HONG KONG INTERNATIONAL CONSTRUCTION INVESTMENT MANAGEMENT GROUP CO., LIMITED (Incorporated in Bermuda with limited liability) (Stock code: 687)

Transcription

1 THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your licensed securities dealer, registered institution in securities, bank manager, solicitor, professional accountant or other professional adviser. If you have sold or transferred all your shares in Hong Kong International Construction Investment Management Group Co., Limited, you should hand this circular together with the accompanying proxy form at once to the purchaser or transferee or to the bank, licensed securities dealer or registered institution in securities or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee. Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular. HONG KONG INTERNATIONAL CONSTRUCTION INVESTMENT MANAGEMENT GROUP CO., LIMITED (Incorporated in Bermuda with limited liability) (Stock code: 687) MAJOR TRANSACTION IN RELATION TO THE DISPOSAL OF THE ENTIRE EQUITY INTEREST IN A SUBSIDIARY A letter from the Board is set out on pages 7 to 17 of this circular. The Company has obtained written approval for the SPA and the transactions contemplated thereunder pursuant to Rule of the Listing Rules from the Controlling Shareholder which holds more than 50% of the issued share capital of the Company giving the right to attend and vote at a general meeting. Accordingly, no Shareholders meeting will be convened to approve the SPA and the transactions contemplated thereunder pursuant to Rule of the Listing Rules. This circular is being despatched to the Shareholders for information only. 25 February 2019

2 CONTENTS Page Definitions... 1 Letter from the Board... 7 Appendix I Financial Information of the Group... I-1 Appendix II Valuation Report on the Property... II-1 Appendix III General Information... III-1 i

3 DEFINITIONS In this circular, the following expressions shall have the meanings set out below unless the context otherwise requires: 6563 Land Parcel the piece of land parcel known as New Kowloon Inland Lot No. 6563, on Kai Tak Area 1L Site 2, Kai Tak, Kowloon, Hong Kong 6564 Land Parcel the piece of land parcel known as New Kowloon Inland Lot No on Kai Tak Area 1L Site 1, Kai Tak, Kowloon, Hong Kong Adjusted NAV associate(s) Board Closing Closing Accounts the adjusted consolidated net assets value of the Target Group as of the Closing Date, being the total consolidated assets less total consolidated liabilities of the Target Group as adjusted in accordance with the terms of the SPA has the meaning ascribed to it under the Listing Rules the board of Directors the closing of the Transaction, which took place on the Closing Date the unaudited closing accounts of the Target Group as of the Closing Date, which shall reflect the financial position of the Target Group immediately before Closing on a consolidated basis and in accordance with all applicable HKFRSs Closing Date 15 February 2019 Company Conditions Precedent Controlling Shareholder or HNA Finance I Hong Kong International Construction Investment Management Group Co., Limited, a company incorporated under the laws of Bermuda with limited liability, the shares of which are listed on the Main Board of the Stock Exchange (stock code: 687) the conditions precedent to Closing as set out in the SPA means HNA Finance I Co., Ltd., a company incorporated in Anguilla with limited liability and a subsidiary of HNA Group Co., Ltd., which, as at the Latest Practicable Date, held 2,340,904,131 Shares, representing approximately 69.54% of the issued Shares 1

4 DEFINITIONS Development Director(s) Escrow Agent Escrow Agreement Existing Arrangements Existing Bank Loan Existing Bank Security Existing Finance Documents Facility Agreement Final Statement of Adjusted NAV Fortunate Pool Foundation Contract Group the development under construction on the 6563 Land Parcel the director(s) of the Company a third party escrow agent an escrow agreement dated 13 February 2019 entered into between the Purchaser, the Company and the Escrow Agent such contracts, agreements, arrangements, commitments or undertakings entered into or made by the members of the Target Group (including those in relation to the development and/or sales and marketing and/or management of the 6563 Land Parcel), as more particularly set out in the SPA the term loan facilities under the Existing Finance Documents with an aggregate outstanding principal amount of HK$2,977,000,000 as at the date of the SPA all mortgages, assignments, pledges, guarantees and all other securities required under the terms of the Existing Finance Documents the Facility Agreement together with all other finance and security documents relating to or in connection with the Existing Bank Loan, as the same may be amended or supplemented from time to time the facility agreement entered into between the Target Subsidiary (as borrower) and certain banking institutions a statement of Adjusted NAV of the Target Group as adjusted in accordance with the SPA Fortunate Pool Limited, a company incorporated in Hong Kong with limited liability which is wholly-owned by Mr. Fung the contract documents between, among others, the Target Subsidiary as employer and TFGL as contractor for the foundation, excavation, lateral support, pile cap and basement slab works of the Development the Company and its subsidiaries 2

5 DEFINITIONS HIBOR HKFRSs Hong Kong Latest Practicable Date Listing Rules Hong Kong Interbank Offered Rate the Hong Kong Financial Reporting Standards the Hong Kong Special Administrative Region of the PRC 22 February 2019, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information for inclusion in this circular the Rules Governing the Listing of Securities on the Stock Exchange Long Stop Date 28 May 2019 Model Code Mr. Fung MTN Programme NAV Other Documents Other Purchaser Documents Parties PBOC percentage ratios the Model Code for Securities Transactions by Directors of Listed Issuers set out in Appendix 10 to the Listing Rules Mr. Fung Chiu Chak, Victor, a vice chairman of the Board and an executive Director the USD1,000,000,000 guaranteed medium term note programme established by Silverbell the amount of the net asset value of the Target Group documents referred to in the SPA to which the Vendor is a party, apart from the SPA documents referred to in the SPA to which the Purchaser is a party, apart from the SPA the Vendor, the Purchaser, the Company and the Purchaser Guarantor The People s Bank of China has the meaning ascribed to it under Chapter 14 of the Listing Rules 3

