CONNECTED TRANSACTION ACQUISITION OF EQUITY INTEREST IN THE TARGET COMPANY BY GUANGDONG POLY

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1 Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement. (Incorporated in Hong Kong with limited liability) (Stock Code: 00119) CONNECTED TRANSACTION ACQUISITION OF EQUITY INTEREST IN THE TARGET COMPANY BY GUANGDONG POLY THE EQUITY TRANSFER AGREEMENT The Board is pleased to announce that on 6 December 2018, Guangdong Poly (a wholly-owned subsidiary of the Company) and Poly Financial Holding Company (a subsidiary of China Poly which is a controlling shareholder of the Company) entered into the Equity Transfer Agreement in respect of the Target Company. Pursuant to the Equity Transfer Agreement, Guangdong Poly has agreed to acquire, and Poly Financial Holding Company has agreed to sell the Equity Interest and to assume the Shareholder s Loan, subject to the terms and conditions of the Equity Transfer Agreement, for a total consideration of approximately RMB301,426,600. LISTING RULES IMPLICATIONS As at the date of this announcement, the Vendor is a subsidiary of China Poly, a controlling shareholder of the Company, and therefore is a connected person of the Company. Guangdong Poly is a wholly-owned subsidiary of the Company. Therefore, the Acquisition constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules. Pursuant to Rule 14A.76(2) of the Listing Rules, as all the relevant percentage ratio in respect of the Acquisition exceeds 0.1% but is less than 5%, the Acquisition is subject to the reporting and announcement requirements but is exempted from the independent shareholders approval requirement under Chapter 14A of the Listing Rules. 1

2 BACKGROUND The Board is pleased to announce that on 6 December 2018, Guangdong Poly (a wholly-owned subsidiary of the Company) and Poly Financial Holding Company (a subsidiary of China Poly which is a controlling shareholder of the Company) entered into the Equity Transfer Agreement in respect of the Target Company. Pursuant to the Equity Transfer Agreement, Guangdong Poly has agreed to acquire, and Poly Financial Holding Company has agreed to sell the Equity Interest and to assume the Shareholder s Loan from the Vendor, subject to the terms and conditions of the Equity Transfer Agreement, for a total consideration of approximately RMB301,426,600. THE EQUITY TRANSFER AGREEMENT The principal terms of the Equity Transfer Agreement are set out as follows: Date: 6 December 2018 Parties: (1) Guangdong Poly, a wholly-owned subsidiary of the Company (as purchaser); and (2) Poly Financial Holding Company, a subsidiary of China Poly (the Vendor ) (as vendor). The Vendor is wholly-owned by China Poly, which is a controlling shareholder of the Company. Therefore, the Vendor is a connected person of the Company. Equity interest to be acquired: Assumption of Shareholder s Loan: Consideration: Guangdong Poly has agreed to acquire, and the Vendor has agreed to sell, the Equity Interest i.e. 20% equity interest held by the Vendor in the Target Company. Guangdong Poly has agreed to assume the Shareholder s Loan owed by the Target Company to the Vendor. The total consideration for the Acquisition payable by Guangdong Poly to the Vendor consists of: (1) RMB121,426,600 in respect of the Equity Interest, and (2) RMB180,000,000 in respect of the Shareholder s Loan, both of which shall be settled by cash in a lump sum within 15 days after the signing of the Equity Transfer Agreement. The consideration will be satisfied by the Company s internal resources. 2

3 Basis for determination of the consideration: The consideration for the Acquisition was determined based on arm s length negotiations between Guangdong Poly and the Vendor with reference to: (1) the audited consolidated financial statements of the Target Company for the years ended 31 December 2017 and 2016 and for the six months ended 30 June 2018; (2) the net asset value of the Target Company as of 30 June 2018; (3) the adjusted net asset value of the Target Company in the amount of approximately RMB617,000,000 based on a property valuation report prepared by an independent valuer using the asset approach; and (4) the value of the Shareholder s Loan. Termination: Guangdong Poly and the Vendor may terminate the Equity Transfer Agreement by mutual agreement in writing under any of the following circumstances: (i) (ii) (iii) (iv) the Equity Transfer Agreement cannot be performed due to force majeure or external reasons that cannot be prevented by a non-defaulting party; one party loses its capacity to perform its obligations; the performance of the Equity Transfer Agreement becomes unnecessary due to any breach by one party or both parties which substantially affects the commercial interests of the nondefaulting party; and both parties agree to vary or terminate the Equity Transfer Agreement due to change in circumstances. REASONS FOR AND BENEFITS OF THE EQUITY TRANSFER AGREEMENT As the price of land in the vicinity of the Dongjiao project has increased and the management of the Company is confident about the future potential of the project, the Company wishes to increase its equity stake in the Target Company to potentially capture a higher total return for the Company. 3

4 Mr. Xue Ming, a Director of the Company, is also a director and the legal representative of Poly Financial Holding Company. Mr. Ye Liwen, a Director of the Company, is also a director of Poly Financial Holding Company. Therefore, Mr. Xue and Mr. Ye may be considered to have a material interest in the Acquisition under the Equity Transfer Agreement and have abstained from voting on the relevant board resolutions. The Directors (including the independent non-executive Directors), are of the opinion that the terms of the Equity Transfer Agreement are fair and reasonable and the Equity Transfer Agreement is entered into on normal commercial terms after arm s length negotiation, in the ordinary and usual course of business of the Company, and in the interests of the Company and the Shareholders as a whole. GENERAL INFORMATION The Company The Company is an investment holding company with its subsidiaries principally engaged in property development and investment in the PRC. Guangdong Poly Guangdong Poly is an investment holding company established in the PRC and a wholly-owned subsidiary of the Company. Its principal business is holding of equity interest in the Target Company. The Vendor The Vendor is an investment holding company established in the PRC and a subsidiary of China Poly, which is a controlling shareholder of the Company. Its principal business is sale and distribution of minerals and property development planning. The Vendor purchased the Equity Interest for RMB2,000,000 from the Target Company in November 2013 and contributed a further RMB18,000,000 as registered capital in a subsequent capital increase of the Target Company in November The Vendor had provided a total of RMB180,000,000 of shareholder s loan to the Target Company as at 30 June The Target Company The Target Company was established in November 2010 with a registered capital of RMB10 million and was acquired by the Group in August The registered capital of the Target Company was increased to RMB 100 million in November

