DISCLOSEABLE AND CONNECTED TRANSACTIONS

Transcription

1 THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your licensed securities dealer or registered institution in securities, bank manager, solicitor, professional accountant or other professional adviser for independent advice. If you have sold or transferred all your shares in Great Eagle Holdings Limited, you should at once hand this circular, together with the enclosed form of proxy, to the purchaser(s) or transferee(s) or to the bank, licensed securities dealer or registered institution in securities or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or transferee(s). 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. (Stock Code: 41) DISCLOSEABLE AND CONNECTED TRANSACTIONS ACQUISITION OF A HOTEL DEVELOPMENT PROJECT IN MINHANG DISTRICT, SHANGHAI, THE PRC AND ACQUISITION OF SHARES IN MAGIC GARDEN INVESTMENTS LIMITED AND NOTICE OF SPECIAL GENERAL MEETING Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders A letter from the Board is set out on pages 11 to 36 of this circular. A letter from the Independent Board Committee containing its advice and recommendation is set out on pages 37 to 38 of this circular. A letter from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders is set out on pages 39 to 59 of this circular. A notice convening the SGM to be held at Yat Tung Heen, 2nd Floor, Great Eagle Centre, 23 Harbour Road, Wanchai, Hong Kong on Friday, 31 October 2014 at 3:30 p.m. is set out on pages SGM-1 and SGM-2 of this circular. A form of proxy for the SGM is enclosed. Whether or not you are able to attend the SGM, you are requested to complete the enclosed form of proxy in accordance with the instructions printed thereon and return the same to the Company s principal place of business in Hong Kong at 33rd Floor, Great Eagle Centre, 23 Harbour Road, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for holding the SGM or any adjournment thereof (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM and any adjournment thereof (as the case may be), should you so desire. 26 September 2014

2 CONTENTS Page Definitions... 1 Letter from the Board Letter from the Independent Board Committee Letter from the Independent Financial Adviser Appendix I Property Valuation Report of the Target Asset and the LXTD Hotel... I-1 Appendix II General Information... II-1 Notice of Special General Meeting... SGM-1 i

3 DEFINITIONS In this circular, the following expressions have the meanings respectively set opposite them unless the context otherwise requires: Aboveground Portion Aboveground Pre-SPA Adjusted Profit and Loss Aggregate Shares Consideration Andaz Hotel Andaz Shareholders Asset Acquisition Asset Completion Asset Completion Date the aboveground portion of the Target Asset the pre-sale and purchase agreement ( ) to be entered into by the Project Company and the GE Subsidiary in relation to the sale and purchase of the Aboveground Portion has the meaning set out under item (2)(a) in the paragraph headed (B) The Shares Acquisition The SPA Adjustments to the Shares Consideration in the section headed Letter from the Board of this circular collectively, the Shares Consideration (subject to adjustment) and the Loan Consideration the real property or properties located at 7/1 Qiu, Jiefang 107, Huaihai Middle Road, Luwan District (now known as Huangpu District), Shanghai, the PRC including the land where the said property or properties are erected thereon the independent third parties which own 50% of the equity interest of Shanghai Li Xing the sale and purchase of the Target Asset pursuant to the terms of the Framework Deed and the PRC SPAs the title of the Target Asset being transferred to and registered under the name of the GE Subsidiary in accordance with the terms of the PRC SPAs the date on which the Asset Completion takes place Asset Consideration RMB965,000,000 (equivalent to approximately HK$1,215,900,000), being the consideration payable for the Asset Acquisition Asset Long Stop Date 31 December 2014 (or such other date as the parties to the Framework Deed may agree in writing), which shall be automatically extended to 27 February 2015 (or such later date as the parties to the Framework Deed may agree in writing) if the GE Subsidiary is not established due to reasons other than the failure of Wisdom Joy to comply with its obligations under the Framework Deed 1

4 DEFINITIONS associate(s) ; close associate(s) ; connected person(s) ; controlling shareholder ; percentage ratio(s) and subsidiary(ies) August Adjusted NAV Bare-shell Floor Plan Board Business Day for Asset Acquisition Business Day(s) for Shares Acquisition BVI Carpark Portion Carpark SPAs China Xintiandi Closing Accounts each has the meaning ascribed to it under the Listing Rules has the meaning set out under the paragraph headed (B) The Shares Acquisition The SPA Aggregate Shares Consideration in the section headed Letter from the Board of this circular the bare-shell floor plan ( ) of the Target Asset to be agreed at the signing of the PRC SPAs the board of Directors a day other than a Saturday, a Sunday or a public holiday in Hong Kong or the PRC, on which banks are open in Hong Kong and the PRC to the general public for business a day (other than a Saturday or Sunday or public holiday in Hong Kong and any day on which a tropical cyclone warning no.8 or above or a black rain warning signal is issued in Hong Kong at any time between 9:00 a.m. and 5:00 p.m.) on which banks are open in Hong Kong for general commercial business British Virgin Islands certain carpark spaces of the Target Asset the sale and purchase agreements to be entered into by the Project Company and the GE Subsidiary in relation to the sale and purchase of the Carpark Portion China Xintiandi Investment Company Limited, a company incorporated in the Cayman Islands and an indirect wholly-owned subsidiary of SOL has the meaning set out under item (1)(a) in the paragraph headed (B) The Shares Acquisition The SPA Adjustments to the Shares Consideration in the section headed Letter from the Board of this circular 2

5 DEFINITIONS Closing Adjusted NAV Company Condition(s) for Asset Acquisition Demerger Demerger Long Stop Date Deposit Director(s) Exit Sale for the Asset Acquisition Exit Sale for the Shares Acquisition Extended Demerger Long Stop Date has the meaning set out under item (2)(b) in the paragraph headed (B) The Shares Acquisition The SPA Adjustments to the Shares Consideration in the section headed Letter from the Board of this circular Great Eagle Holdings Limited, a company incorporated in Bermuda with limited liability, the shares of which are listed on the Stock Exchange (Stock Code: 41) the condition(s) set out under the paragraph headed (A) The Asset Acquisition The Framework Deed Conditions for the Asset Acquisition in the section headed Letter from the Board of this circular has the meaning set out under the paragraph headed (B) The Shares Acquisition Information of the Target Group Demerger in the section headed Letter from the Board of this circular has the meaning set out under the paragraph headed (B) The Shares Acquisition Information of the Target Group Demerger in the section headed Letter from the Board of this circular has the meaning set out under the paragraph headed (A) The Asset Acquisition The Framework Deed Deposit in the section headed Letter from the Board of this circular the director(s) of the Company has the meaning set out under item (a) in the paragraph headed (A) The Asset Acquisition The Framework Deed Exit Sale for the Asset Acquisition in the section headed Letter from the Board of this circular has the meaning set out under item (a) in the paragraph headed (B) The Shares Acquisition The SPA Exit Sale for the Shares Acquisition in the section headed Letter from the Board of this circular has the meaning set out under item (a) in the paragraph headed (B) The Shares Acquisition Information of the Target Group Demerger in the section headed Letter from the Board of this circular 3

6 DEFINITIONS Extended Long Stop Date Floor Price Framework Deed GE Subsidiary GE Xintiandi Gross Consideration After Tax for the Asset Acquisition Group Handover HK$ Hong Kong has the meaning set out under item (1) in the paragraph headed (B) The Shares Acquisition The SPA Conditions for the Shares Acquisition in the section headed Letter from the Board of this circular has the meaning set out under item (a) in the paragraph headed (A) The Asset Acquisition The Framework Deed Right of First Notification in the section headed Letter from the Board of this circular the deed relating to framework for the sale and purchase of the Target Asset entered into by Shine First and Wisdom Joy dated 27 August 2014 relating to the Asset Acquisition a wholly foreign owned enterprise in the PRC to be established by Wisdom Joy as its indirect wholly-owned subsidiary with the necessary capacity to acquire the Target Asset (including having sufficient funds to satisfy the PRC Initial Payment) G.E. Hotel (Xintiandi) Limited, a company incorporated in the BVI and an indirect wholly-owned subsidiary of the Company has the meaning set out under the paragraph headed (A) The Asset Acquisition The Framework Deed Exit Sale for the Asset Acquisition in the section headed Letter from the Board of this circular the Company and its subsidiaries the physical delivery ( ) of the Target Asset to the GE Subsidiary for the purposes of passing the control of the Target Asset to the GE Subsidiary, which shall occur upon the completion acceptance ( ) of the Target Asset by the GE Subsidiary pursuant to the terms of the Preliminary PRC SPAs Hong Kong dollar, the lawful currency of Hong Kong the Hong Kong Special Administrative Region of the PRC 4

7 DEFINITIONS Hurdle Capital Value for the Asset Acquisition Hurdle Capital Value for the Shares Acquisition Independent Board Committee Independent Financial Adviser or First Shanghai the total capital value of the Target Asset upon completion of the Exit Sale for the Asset Acquisition that would produce an IRR of 8.5% per annum for all the investments by the Group in the Target Asset, being the sum of (i) the total capital value of the Asset Consideration paid plus incidental acquisition costs of the Target Asset by the Group, and (ii) the total accrued costs for renovation, furniture, fixtures and equipment (FF&E) incurred by the Group in respect of the Target Asset up to completion of the Exit Sale for the Asset Acquisition the total capital value of the LXTD Hotel upon completion of the Exit Sale for the Shares Acquisition that would produce an IRR of 8.5% per annum for all the investments by the Group in the LXTD Hotel, being the sum of (i) the total capital value of the Aggregate Shares Consideration paid plus incidental acquisition costs of the LXTD Hotel by the Group, and (ii) two-thirds of the total accrued costs for renovation, furniture, fixtures and equipment (FF&E) incurred by the Group in respect of the LXTD Hotel up to completion of the Exit Sale for the Shares Acquisition the independent committee of the Board comprising Mr. Cheng Hoi Chuen, Vincent, Professor Wong Yue Chim, Richard, Mrs. Lee Pui Ling, Angelina and Mr. Zhu Qi, all being independent non-executive Directors, established by the Company to consider the Framework Deed, the PRC SPAs, the SPA and the transactions contemplated thereunder and advise the Independent Shareholders as to whether the terms of the Framework Deed, the PRC SPAs, the SPA and the transactions contemplated thereunder are fair and reasonable and whether the Framework Deed, the PRC SPAs, the SPA and the transactions contemplated thereunder are in the interests of the Company and the Shareholders as a whole, taking into account the recommendation of the Independent Financial Adviser in that regard First Shanghai Capital Limited, a corporation licensed to carry out business in Type 6 (advising on corporate finance) regulated activity under the SFO and is the independent financial adviser to the Independent Board Committee and the Independent Shareholders in connection with the Framework Deed, the PRC SPAs, the SPA and the transactions contemplated thereunder 5

8 DEFINITIONS Independent Shareholders IRR Landton Latest Practicable Date Listing Rules Loan Consideration LXTD Hotel LXTD Hotel Business Management Company Mr. Vincent Lo PRC PRC Initial Payment Shareholders other than Mr. Vincent Lo and his associates internal rate of return Landton Limited ( ), a company incorporated in Hong Kong with limited liability and an indirect wholly-owned subsidiary of the Target Company as at the Latest Practicable Date 23 September 2014, being the latest practicable date prior to the publication of this circular for ascertaining certain information for inclusion in this circular the Rules Governing the Listing of Securities on the Stock Exchange consideration payable by GE Xintiandi for the Shareholder Loan, which shall be equal to the amount of the Shareholder Loan as at the Shares Completion on a dollar-to-dollar basis the Langham Xintiandi Hotel, the real property located at 4/1 Qiu, Jiefang 108, Huaihai Middle Road, Luwan District (now known as Huangpu District), Shanghai, the PRC, including the land where the said property is erected thereon the investment interest of Landton in Shanghai Li Xing in respect of the ownership of the LXTD Hotel and the ownership and operations of the LXTD Hotel by Shanghai Li Xing (Shanghai Xintiandi Hotel Management Co., Ltd.), a company established in the PRC Mr. Lo Hong Sui, Vincent, a non-executive Director the People s Republic of China, and for the purpose of this circular, excluding Hong Kong, the Macao Special Administration Region of the PRC and Taiwan has the meaning set out under item (a)(i) in the paragraph headed (A) The Asset Acquisition The Framework Deed Deposit in the section headed Letter from the Board of this circular 6