6 DEFINITIONS Pro Forma Closing Accounts PRC Property Purchase Price Purchaser Purchaser Guarantor Remaining Group Requisite Shareholder Approval Rights Issue Sale Shares SFO Share(s) Shareholder(s) the pro forma closing accounts of the Target Group as of the Closing Date, which shall reflect the financial position of the Target Group immediately before Closing, on a consolidated basis, prepared by the Vendor in accordance with all applicable HKFRSs and consisting a statement of the Adjusted NAV of the Target Group with the projections made on information available as at the date of its preparation the People s Republic of China the 6563 Land Parcel and the Development, collectively the consideration for the purchase of the Sale Shares and the assignment of the Shareholder Loans under the SPA Fabulous New Limited, a company incorporated in the British Virgin Islands Wheelock Properties Limited, a company incorporated in Hong Kong with limited liability, being the indirect sole shareholder of the Purchaser the Group (excluding the Target Group) immediately after Closing the approval by the Shareholders of the SPA and the consummation of the transactions contemplated under the SPA in accordance with the requirements of the Listing Rules pursuant to a special general meeting of the Company or the written approval by the Controlling Shareholder pursuant to Rule of the Listing Rules the issue by way of rights on the terms set out in the Company s prospectus dated 29 May 2017 the entire issued share capital of the Target the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) the ordinary share(s) of HK$0.10 each in the share capital of the Company holder(s) of the Share(s) 4

7 DEFINITIONS Shareholder Loans Silverbell SPA Stock Exchange subsidiary or subsidiaries Target Target Group Target Subsidiary Tenancy Agreement Termination Agreement TFGL TFHK any loan (whether principal, interest or otherwise) owing by the Target to the Vendor at Closing Silverbell Asia Limited, a company incorporated in the British Virgin Islands and a direct wholly-owned subsidiary of the Company the agreement dated 1 February 2019 entered into between the Vendor, the Purchaser, the Company and the Purchaser Guarantor for the sale and purchase of the Sale Shares and the Shareholder Loans The Stock Exchange of Hong Kong Limited has the meaning ascribed to it under the Listing Rules Twinpeak Assets Limited, a company incorporated in the British Virgin Islands with limited liability and a direct wholly-owned subsidiary of the Vendor the Target and the Target Subsidiary Milway Development Limited, a company incorporated in Hong Kong with limited liability and a direct wholly-owned subsidiary of the Target a tenancy agreement entered into between the Target Subsidiary and a third party landlord the termination agreement(s) or the letter of confirmation, as the case may be, to be entered into by the Vendor, the Company, the Target Subsidiary with each of the parties to the Existing Arrangements (other than the Tenancy Agreement) evidencing the due termination or confirmation (as the case may be) of the relevant Existing Arrangements Tysan Foundation Geotechnical Limited, a company incorporated in Hong Kong with limited liability and an indirect wholly-owned subsidiary of the Company Tysan Foundation (Hong Kong) Limited, a company incorporated in Hong Kong with limited liability and a direct wholly-owned subsidiary of the Company 5

8 DEFINITIONS Transaction Vendor HK$ the sale and purchase of the Sale Shares and the Shareholder Loans pursuant to the terms of the SPA Omnilink Assets Limited, a company incorporated in the British Virgin Islands with limited liability and a direct wholly-owned subsidiary of the Company Hong Kong dollars, the lawful currency of Hong Kong % per cent * the English names of the PRC entities referred to in this circular are translations from their Chinese names and are for identification purposes only. If there is any inconsistency, the Chinese name shall prevail 6

9 LETTER FROM THE BOARD HONG KONG INTERNATIONAL CONSTRUCTION INVESTMENT MANAGEMENT GROUP CO., LIMITED (Incorporated in Bermuda with limited liability) (Stock code: 687) Executive Directors: Mr. CHEN Chao (Co-Chairman) Mr. SUN Kin Ho Steven (Co-Chairman) Mr. HE Jiafu (Vice Chairman and Chief Executive Officer) Mr. FUNG Chiu Chak, Victor (Vice Chairman) Mr. LIU Junchun (Vice Chairman) Mr. HUANG Qijun Mr. GUO Ke Mr. ZHANG Peihua Non-executive Directors: Mr. TANG King Shing Mr. YANG Han Hsiang Independent non-executive Directors: Mr. FAN Chor Ho Mr. TSE Man Bun Mr. LUNG Chee Ming, George Mr. LI Kit Chee Mr. CHONG Kin Ho Registered office: Clarendon House 2 Church Street Hamilton HM 11 Bermuda Head office and principal place of business in Hong Kong: 20th Floor One Island South No. 2 Heung Yip Road Wong Chuk Hang Hong Kong 25 February 2019 To the Shareholders Dear Sir/Madam INTRODUCTION MAJOR TRANSACTION IN RELATION TO THE DISPOSAL OF THE ENTIRE EQUITY INTEREST IN A SUBSIDIARY On 1 February 2019, the Vendor (a wholly-owned subsidiary of the Company), the Purchaser, the Company as guarantor of the Vendor, and the Purchaser Guarantor, entered into the SPA, pursuant to which, among other things, the Purchaser agreed to purchase, and the Vendor agreed to (i) sell the Sale Shares and (ii) assign the Shareholder Loans, for a total consideration of HK$3,912,225,000. The Target Group owns the Property, namely the 6563 Land Parcel and the Development, collectively. 7

