyu

District has completed the preliminary registration. Accordingly, it is excluded from the list of

unsold units of Ruyingju Project;

(ii) Ruyingju Project shall make up the outstanding payment to the relevant authority pursuant to the

provisions in the Planning Acceptance Certificate prior to the initial registration of the Building

Ownership Certificate, and adjust the land use area based on the land area stated in the

Construction Land Use Planning Permit (Sui Gui Di Zheng (2006) No.1551) upon applying for the

Real Estate Ownership Certificate;

(iii) Upon obtaining the Building Ownership Certificate, with respect to the 79 unsold units (other

than Room 3502) that remain unsold to third party or are in the process of preliminary

registration, Panyu Yuehai is entitled to transfer, lease, pledge or otherwise dispose of these 79

units in accordance with the law. Prior to 25 December 2016, Panyu Yuehai is the creditor of Room

3502 and may dispose of Room 3502 in accordance with the law; and

(iv) With respect to parking spaces in the civil defense area, as Ruyingju Project’s parking spaces in

the civil defense area are within the scope of car parking under planning, their ownership may be

agreed by Guangzhou Panyu Yuehai Real Estate Company Ltd. through disposal, gift or lease.

Where the construction planning application and completion acceptance documents and the

attachments are all ready, the parking spaces in the civil defense area may be registered initially

under the name of Panyu Yuehai and disposed of by Panyu Yuehai. Pre-sales are not allowed.

Upon disposal, the needs of the landlord must be satisfied.



(i) State-owned Land Use Rights Certificate Yes

(ii) Planning Permit for Construction Land Yes

(iii) Planning Permit for Construction Works Yes

(iv) Permit for Commencement of Construction Works Yes


– 76 –

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full

responsibility, includes particulars given in compliance with the Listing Rules for the

purpose of giving information with regard to the Group. The Directors, having made all

reasonable enquiries, confirm that to the best of their knowledge and belief, the

information contained in this circular is accurate and complete in all material respects and

not misleading or deceptive, and there are no other matters the omission of which would

make any statement herein or this circular misleading.

2. INTERESTS AND SHORT POSITIONS OF DIRECTORS AND CHIEFEXECUTIVE

As at the Latest Practicable Date, the interests and short positions of the Directors

and chief executive of the Company in the shares, underlying shares and debentures of the

Company and its associated corporations (within the meaning of Part XV of the SFO)

which were required to be (i) notified to the Company and the Stock Exchange pursuant to

Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which the

Directors or chief executive were taken or deemed to have under such provisions of the

SFO); (ii) entered in the register kept by the Company pursuant to Section 352 of the SFO;

or (iii) notified to the Company and the Stock Exchange pursuant to the Model Code, were

as follows:

I. Interests and short positions in securities of the Company

(a) Shares

Name of Director

Capacity/Nature ofinterests

Number ofShares

heldLong/Shortposition

Approximate% of

interestsheld

(Note)

Huang Xiaofeng Personal 2,595,580 Long position 0.041%

Wu Jianguo Personal 333,370 Long position 0.005%

Zhang Hui Personal 2,106,130 Long position 0.034%

Zhao Chunxiao Personal 582,170 Long position 0.009%

Li Wai Keung Personal 1,927,160 Long position 0.031%

Ho Lam Lai Ping,

Theresa

Personal 879,200 Long position 0.014%

Tsang Hon Nam Personal 879,200 Long position 0.014%

Chan Cho Chak, John Personal 5,450,000 Long position 0.087%

Li Kwok Po, David Personal 12,000,000 Long position 0.192%

Cheng Mo Chi, Moses Personal 3,000,000 Long position 0.048%

Note: The approximate percentage of interests held was calculated on the basis of

6,264,931,421 Shares in issue as at the Latest Practicable Date.