9 DEFINITIONS PRC Initial Payment Date PRC Signing PRC SPAs has the meaning set out under item (a)(v) in the paragraph headed (A) The Asset Acquisition The Framework Deed Deposit in the section headed Letter from the Board of this circular signing of the Preliminary PRC SPAs in accordance with the terms of the Framework Deed collectively, the Aboveground Pre-SPA, the Underground Preliminary SPA, the Underground Hotel SPA and the Carpark SPAs Preliminary PRC SPAs collectively, the Aboveground Pre-SPA and the Underground Preliminary SPA Pro Forma Closing Statements Project Company Proportion in the LXTD Hotel Proportion in the Target Asset RMB Sale Interest Sale Shares has the meaning set out under item (1)(b) in the paragraph headed (B) The Shares Acquisition The SPA Adjustments to the Shares Consideration in the section headed Letter from the Board of this circular (Shanghai Ruiqiao Real Estate Development Co., Ltd.), a company established in the PRC and an indirect wholly-owned subsidiary of Shine First as at the Latest Practicable Date has the meaning set out under the paragraph headed (B) The Shares Acquisition The SPA Exit Sale for the Shares Acquisition in the section headed Letter from the Board of this circular has the meaning set out under the paragraph headed (A) The Asset Acquisition The Framework Deed Exit Sale for the Asset Acquisition in the section headed Letter from the Board of this circular Renminbi, the lawful currency of the PRC has the meaning set out under the paragraph headed (A) The Asset Acquisition The Framework Deed Right of First Notification in the section headed Letter from the Board of this circular 2 ordinary shares in the issued share capital of the Target Company, representing approximately 66.67% of its total issued share capital and being all the shares held by China Xintiandi in the issued share capital of the Target Company as at the Latest Practicable Date 7

10 DEFINITIONS SFO SGM Shanghai Li Xing Share(s) Shareholder(s) Shareholder Loan Shares Acquisition Shares Completion Shares Completion Date Shares Consideration Shares Deposit the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), as amended or supplemented from time to time the special general meeting to be convened by the Company to consider and, if thought fit, approve the Framework Deed, the PRC SPAs, the SPA and the transactions contemplated thereunder (Shanghai Li Xing Hotel Co., Ltd.), a company established in the PRC with limited liability and was owned as to 50% by Landton and as to 50% by the Andaz Shareholders as at the Latest Practicable Date ordinary share(s) in the capital of the Company holder(s) of Shares the non-interest-bearing and unsecured loans owed by the members of the Target Group to China Xintiandi (together with its affiliates) as at the Shares Completion, which is approximately RMB466,900,000 (equivalent to approximately HK$588,294,000) as at the date of the SPA the sale and purchase of the Sale Shares and the Shareholder Loan pursuant to the terms of the SPA (including the assignment of the Shareholder Loan as contemplated thereunder) completion of the sale and purchase of the Sale Shares and the Shareholder Loan in accordance with the terms of the SPA (including the assignment of the Shareholder Loan as contemplated thereunder) the date on which the Shares Completion takes place the consideration (subject to adjustment) payable for the Sale Shares under the SPA has the meaning set out under item (a) in the paragraph headed (B) The Shares Acquisition The SPA Terms of Settlement of the Aggregate Shares Consideration in the section headed Letter from the Board of this circular Shares Long Stop Date 31 December

11 DEFINITIONS Shine First SOL SOL Group SPA Stock Exchange Target Asset Target Business Shine First Limited, a company incorporated in the BVI and an indirect wholly-owned subsidiary of SOL as at the Latest Practicable Date Shui On Land Limited, a company incorporated in the Cayman Islands with limited liability, whose shares are listed on the Stock Exchange (Stock Code: 272) SOL and its subsidiaries the agreement for the sale and purchase of the Sale Shares and the Shareholder Loan entered into by China Xintiandi and GE Xintiandi dated 27 August 2014 relating to the Shares Acquisition The Stock Exchange of Hong Kong Limited the assets known as The HUB Hotel located at Building #4, D17 Block, Land Plot 06, Phase I of Hongqiao Commercial Core Zone, Minhang District, Shanghai, the PRC (together with the land use rights underlying such assets), which was owned and being developed by the Project Company as at the Latest Practicable Date and comprises the Aboveground Portion, the Underground Portion and the Carpark Portion the Target Group together with the LXTD Hotel Business Target Company Magic Garden Investments Limited, a company incorporated in the BVI with limited liability and was owned as to approximately 66.67% by China Xintiandi and as to approximately 33.33% by GE Xintiandi as at the Latest Practicable Date Target Group Two-Thirds of Gross Consideration After Tax for the Shares Acquisition the Target Company, Victorious Run and Landton has the meaning set out under the paragraph headed (B) The Shares Acquisition The SPA Exit Sale for the Shares Acquisition in the section headed Letter from the Board of this circular 9

12 DEFINITIONS Underground Hotel SPA Underground Portion Underground Preliminary SPA Victorious Run Wisdom Joy the sale and purchase agreement to be entered into by the Project Company and the GE Subsidiary in relation to the sale and purchase of the Underground Portion the underground portion of the Target Asset the preliminary sale and purchase agreement ( ) to be entered into by the Project Company and the GE Subsidiary in relation to the sale and purchase of the Underground Portion and the Carpark Portion Victorious Run Limited, a company incorporated in the BVI with limited liability and a direct wholly-owned subsidiary of the Target Company as at the Latest Practicable Date Wisdom Joy Investments Limited, a company incorporated in the BVI and an indirect wholly-owned subsidiary of the Company as at the Latest Practicable Date % percent m 2 square metre For the purpose of this circular and for illustration only, RMB is converted into HK$ at the rate of RMB1:HK$1.26. No representation is made that any amounts in RMB has been or could be converted at the above rates or at any other rates. 10

13 LETTER FROM THE BOARD (Stock Code: 41) Directors: LO Ka Shui, Chairman and Managing Director LO Kai Shui, Deputy Managing Director LO TO Lee Kwan # CHENG Hoi Chuen, Vincent* WONG Yue Chim, Richard* LEE Pui Ling, Angelina* ZHU Qi* LO Hong Sui, Antony LAW Wai Duen LO Hong Sui, Vincent # LO Ying Sui # KAN Tak Kwong, General Manager Registered Office: Canon s Court 22 Victoria Street Hamilton HM12 Bermuda Principal Place of Business in Hong Kong: 33rd Floor, Great Eagle Centre 23 Harbour Road Wanchai Hong Kong # Non-executive Directors * Independent Non-executive Directors 26 September 2014 To the Shareholders Dear Sir or Madam, DISCLOSEABLE AND CONNECTED TRANSACTIONS ACQUISITION OF A HOTEL DEVELOPMENT PROJECT IN MINHANG DISTRICT, SHANGHAI, THE PRC AND ACQUISITION OF SHARES IN MAGIC GARDEN INVESTMENTS LIMITED AND NOTICE OF SPECIAL GENERAL MEETING INTRODUCTION The Board has announced that on 27 August 2014, Wisdom Joy, an indirect wholly-owned subsidiary of the Company, entered into the Framework Deed with Shine First, pursuant to which 11

14 LETTER FROM THE BOARD Shine First conditionally agreed to procure the Project Company to enter into the PRC SPAs to sell, and Wisdom Joy conditionally agreed to procure the GE Subsidiary to enter into the PRC SPAs to purchase, the Target Asset (i.e. the Asset Acquisition) at the Asset Consideration. On the same date, GE Xintiandi, an indirect wholly-owned subsidiary of the Company, entered into the SPA with China Xintiandi, pursuant to which China Xintiandi conditionally agreed to sell, and GE Xintiandi conditionally agreed to purchase the Sale Shares and the Shareholder Loan (i.e. the Shares Acquisition) at the Aggregate Shares Consideration. The Asset Acquisition and the Shares Acquisition are two separate and independent transactions for the Group and are not inter-conditional upon each other. The purpose of this circular is to provide the Shareholders with, among other things, (a) further details of the Framework Deed, the PRC SPAs and the Asset Acquisition, (b) further details of the SPA and the Shares Acquisition, (c) the letter from the Independent Board Committee, (d) the letter from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in respect of the Framework Deed, the PRC SPAs, the SPA and the transactions contemplated thereunder, (e) the property valuation in relation to the Target Asset and the LXTD Hotel and (f) a notice convening the SGM. Completion of the Asset Acquisition and the Shares Acquisition are conditional upon, among other things, the satisfaction of a number of conditions under the Framework Deed, the PRC SPAs and the SPA (as the case may be). Therefore, the Asset Acquisition and the Shares Acquisition may or may not materialise. Shareholders and potential investors are reminded to exercise caution when dealing in the Shares. (A) THE ASSET ACQUISITION The major terms of the Framework Deed are summarised as follows: THE FRAMEWORK DEED Date 27 August 2014 Parties (1) Shine First (2) Wisdom Joy As at the Latest Practicable Date, Shine First, an indirect wholly-owned subsidiary of SOL, indirectly owns the entire beneficial interest in the Project Company, which in turn develops and owns the Target Asset. Wisdom Joy will, through its wholly-owned subsidiary incorporated in Hong Kong, establish a wholly foreign owned enterprise in the PRC, namely the GE Subsidiary, which will be an indirect wholly-owned subsidiary of the Company, to purchase the Target Asset. 12

15 LETTER FROM THE BOARD Asset Consideration and terms of settlement The Asset Consideration of RMB965,000,000 (equivalent to approximately HK$1,215,900,000) shall be paid by the GE Subsidiary to the Project Company in accordance with the terms of the PRC SPAs. The Asset Consideration is expected to be funded by the Group s internal resources. Conditions for the Asset Acquisition The procurement obligations of Shine First and Wisdom Joy under the Framework Deed are conditional upon the satisfaction of the following conditions on or before the Asset Long Stop Date (except in the case of item (c) below, at least 50 days (or such extended period as the parties to the Framework Deed may agree in writing) before the Asset Long Stop Date): (a) (b) (c) (d) each of Wisdom Joy and Shine First obtaining the approval of each of its and its holding companies shareholders in respect of the Framework Deed and the transactions contemplated thereunder in accordance with, among others, the Listing Rules; the GE Subsidiary having been established with the necessary capacity to acquire the Target Asset (including having sufficient funds to satisfy the PRC Initial Payment); Shine First having delivered to Wisdom Joy the Bare-shell Floor Plan that does not have a material usage deviation; Shine First having delivered to Wisdom Joy: (i) (ii) a letter issued by a third party bank confirming that it does not object to the sale of the Target Asset by the Project Company to the GE Subsidiary; and a letter issued by the Management Company confirming that it does not object to the sale of the Target Asset by the Project Company to the GE Subsidiary and it will not take any legal actions against the Target Asset or the GE Subsidiary in relation to or arising from the Asset Acquisition; (e) (f) Shine First having delivered to the GE Subsidiary copies of the initial deed of mutual covenants and initial property management agreement to be entered into in respect of the project of which the Target Asset forms a part; and other material matters in relation to the Target Asset, including but not limited to statements on the title rights of the Target Asset, being true, accurate and complete and not misleading except to the extent as would not materially and adversely affect the completion of the Asset Acquisition or the function and usage of the Target Asset. 13