10 LETTER FROM THE BOARD The purpose of this circular is to provide you with, among other things, (i) further details of the SPA; (ii) the Transaction and the transactions contemplated under it; and (iii) other information as required under the Listing Rules. THE SPA Date 1 February 2019 Parties (a) Omnilink Assets Limited, as Vendor; (b) Fabulous New Limited, as Purchaser; (c) the Company, as guarantor of the Vendor; and (d) Wheelock Properties Limited, as Purchaser Guarantor. Transaction The Purchaser agreed to purchase, and the Vendor agreed to (i) sell the Sale Share and (ii) assign the Shareholder Loans. Purchase price HK$3,912,225,000, subject to adjustment (if any). The Purchase Price was arrived at after arm s length commercial negotiations among the Parties primarily taking into account: (i) the price for the Property as commercially agreed among the Parties to be HK$6,889,225,000 (the Agreed Price ); and (ii) the Existing Bank Loan (the outstanding principal amount of which is HK$2,977,000,000 as at the date of the SPA). Based on the valuation report prepared by Vigers Appraisal & Consulting Limited as set out in Appendix II of this circular (the Valuation Report ), the Property was valued at HK$7,476,000,000 as at 31 December 2018 (the Valuation ), which is higher than the Agreed Price by HK$586,775,000. The Valuation represents the market value of the existing state of the Property taking into account the incurred construction cost on the Property up to 31 December 2018 of approximately HK$596,000,000 as set out in note 6 to the Valuation Report. Without taking into account such incurred construction costs, the market value of the Property in bare-site condition as at 31 December 2018 would be approximately HK$6,880,000,000 (as set out in note 6 in the Valuation Report), which is generally on par with the Agreed Price. 8

11 LETTER FROM THE BOARD The Company considered that the Agreed Price (which is lower than the Valuation) and hence the Purchase Price were commercially reasonable primarily because, as set out in the section headed Reasons for and benefits of the Transaction in this circular, the Board considers that the recent volatile market conditions globally and generally weakening property prices and the transaction volume in Hong Kong have led to increasing uncertainties in the future prospects of the property development business in Hong Kong. Having assessed the prospects of developing the Property, the market competition and the associated costs, efforts and risks involved in the development of the Property, the Board considers that the Transaction provides an opportunity for the Group to realise its investment and re-deploy its resources in a more prudent matter. In particular, the Company estimates that it would need to further expend substantial construction cost if it proceeds to complete the construction of the Development. In view of the above including the substantial construction cost required to complete the construction of the Development, the Company considered that it would be more beneficial to the Company to dispose the Property at this stage. Terms of payment The terms of payment of the Purchase Price by the Purchaser are set out below: (a) Payment of Deposit HK$1,377,845,000 (the Deposit ) was paid by the Purchaser to the Vendor immediately upon execution of the SPA. (b) Completion payment At Closing, HK$3,259,698, was paid by the Purchaser to the Vendor, being an amount equal to the Purchase Price: (i) (ii) less the Deposit and the Escrow Amount (as defined below); and added the amount of the Adjusted NAV, being HK$1,285,318,721.52, as set forth in the Pro Forma Closing Accounts. (c) Escrow arrangement The remaining balance of HK$560,000,000 (the Escrow Amount ) was paid by the Purchaser to the Escrow Agent at Closing in favour of the Company (as nominee of the Vendor) subject to the terms and conditions of the Escrow Agreement and the release of which to the Company (as nominee of the Vendor) shall be subject to the terms of the SPA. The Escrow Amount shall be treated as retention money as security for the performance by the Vendor of its obligations as specified in the SPA. The Escrow Amount (or such part thereof, if any) shall be released and paid to the Vendor on the earlier of: (i) (ii) within ten (10) business days after the expiry of the six-month period after Closing; or within ten (10) business days after receipt by the Purchaser of (i) the duly executed Termination Agreements in respect of all Existing Arrangements (other than the Tenancy Agreement); and (ii) a notice in writing of the Vendor confirming that final 9