APPENDIX II GENERAL INFORMATION

– 77 –

(b) Share options

Name of Director

Date ofgrant of

shareoptions

Number ofshare

optionsgranted on

date ofgrant

Number ofshare

optionsheld as atthe Latest

PracticableDate

Totalconsideration

paid forshare

optionsgranted

Price to bepaid on

exercise ofshare

optionsLong/Shortposition

(dd.mm.yyyy) HK$ HK$(per Share)

Huang Xiaofeng 22.01.2013 2,693,000 877,420 – 6.20 Long position

Wen Yinheng 22.01.2013 1,395,000 454,330 – 6.20 Long position

Wu Jianguo 22.01.2013 2,268,000 778,630 – 6.20 Long position

Zhang Hui 22.01.2013 2,268,000 770,870 – 6.20 Long position

Zhao Chunxiao 22.01.2013 2,268,000 778,630 – 6.20 Long position

Li Wai Keung 22.01.2013 2,243,000 815,840 – 6.20 Long position

Ho Lam Lai Ping,

Theresa

22.01.2013 1,256,000 376,800 – 6.20 Long position

Tsang Hon Nam 22.01.2013 1,256,000 376,800 – 6.20 Long position

Notes to the above share options granted pursuant to the share option scheme adopted by

the Company on 24 October 2008:

(1) The option period of all the share options is five years and six months from the

date of grant.

(2) Any share option is only exercisable during the option period after it has become

vested.

(3) The normal vesting scale of the share options is as follows:

Date Percentage Vesting

The date two years after the date of grant 40%

The date three years after the date of grant 30%

The date four years after the date of grant 10%

The date five years after the date of grant 20%

(4) The vesting of the share options is further subject to the achievement of such

performance targets as determined by the Board upon grant and stated in the offer

of grant.


– 78 –

(5) The leaver vesting scale of the share options that would apply in the event of the

grantee ceasing to be an eligible person under certain special circumstances (less

the percentage which has already vested under the normal vesting scale or lapsed)

is as follows:

Date on which event occurs Percentage Vesting

Before the date which is four months after the date

of grant

0%

On or after the date which is four months after but

before the date which is one year after the date of

grant

10%

On or after the date which is one year after but

before the date which is two years after the date

of grant

25%

On or after the date which is two years after but

before the date which is three years after the date

of grant

40%

On or after the date which is three years after but

before the date which is four years after the date

of grant

70%

On or after the date which is four years after the

date of grant

80%

The remaining 20% also

vests upon passing the

overall performance

appraisal for those four

years

II. Interests and short positions in shares of associated corporations

(a) GDL

Name of Director


Numberof shares


Approximate% of

interestsheld

(Note)

Huang Xiaofeng Personal 3,880,000 Long position 0.227%

Ho Lam Lai Ping,

Theresa


Cheng Mo Chi, Moses Personal 600,000 Long position 0.035%


1,711,536,850 ordinary shares of GDL in issue as at the Latest Practicable Date.


– 79 –

(b) Guangnan (Holdings) Limited (“Guangnan Holdings”)

Name of Director


Numberof shares


Approximate% of

interestsheld

(Note)

Tsang Hon Nam Personal 300,000 Long position 0.033%

Li Kwok Po, David Personal 15,000 Long position 0.002%


907,593,285 ordinary shares of Guangnan Holdings in issue as at the Latest

Practicable Date.

(c) Guangdong Tannery Limited

Name of Director


Numberof shares


Approximate% of

interestsheld

(Note)

Ho Lam Lai Ping,

Theresa



538,019,000 ordinary shares of Guangdong Tannery Limited in issue as at the

Latest Practicable Date.

Save as disclosed above, as at the Latest Practicable Date, to the knowledge of

the Company, none of the Directors or chief executive of the Company had any

interests or short positions in the shares, underlying shares and debentures of the

Company or any of its associated corporations (within the meaning of Part XV of the

SFO) which were required to be: (i) notified to the Company and the Stock Exchange

pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short

positions which the Directors and chief executive were taken or deemed to have

under such provisions of the SFO); (ii) entered in the register kept by the Company

pursuant to Section 352 of the SFO; or (iii) notified to the Company and the Stock

Exchange pursuant to the Model Code.