16 LETTER FROM THE BOARD The above items (d)(ii) and (e) of the Conditions for the Asset Acquisition may be waived by Wisdom Joy under the Framework Deed. The above items (c) and (f) of the Conditions for the Asset Acquisition may be waived by Wisdom Joy under the Framework Deed, in which case (1) Wisdom Joy shall (for itself and on behalf of the Group) also irrevocably waive all its rights to claim under the Framework Deed or any of the PRC SPAs in respect of the material usage deviation, or the material change or the failure to remedy it, and (2) the parties shall procure the relevant amendments to the PRC SPAs to reflect the aforesaid waiver by Wisdom Joy of the material usage deviation or the material change. Wisdom Joy does not intend to waive any of the Conditions for the Asset Acquisition. As at the Latest Practicable Date, no Condition for the Asset Acquisition has been fulfilled. PRC Signing The PRC Signing will take place on the 10th Business Day for Asset Acquisition after the satisfaction (or waiver, where items other than the above item (d)(ii) and (e) of the Conditions for Asset Acquisition cannot be waived) of all the Conditions for Asset Acquisition (or such other date as Shine First and Wisdom Joy may agree in writing). Deposit Wisdom Joy will pay the cash sum of RMB96,500,000 (equivalent to approximately HK$121,590,000) (the Deposit ) to an escrow agent upon the execution of the Framework Deed, and the Deposit will be held by the escrow agent in the following manner and pursuant to the terms under the escrow agreement entered into among Wisdom Joy, Shine First and the escrow agent on the same date as the Framework Deed: (a) the Deposit (together with accrued interest) will be returned to Wisdom Joy under the following circumstances: (i) (ii) (iii) the PRC Signing takes places and the Project Company having received the first payment in the cash sum of RMB386,000,000 (equivalent to approximately HK$486,360,000) payable by the GE Subsidiary pursuant to the terms of the Aboveground Pre-SPA (the PRC Initial Payment ); any of the Conditions for Asset Acquisition has not been satisfied (or waived) by the Asset Long Stop Date and the Framework Deed is terminated, except where the condition of establishment of the GE Subsidiary has not been fulfilled on or before the Asset Long Stop Date due to Wisdom Joy s breach of its obligation under the Framework Deed and in such case the Deposit shall be released to Shine First; all of the Conditions for Asset Acquisition have been satisfied (or waived), the GE Subsidiary has executed the Preliminary PRC SPAs, but the Project Company fails to execute the Preliminary PRC SPAs on the date of the PRC Signing and the Framework Deed is terminated; 14

17 LETTER FROM THE BOARD (iv) the Framework Deed is terminated due to a breach of warranty; or (v) the GE Subsidiary fails to make the PRC Initial Payment on or before the last payment date allowed under the Aboveground Pre-SPA without any penalty being incurred by the GE Subsidiary to the Project Company (the PRC Initial Payment Date ) but the period of such failure is less than 100 days after the PRC Initial Payment Date, the Deposit (together with all accrued interest) shall be returned to Wisdom Joy on the date when the GE Subsidiary subsequently makes the PRC Initial Payment to the Project Company together with any penalties for late payment. (b) the Deposit (together with accrued interest) will be released to Shine First under the following circumstances: (i) Wisdom Joy fails to establish the GE Subsidiary pursuant to the requirements set out under the Framework Deed on or before the Asset Long Stop Date due to a breach of its obligation under the Framework Deed and the Framework Deed is terminated; (ii) all of the Conditions for Asset Acquisition have been satisfied (or waived), the Project Company has executed the Preliminary PRC SPAs, but the GE Subsidiary fails to execute the Preliminary PRC SPAs on the date of PRC Signing and the Framework Deed is terminated; or (iii) the GE Subsidiary fails to make the PRC Initial Payment on or before the PRC Initial Payment Date and the period of such failure is equal to or more than 100 days after the PRC Initial Payment Date, in which case the Deposit (together with all accrued interest) shall be released to Shine First on the 100th day after the PRC Initial Payment Date. Exit Sale for the Asset Acquisition Shine First requires to share part of the upside benefit in case there is a subsequent sale (if any) of the Target Asset by Wisdom Joy in the future as part of the terms of the Framework Deed after arm s length negotiations. In view of the foregoing, Wisdom Joy undertakes to Shine First that if: (a) a member of the Group sells the Target Asset within 6 years from the Asset Completion Date (the Exit Sale for the Asset Acquisition ); and (b) the Gross Consideration After Tax for the Asset Acquisition (X 1 ) exceeds the product of the Hurdle Capital Value for the Asset Acquisition (A 1 +B 1 ) and the Proportion in the Target Asset (P 1 ), 15

18 LETTER FROM THE BOARD Wisdom Joy will pay to Shine First a sum equivalent to 10% of the amount by which the Gross Consideration After Tax for the Asset Acquisition exceeds the product of the Hurdle Capital Value for the Asset Acquisition and the Proportion in the Target Asset, provided that the maximum amount to be paid shall not exceed RMB10,000,000 (equivalent to approximately HK$12,600,000). Such amount is illustrated by the formula below: [X 1 (A 1 +B 1 )xp 1 ] x 10% where X 1 = gross consideration of the Exit Sale for the Asset Acquisition less all tax payable by the Group in respect of the Exit Sale for the Asset Acquisition (the Gross Consideration After Tax for the Asset Acquisition ) A 1 +B 1 = the Hurdle Capital Value for the Asset Acquisition A 1 = the capital value of the Target Asset upon completion of the Exit Sale for the Asset Acquisition that would produce an IRR of 8.5% per annum for the Asset Consideration paid plus incidental acquisition costs of the Target Asset by the Group B 1 = the capital value of the Target Asset upon completion of the Exit Sale for the Asset Acquisition that would produce an IRR of 8.5% per annum for the total accrued costs for renovation, furniture, fixtures and equipment (FF&E) incurred by the Group in respect of the Target Asset up to completion of the Exit Sale for the Asset Acquisition P 1 = the proportionate interest in the Target Asset that has been disposed of after the Asset Completion Date (the Proportion in the Target Asset ) The terms under the Exit Sale for the Asset Acquisition, including the period of 6 years, the IRR of 8.5% and the maximum payment of RMB10,000,000 represent the reasonable limits imposed on the upside benefit granted by the Group under the Exit Sale for the Asset Acquisition and were determined after arm s length negotiations with reference to the following factors: (a) (b) (c) the said period of 6 years was reached between parties to the Framework Deed taking into account that for a new hotel similar to the Target Asset, it normally requires 3 years stabilisation period and also takes some time to achieve growth; in relation to the IRR of 8.5% per annum, the factors such as cost of funding and prevailing interest rate of lending in the PRC; and the maximum payment is capped to RMB10,000,000 (equivalent to approximately HK$12,600,000) which is not substantial when compared with the Asset Consideration. 16

19 LETTER FROM THE BOARD Restrictions on Exit Sale for the Asset Acquisition Wisdom Joy shall procure GE Subsidiary not to effect or permit the Exit Sale for the Asset Acquisition if the transferee or its related party is generally recognised in the business community as of ill repute or whom a prudent businessperson would not wish to associate in a commercial venture. In view of the reasons and factors set out above and taking into account all the other terms of the Framework Deed of the PRC SPAs as a whole, the Directors consider that the terms under the Exit Sale for the Asset Acquisition are fair and reasonable and in the interests of the Company and the Shareholders as a whole. Right of First Notification As detailed in the paragraph headed Information of the Target Asset below, THE HUB is a comprehensive project which includes hotel, office and retail project components. Any subsequent sale of the Sale Interest to any third party which is not compatible with the office and retail components of THE HUB may in turn adversely affect the reputation and operation of THE HUB. Therefore, Shine First requires a right of notification as part of the terms of the Framework Deed after arm s length negotiations. Wisdom Joy agrees to grant to Shine First a right of first notification for a period of 6 years from Asset Completion in relation to the sale of a specified interest in the Target Asset (the Sale Interest ) as follows: (a) (b) (c) the Group shall notify the SOL Group if it proposes to sell the Sale Interest and the minimum price (the Floor Price ) for selling the Sale Interest; if the SOL Group is interested in acquiring the Sale Interest and notify the Group within the prescribed time, the Group shall negotiate with the SOL Group on a non-exclusive basis at a price no less than the Floor Price within a 180 day period, during which the Group shall not enter into any binding agreement for the Sale Interest with any party at a price which is less than the Floor Price; and if the Group fails to enter into a binding agreement for the Sale Interest with any party at a price which is no less than the Floor Price within such 180 day period, or, if a binding agreement for the Sale Interest is entered into with any party at a price which is no less than the Floor Price within such 180 day period but such sale fails to complete subsequently, then the right of the Group to sell its interest in the Target Asset shall again be subject to the abovementioned right of first notification. The Company has agreed to grant the abovementioned right of first notification subject to a reasonable limit of a period of 6 years after arm s length negotiations between the parties to the Framework Deed and taking into consideration that for a new hotel similar to the Target Asset, it normally requires 3 years stabilisation period and it will also take some time to achieve growth. 17

20 LETTER FROM THE BOARD In view of the reasons and factors set out above and taking into account all the other terms of the Framework Deed and the PRC SPAs as a whole, the Directors consider that the terms under the abovementioned right of first notification are fair and reasonable and in the interests of the Company and the Shareholders as a whole. THE PRELIMINARY PRC SPAS The Preliminary PRC SPAs comprise two agreements to be entered into between GE Subsidiary as purchaser and the Project Company as vendor in relation to the acquisitions of: (a) (b) the Aboveground Portion, namely the Aboveground Pre-SPA; and the Underground Portion and the Carpark Portion, namely the Underground Preliminary SPA. Parties The principal terms of the Preliminary PRC SPAs are set out as follows: (1) the Project Company as seller (2) the GE Subsidiary as purchaser Assets to be acquired The Aboveground Portion, the Underground Portion and the Carpark Portion Asset Consideration The Asset Consideration of RMB965,000,000 (equivalent to approximately HK$1,215,900,000) comprises: (a) (b) consideration payable for the Aboveground Portion in the amount of RMB772,000,000 (equivalent to approximately HK$972,720,000); and consideration payable for the Underground Portion and the Carpark Portion in the amount of RMB193,000,000 (equivalent to approximately HK$243,180,000). The Asset Consideration shall be paid by the GE Subsidiary to the Project Company in the following manner: (a) (b) as to RMB386,000,000 (equivalent to approximately HK$486,360,000), being 40% of the Asset Consideration, and as the PRC Initial Payment, within 15 days upon the PRC Signing; as to RMB386,000,000 (equivalent to approximately HK$486,360,000), being 40% of the Asset Consideration, on the same date of the Handover; and 18

21 LETTER FROM THE BOARD (c) as to RMB193,000,000 (equivalent to approximately HK$243,180,000), being 20% of the Asset Consideration, within 15 days upon the satisfaction of the following conditions: (i) (ii) (iii) (iv) the Handover has taken place; the Underground Hotel SPA and the Capark SPAs have been signed; the delivery certificate ( ) has been signed in respect of the Aboveground Portion; and the Project Company has provided the GE Subsidiary with all application documents (save for the fapiao ( ) of such third payment) that shall be prepared and provided by the Project Company for the purpose of registering the title of the Target Asset under the name of the GE Subsidiary. The Asset Consideration is determined after arm s length negotiations between Shine First and Wisdom Joy with reference to, among other things, the relevant construction costs (including finance costs) in an estimated amount of approximately RMB554,500,000 (equivalent to approximately HK$698,670,000) and land acquisition costs in an estimated amount of approximately RMB343,500,000 (equivalent to approximately HK$432,810,000) incurred by the Project Company. The Directors are of the view that the Asset Consideration is fair and reasonable, as it is determined with reference to, among other things, the relevant construction costs (including the finance costs), land acquisition costs incurred by the Project Company and the valuation of the Target Asset. For the sale and purchase of an asset in the PRC similar to the Target Asset which is still under construction, it is in line with market practice for the consideration of such sale and purchase to be determined with reference to the costs incurred by the seller in acquiring and developing such asset (including the land costs and the construction costs) and the valuation of the relevant properties. Conditions to Handover Handover is conditional upon, among others, the satisfaction of the following conditions: (a) (b) (c) the obtaining of the construction project completion inspection certificate issued by the competent PRC authorities in relation to the Target Asset; the actual usage and function and construction standards of the Target Asset at Handover is substantially the same as those set out in the Preliminary PRC SPAs; and there is no encumbrance on the interest of the Target Asset except as provided in the Preliminary PRC SPAs. 19