12 LETTER FROM THE BOARD accounts or settlement amount (as the case may be) for all Existing Arrangement (other than the Tenancy Agreement) have been issued and agreed by the Target Subsidiary and all contractors and/or consultants and/or service providers thereof (or deemed to be conclusive under the relevant Termination Agreements) (the Agreed Contractor Final Account ), after deducting (i) all amounts payable by any member of the Target Group under the Termination Agreements and the Agreed Contractor Final Account; and (ii) the Contractor Accounts Payment (as defined below) (if any) (the balance thereof, the Remaining Balance ), provided always that: (A) (B) if the amount of the Remaining Balance is positive, payment of the Remaining Balance shall only be made after deducting therefrom certain Vendor s outstanding obligations as specified in the SPA but have neither been fully paid nor accounted for; or if the amount of the Remaining Balance is zero or negative, without prejudice to the generality of certain Vendor s obligations as specified in the SPA, the Vendor shall cease to have any liability in respect of the relevant Existing Arrangement(s) with no Agreed Contractor Final Account. Within five (5) business days after the expiry of the six-month period after Closing or within five (5) business days after receipt by the Purchaser of all the documents as referred to in (c)(ii) above, whichever is earlier, the Company and the Purchaser shall give joint instructions to the Escrow Agent by each delivering a signed notice of release in accordance with the terms of the Escrow Agreement to instruct the Escrow Agent to release the Escrow Amount (or such part thereof after deducting therefrom) to the Company (as nominee of the Vendor). Where there is no Agreed Contractor Final Account in respect of any one or more of the Existing Arrangements (other than the Tenancy Agreement) on or before the expiry of the six-month period after Closing, a sum representing 20% of the aggregate contract sum of all such Existing Arrangements with no Agreed Contractor Final Account (the Contractor Accounts Payment ) shall be absolutely forfeited to and kept by the Purchaser, pursuant to which the Vendor shall cease to have any liability in respect of such Existing Arrangements. NAV payment (a) Pro Forma Closing Accounts The Vendor is required to prepare the Pro Forma Closing Accounts, which shall reflect the financial position of the Target Group immediately before Closing. (b) Closing Accounts The Vendor is required to prepare the Closing Accounts to be audited by auditors and a Final Statement of Adjusted NAV. The Vendor and the Purchaser shall use their reasonable endeavours to agree on the Adjusted NAV as set out in the Final Statement of Adjusted NAV after having reviewed and taken into account the information provided by the audited Closing Accounts (the Final Statement of Adjusted NAV so agreed is referred to as the Agreed Statement ). 10

13 LETTER FROM THE BOARD In the event that the Adjusted NAV as set forth in the Agreed Statement differs from the Adjusted NAV as set forth in the Pro Forma Closing Accounts, payment by the Vendor or (as the case may be) the Purchaser shall be adjusted accordingly and shall be made within five (5) business days from the date of the Agreed Statement. Termination and default by either Parties If Closing shall not occur in accordance with the SPA by reason of the Vendor failing to perform or comply with the Conditions Precedent (otherwise than by reason of the default of the Purchaser), or if for any reason the Vendor does not materially perform or comply with its obligations as specified in the SPA, then the Purchaser shall be entitled, in its sole and absolute discretion, to: (a) (b) (c) proceed to Closing or seek specific performance to complete the Transaction so far as practicable (without prejudice to its rights or remedies under the SPA or otherwise at law or in equity); or defer the Closing to a later date; or terminate the SPA by giving to the Vendor a written notice of termination and if the Purchaser shall do so, the SPA shall forthwith be terminated and of no further force and effect and in which event the Deposit (together with any interest accrued thereon) shall be returned to the Purchaser. If Closing shall not occur in accordance with the SPA by reason of the Purchaser failing to perform or comply with its obligations as specified in the SPA (otherwise than by reason of the default of the Vendor or the Company), the Vendor shall be entitled, in its sole and absolute discretion, to: (a) (b) (c) proceed to Closing or seek specific performance to complete the Transaction, including enforcing Purchaser s obligation to deliver all deliverables under the SPA so far as practicable (without prejudice to its rights or remedies under the SPA or otherwise at law or in equity); or defer the Closing to a later date; or if the Purchaser has failed to perform or comply with its obligations in the SPA, terminate the SPA by giving to the Purchaser a written notice of termination and if the Vendor shall do so, the SPA shall forthwith be terminated and of no further force and effect and the Deposit (together with any interest accrued thereon) shall be retained by the Vendor. Without prejudice to the other rights and remedies of the Purchaser, if Closing does not take place as a result of default by the Vendor on the ground that any of the relevant warranties under the SPA is not true or accurate or is misleading in any respect as at Closing, the Deposit (together with any interest accrued thereon) shall be returned to the Purchaser. In addition, the Vendor shall pay to the Purchaser an additional amount equal to the Deposit as liquidated damages. Without prejudice to the other rights and remedies of the Vendor, if Closing does not take place as a result of default by the Purchaser not complying with its payment obligations in accordance with the SPA, the Vendor shall be entitled to retain the Deposit as liquidated damages. 11