– 80 –

3. INTERESTS AND SHORT POSITIONS OF SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, so far as is known to any Director or chief

executive of the Company, the following persons (other than a Director or chief executive

of the Company) had, or were taken or deemed to have interests or short positions in the

Shares or underlying Shares of the Company which would fall to be disclosed to the

Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of

the SFO, or which were recorded in the register kept by the Company pursuant to Section

336 of the SFO:

Name of shareholderCapacity/Nature of interests

Numberof Shares


Approximate% of

interestsheld

(Note 2)

Guangdong Holdings

(Note 3)Interest in controlled

corporation

3,693,453,546 Long position 56.49%

GDH (Note 4) Beneficial owner/

Interest in controlled

corporation

3,693,453,546 Long position 56.49%

Guangdong Trust Ltd.

(粵海信托有限公司)

Beneficial owner/

Interest in controlled

corporation

576,404,918 Long position 8.82%

Notes:

1. The above interests include the allotment and issue of the Consideration Shares upon and subject

to completion of the Sale and Purchase Agreement.

2. The approximate percentage of interests held was calculated on the basis of 6,537,821,440 Shares

of the Company in issue after completion of the Sale and Purchase Agreement.

3. The attributable interest which Guangdong Holdings has in the Company is held through its

100% direct interest in GDH.

4. The interests of GDH set out above include attributable interest held through its wholly-owned

subsidiary, Guangdong Trust Ltd. (粵海信托有限公司).


– 81 –

5. As at the Latest Practicable Date, the following Directors were a director or an employee of

Guangdong Holdings and/or GDH:

Name of DirectorPosition(s) held inGuangdong Holdings Position(s) held in GDH

Huang Xiaofeng chairman and director chairman and director

Cai Yong director and general manager executive director and

general manager

Wu Jianguo director executive director

Zhang Hui deputy general manager executive director

Zhao Chunxiao deputy general manager and

chief administration officer

executive director, chief

administration officer and

company secretary

Lan Runing deputy general manager executive director

Li Wai Keung chief financial officer executive director and chief

financial officer

Save as disclosed above, as at the Latest Practicable Date, no other person (other

than a Director or chief executive of the Company) had, or were taken or deemed to have

interests or short positions in the Shares or underlying Shares of the Company which

would fall to be disclosed to the Company and the Stock Exchange under the provisions of

Divisions 2 and 3 of Part XV of the SFO, or which were recorded in the register kept by the

Company pursuant to Section 336 of the SFO.

Save as disclosed below, as at the Latest Practicable Date, so far as is known to the

Directors or chief executive of the Company, no other person (other than a Director or

chief executive of the Company) was directly or indirectly interested in 10% or more of the

issued shares carrying rights to vote in all circumstances at general meetings of other

members of the Group or had any option in respect of such issued shares:

Name of shareholder interested in 10%or more of the subsidiaries of the Company1

Name of subsidiary ofthe Company

Long/Shortposition

Percentage ofinterests held

by thatshareholder

寶應縣自來水公司(Baoying Tap Water Company Limited*)

寶應悅寶工程有限公司(Baoying Yuebao

Engineering Company

Limited*)

Long position 30.00%

寶應縣自來水公司(Baoying Tap Water Company Limited*)

寶應粵海水務有限公司(Baoyjng Yuehai Water

Company Limited*)



– 82 –



Long/Shortposition


by thatshareholder

Billion City Investments Limited Super Sino Investment

Limited


Billion City Investments Limited 儋州聯順通自來水管網有限公司(Danzhou Lian Shun Tong

Water Pipe Company

Limited*)


Billion City Investments Limited 儋州清泉水質檢測有限公司(Danzhou Qing Quan

Water Testing Company

Limited*)


Billion City Investments Limited 海南儋州自來水有限公司(Hainan Danzhou Tap

Water Company Limited*)


