THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

Transcription

1 THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION If you are in doubt as to any aspect of this circular, you should consult your licensed securities dealer or registered institution in securities, bank manager, solicitor, professional accountant or other professional adviser. If you have sold or transferred all your shares in Guangdong Investment Limited, you should at once hand this circular and the accompanying form of proxy to the purchaser or the transferee or to the bank, licensed securities dealer, registered institution in securities or other agent through whom the sale or transfer was effected for transmission to the purchaser or the 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. This circular appears for information only and does not constitute an invitation or offer to acquire, purchase or subscribe 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 SHARES INVOLVING THE ISSUE OF CONSIDERATION SHARES UNDER THE SPECIFIC MANDATE RE-ELECTION OF DIRECTOR AND NOTICE OF EXTRAORDINARY GENERAL MEETING Financial Adviser to Guangdong Investment Limited Independent Financial Adviser to the 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 the Independent Board Committee (as defined in this circular) to the Independent Shareholders (as defined in this circular) is set out on pages 28 and 29 of this circular. A letter from the Independent Financial Adviser (as defined in this circular) containing its advice to the Independent Board Committee and the Independent Shareholders is set 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, Renaissance Harbour View Hotel Hong Kong, One Harbour Road, Wanchai, Hong Kong on Monday, 20 March 2017 at 10:00 a.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 form of 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 and in 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 the EGM or any adjournment thereof should you so wish. 24 February 2017

2 CONTENTS Page DEFINITIONS... 1 LETTER FROM THE BOARD... 7 LETTER FROM THE INDEPENDENT BOARD COMMITTEE LETTER FROM SOMERLEY APPENDIX I VALUATION REPORT APPENDIX II GENERAL INFORMATION APPENDIX III DETAILS OF THE DIRECTOR TO BE RE-ELECTED NOTICE OF EXTRAORDINARY GENERAL MEETING... 91

3 DEFINITIONS Terms or expressions used in this circular shall, unless the context otherwise requires, have the meanings ascribed to them below: Acquisition ASP associate(s) Board Business Day Buxin Project Buyer Cash Consideration Company the proposed acquisition of the Sale Shares by the Company from the Vendor pursuant to the Sale and Purchase Agreement; 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; has the meaning ascribed to it under the Listing Rules; the board of Directors of the Company; 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; 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; 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; 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; Guangdong Investment Limited ( ), a company incorporated in Hong Kong with limited liability and the Shares of which are listed on the Main Board of the Stock Exchange; 1

4 DEFINITIONS Completion Completion Date Conditions Precedent connected person(s) Consideration Consideration Shares Deficient Amount Director(s) Discount EGM Executive the completion of the Acquisition in accordance with the terms and conditions of the Sale and Purchase Agreement; the date on which Completion shall take place; has the meaning ascribed to it under the section headed A.2. The Sale and Purchase Agreement Conditions Precedent in the Letter from the Board contained in this circular; has the meaning ascribed to it under the Listing Rules; 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; 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; 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; the director(s) of the Company; 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; 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; the Executive Director of the Corporate Finance Division of the SFC or any delegate thereof; 2

5 DEFINITIONS GDL GDL Group GDP GFA Group Guangdong Holdings Guangdong Land Holdings Limited ( ), a company incorporated in Bermuda with limited liability and the shares of which are listed on the Main Board of the Stock Exchange; GDL and its subsidiaries; 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; gross floor area; the Company and its subsidiaries; 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 Independent Board Committee Hong Kong dollars, the lawful currency of Hong Kong; the Hong Kong Special Administrative Region of the PRC; 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; 3

6 DEFINITIONS Independent Financial Adviser or Somerley Independent Shareholders Indirect Intermediate Holding Companies Issue Price Latest Practicable Date Letter from the Board Listing Rules Minimum Year-end NAV Model Code Parties 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; shareholders of the Company other than those who are required to abstain from voting at the EGM pursuant to the Listing Rules; Guangdong Trust Ltd. ( ), Guangdong Assets Management Ltd. ( ), 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; 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; 20 February 2017, being the latest practicable date prior to the printing of this circular for ascertaining certain information for inclusion herein; the letter from the Board contained in this circular; the Rules Governing the Listing of Securities on the Stock Exchange, as amended from time to time; 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 the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Listing Rules; the Vendor and the Company; and Party means any one of them; 4

7 DEFINITIONS PRC or China Reassessed NAV RMB Ruyingju Project 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; 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 Renminbi, the lawful currency of the PRC; 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 Sale Shares Percentage SFC SFO Shareholder(s) Shares Specific Mandate sq.m. Stock Exchange 1,263,494,221 ordinary shares of GDL representing approximately 73.82% of the issued share capital of GDL; 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; the Securities and Futures Commission of Hong Kong; the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong); the shareholder(s) of the Company; the ordinary shares in the share capital of the Company; the specific mandate proposed to be obtained from the Independent Shareholders at the EGM to issue the Consideration Shares to the Vendor; square metre(s); The Stock Exchange of Hong Kong Limited; 5