14 LETTER FROM THE BOARD Guarantee of the Vendor The Company irrevocably and unconditionally guarantees and undertakes to the Purchaser due, proper and punctual performance by the Vendor of all the Vendor s obligations, covenants, indemnities and other undertakings and the terms and provisions of the SPA and Other Documents. Guarantee of the Purchaser The Purchaser Guarantor irrevocably and unconditionally guarantees and undertakes to the Vendor due, proper and punctual performance by the Purchaser of all the Purchaser s obligations, covenants, indemnities and other undertakings and the terms and provisions of the SPA and Other Purchaser Documents. Conditions Precedent Closing was conditional upon the Conditions Precedent being satisfied (or waived by the Purchaser in accordance with the SPA) on or before the Long Stop Date (or such other date to be agreed by the Vendor and the Purchaser in writing) except that in the case of the Conditions Precedent set out in (e) and (f) below which can be satisfied (or waived by the Purchaser in accordance with the SPA on or before Closing): (a) (b) (c) (d) (e) (f) compliance with all applicable notification, announcement, Shareholders approval and other requirements under the Listing Rules relating to the SPA and the transactions contemplated thereunder by the Company (where applicable), including the Requisite shareholder Approval, save and except for the requirements under the Listing Rules in relation to the issue and despatch of a circular by the Company to the Shareholders in case where the Requisite Shareholder Approval is sought under Rule of the Listing Rules; compliance with all applicable notification, announcement, and other requirements under the Listing Rules relating to the SPA and the transactions contemplated thereunder by the holding company of the Purchaser (where applicable); the Foundation Contract having been terminated to the Purchaser s reasonable satisfaction and the relevant Termination Agreement for such termination having been duly executed by the parties thereto and delivered to the Purchaser; (i) the substantial completion certificate having been issued by the architect under the Foundation Contract for the whole of the works under the Foundation Contract and a certified copy of which having been delivered to the Purchaser; and (ii) the Form BA14 (Certificate on Completion of Building Works Not Resulting in a New Building or of Street Works) having been signed by TFGL for reporting completion or (as the case may be) partial completion of the works for pile cap, tie beam, screen wall and basement slab and a certified copy of which having been delivered to the Purchaser; there being no encumbrances over the Sale Shares, the Shareholder Loans or the Property (or any part thereof) at Closing save and except the Existing Bank Security; all consents, approvals and/or authorisations of the existing mortgagee, any other banks, financial institutions and relevant third parties which are required under the Existing 12

15 LETTER FROM THE BOARD Finance Documents in connection with the transactions contemplated under the SPA having been obtained, and if subject to conditions, on such conditions having been satisfied to the satisfaction of the existing mortgagee (as agent) prior to the Long Stop Date, and such consents, approvals and authorisations remaining in full force and effect and not being revoked as at Closing; and (g) the Tenancy Agreement having been duly assigned by the Target Subsidiary to the Company or any of its subsidiaries (other than any member of the Target Group) as the replacement tenant; and such replacement tenant and the Target Subsidiary as the outgoing tenant having duly executed the deed of assignment of tenancy and the notice of assignment as duly signed by the Target Subsidiary having been duly served on the landlord. The Vendor shall use its best endeavours to procure the satisfaction of all the Conditions Precedent set out in (a), (c) to (g) above on or before the Long Stop Date and the Conditions Precedent set out in (e) and (f) above at Closing. The Purchaser shall use its best endeavours to procure the satisfaction of the Condition Precedent set out in (b) above on or before the Long Stop Date. If (i) any of the Conditions Precedent are not satisfied or, in the case of the Conditions Precedent set out in (c) to (g) above (or any part thereof), waived by the Purchaser on or before the Long Stop Date or the Conditions Precedent set out in (e) and (f) above are not satisfied or waived by the Purchaser on or before Closing; or (ii) it is demonstrated by the Purchaser that any of the relevant warranties under the SPA is not true or accurate or is misleading in any respect as at Closing, the Purchaser may by a written notice to the Vendor terminate the SPA, whereupon the Deposit, with interest, shall be returned to the Purchaser. If any of the Conditions Precedent set out in (a) and (b) above is not satisfied on or before the Long Stop Date, the Vendor or (as the case may be) the Purchaser may by a written notice to the other terminate the SPA, whereupon the Deposit, with interest, shall be returned to the Purchaser. Closing As disclosed in the announcement of the Company dated 15 February 2019, Closing has taken place on 15 February 2019, and as at Closing, all of the Conditions Precedent set out above had been fulfilled or waived. INFORMATION ABOUT THE TARGET GROUP AND THE PROPERTY The Target The Target is a company incorporated in the British Virgin Islands with limited liability and as at the Latest Practicable Date was a direct wholly-owned subsidiary of the Vendor. The Target is the sole shareholder of the Target Subsidiary, which is the sole legal and beneficial owner of the Property. Upon Closing, the Target had ceased to be a subsidiary of the Company. 13

16 LETTER FROM THE BOARD A summary of the financial information of the Target (on a consolidated basis) for the period from 8 February 2017 (being the date of incorporation) to 31 December 2017 and the year ended 31 December 2018 is set out below: For the year ended 31 December 2018 (unaudited) HK$ 000 For the period from 8 February 2017 (being the date of incorporation) to 31 December 2017 (unaudited) HK$ 000 Net loss before taxation and extraordinary items 566, Net loss after taxation and extraordinary items 566, As at 31 December 2018, the unaudited net liabilities of the Target (on a consolidated basis) amounted to approximately HK$566,417,000. The Target Subsidiary The Target Subsidiary is a company incorporated in Hong Kong with limited liability whose principal business activity is property development and is a wholly-owned subsidiary of the Target. The Target Subsidiary is the registered and the sole legal and beneficial owner of the Property. Upon Closing, the Target Subsidiary had ceased to be a subsidiary of the Company. The Property The Property is the development under construction on New Kowloon Inland Lot No The Property has a total site area of approximately 9,482 square metres and is valued at HK$7,476,000,000 as at 31 December 2018 based on the valuation report prepared by Vigers Appraisal & Consulting Limited as set out in Appendix II of this circular. The unaudited net book value of the Property as at 31 December 2018 is HK$7,476,000,000. INFORMATION ABOUT THE GROUP AND THE PARTIES TO THE SPA The Company, the Group and the Vendor The Company is a company incorporated under the laws of Bermuda with limited liability, and is an investment holding company. The Group s principal business includes foundation piling and site investigation, property development and investment and investment business. The Vendor is a company incorporated in the British Virgin Islands with limited liability and is a wholly-owned subsidiary of the Company. The Vendor s principal business activity is investment holding. 14