儋州市農林水利開發有限公司(Danzhou Nonglin Shuili Development

Company Limited*)

海南儋州粵海水務有限公司(Hainan Danzhou

Guangdong Water

Company Limited*)


東莞發展控股股份有限公司(Dongguan Development Holding Company

Limited*)

東莞市清溪粵海水務有限公司(Dongguan Qingxi

Guangdong Water Co.,

Ltd.*)


東莞市東江原水有限公司(Dongguan Dongjiang Raw Water Company

Limited*)

東莞市清溪粵海水務有限公司(Dongguan Qingxi

Guangdong Water Co.,

Ltd.*)


東莞市東江原水有限公司(Dongguan Dongjiang Raw Water Company

Limited*)

東莞市粵海東原水務有限公司(Dongguan Yuehai

Dongyuan Water Co.,

Ltd.*)


高郵市自來水公司(Gaoyoushi Tap Water Company Limited*)

高郵港郵供水有限公司(Gaoyou Gangyou Water

Supply Company Limited*)



– 83 –



Long/Shortposition


by thatshareholder

高郵市自來水公司(Gaoyoushi Tap Water Company Limited*)

高郵市港郵工程有限公司(Gaoyoushi Gangyou

Engineering Company

Limited*)


高州市城鄉基礎設施建設投資有限公司(Gaozhou Chengxiang Foundation Facilities

Construction Investment Company Limited*)

高州粵海水務有限公司(Gaozhou Guangdong



廣東粵海投資開發有限公司(Guangdong Yuehai Investment

Development Co., Ltd.*)

廣州天河城投資有限公司(Guangzhou Tianhecheng

Investment Co., Ltd.*)


廣州市城市建設開發集團有限公司(Guangzhou City Construction &

Development Holdings Ltd.*)

Teem Holdings Limited Long position 12.98%

廣州市番禺信息技術投資發展有限公司(Guangzhou City Panyu Information

Technology Investment Development

Company Limited*)

廣州市萬亞投資管理有限公司(Guangzhou City Wanye

Investment Management

Company Limited*)


廣州市市政園林工程管理中心(Guangzhou City Shizheng Yuanlin

Engineering Management Centre*)

開平粵海水務有限公司(Kaiping Guangdong

Water Co., Ltd.*)


國開發展基金有限公司(Guokai Development Fund Company

Limited*)

梅州梅穗投資有限責任公司(Meizhou Meisui

Investment Co., Limited*)


廣州市市政園林工程管理中心(Guangzhou Shizheng Yuanlin Engineering

Management Centre*)

開平粵海污水處理有限公司(Kaiping Yuehai Sewage

Treatment Co., Ltd.*)


江河水務有限公司(Jianghe Water Company Limited*)

廣西梧州自來水工程有限公司(Guangxi Wuzhou Tap

Water Engineering

Company Limited*)



梧州粵海江河水務有限公司(Wuzhou Yuehai Jianghe




– 84 –



Long/Shortposition


by thatshareholder


梧州市建標水表檢定有限公司(Wuzhoushi Jianbiao

Shuibiao Jianding

Company Limited*)


梅州市自來水總公司(Meizhou Water Supply Co., Ltd.*)

梅州粵海水務有限公司(Meizhou Guangdong

Water Co., Ltd.*)



梅州市自來水安裝公司(Meizhou Water Supply

Installation Co., Ltd*)



梅州梅穗投資有限責任公司(Meizhou Meisui

Investment Co., Limited*)


汕尾市紅草產業園投資開發有限公司(Shanwei Hongcao Chanyeyuan Investment

Development Company Limited*)

汕尾粵海環保有限公司(Shanwei Yuehai Huanbao

Co., Ltd.*)


梧州市國資委(State-owned Assets Supervision and

Administration Commission of Wuzhou*)

梧州粵海環保發展有限公司(Wuzhou Yuehai Huanbao

Fazhan Company

Limited*)


遂溪縣自來水公司(Suixi Tap Water Company Limited*)