22 LETTER FROM THE BOARD Handover The date for delivering the Target Asset (i.e. the Handover), which shall take place simultaneously for each of the Aboveground Portion, Underground Portion and the Carpark Portion, is agreed to be on or before 30 May Post-Handover obligations The Project Company undertakes to fulfil the following obligations (among others) after the Handover: (a) obtain the initial property title certificate ( ) of the Target Asset within 8 months from the obtaining of the construction project completion inspection certificate issued by the competent PRC authorities in relation to the Target Asset; (b) assist the GE Subsidiary to apply for the property title certificate ( ) of the Aboveground Portion within 90 days from the date of the signing of the delivery certificate ( ), and of the Underground Portion and Carpark Portion within 90 days from the date of execution of the Undergound Hotel SPA and the Carpark SPAs, by preparing and delivering all documents required to be stamped and signed by the Project Company for the application of the property title certificate ( ) of the Target Asset to the GE Subsidiary; and (c) ensure that any mortgage or charge on the Aboveground Portion has been released at the signing of the delivery certificate ( ) and that any mortgage or charge on the Underground Portion or Carpark Portion has been released at the signing of the Underground Hotel SPA and the Carpark SPAs. GE Subsidiary and the Project Company shall also sign the Underground Hotel SPA and the Carpark SPAs within 30 days from the date of the Project Company obtaining the initial property title certificate of the Target Asset. INFORMATION OF THE TARGET ASSET The Target Asset is known as The HUB Hotel located at Building #4, D17 Block, Land Plot 06, Phase I of Hongqiao Commercial Core Zone, Minhang District, Shanghai, the PRC. The Target Asset comprises the aboveground portion of a 12-storey building, the underground portion of 3 storeys, and 27 carpark spaces, with a total gross floor area permitted to be constructed of approximately 46,229 m 2 for 403 guest rooms. The Target Asset is situated at THE HUB in the Hongqiao Central Business District which is designed and constructed by SOL to become a new business, cultural and lifestyle landmark which will comprise a retail component, offices, a performing arts and exhibition centre and a hotel, spanning a total gross floor area of 282,000 m 2. 20

23 LETTER FROM THE BOARD Based on information provided by Shine First, the unaudited net book value of the Target Asset prepared in accordance with accounting principles generally accepted in the PRC was approximately RMB683,300,000 (equivalent to approximately HK$860,958,000) as at 30 June As the Target Asset is still under development and construction, no net profits (both before and after taxation and extraordinary items) are attributable to the Target Asset for the two financial years immediately preceding the Asset Acquisition. The development cost of the Target Asset by the Project Company is approximately RMB898,000,000 (equivalent to approximately HK$1,131,480,000). REASONS FOR AND BENEFITS OF ENTERING INTO THE FRAMEWORK DEED AND THE ASSET ACQUISITION As at the Latest Practicable Date, the GE Subsidiary has not yet been established. In order to crystallise the major terms of the Asset Acquisition, the Group considers that it is beneficial to the Company and its Shareholders as a whole and in its commercial interests to enter into the Framework Deed with Shine First prior to entering into the PRC SPAs between the Project Company and the GE Subsidiary, such that the relevant terms and conditions of the Asset Acquisition can be confirmed and the Asset Acquisition can be procured to be effected immediately upon, among other things, the establishment of the GE Subsidiary with the necessary capacity to acquire the Target Asset (including having sufficient funds to satisfy the PRC Initial Payment). The acquisition of the hotel in Hongqiao, i.e. the Target Asset, will allow the Group to benefit from the rapid rising demand for hotel rooms from the upcoming completion of the Hongqiao transportation hub and Hongqiao national convention and exhibition centre in Hongqiao s central business district. Located to the west of Shanghai s traditional downtown, Hongqiao s transportation hub is considered one of the most important interconnecting hub in China, which will integrate eight means of transportation, including airport, railway station and metro lines. The national convention and exhibition centre is also expected to be one of the largest in China, with a planned exhibition space of 500,000 m 2, it is nearly three times the size of the Shanghai new international expo center. The Directors (excluding Mr. Vincent Lo who has abstained but including the independent non-executive Directors who have expressed their views on the terms of the Framework Deed, the PRC SPAs and the transactions contemplated thereunder after taking into account the advice of the Independent Financial Adviser) consider that the terms of the Framework Deed, the PRC SPAs and the transactions contemplated thereunder are fair and reasonable and on normal commercial terms and in the interest of Company and its Shareholders as a whole. 21

24 LETTER FROM THE BOARD (B) THE SHARES ACQUISITION The major terms of the SPA are summarised as follows: THE SPA Date Parties 27 August 2014 (1) China Xintiandi (2) GE Xintiandi As at the Latest Practicable Date, (i) China Xintiandi, an indirect wholly-owned subsidiary of SOL, owns the Sale Shares, representing approximately 66.67% of the total issued share capital of the Target Company; and (ii) the members of the Target Group owed China Xintiandi the Shareholder Loan. Subject matter of the SPA (a) (b) the Sale Shares, representing approximately 66.67% of the total issued share capital in the Target Company; and the Shareholder Loan owed by the members of the Target Group to China Xintiandi as at the Shares Completion. Aggregate Shares Consideration The Aggregate Shares Consideration comprises (a) the Shares Consideration (subject to adjustment) and (b) the Loan Consideration. The Shares Consideration (subject to adjustment) shall be equal to 66.67% times the aggregate adjusted net asset value of the Target Business as at 31 August 2014 (the August Adjusted NAV ), which shall be computed based on the audited accounts of the Target Business as at 31 August 2014 and adjusted for the following items: (a) (b) (c) (d) the aggregate net book value of the investment properties, property, plant and equipment and property, plant and equipment prepaid lease shall be substituted with an agreed amount equal to RMB1,739,000,000 (equivalent to approximately HK$2,191,140,000); the deferred tax of the Target Business, if any, shall not be taken into account; the effect of intangible assets/liabilities of the Target Business, if any, shall be excluded; and no account shall be taken of the assets and liabilities relating to Andaz Hotel, if any. 22

25 LETTER FROM THE BOARD As at the Latest Practicable Date, the exact amount of the August Adjusted NAV has to be ascertained as the audit of the relevant financial statements of the Target Business is still under progress. The Loan Consideration shall be an amount equal to the amount of the Shareholder Loan as at the Shares Completion on a dollar-for-dollar basis. Adjustments to the Shares Consideration (1) After the Shares Completion, the following shall be prepared: (a) (b) the audited accounts of the Target Business as at the Shares Completion and for the period between 1 September 2014 up to the Shares Completion (the Closing Accounts ); and the pro forma balance sheet and an income statement of the Target Business as at the Shares Completion (the Pro Forma Closing Statements ). (2) Based on the Closing Accounts and the Pro Forma Closing Statements, the following amount shall be determined: (a) (b) the profit after tax/loss of the Target Business for the period between 1 September 2014 and Shares Completion excluding non-cash items (except for foreign exchange differences), depreciation and amortisation, revaluation increase on investment properties and deferred taxation and as stated in the Pro Forma Closing Statements (the Adjusted Profit and Loss ); and an amount equal to the aggregate adjusted net asset value of the Target Business as at the Shares Completion computed based on the Closing Accounts and with the same adjustments as the August Adjusted NAV, and as stated in the Pro Forma Closing Statements (the Closing Adjusted NAV ). (3) The Shares Consideration shall then be adjusted as follows: (a) (b) if the Closing Adjusted NAV is less than the sum of (i) the August Adjusted NAV and (ii) the Adjusted Profit and Loss, or in the case where the Adjusted Profit and Loss is a loss, the balance of the August Adjusted NAV after deducting such loss, China Xintiandi shall pay such shortfall amount times 66.67% to GE Xintiandi; and if the Closing Adjusted NAV is more than the sum of (i) the August Adjusted NAV and (ii) the Adjusted Profit and Loss, or in the case where the Adjusted Profit and Loss is a loss, the balance of the August Adjusted NAV after deducting such loss, GE Xintiandi shall pay such excess amount times 66.67% to China Xintiandi, 23

26 LETTER FROM THE BOARD provided that the shortfall to be paid by China Xintiandi or the excess to be paid by GE Xintiandi (as the case may be) on the Shares Consideration shall not exceed RMB10,000,000 (equivalent to approximately HK$12,600,000). The Company expected that the Aggregate Shares Consideration after the above adjustments shall not exceed RMB600,000,000 (equivalent to approximately HK$756,000,000), which was estimated with reference to (i) the estimated amount of the Shares Consideration in the sum of approximately RMB86,000,000 (equivalent to approximately HK$108,360,000) with reference to the available management accounts of the Target Business for the six months ended 30 June 2014 and applying the principle of adjustments set out above; (ii) the estimated amount of the Loan Consideration in the sum of approximately RMB470,000,000 (equivalent to approximately HK$592,200,000), which is based on the amount of Shareholder Loan of approximately RMB466,900,000 (equivalent to approximately HK$588,294,000) as at date of the SPA; and (iii) the maximum amount of adjustment of RMB10,000,000 (equivalent to approximately HK$12,600,000) as stated above. The Aggregate Shares Consideration is determined after arm s length negotiations between China Xintiandi and GE Xintiandi with reference to, among other things, the net asset value and profit and loss of the Target Company attributable to the LXTD Hotel and the relevant investment costs incurred by China Xintiandi including land acquisition costs, construction costs and renovation costs of the LXTD Hotel. In view of the reasons and factors set out above and taking into account all the other terms of the SPA as a whole, the Directors consider that the amount of the Aggregate Shares Consideration is fair and reasonable and in the interests of the Company and the Shareholders as a whole. Terms of Settlement of the Aggregate Shares Consideration The Aggregate Shares Consideration shall be paid by GE Xintiandi to China Xintiandi in the following manner: (a) as to RMB60,000,000 (equivalent to approximately HK$75,600,000) (the Shares Deposit ), within 2 days after the signing of the SPA; and (b) an amount equal to the sum of (i) the Shares Consideration (before any adjustment) and (ii) the Loan Consideration, and after deducting the amount of the Shares Deposit, upon the Shares Completion. After the Shares Completion, either China Xintiandi or GE Xintiandi (as the case may be) shall pay the amount representing any adjustments to the Shares Consideration to the other party within 14 days of the date of receipt of the Pro Forma Closing Statements. The Aggregate Shares Consideration is expected to be funded by the Group s internal resources. 24