17 LETTER FROM THE BOARD The Purchaser and the Purchaser Guarantor The Purchaser is a company incorporated in the British Virgin Islands whose principal business activity is investment holding. The Purchaser Guarantor is a company incorporated in Hong Kong with limited liability whose principal business activity is investment holding. Each of the Purchaser and the Purchaser Guarantor is a wholly-owned subsidiary of Wheelock and Company Limited. To the best of the Directors knowledge, information and belief having made all reasonable enquiries, the Purchaser, the Purchaser Guarantor and their respective ultimate beneficial owners are third parties independent of the Company and connected persons (as defined under the Listing Rules) of the Company. REASONS FOR AND BENEFITS OF THE TRANSACTION The Board considers that the recent volatile market conditions globally and generally weakening property prices and the transaction volume in Hong Kong have led to increasing uncertainties in the future prospects of the property development business in Hong Kong. Having assessed the prospects of developing the Property, the market competition and the associated costs, efforts and risks involved in the development of the Property, the Board considers that the Transaction provides an opportunity for the Group to realise its investment and re-deploy its resources in a more prudent matter. The Board will continue to monitor the market sentiment and evaluate the development strategy of the Group, while for the time being focus on the Group s other principal business of foundation piling and site investigation and continue to explore business opportunities in the Group s other principal business and other investment opportunities, with a view to achieving sustainable growth and development of the Group as a whole. Taking into account the abovementioned factors, the Directors consider that the terms of the SPA (and the transactions contemplated under it) are made on normal commercial terms and are fair and reasonable, and that the entering into the SPA and the Transaction are in the interests of the Company and the Shareholders as a whole. The Company estimates that the net proceeds from the Transaction will be approximately HK$3.6 billion (subject to finalisation). As of the Latest Practicable Date, the Company had applied part of such proceeds to repay HK$229 million of the Group s bank borrowing. While the Board had not made any definitive decision as of the Latest Practicable Date, the Board may apply the remaining proceeds to appropriate investment opportunities as and when they arise and/or to general working capital of the Group. In particular, as of the Latest Practicable Date, the Company was in consideration of acquiring certain commercial real estate property in Hong Kong for investment purpose, which may or may not materialise as contemplated or at all. As of the Latest Practicable Date, the Company had not entered into any definitive sale and purchase agreement with respect to such real estate property. The Company will make further announcement(s) as and when required under the Listing Rules. In addition, the Board will review the financial position of the Group in conjunction with the annual results for the year ended 31 December 2018 (which is expected to be published by the end of March 2019) and will consider if any dividends will be recommended for distribution to the Shareholders. Any such recommendation and declaration of dividends will be subject to compliance with all applicable laws and regulations and the requirements under the Company s bye-laws. In addition to the potential cash dividend, the Company may consider further repaying existing debts with a view to lowering the 15

18 LETTER FROM THE BOARD gearing ratio and maintaining a more prudent financial position as a whole. The actual use of the net proceeds from the Transaction is subject to the then circumstances and decision of the Board. FINANCIAL EFFECTS OF THE TRANSACTION The Company currently expects to record a loss from the Transaction (before tax) of approximately HK$740 million (subject to finalisation and adjustments), estimated based on (i) the unaudited consolidated financial information of the Target as at 31 December 2018; (ii) estimated costs to be incurred for the development of the Property up to Closing; and (iii) other estimated related transaction costs and expenses. Any such loss from the Transaction will be recognised in the financial information of the Company for the year ending 31 December 2019, the actual amount of which is subject to finalisation and adjustments. Moreover, the Company expects that the write-down of the properties under development of the Target Group will also impact the net profit of the Company for the year ended 31 December As disclosed in the interim results announcement of the Company dated 27 August 2018, the Company recorded an unaudited profit attributable to ordinary equity holders of the Company of HK$1,054 million. However, it is expected that the corresponding figure for the year ended 31 December 2018 will be substantially lower, primarily due to the aforesaid write-down of approximately HK$450 million (subject to finalisation) and also the share option expenses of approximately HK$160 million (subject to finalisation) arising from the grant of share options by the Company in the second half of Based on the Company s current estimation, the completion of the Transaction is not expected to result in any change in the total non-current assets of the Group, while it is expected to decrease the total current assets of the Group by approximately HK$3,800 million and decrease the total liabilities of the Group by approximately HK$3,060 million. Taking into account the write-down of the properties under development of the Target Group of approximately HK$450 million (subject to finalisation) and also the share option expenses of approximately HK$160 million (subject to finalisation) arising from the grant of share options by the Company in the second half of 2018 as disclosed in the announcement of the Company dated 1 February 2019, based on the unaudited consolidated management accounts of the Company, as at 31 December 2018, the Group had total cash on hand of approximately HK$4.90 billion (including fixed deposits and non-pledged bank balances of approximately HK$3.43 billion, pledged bank balances of approximately HK$0.04 billion and restricted cash of approximately HK$1.43 billion), as well as total borrowings of approximately HK$3.83 billion, and the unaudited net asset value of the Group as at 31 December 2018 was approximately HK$12.19 billion. The above figures are only based on the preliminary assessment by the Company, with reference to its management accounts and the information currently available, which are subject to finalisation and adjustments where necessary, and have not been reviewed or audited by the auditors or audit committees of the Company. Also, the final figures may be affected by certain items that are still being ascertained and finalised. The Company is still in the process of finalising its annual results for the year ended 31 December Financial information and other details of the Company for the year ended 31 December 2018 will be disclosed in its annual results announcements in accordance with the requirements of the Listing Rules. Shareholders and other investors should read carefully the annual results announcement of the Company for the year ended 31 December 2018, which is expected to be published by the end of March 2019 pursuant to the requirements of the Listing Rules. 16