遂溪粵海水務有限公司(Suixi Guangdong Water

Company Limited*)


Upper Horn Investments Limited Guangdong Power

(International) Limited


儀征城鄉水務有限公司(Yizheng Chengxiang Water Company

Limited*)

揚州粵港市政工程有限公司(Yanzhou Yuegang

Shizheng Engineering Co. ,

Ltd.*)


儀征城鄉水務有限公司(Yizheng Chengxiang Water Company

Limited*)

儀征港儀供水有限公司(Yizheng Gangyi Water

Supply Company Limited*)



– 85 –



Long/Shortposition


by thatshareholder

肇慶大旺城市發展有限公司(Zhaoqing Dawang City Development

Company Limited*)

肇慶高新區粵旺工程有限公司(Zhaoqing Gaoxinqu

Yuewang Engineering

Company Limited*)


肇慶大旺城市發展有限公司(Zhaoqing Dawang City Development

Company Limited*)

肇慶高新區粵海水務有限公司(Zhaoqing HZ GDH Water

Co., Ltd.*)


中山興中集團有限公司(Zhongshan Xingzhong Group Co., Ltd.*)

中山火力發電有限公司(Zhongshan Thermal

Power Co., Ltd.*)


1 These interests include interests in the issued share capital of subsidiaries of the Company, equity

interests in subsidiaries of the Company which are established in the form of an equity joint

venture in the PRC, and interests in subsidiaries of the Company which are established in the

form of a cooperative joint venture in the PRC.

4. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had entered or was

proposing to enter into a service contract with any member of the Group (excluding

contracts expiring or determinable by the employer within one year without payment of

compensation (other than statutory compensation)).

5. DIRECTORS’ INTERESTS IN ASSETS, CONTRACTS OR ARRANGEMENT

As at the Latest Practicable Date, none of the Directors had any direct or indirect

interests in any assets which had been, since 31 December 2015, the date to which the

latest published audited consolidated financial statements of the Group were made up,

acquired or disposed of by or leased to any member of the Group, or were proposed to be

acquired or disposed of by or leased to any member of the Group.

Except for the share options held by the Directors as mentioned above, as at the

Latest Practicable Date, none of the Directors was materially interested, directly or

indirectly, in any contract or arrangement subsisting at the Latest Practicable Date which

is significant in relation to the business of the Group.


– 86 –

6. COMPETING INTERESTS OF DIRECTORS AND CLOSE ASSOCIATES

As at the Latest Practicable Date, so far as is known to any Director or chief

executive of the Company, the interests of Directors or their respective close associates in

the businesses which competed or were likely to compete, either directly or indirectly,

with the businesses of the Group as required to be disclosed were as follows:

I. Core business activities of the Group

(1) Water resources

(2) Property holding and investment

(3) Hotel ownership and operation

(4) Hotel management

(5) Department store operation

(6) Investments in other infrastructure projects

II. Interests in Competing Business

Name of Director Name of company Nature of interestsCompetingBusiness

Huang Xiaofeng Guangdong Holdings Chairman (1), (2) & (3)

GDH Chairman (1), (2) & (3)

GDL Chairman &

Non-Executive

Director

(2)

Cai Yong Guangdong Holdings Director & General

Manager

(1), (2) & (3)

GDH Executive Director &

General Manager

(1), (2) & (3)

Wu Jianguo Guangdong Holdings Director (1), (2) & (3)

GDH Executive Director (1), (2) & (3)

Zhang Hui GDH Executive Director (1), (2) & (3)

Zhao Chunxiao GDH Executive Director (1), (2) & (3)

GDL Executive Director &

Chief Executive

Officer

(2)

Lan Runing GDH Executive Director (1), (2) & (3)

Li Wai Keung GDH Executive Director (1), (2) & (3)

GDL Executive Director (2)


– 87 –

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or

their respective close associates had an interest in any business that competes with or is

likely to compete with the business of the Group.