8 DEFINITIONS Takeovers Code the Code on Takeovers and Mergers issued by the SFC; Vendor or GDH GDH Limited ( ), 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$ 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. 6

9 LETTER FROM THE BOARD (Incorporated in Hong Kong with limited liability) (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) Registered office: 28th and 29th Floors Guangdong Investment Tower 148 Connaught Road Central Hong Kong 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 24 February 2017 To the Shareholders Dear Sir or Madam, DISCLOSEABLE AND CONNECTED TRANSACTION THE ACQUISITION OF THE SALE SHARES INVOLVING THE ISSUE OF CONSIDERATION SHARES UNDER THE SPECIFIC MANDATE RE-ELECTION OF DIRECTOR AND NOTICE OF EXTRAORDINARY GENERAL MEETING 7

10 LETTER FROM THE BOARD 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: Purchaser: GDH Limited ( ) 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

11 LETTER FROM THE BOARD (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 ,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$4,326.8 million at the exchange rate of RMB1.00=HK$ as quoted by the People s Bank of China on 30 September 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

12 LETTER FROM THE BOARD 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

13 LETTER FROM THE BOARD 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) (ii) approximately 4.36% of the existing issued share capital of the Company as at the Latest Practicable Date; and 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) (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; 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

14 LETTER FROM THE BOARD (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 10 consecutive trading days immediately prior to the date of the Sale and Purchase Agreement; (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; (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

15 LETTER FROM THE BOARD (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

16 LETTER FROM THE BOARD (xi) the listing of the shares of GDL 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 of GDL on the Stock Exchange; (xii) the Vendor having performed all relevant obligations, duties, undertakings and warranties in accordance with the Sale and Purchase Agreement on or before the Completion Date; (xiii) the representations and warranties by the Vendor being true, accurate and not misleading in all material respects on or before the Completion 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

17 LETTER FROM THE BOARD 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 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: 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

18 LETTER FROM THE BOARD 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 54.60% 73.82% The Company GDL 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 56.49% The Company 73.82% GDL 16

19 LETTER FROM THE BOARD 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. Profit before tax Profit after tax For the year ended 31 December 2014 (audited) Approximately HK$90,898,000 Approximately HK$81,773,000 For the year ended 31 December 2015 (audited) Approximately HK$176,362,000 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, 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 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

20 LETTER FROM THE BOARD 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 and investment 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 74,273 52,330 49, , , , , , , , , , , , ,000 Per capita GDP (RMB) Source of GDP, GDP per capita and population of China and the above cities: Bureau of Statistics of China and the respective cities 18

21 LETTER FROM THE BOARD (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 1,091 1,080 1,005 1,810 1,750 1,654 1,572 1,450 2,496 2, ,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 (RMB) 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5, ,653 44,633 40,742 40,948 36,505 31,195 26,955 28,844 24,565 21, Shenzhen per capita disposable income of urban residents National average 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

22 LETTER FROM THE BOARD 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 Primary 0.2% 0.03% Secondary Tertiary 53.4% 46.4% 41.2% 58.8% Financial Real estate Whole and retail sales Info tech, info transfer and software 6.2% 9.0% 10.5% 3.4% 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 ,000 2,500 2,000 1,500 1, 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 Q ,000 60,000 50,000 40,000 30,000 20,000 10,000 0 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

23 LETTER FROM THE BOARD 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 the property 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

24 LETTER FROM THE BOARD 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

25 LETTER FROM THE BOARD 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 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, (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

26 LETTER FROM THE BOARD (iv) Guangdong Holdings will procure that Guangdong Trust Ltd. ( ) (an Indirect Intermediate Holding Company) 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; (v) Guangdong Holdings will procure that GD Assets Management (Custodian) Limited (an Indirect Intermediate Holding Company) 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; (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 dispose of, any Shares to any parties not acting in concert with Guangdong Holdings, the Vendor and/or the Company; (vii) Guangdong Holdings will procure that the Company will not transfer or otherwise dispose of, or enter into any agreement to transfer or otherwise 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

27 LETTER FROM THE BOARD 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

28 LETTER FROM THE BOARD 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

29 LETTER FROM THE BOARD 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 Limited HUANG Xiaofeng Chairman 27

30 LETTER FROM THE INDEPENDENT BOARD COMMITTEE (Incorporated in Hong Kong with limited liability) (Stock Code: 0270) 24 February 2017 To the Independent Shareholders Dear Sir or Madam, DISCLOSEABLE AND CONNECTED TRANSACTION THE ACQUISITION OF THE SALE SHARES INVOLVING 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. 28

31 LETTER FROM THE INDEPENDENT BOARD COMMITTEE 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, John Independent Non-Executive Director 29