27 LETTER FROM THE BOARD Conditions for the Shares Acquisition The Shares Completion under the SPA is conditional upon the satisfaction of the following conditions on or before the Shares Long Stop Date: (a) (b) (c) (d) (e) (f) each of the Company and SOL has obtained the requisite shareholders approval approving the SPA, its related transaction documents and the transactions contemplated thereunder as may be required under its constitutional documents and/or the Listing Rules; Shanghai Li Xing and each member of the Target Group have obtained consents under the debt covenants that are required to consummate the SPA, its related transaction documents and the transactions contemplated thereunder under the loans from a third party bank to Shanghai Li Xing, and such consents have not been withdrawn; all outstanding amount between the Target Business with any member of the SOL Group (excluding the Target Business), whether accrued in the ordinary course of trading or not and including any value-added tax arising out of them, as at the Shares Completion have been settled; board resolutions of Shanghai Li Xing duly executed by the board of directors of Shanghai Li Xing, approving (i) the resignation of directors, supervisors and general manager of Shanghai Li Xing appointed by the SOL Group, (ii) the appointment of persons nominated by GE Xintiandi as directors, supervisors and general manager of Shanghai Li Xing, (iii) the resignation of Mr. Vincent Lo as the legal representative of Shanghai Li Xing, (iv) the appointment of a person nominated by GE Xintiandi as the legal representative of Shanghai Li Xing and, where required, (v) changes to the constitutional documents of Shanghai Li Xing in connection with items (iii) and (iv) above, provided that GE Xintiandi shall notify China Xintiandi in writing the name of the persons it nominates as directors, supervisors and the legal representative of Shanghai Li Xing at least 60 days before the Shares Completion Date; no statute, rule or regulation has been enacted or promulgated by any governmental entity which prohibits the Shares Completion, and there has been no order or injunction of a court of competent jurisdiction or order from a governmental entity in effect precluding or prohibiting the Shares Completion or prohibiting GE Xintiandi and China Xintiandi from performing their respective obligations under the SPA and its related transaction documents; an agreement entered into between Shanghai Li Xing and the Management Company confirming that the hotel asset management agreement dated 17 February 2014 entered into between Shanghai Li Xing and the Management Company shall cease to be in effect upon and after the Shares Completion and no claims or demands has been or will be made by either of Shanghai Li Xing and the Management Company under the said agreement; 25

28 LETTER FROM THE BOARD (g) China Xintiandi has not materially breached any of the title warranties relating to LXTD Hotel that will result in a material adverse effect on the LXTD Hotel Business as a whole; (h) China Xintiandi has obtained all consents, approvals, clearances and authorisations of any relevant governmental authorities or other relevant third parties that are necessary for the consummation of the Shares Acquisition; and (i) GE Xintiandi has obtained sufficient funding in the PRC for financing the LXTD Hotel Business for a period of not more than six years after the Shares Completion. If the above conditions have not been fulfilled, or in respect of conditions (f), (g) and (i) above waived by GE Xintiandi unilaterally on or before the Shares Long Stop Date, (1) China Xintiandi and GE Xintiandi may agree in writing to extend the Shares Long Stop Date to a new long stop date (the Extended Long Stop Date ); (2) if the parties to the SPA do not elect to extend the Shares Long Stop Date, or the conditions have not been fulfilled or waived (as the case may be) on or before the Extended Long Stop Date, the SPA shall automatically terminate and all rights and liabilities by any party under the SPA shall cease (except for any rights and obligations accrued before termination) and China Xintiandi shall return the Shares Deposit without interest to GE Xintiandi. Other than condition (f), (g) and (i), no conditions may be waived unless by written agreement of both parties to the SPA. GE Xintiandi does not intend to waive the above conditions. As at the Latest Practicable Date, no condition has been fulfilled. Shares Completion Shares Completion shall take place within 10 Business Days for Shares Acquisition after the satisfaction or waiver (as the case may be) of the conditions of the SPA or any date agreed by China Xintiandi and GE Xintiandi in writing. Exit Sale for the Shares Acquisition GE Xintiandi undertakes to China Xintiandi that if: (a) a member of the Group sells the LXTD Hotel within 6 years from the Shares Completion Date (the Exit Sale for the Shares Acquisition ); and 26

29 LETTER FROM THE BOARD (b) Two-Thirds of Gross Consideration After Tax for the Shares Acquisition (X 2 ) exceeds the product of the Hurdle Capital Value for the Shares Acquisition (A 2 +B 2 ) and the Proportion in the LXTD Hotel (P 2 ), GE Xintiandi will pay to China Xintiandi a sum equivalent to 10% of the amount by which the Two-Thirds of Gross Consideration After Tax for the Shares Acquisition exceeds the product of the Hurdle Capital Value for the Shares Acquisition and the Proportion in the LXTD Hotel, provided that the maximum amount to be paid shall not exceed RMB10,000,000 (equivalent to approximately HK$12,600,000). Such amount is illustrated by the formula below: [X 2 (A 2 +B 2 )xp 2 ] x 10% Where X 2 = two-thirds of the gross consideration of the Exit Sale for the Shares Acquisition less the tax payable by the Group in respect of the Exit Sale for the Shares Acquisition (the Two-Thirds of Gross Consideration After Tax for the Shares Acquisition ) A 2 +B 2 = the Hurdle Capital Value for the Shares Acquisition A 2 = the capital value of the LXTD Hotel upon completion of the Exit Sale for the Shares Acquisition that would produce an IRR of 8.5% per annum for the Aggregate Shares Consideration paid plus incidental acquisition costs of the LXTD Hotel by the Group B 2 = two-thirds of the capital value of the LXTD Hotel upon completion of the Exit Sale for the Shares Acquisition that would produce an IRR of 8.5% per annum for the total accrued costs for renovation, furniture, fixtures and equipment (FF&E) incurred by the Group in respect of the LXTD Hotel up to completion of the Exit Sale for the Shares Acquisition P 2 = the proportionate interest in the LXTD Hotel that has been disposed of after the Shares Completion Date (the Proportion in the LXTD Hotel ) 27

30 LETTER FROM THE BOARD INFORMATION OF THE TARGET GROUP The Target Company is an investment holding company incorporated in the BVI which was owned by China Xintiandi as to approximately 66.67% and GE Xintiandi as to approximately 33.33% as at the Latest Practicable Date. As at the Latest Practicable Date, the Target Company indirectly owned 50% equity interests in Shanghai Li Xing through Victorious Run and Landton. Shanghai Li Xing is a company established in the PRC and is owned as to 50% by Landton and as to 50% by the Andaz Shareholders. Shanghai Li Xing owns the land use rights and the building ownership rights pertaining to the LXTD Hotel and the Andaz Hotel. Pursuant to the shareholders agreement dated 12 November 2010 entered into between Landton and the Andaz Shareholders, (a) the Andaz Shareholders have the right over the development and operation of the Andaz Hotel and are entitled to all benefits arising from the Andaz Hotel; (b) Landton has the right over the development and operation of LXTD Hotel and is entitled to all the benefits arising from the LXTD Hotel; and (c) any cost not attributable exclusively to either LXTD Hotel or the Andaz Hotel are borne by Landton and the Andaz Shareholders in equal shares. Demerger Pursuant to the terms of the SPA, GE Xintiandi agrees to procure Shanghai Li Xing to appoint China Xintiandi (or its affiliate) as its agent to facilitate the completion of the proposed segregation of land use rights and building ownership rights of the Target Company over the Andaz Hotel and the LXTD Hotel (the Demerger ) within three years from the Shares Completion Date (the Demerger Long Stop Date ). China Xintiandi shall be responsible for two-third of the costs (including any tax and land transfer fees arising from the transfer of the underground portion of the LXTD Hotel) that should be borne by any member of the Target Business arising from the Demerger. The estimated costs for the Demerger cannot be ascertained at this stage as the Demerger is a future event and the amount of the costs associated with the Demerger (including the taxes payable for the Demerger) will be subject to the actual circumstances (including the applicable laws and regulations) when the Demerger takes place. In view of the fact that GE Xintiandi is beneficially interested in one-third of the shareholding in Landton prior to the entering into of the SPA and as at the Latest Practicable Date, and taking into consideration the overall benefit of the Demerger to the Group, the Directors consider that the sharing of the one-third of the Demerger costs by GE Xintiandi is fair and reasonable and in the interests of the Company and the Shareholders as a whole. 28

31 LETTER FROM THE BOARD After completion of the Demerger, the Target Company will through Victorious Run, Landton and Shanghai Li Xing (or another wholly-owned subsidiary of Landton) hold all the legal and beneficial interest and assume all liabilities in relation to the LXTD Hotel. A company owned by the Andaz Shareholders, namely Trillion Full Investments Limited, a company incorporated in the BVI and (Metro Land Corporation*), a company established in the PRC, both of which are owned by independent third parties, will hold all the legal and beneficial interest and assume all liabilities in relation to the Andaz Hotel. If the Demerger has not been completed on or before the Demerger Long Stop Date, (a) China Xintiandi may, at any time up to 30 days prior to the Demerger Long Stop Date, by written notice to GE Xintiandi and payment of RMB10,000,000 (equivalent to approximately HK$12,600,000) to GE Xintiandi in cash, elect to extend the Demerger Long Stop Date by a period of one year to a new date (the Extended Demerger Long Stop Date ); (b) if China Xintiandi does not elect to extend the Demerger Long Stop Date, or if it elects for such extension but the Demerger has not been completed on or before the Extended Demerger Long Stop Date, China Xintiandi shall procure the Andaz Shareholders to sell their entire interest in Shanghai Li Xing to a member of the Group in return for the disposal of Shanghai Li Xing s entire interest in Andaz Hotel to the Andaz Shareholders or their nominee, and such sale shall be completed within 6 months after the Demerger Long Stop Date or the Extended Demerger Long Stop Date (as the case may be). Where (i) China Xintiandi fails to procure the Andaz Shareholders to complete the sale contemplated above or (ii) China Xintiandi notifies GE Xintiandi in writing that it may not, in its reasonable opinion, be able to procure the Andaz Shareholders to complete such sale, whichever is the earlier, GE Xintiandi shall then procure the sale of the LXTD Hotel by Shanghai Li Xing to a member of the Group as soon as practicable, and two-thirds of the costs that may be payable under such sale (including any tax and land transfer fees arising from the transfer of the underground portion of the LXTD Hotel) shall be borne by China Xintiandi. * For identification purposes only 29

32 LETTER FROM THE BOARD Simplified Shareholding Structure of the Target Business As at the Latest Practicable Date, the existing simplified shareholding structure of the Target Business is set out as follows: China Xintiandi GE Xintiandi 66.67% 33.33% Target Company 100% Victorious Run 100% Landton Andaz Shareholders 50% 50% Shanghai Li Xing 100% 100% LXTD Hotel Andaz Hotel 30

33 LETTER FROM THE BOARD Assuming there is no change to the shareholding of the Target Business other than changes as a result of the Shares Completion, the simplified shareholding structure of the Target Business immediately after the Shares Completion will be as follows: GE Xintiandi 100% Target Company 100% Victorious Run 100% Landton Andaz Shareholders 50% 50% Shanghai Li Xing 100% 100% LXTD Hotel Andaz Hotel 31

34 LETTER FROM THE BOARD Assuming there is no change to the shareholding of the Target Business other than changes as a result of the Shares Completion and the completion of the Demerger, the shareholding structure of the Target Business immediately after the Shares Completion and the completion of the Demerger will be as follows: GE Xintiandi 100% Target Company 100% Victorious Run 100% Landton 100% Shanghai Li Xing (or another wholly-owned subsidiary of Landton) 100% LXTD Hotel 32

35 LETTER FROM THE BOARD LXTD Hotel The LXTD Hotel is a hotel located at 4/1 Qiu, Jiefang 108, Huaihai Middle Road, Luwan District (now known as Huangpu District), and is next to (Shanghai Xintiandi), which is owned by the SOL Group and is a renowned destination for leisure and entertainment as well as commerce in Shanghai. It is a luxury hotel comprising 26 storeys (including Mezzanine floors) and a five-level basement with a total gross floor area of approximately 53,407 m 2, providing 357 guest rooms and various hotel and entertainment facilities. LXTD Hotel commenced a soft opening in October 2010 and a grand opening in September Financial Information of the Target Business The net liabilities of the Target Business as at 30 June 2014 was approximately RMB102,000,000 (equivalent to approximately HK$128,520,000). Set out below are the unaudited net loss before and after taxation of the Target Business for the years ended 31 December 2012 and 2013 prepared in accordance with the International Financial Reporting Standards: Year ended 31 December 2012 Approximately RMB Equivalent to approximately HK$ Year ended 31 December 2013 Approximately RMB Equivalent to approximately HK$ Net loss before taxation 35,000,000 44,100,000 79,000,000 99,540,000 Net loss after taxation 35,000,000 44,100,000 79,000,000 99,540,000 Upon the Shares Completion, the Target Company will become a wholly-owned subsidiary of the Company and accordingly, the financial results of the Target Business will be consolidated into the consolidated financial statements of the Company. The original purchase cost of the Sale Shares by China Xintiandi is RMB241,000,000 (equivalent to approximately HK$303,660,000). REASONS FOR AND BENEFITS OF ENTERING INTO THE SPA AND THE SHARES ACQUISITION Given the prime location of the hotel in the heart of Xintiandi, Shanghai, which is a key destination for both corporate and leisure travellers, the LXTD Hotel, which was managed by the Group since October 2010, is one of the Group s landmark hotels, that anchors the Group s globally recognised Langham brand. With the acquisition of the remaining approximately 66.67% ownership interest in the LXTD Hotel that the Group does not currently own, the full ownership of the LXTD Hotel will help to ensure the penetration of our brand in one of the world s most important business and tourism cities. 33