7. EXPERTS AND CONSENTS OF EXPERTS

The following are the qualifications of the experts who had given opinion or advice

which is contained herein:

Name Qualification

Somerley Capital Limited a corporation licensed to carry out Type 1 (dealing in

securities) and Type 6 (advising on corporate finance)

regulated activities under the SFO

Vigers Appraisal &

Consulting Limited

Professional surveyor and valuer

As at the Latest Practicable Date, each of the above expert had given and had not

withdrawn its written consent to the issue of this circular with the inclusion herein of its

letter dated the date of this circular and references to its names in the form and context in

which it appears.

As at the Latest Practicable Date, none of the above experts had any shareholding,

directly or indirectly, in any member of the Group or any right (whether legally

enforceable or not) to subscribe for or to nominate persons to subscribe for securities in

any member of the Group.

As at the Latest Practicable Date, none of the above experts had any direct or

indirect interests in any assets which had been, since 31 December 2015, the date to which

the latest published audited consolidated financial statements of the Group were made

up, acquired or disposed of by or leased to any member of the Group, or were proposed to

be acquired or disposed of by or leased to any member of the Group.

8. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material

adverse change in the financial or trading position of the Group since 31 December 2015,

the date to which the latest published audited consolidated financial statements of the

Group were made up.

9. GENERAL

In the event of any inconsistency, the English texts of this circular and the

accompanying form of proxy shall prevail over their respective Chinese texts.


– 88 –

10. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be made available for inspection at the

office of Reed Smith Richards Butler, legal advisers to the Company as to Hong Kong laws,

at 20th Floor, Alexandra House, 18 Chater Road, Central, Hong Kong, during normal

business hours on any Business Day from the date of this circular up to 20 March 2017

(both days inclusive):

(a) the Sale and Purchase Agreement;

(b) the letter from the Independent Board Committee, the text of which is set out

on pages 28 and 29 of this circular;

(c) the letter from Somerley to the Independent Board Committee and the

Independent Shareholders, the text of which is set out on pages 30 to 66 of this

circular;

(d) the valuation report, the text of which is set out on pages 67 to 76 in Appendix

I to this circular;

(e) the written consents as referred to in the paragraph headed “7. EXPERTS AND

CONSENTS OF EXPERTS” in this appendix; and

(f) this circular.


– 89 –

Set out below are the personal particulars of Mr. CAI Yong, who has offered himself

for re-election at the EGM:

Mr. CAI Yong, aged 51, was appointed a Non-Executive Director of the Company on

25 August 2016. Mr. Cai holds a Master ’s degree in Business Administration from the

South China University of Technology. Between 1991 and 2016, Mr. Cai worked for a

number of departments of the People’s Government of Guangdong Province in various

positions including Deputy Director of the Economic and Trade Commission, Deputy

Director of the Economic and Information Commission and Deputy Director of

Department of Commerce. Mr. Cai was appointed a Director and the General Manager of

Guangdong Holdings in January 2016 and an Executive Director and the General Manager

of GDH in May 2016.

Other than as stated above, Mr. Cai is not related to any Director, senior

management or substantial shareholder or controlling shareholder of the Company and

has not held any directorship in any other listed company in the last three years.

As at the Latest Practicable Date, Mr. Cai did not have any interests in shares and/or

underlying shares of the Company or its associated corporations within the meaning of

Part XV of the SFO.

There is a letter of appointment entered into between the Company and Mr. Cai.

Mr. Cai, if re-elected, will hold office for a term of not more than approximately three

years effective from the conclusion of the EGM to the earlier of (i) the conclusion of the

Company’s annual general meeting to be held in 2019 and (ii) 30 June 2019, subject to

earlier determination in accordance with the Articles of Association of the Company

and/or any applicable laws and regulations.

Pursuant to the Articles of Association of the Company, Mr. Cai is entitled to such

director ’s fee as may be approved by the Board. Remuneration (if any) for Mr. Cai will be

determined in accordance with the Company’s policy on Directors’ remuneration by

reference to the responsibilities involved and the remuneration offered for similar

positions in comparable companies. At present, Mr. Cai is not receiving any remuneration

from the Company.