19 LETTER FROM THE BOARD LISTING RULES IMPLICATIONS As one or more of the relevant applicable percentage ratios set forth under Rule of the Listing Rules in respect of the Transaction exceed 25% but all the applicable percentage ratios are below 75%, the Transaction constitutes a major transaction for the Company and is therefore subject to the reporting, announcement and Shareholders approval requirements under Chapter 14 of the Listing Rules. To the best of the Directors knowledge, information and belief, and having made all reasonable enquiries, no Shareholder has an interest in the SPA and the transactions contemplated thereunder which is materially different from the other Shareholders. Accordingly, no Shareholder is required to abstain from voting if the Company were to convene a special general meeting for the approval of the SPA and the transactions contemplated under the SPA. Since no Shareholder is required to abstain from voting if the Company were to convene a special general meeting for approval by the Shareholders of the SPA and the transactions contemplated under the SPA, and the Company has obtained a written approval for the SPA and the transactions contemplated under the SPA from HNA Finance I (the Controlling Shareholder holding 2,340,904,131 Shares, representing approximately 69.54% of the issued share capital of the Company as at the Latest Practicable Date), a special general meeting of the Company to approve the SPA and the transactions contemplated under the SPA is not required pursuant to Rule of the Listing Rules and will not be convened. None of the Directors has a material interest in the SPA and the transactions contemplated thereunder. Accordingly, no Director was required to abstain from voting on and/or passing the relevant Board resolutions. RECOMMENDATION Although no special general meeting will be convened for approving the Transaction, the Directors (including the independent non-executive Directors) consider that the terms of the SPA and the transactions contemplated thereunder are fair and reasonable and on normal commercial terms, and in the interest of the Group and the Shareholders as a whole. Accordingly, if a special general meeting of the Company were convened for approving the Transaction, the Directors (including the independent non-executive Directors) would have recommended the Shareholders to vote in favour of the Transaction. FURTHER INFORMATION Your attention is drawn to the additional information set out in the appendices to this circular. By order of the Board HONG KONG INTERNATIONAL CONSTRUCTION INVESTMENT MANAGEMENT GROUP CO., LIMITED Sun Kin Ho Steven Co-Chairman 17

20 APPENDIX I FINANCIAL INFORMATION OF THE GROUP 1. STATEMENT OF INDEBTEDNESS As at 31 December 2018, being the latest practicable date for the purpose of preparation of this statement prior to the publication of this circular, the Group had unaudited bank borrowings and other borrowings amounting to approximately HK$3,234,292,000 and HK$933,605,000, respectively, details of which are as follows: HK$ 000 Bank borrowings Current Bank loan, secured 229,000 Instalment loan, secured 3, ,952 Non-current Bank loan, secured 2,934,628 Instalment loan, secured 66,712 3,001,340 Total 3,234,292 Other borrowings Current Loan from a related company 163,958 Non-current Loan from a related company 170,790 Guaranteed notes 298,857 Other loan 300, ,647 Total 933,605 As at 31 December 2018, the Group s non-current secured bank loan of approximately HK$2,934,628,000 was secured by the Group s properties under development located at the 6563 Land Parcel with a carrying amount of HK$7,476,000,000 and all the issued shares of Milway Development Limited, fixed charge on bank balances of approximately HK$37,469,000, floating charge on bank balances of approximately HK$1,437,492,000 and other assets of approximately HK$4,840,000, and were supported by corporate guarantee from the Company. I-1