36 LETTER FROM THE BOARD The Directors (excluding Mr. Vincent Lo who has abstained but including the independent non-executive Directors who have expressed their views on the terms of the SPA and the transactions contemplated thereunder after taking into account the advice of the Independent Financial Adviser) consider that the terms of the SPA and the transactions contemplated thereunder are fair and reasonable, on normal commercial terms and are in the interest of Company and the Shareholders as a whole. The Asset Acquisition and the Shares Acquisition are two separate and independent transactions for the Group and are not inter-conditional upon each other. INFORMATION OF THE GROUP, WISDOM JOY, SHINE FIRST, CHINA XINTIANDI AND THE SOL GROUP The principal activities of the Group include property development and investment, hotel and restaurant operations, manager of real estate investment trust, trading of building materials, share investment, provision of management and maintenance services, property management and fitness centre operations. Its investment in office properties extends to the United States of America, and its hotel portfolio covers Asia, Australia, Europe, New Zealand and North America. Wisdom Joy is an investment holding company and an indirect wholly-owned subsidiary of the Company. Shine First is an investment holding company and an indirect wholly-owned subsidiary of SOL. China Xintiandi is a separately managed, indirect wholly-owned subsidiary of SOL, focusing principally on owning, managing, designing, leasing, marketing and enhancing premium retail, office and entertainment properties in affluent urban areas in the PRC. The SOL Group is one of the leading property developers in the PRC. It engages principally in the development, sale, leasing, management and long-term ownership of high-quality residential, office, retail, entertainment and cultural properties in the PRC. LISTING RULES IMPLICATIONS As one or more of the applicable percentage ratios as defined under the Listing Rules in respect of the Asset Acquisition and Shares Acquisition in aggregate is/are more than 5% but less than 25%, each of the Asset Acquisition and the Shares Acquisition constitutes a discloseable transaction for the Company and are therefore subject to the reporting and announcement requirements under Chapter 14 of the Listing Rules. Mr. Vincent Lo is a non-executive Director and by virtue of being a discretionary beneficiary of a trust which holds more than 30% of the issued share capital of the Company, Mr. Vincent Lo is an associate of the controlling shareholder of the Company. Each of Shine First and China Xintiandi is a wholly-owned subsidiary of SOL. Mr. Vincent Lo, the chairman and an executive director of SOL, and his associates are together entitled to control the exercise of more than 30% of the voting power at general meetings of SOL. As such, each of the Asset Acquisition and the Shares Acquisition also constitutes a connected transaction for the Company under the Listing Rules. As one or more of the applicable percentage ratios as defined under the Listing Rules in respect of the Asset Acquisition and the Shares Acquisition in aggregate is/are more than 5%, the Asset Acquisition and the Shares Acquisition are subject to the reporting, announcement, annual review and independent shareholders approval requirement under Chapter 14A of the Listing Rules. 34

37 LETTER FROM THE BOARD Mr. Vincent Lo is regarded as having a material interest in the Framework Deed, the PRC SPAs, the SPA and the transactions contemplated thereunder and therefore has abstained from voting at the meeting of the Board convened for the purpose of approving the Framework Deed, the PRC SPAs, the SPA and the transactions contemplated thereunder. SPECIAL GENERAL MEETING Set out on pages SGM-1 to SGM-2 of this circular is a notice convening the SGM to be held at Yat Tung Heen, 2nd Floor, Great Eagle Centre, 22 Harbour Road, Wanchai, Hong Kong, on 31 October 2014 at 3:30 p.m. at which ordinary resolutions will be proposed to the Independent Shareholders to consider and, if thought fit, approve the Framework Deed, the PRC SPAs, the SPA and the transactions contemplated thereunder. In accordance with Rule 13.39(4) of the Listing Rules, voting of the shareholders at the SGM will be conducted by poll. The chairman of the SGM will demand a poll for the resolutions to be proposed at the SGM in accordance with the bye-laws of the Company. In view of Mr. Vincent Lo s interests in the Framework Deed, the PRC SPAs, the SPA and the transactions contemplated thereunder, Mr. Vincent Lo and his associates (including The Lo Family Trust), who as far as the Directors are aware based on public information, in aggregate holding 408,271,934 Shares (representing approximately 62.26% of the issued share capital of the Company) as at the Latest Practicable Date, will abstain from voting at the SGM. The results of the poll will be published on the websites of the Company and the Stock Exchange on the day of the SGM. A form of proxy for use at the SGM is enclosed. Whether or not you propose to attend the SGM, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return the same to the Company s principal place of business in Hong Kong at 33rd Floor, Great Eagle Centre, 23 Harbour Road, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the SGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM and any adjournment thereof, should you so wish. RECOMMENDATIONS The Independent Board Committee, comprising all of the four independent non-executive Directors, has been established to advise the Independent Shareholders on the terms of the Framework Deed, the PRC SPAs, the SPA and the transactions contemplated thereunder. Your attention is drawn to its letter of recommendation set out on pages 37 to 38 of this circular. First Shanghai has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders on the terms of the Framework Deed, the PRC SPAs, the SPA and the transactions contemplated thereunder. Your attention is drawn to their letter of recommendation set out on pages 39 to 59 of this circular. 35

38 LETTER FROM THE BOARD The Directors (excluding Mr. Vincent Lo who has abstained but including the independent non-executive Directors who have expressed their views on the terms of the Framework Deed, the PRC SPAs, the SPA and the transactions contemplated thereunder after taking into account the advice of the Independent Financial Adviser) consider that the terms of the Framework Deed, the PRC SPAs, the SPA and the transactions contemplated thereunder are on normal commercial terms, and are fair and reasonable and the transactions contemplated thereunder are in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend that you vote in favour of the ordinary resolutions to be proposed at the SGM to approve the Framework Deed, the PRC SPAs, the SPA and the transactions contemplated thereunder. Completion of the Asset Acquisition and the Shares Acquisition are conditional upon, among other things, the satisfaction of a number of conditions under the Framework Deed, the PRC SPAs and the SPA (as the case may be). Therefore, the Asset Acquisition and the Shares Acquisition may or may not materialise. Shareholders and potential investors are reminded to exercise caution when dealing in the Shares. ADDITIONAL INFORMATION Your attention is also drawn to the (i) the property valuation in relation to the Target Asset and the LXTD Hotel in Appendix I to this circular; and (ii) the additional information set out in Appendix II to this circular. Your faithfully, By Order of the Board Great Eagle Holdings Limited Lo Ka Shui Chairman and Managing Director 36

39 LETTER FROM THE INDEPENDENT BOARD COMMITTEE (Stock Code: 41) 26 September 2014 To the Independent Shareholders Dear Sir or Madam, DISCLOSEABLE AND CONNECTED TRANSACTIONS ACQUISITION OF A HOTEL DEVELOPMENT PROJECT IN MINHANG DISTRICT, SHANGHAI, THE PRC AND ACQUISITION OF SHARES IN MAGIC GARDEN INVESTMENTS LIMITED AND NOTICE OF SPECIAL GENERAL MEETING Reference is made to the circular dated 26 September 2014 of the Company (the Circular ) of which this letter forms part. Terms defined in this letter shall have the same meanings as defined in the Circular unless the context otherwise requires. We have been appointed as the Independent Board Committee to advise you on the fairness and reasonableness of the terms of the Framework Deed, the PRC SPAs, the SPA and the transactions contemplated thereunder, details of which are set out in the letter from the Board contained in the Circular. First Shanghai has been appointed as the Independent Financial Adviser to advise us and the Independent Shareholders in this respect. We wish to draw your attention to the letter from the Board on pages 11 to 36 of the Circular, which sets out information in connection with the Framework Deed, the PRC SPAs, the SPA and the transactions contemplated thereunder. We also wish to draw your attention to the letter from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders, which contains its advice in respect of the Framework Deed, the PRC SPAs, the SPA and the transactions contemplated thereunder, set out on pages 39 to 59 of the Circular. Having considered the principal factors and reasons considered by, and the advice of First Shanghai as set out in its letter of advice, we consider that the Framework Deed, the PRC SPAs, the SPA and the transactions contemplated thereunder are entered into in the ordinary and usual course of business, and the terms of each of the Framework Deed, the PRC SPAs, the SPA and the 37

40 LETTER FROM THE INDEPENDENT BOARD COMMITTEE transactions contemplated thereunder are fair and reasonable, on normal commercial terms and are 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 resolutions to be proposed at the SGM to approve the Framework Deed, the PRC SPAs, the SPA and the transactions contemplated thereunder. Yours faithfully For and on behalf of the Independent Board Committee Cheng Hoi Chuen, Vincent Independent Non-executive Director Wong Yue Chim, Richard Independent Non-executive Director Lee Pui Ling, Angelina Independent Non-executive Director Zhu Qi Independent Non-executive Director 38

41 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER The following is the full text of the letter from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in connection with the Framework Deed, the PRC SPAs, the SPA and the transactions contemplated thereunder which has been prepared for the purpose of inclusion in this circular. FIRST SHANGHAI CAPITAL LIMITED 19th Floor, Wing On House 71 Des Voeux Road Central Hong Kong 26 September 2014 To the Independent Board Committee and the Independent Shareholders Dear Sir or Madam, DISCLOSEABLE AND CONNECTED TRANSACTIONS ACQUISITION OF A HOTEL DEVELOPMENT PROJECT IN MINHANG DISTRICT, SHANGHAI, THE PRC AND ACQUISITION OF SHARES IN MAGIC GARDEN INVESTMENTS LIMITED INTRODUCTION We refer to our engagement to advise the Independent Board Committee and the Independent Shareholders in respect of the Framework Deed, the PRC SPAs, the SPA and the transactions contemplated thereunder, details of which are set out in the circular of the Company to the Shareholders dated 26 September 2014 (the Circular ), of which this letter forms part. Unless the context otherwise requires, terms used in this letter shall have the same meanings as those defined in the Circular. On 27 August 2014, Wisdom Joy (an indirect wholly-owned subsidiary of the Company) entered into the Framework Deed with Shine First (an indirect wholly-owned subsidiary of SOL), pursuant to which Wisdom Joy conditionally agreed to procure the GE Subsidiary (an indirect wholly-owned subsidiary of the Company to be set up by Wisdom Joy through a Hong Kong subsidiary ( the HK Subsidiary )) to enter into the PRC SPAs to purchase, and Shine First conditionally agreed to procure the Project Company (a wholly-owned subsidiary of Shine First) to enter into the PRC SPAs to sell, the Target Asset (i.e. the Asset Acquisition) at the Asset Consideration of RMB965 million. 39