Save as disclosed above, the Board is not aware of any other matters that need to be

brought to the attention of the Shareholders in relation to the re-election of Mr. Cai as a

Director of the Company and there is no information which is discloseable nor is/was Mr.

Cai involved in any matters required to be disclosed pursuant to any of the requirements

of the provisions under paragraphs (h) to (v) of Rule 13.51(2) of the Listing Rules.

APPENDIX III DETAILS OF THE DIRECTOR TO BE RE-ELECTED

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(Stock Code: 0270)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that an extraordinary general meeting (the “EGM”) of

Guangdong Investment Limited (the “Company”) will be held at Concord Room, 8th

Floor, Renaissance Harbour View Hotel Hong Kong, One Harbour Road, Wanchai, Hong

Kong on Monday, 20 March 2017 at 10:00 a.m. for the purpose of considering and, if

thought fit, passing with or without amendments, the following resolutions of the

Company:

ORDINARY RESOLUTIONS

1. “THAT:

(a) the Sale and Purchase Agreement dated 19 January 2017 entered into between

GDH Limited and the Company in relation to the Acquisition (as defined and

the particulars of which are set out in the circular of the Company dated 24

February 2017 to its shareholders), all transactions contemplated under the

Sale and Purchase Agreement and the Acquisition, be and are hereby

approved and confirmed;

(b) the allotment and issue to the Vendor of 272,890,019 shares of the Company

credited as fully paid-up at the issue price of HK$10.39 per share (the

“Consideration Shares”), as part of the consideration for the Acquisition, be

and is hereby approved; and

(c) the authorisation of any one or more directors of the Company to sign, execute

and deliver all such documents and take all such actions and steps and do

such acts, matters and things as any one or more of them may consider

necessary, appropriate, desirable or expedient to give full effect to this

resolution, and for the purposes of or in connection with the Acquisition, the

Sale and Purchase Agreement and the allotment and issue of the

Consideration Shares, be and are hereby approved and confirmed.”


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2. “THAT Mr. CAI Yong be and is hereby re-elected as a Director of the Company.”

By Order of the Board

Guangdong Investment LimitedHUANG Xiaofeng

Chairman

Hong Kong, 24 February 2017

Registered office:

28th and 29th Floors

Guangdong Investment Tower

148 Connaught Road Central

Hong Kong

Notes:

(i) A shareholder entitled to attend and vote at the EGM may appoint one or more proxies to attend and, on

a poll, vote in his place and such proxy need not be a shareholder of the Company.

(ii) A form of proxy is enclosed. To be valid, the form of proxy together with the power of attorney (if any) or

other authority (if any) or the authority under which it is signed (or a notarially certified copy of such

power or authority) must be delivered to the Company’s share registrar, Tricor Tengis Limited, at Level

22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, not less than 48 hours before the time fixed for

holding the EGM or adjourned meeting. The appointment of a proxy will not prevent a shareholder from

subsequently attending and voting at the EGM or any adjourned meeting if he so wishes. If a shareholder

who has lodged a form of proxy attends the EGM, his form of proxy will be deemed to have been revoked.

(iii) In the case of joint shareholders, the vote of the senior who tenders a vote, whether in person, or by proxy,

shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority

will be determined by the order in which the names stand in the Company’s register of members in

respect of the joint holding.

(iv) The register of members will be closed and no transfer of shares will be effected for one day on Monday,

20 March 2017 for determining the shareholders’ eligibility to attend and vote at the EGM.

(v) In order to qualify for attending and voting at the EGM, unregistered holders of shares of the Company

should ensure that all transfer documents accompanied by the relevant share certificates must be lodged

with the Company’s share registrar, Tricor Tengis Limited, at Level 22, Hopewell Centre, 183 Queen’s

Road East, Hong Kong, for registration not later than 4:30 p.m. on Friday, 17 March 2017.


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