21 APPENDIX I FINANCIAL INFORMATION OF THE GROUP As at 31 December 2018, the Group s current secured bank loan of HK$229,000,000 and a secured instalment loan of HK$70,664,000 were secured by the Group s office premises with a gross floor area of 29,526 sq.ft located at 20th floor, One Island South, Wong Chuk Hang, Hong Kong with a carrying amount of approximately HK$153,505,000 and were supported by corporate guarantee from the Company. As at 31 December 2018, the current loan from Tysan Property Development (Tianjin) Co., Ltd., a related company, was unsecured, bore interest at interest rate published by PBOC and repayable on 21 December 2019, and the non-current loan from Tysan Land (Shanghai) Limited, a related company, was unsecured, bore interest at interest rate published by PBOC and repayable on 29 September Both loans from related companies are classified as liabilities directly associated with the assets classified as held for sale under current liabilities in the Group s consolidated statement of financial position. As at 31 December 2018, the Group s guaranteed notes and other loan were supported by corporate guarantees from the Company. The current secured bank loan of HK$229,000,000 was early repaid on 21 February As at 31 December 2018, the interest payable relating to such bank loan was approximately HK$296,000. Interest rates of bank borrowings range from HIBOR plus 1.3% to HIBOR plus 2.75% per annum. Interest rates of guaranteed notes and other loan are 7% per annum and HIBOR plus 4.75% per annum, respectively. 2. CONTINGENT LIABILITIES As at 31 December 2018: (a) the Group provided guarantees to certain banks in respect of performance bonds granted to certain subsidiaries of approximately HK$325,219,000; (b) the Group provided guarantees in respect of mortgage facilities granted by Shenyang Housing Fund Management Center relating to the mortgage loans arranged for purchases of certain properties developed by a subsidiary of the Company and the outstanding mortgage loans under these guarantees amounted to approximately HK$4,645,000; (c) the Company provided guarantees to holders of the guaranteed medium term notes issued by a subsidiary of the Company in an aggregate amount of HK$305,000,000; (d) the Company provided guarantees to an independent third party in connection with the other loan granted to a subsidiary of the Company in an amount of HK$300,000,000; and (e) the Company provided guarantees to certain banks in connection with bank loans and general credit facilities granted to its certain subsidiaries in an aggregate amount of approximately HK$3,585,246,000. I-2

22 APPENDIX I FINANCIAL INFORMATION OF THE GROUP 3. DISCLAIMER Save as disclosed above and apart from intra-group liabilities and normal accounts payable in the ordinary course of business, the Group did not have any loan capital issued and outstanding or agreed to be issued, any loan capital, bank overdrafts and liabilities under acceptances or other similar indebtedness, debentures, mortgages, debt securities, charges or loans or hire purchase commitments, guarantees or other continent liabilities as at the close of business on 31 December WORKING CAPITAL The Directors are of the opinion that, in the absence of unforeseeable circumstances and after taking into account (i) the proceeds from the Transaction; (ii) the Group s internal resources; and (iii) the loan facilities presently available to the Group, the Group has sufficient working capital for its present requirements, which is for at least the next 12 months from the date of this circular. 5. MATERIAL ADVERSE CHANGE Save for the profit warning as set out in the Company s announcement dated 1 February 2019 or as disclosed in the section headed Financial effects of the Transaction in the Letter from the Board, as at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position or outlook of the Group since 31 December 2017, being the date to which the latest published audited consolidated financial statements of the Group were made up. 6. FINANCIAL AND TRADING PROSPECTS OF THE REMAINING GROUP The Company will continue to pursue the core objective of creating maximized value for shareholders. While continuing to consolidate the development of existing principal businesses, the Company will continue to explore suitable investment opportunities, with a view to striking a balance between risk and revenue to achieve the long-term development objective of the Company. Foundation Piling Regarding the foundation piling and construction business, competition is expected to remain keen in the near future due to the growing number of market players and reduced available projects. Profit margins as a whole have been negatively affected given market factors such as labour shortages, rising operating costs and intensification of competition, causing an impact on segment results for the foundation piling business of the Group. As at the Latest Practicable Date, the Group had 21 foundation piling projects on hand. The Company will continue to reinforce development in the foundation piling business. While constantly maintaining the Company s industry leading position in the Hong Kong and Macau markets, the Company will further enhance its influence in the industry and contribute to the long-term development of the Company. I-3

23 APPENDIX I FINANCIAL INFORMATION OF THE GROUP Property Development and Investment In relation to the current property development and investment business, the Board will continue to review its business strategy while continue to explore suitable investment opportunities. Investment business The Board will continue to monitor the market sentiment and evaluate the investment strategy of the Group with a view to achieving sustainable growth and development and creating an investment portfolio with stable cash flow and value appreciation. I-4

24 APPENDIX II VALUATION REPORT ON THE PROPERTY The following is the valuation report prepared for the purpose of incorporation in this circular received from Vigers Appraisal & Consulting Limited, an independent valuer, in connection with its valuation of 6563 Land Parcel as at 31 December Vigers Appraisal & Consulting Limited International Assets Appraisal Consultants 27/F, Standard Chartered Tower Millennium City Kwun Tong Road Kowloon, Hong Kong 25 February 2019 The Board of Directors Hong Kong International Construction Investment Management Group Co., Limited 20/F One Island South No 2 Heung Yip Road Wong Chuk Hang Hong Kong Dear Sirs, In accordance with your instructions of Hong Kong International Construction Investment Management Group Co., Limited (the Company ) and its subsidiaries (hereinafter referred to as the Group ) to value the property interest in the Hong Kong Special Administrative Region of the People s Republic of China ( Hong Kong ), 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 interest as at 31 December 2018 ( 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 property interest, we have valued the property on the basis that the property will be developed and completed in accordance with latest development proposal available to us as at the Valuation Date. We have assumed that approvals for the proposal have been obtained. In arriving at our opinion of the market value, we have adopted the direct comparison approach by making reference to comparable sales evidence as available in the relevant market and have also taken into account the incurred construction costs and the estimated construction costs remaining outstanding for completing the development. II-1