5 As at the date of this announcement, the Target Company was held as to (i) 55% by Guangdong Poly; (ii) 20% by the Vendor; and (iii) 25% by Guangzhou Shangmian Investment Co, Ltd ( 廣州市上綿投資有限公司 ), which, to the best of the Directors knowledge, information and belief having made all reasonable enquiry, is ultimately owned by a third party independent of the Company and its connected persons. The Target Company is principally engaged in the development of the Dongjiao project located in the centre of the south bank of Liwan District, Guangzhou City. It is close to the intersection of Guangzhou and Foshan main traffic streams and the core area of the former Fangcun Old Zone. This project is 800 metres and 1,000 metres away from Kengkou Station of Metro Line 1 and Fangcun Bus Stop, respectively, and it is only a few-minute drive from Nanhai District, Foshan City. The total area of the Dongjiao Project is approximately 146,000 square metres with a construction area of approximately 625,000 square meters. It will be developed into an integrated community of residence, retail shops and office premises. Upon Completion, the Target Company will be held by Guangdong Poly and Guangzhou Shangmian Investment Co., Ltd ( 廣州市上綿投資有限公司 ) as to 75% and 25%, respectively. Financial information of the Target Company The financial information prepared in accordance with the PRC Generally Accepted Accounting Principles for the two financial years ended 31 December 2016 and 31 December 2017 and for the six months ended 30 June 2018 is set out below: For the year ended 31 December 2016 RMB 000 (Audited) For the year ended 31 December 2017 RMB 000 (Audited) For the six months ended 30 June 2018 RMB 000 (Unaudited) (approximately) (approximately) (approximately) Profit before taxation -16, ,155 59,936 Profit after taxation -16, ,841 44,952 Net asset value 64, , ,892 LISTING RULES IMPLICATIONS As at the date of this announcement, the Vendor is a subsidiary of China Poly, a controlling shareholder of the Company, and therefore is a connected person of the Company. Guangdong Poly is a wholly-owned subsidiary of the Company. Therefore, the Acquisition constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules. Pursuant to Rule 14A.76(2) of the Listing Rules, as all the relevant percentage ratio in respect of the Acquisition exceeds 0.1% but is less than 5%, the Acquisition is subject to the reporting and announcement requirements but is exempted from the independent shareholders approval requirement under Chapter 14A of the Listing Rules. 5

6 DEFINITIONS In this announcement, unless the content otherwise requires, the following expressions have the following meanings: Acquisition associate Board China Poly Company connected person(s) Director(s) Equity Interest the acquisition by Guangdong Poly of the Equity Interest held by the Vendor in the Target Company and the assumption of the Shareholder s Loan owed by the Target Company to the Vendor pursuant to the Equity Transfer Agreement has the meaning ascribed to it under the Listing Rules the board of directors of the Company 中國保利集團有限公司 (China Poly Group Corporation Limited), a state-owned enterprise established in the PRC and a controlling shareholder of the Company Poly Property Group Co., Limited, a company incorporated in Hong Kong with limited liability whose shares are listed on the Main Board of The Stock Exchange of Hong Kong Limited has the meaning ascribed to it under the Listing Rules the director(s) of the Company the 20% equity interest held by the Vendor in the Target Company Equity Transfer Agreement the equity transfer agreement dated 6 December 2018 entered into between Guangdong Poly and the Vendor in relation to the Acquisition Guangdong Poly Hong Kong Listing Rules 廣東保利置業有限公司 (Guangdong Poly Property Company Limited), a company established in the PRC with limited liabilities and a wholly-owned subsidiary of the Company. the Hong Kong Special Administrative Region of the PRC the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited 6

7 PRC RMB Shareholder(s) Shareholder s Loan subsidiary Target Company Vendor or Poly Financial Holding Company Vendor the People s Republic of China, which for the purposes of this announcement, excludes the Hong Kong Special Administrative Region, the Macau Special Administrative Region and Taiwan Renminbi, the lawful currency of the PRC the shareholder(s) of the Company the shareholder s loan owed by the Target Company to the Vendor in the amount of RMB180,000,000 as at 30 June 2018 has the meaning ascribed to it under the Listing Rules 廣州東灝房地產開發有限公司 (Guangzhou Donghao Real Estate Development Company Limited), a company established in the PRC with limited liability and a subsidiary of Guangdong Poly, further details of which are set out in the paragraph headed General Information-The Target Company above 保利金控 ( 上海 ) 企業發展有限公司 (Poly Financial Holding (Shanghai) Enterprise Development Company Limited), a company established in the PRC and a connected person of the Company Poly Financial Holding Company % percent By Order of the Board Poly Property Group Co., Limited XUE Ming Chairman Hong Kong, 6 December 2018 As at the date of this announcement, the executive directors of the Company are Mr. Xue Ming, Mr. Han Qingtao, Mr. Wang Xu, Mr. Ye Liwen and Mr. Zhu Weirong, the non-executive director is Mr. Ip Chun Chung, Robert, and the independent non-executive directors are Mr. Choy Shu Kwan, Miss Leung Sau Fan, Sylvia and Mr. Wong Ka Lun. 7