32 LETTER FROM SOMERLEY Set out below is the text of the letter of advice from Somerley to the Independent Board Committee and the Independent Shareholders in respect of the Acquisition and the Specific Mandate, which has been prepared for the purpose of inclusion in this circular. SOMERLEY CAPITAL LIMITED 20th Floor China Building 29 Queen s Road Central Hong Kong 24 February 2017 To: The Independent Board Committee and the Independent Shareholders of Guangdong Investment Limited Dear Sirs, DISCLOSEABLE AND CONNECTED TRANSACTION THE ACQUISITION OF THE SALE SHARES INVOLVING THE ISSUE OF CONSIDERATION SHARES UNDER 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 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. 30

33 LETTER FROM SOMERLEY 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 Q 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 Q 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

34 LETTER FROM SOMERLEY 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 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. 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 The investments in other infrastructure projects consist of certain interests in power plants and an expressway in the PRC. 32

35 LETTER FROM SOMERLEY Set out below is a summary of the financial performance of the Group, including revenue and results of major operating segments, for the nine months ended 30 September 2016, six months ended 30 June 2016 and two years ended 31 December 2015 and 2014 as extracted from the GDI Q Announcement, the GDI 2016 Interim Report and the GDI 2015 Annual Report respectively. For nine months ended 30 September 2016 For six months ended 30 June 2016 For the year ended 31 December 2015 For the year ended 31 December 2014 Revenue Results Revenue Results Revenue Results Revenue Results HK$ million % HK$ million % HK$ million % HK$ million % HK$ million % HK$ million % HK$ million % HK$ million % By segments: Water resources 5, , , , , , , , Property investment and development , , , , Department stores Electric power generation Toll road and bridge Hotel operation and management Others and eliminations (154.3) (106.9) (290.2) (85.8) 8, , , , , , , , Profit before tax 4, , , ,100.9 Profit for the period/ year attributable to the Shareholders 3, , , ,

36 LETTER FROM SOMERLEY 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 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 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 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 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

37 LETTER FROM SOMERLEY 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 at 30 June As At 31 December As at 31 December HK$ million HK$ million HK$ million NON-CURRENT ASSETS Property, plant and equipment 6, , ,649.6 Investment properties 12, , ,113.8 Operating concession rights 14, , ,858.0 Others 2, , ,985.6 Total non-current assets 36, , ,607.0 CURRENT ASSETS Available-for-sale financial assets 4, , ,207.9 Cash and cash equivalents 10, , ,001.9 Others 1, Total current assets 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, , ,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, , ,664.2 EQUITY Equity attributable to owners of the Company 31, , ,266.8 Non-controlling interests 5, , ,397.4 Total equity 37, , ,

38 LETTER FROM SOMERLEY 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 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 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 Q 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 ( ), 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 ( ) 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

39 LETTER FROM SOMERLEY Property District and City GDL Group s shareholding Major usage Nature Total GFA Current status Actual / Expected completion Reference in valuation report (Appendix I to the Circular) Market value in existing state as at 30 November 2016 (%) (sq.m.) (RMB million) Buxin Project Luohu, Shenzhen 100% Multi-module Construction in progress on three land parcels of the development property project 462,051 (Note 1) (Note 2) Commencement of main construction works on Phase I Phase I expected to complete by September 2021 and Phase II expected to complete by July 2023 #1 4,268.0 (Note 1) Ruyingju Project Panyu, Guangzhou 80% Residential and car park Unsold 80 apartment units and 651 car parking spaces of the development property project 8,159 (Note 3) Completed and vacant Completed in November 2015 # (Note 3) Buxin Garden Luohu, Shenzhen 100% Residential 59 residential units used as staff quarters 4,634 Completed and occupied Completed in around 1988 # Notes: 1. For reference purposes, as set out in the valuation report, the investment value of the self-owned portion of a GFA of 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 Phase II of the Buxin Project and the self-owned portion of a GFA of approximately 38,198 sq.m. for commercial use and approximately 8,842 sq.m. for underground commercial use of Phase I of the Buxin Project. 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, The GDL Group cannot freely transfer non-commodity houses, self-owned portion of land and buildings but they can be used for leasing. Therefore, Vigers has 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, Vigers has attributed an investment value to the aforesaid self-owned portion, comprising a total GFA of approximately 192,108 sq.m., as at 30 November 2016 RMB2,228.4 million. The above GFA includes aforesaid aggregated GFA of approximately 192,108 sq. m. 2. Inclusive of underground area with a GFA of 30,000 sq.m. for commercial use. 3. The above GFA does not include the GFA for the 651 car-parking spaces while the above market value includes that of these car-parking spaces. 37

40 LETTER FROM SOMERLEY (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 ( ) 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 ( ) pursuant to the urban renewal unit planning proposal ( ) for the Buxin Project approved (the Buxin Project Approval ) by the Shenzhen Urban Planning Committee ( ) in November 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 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 ( ) 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 ( ) 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

41 LETTER FROM SOMERLEY 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 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 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