42 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER On 27 August 2014, GE Xintiandi (an indirect wholly-owned subsidiary of the Company) entered into the SPA with China Xintiandi (an indirect wholly-owned subsidiary of SOL), pursuant to which GE Xintiandi conditionally agreed to purchase, and China Xintiandi conditionally agreed to sell, the Sale Shares and the Shareholder Loan (i.e. the Shares Acquisition) at the Aggregate Shares Consideration, which is expected to be not more than RMB600 million. The Asset Acquisition and the Shares Acquisition are two separate and independent transactions for the Group and are not inter-conditional upon each other. Mr. Vincent Lo is a non-executive Director and, by virtue of being a discretionary beneficiary of a trust which holds more than 30% of the issued share capital of the Company, Mr. Vincent Lo is an associate of the controlling shareholder of the Company. Each of Shine First and China Xintiandi is a wholly-owned subsidiary of SOL. Mr. Vincent Lo, the chairman and an executive director of SOL, and his associates are together entitled to control the exercise of more than 30% of the voting power at general meetings of SOL. As such, each of the Asset Acquisition and the Shares Acquisition (collectively, the Acquisitions ) constitutes a connected transaction for the Company under the Listing Rules. Accordingly, as detailed in the letter from the Board in the Circular, the Acquisitions are subject to, among other requirements, independent shareholders approval under Chapter 14A of the Listing Rules. The Independent Board Committee, comprising all the independent non-executive Directors, namely, Mr. Cheng Hoi Chuen, Vincent, Professor Wong Yue Chim, Richard, Mrs. Lee Pui Ling, Angelina and Mr. Zhu Qi, has been formed to advise the Independent Shareholders in respect of the Framework Deed, the PRC SPAs, the SPA and the transactions contemplated thereunder. We, First Shanghai Capital Limited, have been appointed to advise the Independent Board Committee and the Independent Shareholders in this regard. The Independent Shareholders should note that, within the past two years from the Latest Practicable Date, we were engaged as independent financial adviser by the Company and by Champion Real Estate Investment Trust ( Champion REIT ), which is a subsidiary of the Company, for two occasions as detailed in (i) the circular of the Company dated 16 May 2013 in relation to the spin-off of Langham Hospitality Investments and Langham Hospitality Investments Limited ( LHI ); and (ii) the circular of Champion REIT dated 21 November 2013 in relation to continuing connected transactions. Given (i) our independent role in these two engagements; and (ii) our fees for these two engagements represented an insignificant percentage of the revenue of our parent group, we consider these two engagements would not affect our independence to form our opinion in respect of the Framework Deed, the PRC SPAs, the SPA and the transactions contemplated thereunder. In putting forth our opinion and recommendation, we have relied on the accuracy of the information and representations made or referred to in the Circular and provided to us by the management of the Group. We have assumed that all such information and representations were true at the time they were made and will continue to be true up to the date of the Circular. We have also assumed that all statements of belief, opinion and intention made in the Circular were reasonably made after due enquiry. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the management of the Group and have been advised that no material facts have been withheld or omitted from the 40

43 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER information provided and referred to in the Circular. We consider that we have reviewed sufficient information to reach an informed view and to justify reliance on the accuracy of the information contained in the Circular and to provide a reasonable basis for our advice. We have not, however, conducted any independent verification of the information included in the Circular and provided to us by the management of the Group nor have we conducted any form of investigation into the business, affairs or future prospects of the Group, the SOL Group, the Target Asset and the Target Group. PRINCIPAL FACTORS AND REASONS CONSIDERED In formulating our opinion in respect of the Acquisitions, we have taken into account the following principal factors and reasons: 1. Benefits of the Acquisitions The Acquisitions are expected to bring forward the following benefits to the Group:- apart from the approximately 33% minority interest in the LXTD Hotel, the Group currently owns five operating hotels in North America, three in Australia and New Zealand, one in London and three in Hong Kong. The Acquisitions can expand the hotel portfolio of the Group in the PRC; the PRC hotel industry has growth potential. Shanghai, as one of the world s most important business and tourism cities, is the region with the highest revenue per available room ( RevPAR ) in the PRC. The Acquisitions allow the Group to set foot in prime areas in Shanghai and enjoy potential growth; the Target Asset, which is known as the HUB Hotel, is located at the Shanghai Hongqiao Central Business District ( ), the PRC. The Asset Acquisition allows the Group to benefit from the demand for hotel rooms generated by the Hongqiao Integrated Transportation Hub ( ) and the upcoming completion of the National Exhibition and Convention Center (Shanghai) ( ); the LXTD Hotel, which is beneficially owned by the Target Company, is located in the heart of Xintiandi ( ), Shanghai, the PRC. The LXTD Hotel has been managed by the Group since October 2010 and is one of the landmark hotels of the Group. The Shares Acquisition allows the Group to obtain full ownership of the LXTD Hotel to ensure the strategic penetration of the Langham brand in Shanghai; and the majority of the core business revenue of the Group was derived from the hotel division for the year ended 31 December The Group recorded net assets attributable to owners of the Company of over HK$50 billion and had bank balances and cash of approximately HK$10 billion as at 30 June The Acquisitions allow the Group to utilise its cash resources to strengthen its principal business. 41

44 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER Having considered the above principal factors, we are of the view that the Acquisitions are in line with the principal business of the Group and are in the interests of the Company and the Shareholders as a whole. 2. Business and financial review of the Group The principal activities of the Group include property development and investment, hotel and restaurant operations, management of real estate investment trust, trading of building materials, share investment, provision of management and maintenance services, property management and fitness centre operation. Based on the annual report of the Company for the year ended 31 December 2013 (the 2013 Annual Report ) and the interim results announcement of the Company for the six months ended 30 June 2014 (the 2014 Interim Results ), the composition of the core business revenue of the Group for the year ended 31 December 2013 and the six months ended 30 June 2014 were as follows:- Core business revenue (1) For the year ended 31 December 2013 For the six months ended 30 June 2014 (HK$ (HK$ million) % million) % Hotel division (2) 3,481 64% 1,596 59% Distribution income from Champion REIT % % Gross rental income 335 6% 217 8% Management fee income from Champion REIT 316 6% 158 6% Distribution income from LHI 189 4% 148 6% Other operations 381 7% 214 8% 5, % 2, % Notes: 1. On the basis of core business, figures excluded fair value changes relating to the investment properties and financial assets of the Group and were based on attributable distribution income from Champion REIT and LHI, as well as realised gains on financial assets. 2. Hotel income includes contribution from the Hong Kong hotels. Upon the public listing of LHI on 30 May 2013, the interests in the Hong Kong hotels were disposed to LHI. Hotel income from the Hong Kong hotels for 2013 therefore covered the period from 1 January 2013 to 29 May The hotel division contributed approximately 64% and 59% of the core business revenue of the Group for the year ended 31 December 2013 and the six months ended 30 June 2014, respectively. 42

45 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER Based on the 2013 Annual Report and the 2014 Interim Results, the RevPAR of the operating hotels owned by the Group for the recent financial periods were as follows:- RevPAR in local currency For the year ended 31 December Year on year For the six months ended 30 June Year on year change change North America The Langham, Boston % % The Langham % % Huntington, Pasadena The Langham, n/a 136 n/a n/a 155 n/a Chicago (1) Langham Place, Fifth n/a 511 n/a n/a 383 n/a Avenue, New York (2) Eaton Chelsea Toronto % % Australia and New Zealand The Langham, % % Melbourne The Langham, Sydney % % The Langham, Auckland % % London The Langham, London % % Hong Kong PRC The Langham, Hong Kong Langham Place, Hong Kong Eaton Hotel, Hong Kong The LXTD Hotel (approximately 33% owned) 1,927 2,013 +4% 1,924 2,017 +5% 1,665 1,707 +3% 1,619 1,731 +7% 1,138 1,149 +1% 1,082 1,127 +4% % 957 1, % Notes: 1. From 10 July 2013 to 31 December 2013 (the hotel opened in July 2013). 2. From 25 September 2013 to 31 December 2013 (the hotel was acquired in September 2013). 43

46 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER The Group beneficially owns one operating hotel in the PRC, being the approximately 33% interest in the LXTD Hotel. RevPAR of the LXTD Hotel recorded year on year growth of approximately 11% for the year ended 31 December 2013 and approximately 14% for the six months ended 30 June 2014, which outperformed the majority of the hotels of the Group. According to the 2014 Interim Results, the Group recorded net assets attributable to owners of the Company of over HK$50 billion and had bank balances and cash of approximately HK$10 billion as at 30 June Background of the SOL Group SOL has been listed on the Stock Exchange since The SOL Group is one of the leading property developers in the PRC with proven track record in developing large-scale, mixed-use city-core communities and integrated residential development projects. The SOL Group owns, among other properties, Shanghai Xintiandi ( ), Shanghai 1&2 Corporate Avenue ( 1 2 ) and Shanghai Shui On Plaza ( ). With reference to the annual report of SOL for the year ended 31 December 2013, approximately 74% and 85% of the turnover of the SOL Group were derived from the development and sale of properties for each of the years ended 31 December 2012 and 2013, respectively. 4. Business and financial review of the Target Asset The Target Asset comprises the aboveground portion of a 12-storey building, the underground portion of three storeys, and 27 carpark spaces, with a total gross floor area permitted to be constructed of approximately 46,229 m 2 for 403 guest rooms. The Target Asset shall have obtained the construction project completion inspection certificate ( ) issued by the competent PRC authorities at the time of the Handover. We are advised by the management of the Group that the Target Asset is expected to be developed into a five-star hotel (the HUB Hotel ) and commence commercial operation in the first half of

47 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER The Target Asset is located at the Shanghai Hongqiao Central Business District ( ), the PRC and the HUB Hotel can benefit from the demand for hotel rooms from, among other things, the Hongqiao Integrated Transportation Hub ( ) and the upcoming completion of the National Exhibition and Convention Center (Shanghai) ( ) in the district. According to the website of the National Exhibition and Convention Center (Shanghai), the construction of the center is expected to be gradually completed by phase and the center is expected to commence full operation in mid The following map indicates the approximate location of the HUB Hotel:- Source: Google Maps and First Shanghai With reference to the announcement of SOL dated 27 August 2014, the book value of the Target Asset was approximately RMB683 million as at 30 June 2014 and the book value of the Target Asset at the Handover is expected to be approximately RMB898 million. Given the Target Asset is still under construction, the Target Asset has not recorded any profit. 5. Business and financial review of the Target Business The Target Company is an investment holding company incorporated in the BVI and is owned as to (i) approximately 33% by the Company via GE Xintiandi; and (ii) approximately 67% by SOL via China Xintiandi. Shanghai Li Xing, which owns the land use rights and the building ownership rights pertaining to the LXTD Hotel and the Andaz Hotel, is owned as to (i) 50% by the Target Company via Victorious Run and Landton; and (ii) 50% by the Andaz Shareholders. The Andaz Shareholders are (i) Trillion Full Investments Limited, which is a company incorporated in the BVI; and (iii) Metro Land Corporation ( ), which is a company established in the PRC, both of which are owned by independent third parties. We are advised by the management of the Group that the LXTD Hotel and the Andaz Hotel are operated independently and, based on the shareholders agreement dated 12 November 2010, (i) the Target Group is entitled to all benefits arising from the LXTD Hotel; and (ii) the Andaz Shareholders are entitled to all benefits arising from the Andaz Hotel. 45

48 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER The LXTD Hotel is situated in the heart of Xintiandi ( ) in the Luwan District ( ) (now known as Huangpu District ( )), Shanghai, the PRC and had its grand opening in September It is a five-star luxury hotel comprising 26 storeys (including Mezzanine floors) and a five-level basement with a total gross floor area of approximately 53,407 m 2, providing 357 guest rooms and various hotel and entertainment facilities. The following map indicates the approximate location of the LXTD Hotel:- Source: Google Maps and First Shanghai The table below sets out a summary of the key information on the financial performance of the Target Business for the year ended 31 December 2013 and the six months ended 30 June 2014, being the financial periods after the grand opening of the LXTD Hotel (the Review Period ), extracted from the unaudited financial statements of the Target Business prepared in accordance with the International Financial Reporting Standards as advised by the management of the Group:- For the year ended 31 December 2013 RMB million (Unaudited) For the six months ended 30 June 2014 RMB million (Unaudited) Turnover Cost of sales (168) (88) Operating profit before depreciation Depreciation (60) (29) Operating profit (4) 1 Overheads (13) (5) Finance costs (62) (33) Other income 3 Loss before and after tax (79) (34) 46

49 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER We are advised by the management of the Group that, during the Review Period, (i) the turnover of the Target Business were generated from the operation of the LXTD Hotel; (ii) the operating profit (before depreciation) margin maintained at approximately 25% for the year ended 31 December 2013 and for the six months ended 30 June 2014; (iii) the net losses of the Target Business were primarily attributable to depreciation charges on the LXTD Hotel and finance costs, which were interests on bank borrowings. We are also advised by the management of the Group that the financial performance of the Target Business may improve in the future following (i) the continuous building up of reputation of the LXTD Hotel, which may improve turnover; and (ii) the potential reduction of bank loans, which may reduce finance costs. The table below sets out a summary of the key information on the financial position of the Target Business as at 30 June 2014 based on the unaudited financial statements of the Target Business prepared in accordance with the International Financial Reporting Standards as advised by the management of the Group:- As at 30 June 2014 RMB million (Unaudited) Non-current assets 1,568 Current assets 23 Total assets 1,591 Current liabilities 916 Non-current liabilities 777 Total liabilities 1,693 Net liabilities 102 The Target Business recorded net liabilities of approximately RMB102 million as at 30 June We are advised by the management of the Group that, as at 30 June 2014, (i) non-current assets of the Target Business primarily comprised fixed assets related to the property of the LXTD Hotel at an aggregate amount of approximately RMB1,508 million; (ii) current assets of the Target Business primarily comprised accounts receivable, deposits and prepayments of approximately RMB15 million; (iii) current liabilities of the Target Business primarily comprised the Shareholder Loan of approximately RMB467 million; and (iv) non-current liabilities of the Target Business primarily comprised bank borrowings of approximately RMB776 million. 47

50 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER 6. Overview of the PRC hotel industry We have reviewed the 2013 PRC Star-rated Hotel Statistics Publication (2013 ) (the 2013 CNTA Report ) published on the website of the China National Tourism Association ( ) in August The following table sets out the landscape of the PRC hotel industry in 2013:- Fivestar Fourstar Threestar Twostar Onestar Total Number of hotels 739 2,361 5,631 2, ,687 Number of rooms (thousand) ,539 Number of beds (thousand) , ,705 Revenue (RMB million) 76,145 77,666 63,077 12, ,293 Net profit/(loss) (RMB million) 2,996 (3,289) (2,115) (2,088) Average room rate (RMB) Occupancy rate (%) RevPAR (RMB) Source: the 2013 CNTA Report We note that five-star hotels in the PRC were profitable with a profit margin of approximately 4%, whereas the four-star and three-star hotels in the PRC were loss making, for the year ended 31 December

51 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER The following table sets out the top five regions in terms of average room rate, occupancy rate and RevPAR of PRC hotels for the year ended 31 December 2013:- Rank Region Average room rate Region Occupancy rate Region RevPAR (RMB) (%) (RMB) 1 Shanghai ( ) 617 Hunan ( ) 73 Shanghai ( ) Beijing ( ) 535 Yunnan ( ) 63 Beijing ( ) Hainan ( ) 488 Shanghai ( ) 59 Hainan ( ) Tianjin ( ) 393 Guizhou ( ) 59 Guangdong 210 ( ) 5 Guangdong ( ) 371 Beijing ( ) 58 Sichuan ( ) 207 Source: the 2013 CNTA Report We note that hotels in Shanghai achieved the highest average room rate and RevPAR among the PRC regions for the year ended 31 December In respect of the prospects of the PRC hotel industry, we have reviewed the article titled China s Hospitality Industry Rooms for Growth dated April 2013 (the 2013 A.T. Kearney Report ) published on the website of A.T. Kearney, which is a global management consulting firm with offices in more than 40 countries. According to the 2013 A.T. Kearney Report, the business of the PRC hotel industry (i) is expected to be driven by, among other factors, continued demand for meetings, conferences and exhibitions and proliferation of industry parks; and (ii) is expected to grow from approximately US$45 billion in 2012 to approximately US$101 billion in 2022 as illustrated in the following chart:- Business scale of the PRC hotel industry (US$ billion) High-end hotel Mid-scale hotel Budget hotel Source: the 2013 A.T. Kearney Report 49

52 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER We note that the business scale of the PRC high-end hotel segment is expected to grow from approximately US$12 billion in 2012 to approximately US$25 billion in 2022, representing a compound annual growth rate of around 8% during the period. 7. Principal terms of the Asset Acquisition Pursuant to the Framework Deed, (i) Wisdom Joy (an indirect wholly-owned subsidiary of the Company) conditionally agreed to procure the GE Subsidiary (an indirect wholly-owned subsidiary of the Company to be set up by Wisdom Joy through the HK Subsidiary) to enter into the PRC SPAs to purchase; and (ii) Shine First (an indirect wholly-owned subsidiary of SOL) conditionally agreed to procure the Project Company (a wholly-owned subsidiary of Shine First) to enter into the PRC SPAs to sell, the Target Asset at the Asset Consideration of RMB965 million. The PRC Signing shall take place on the 10th Business Day after the satisfaction or waiver of all the Conditions for Asset Acquisition, which include but not limited to the GE Subsidiary having been established with the necessary capacity to acquire the Target Asset. Wisdom Joy paid the Deposit, which amounts to 10% of the Asset Consideration (i.e. approximately RMB97 million), to an escrow agent upon the execution of the Framework Deed. The Deposit shall be returned to Wisdom Joy under, among other circumstances, the PRC Signing takes place and the Project Company having received the PRC Initial Payment. The following simplified shareholding chart illustrates the nature of the Asset Acquisition. Immediately before Asset Completion Immediately after Asset Completion Company SOL Company SOL 100% Wisdom Joy 100% 100% Wisdom Joy 100% 100% Shine First 100% Shine First HK Subsidiary 100% 100% HK Subsidiary 100% 100% GE Subsidiary Project Company GE Subsidiary Project Company 100% 100% Target Asset Target Asset (a) The Asset Consideration The Asset Consideration amounts to RMB965 million, which shall be paid as to (i) RMB386 million, being the PRC Initial Payment representing 40% of the Asset Consideration, within 15 days upon the PRC Signing; (ii) RMB386 million, representing 40% of the Asset Consideration, on the same date of the Handover; and (iii) RMB193 million, representing 20% of the Asset Consideration, within 15 days upon the satisfaction of, among other conditions, the Project Company has provided the GE Subsidiary with all application documents for the purpose of registering the title of the Target Asset under the GE Subsidiary. Handover (being the physical 50

53 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER delivery of the Target Asset to the GE Subsidiary for the purposes of passing the control of the Target Asset to the GE Subsidiary) is agreed to be on or before 30 May 2015 and is conditional upon, among other requirements, the obtaining of the construction project completion inspection certificate ( ) issued by the competent PRC authorities in relation to the Target Asset. We understand the Asset Consideration is in line with the appraised property value of the Target Asset of RMB962 million as at 25 August 2014 with reference to the valuation report for the Target Asset prepared by DTZ Debenham Tie Leung Limited (the Independent Valuer ) set out in Appendix I to the Circular. We have reviewed the engagement terms of the Independent Valuer and interviewed the Independent Valuer as to its expertise. Based on our discussion with the Independent Valuer and the management team of the Group, we understand that (i) apart from the provision of independent valuation services, the Independent Valuer has no other current or prior relationships with the Group, the SOL Group and the connected persons of either of them; and (ii) the Group and the SOL Group have not made any formal or informal representations to the Independent Valuer in relation to the valuation of the Target Asset which are not in accordance with our knowledge. We have also reviewed the valuation report and discussed with the Independent Valuer regarding the methodology of and the principal bases and assumptions adopted for the valuation of the Target Asset. We understand that the Independent Valuer had primarily adopted the direct comparison approach, which is a common approach for property valuation. We also understand that (i) the cost approach was not adopted because it ignores the market trend of the property market; and (ii) the income approach was not adopted because it involves making assumptions which are subject to uncertainties. We have reviewed information on the market comparables adopted by the Independent Valuer for the valuation of the Target Asset under the direct comparison approach. Given we note that the appraised unit price of the Target Asset (being approximately RMB2.4 million per room) is within the range of the adjusted unit price of the market comparables (being from approximately RMB2.2 million per room to approximately RMB2.5 million per room), which is a narrow range, we consider the appraised unit price of the Target Asset to be appropriate. For our alternative assessment and cross reference purposes, we note that the appraised property value of the Target Asset does not materially deviate from the aforementioned expected book value of the Target Asset at the Handover of approximately RMB898 million. During the course of our discussion with the Independent Valuer, we have not identified any major factors which cause us to doubt the fairness and reasonableness of the principal bases and assumptions adopted for the property valuation of the Target Asset. Taking into account, in particular, (i) the Asset Consideration is in line with the appraised value of the Target Asset; (ii) the majority of the Asset Consideration shall be payable on or after the date of the Handover; and (iii) the benefits of the Asset Acquisition as previously discussed, we consider the Asset Consideration to be acceptable. 51

54 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER (b) Exit Sale for the Asset Acquisition Wisdom Joy undertakes to Shine First that, if a member of the Group sells the Target Asset within six years from the Asset Completion Date, Wisdom Joy shall pay 10% of the capital gain (i.e. the amount which the Gross Consideration After Tax for the Asset Acquisition exceeds the product of the Hurdle Capital Value for the Asset Acquisition and the Proportion in the Target Asset) to Shine First. We understand the base value to derive the capital gain payment would be the Hurdle Capital Value for the Asset Acquisition, which shall be higher than the amount of the Asset Consideration and result in a lower capital gain payment, if any. The maximum amount to be paid to Shine First on the sharing of capital gain is capped at RMB10 million. The terms related to the Exit Sale for the Asset Acquisition are limited to six years. With reference to the letter from the Board in the Circular, a new hotel normally requires several years to stabilise its business operation and also takes some time to achieve growth. We are advised by the management of the Group that the Group currently intends to operate the HUB Hotel as part of its principal business and does not intend to dispose of the Target Asset after the Asset Completion in the upcoming years. Taking into account, in particular, (i) the maximum amount to be paid for the Exit Sale for the Asset Acquisition is limited to RMB10 million, which represents approximately 1% of the Asset Consideration and is insignificant; (ii) the terms related to the Exit Sale for the Asset Acquisition is limited to six years, the period of which is in line with the current intention of the Group to hold the Target Asset in the upcoming years; (iii) the Hurdle Capital Value for the Asset Acquisition, which shall be higher than the amount of the Asset Consideration, would be used as the base value to derive the capital gain payment; (iv) the basis of the Asset Consideration as previously discussed; and (v) the benefits of the Asset Acquisition as previously discussed, we consider the terms related to the Exit Sale for the Asset Acquisition to be acceptable. (c) Right of first notification As detailed in the letter from the Board in the Circular, Wisdom Joy agrees to grant a right of first notification to Shine First for a period of six years from Asset Completion in connection with the sale of a specified interest in the Target Asset. Taking into account, in particular, (i) the negotiation between the Group and the SOL Group shall be on a non-exclusive basis; (ii) the floor price shall be determined by the Group; (iii) the right is limited to six years, the period of which is in line with the current intention of the Group to hold the Target Asset in the upcoming years; and (iv) the benefits of the Asset Acquisition as previously discussed, we consider the right of first notification to be acceptable. 52

55 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER (d) Conclusion Having considered the aforementioned factors, we are of the view that the terms of the Asset Acquisition are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned. 8. Principal terms of the Shares Acquisition Pursuant to the SPA, GE Xintiandi (an indirect wholly-owned subsidiary of the Company) conditionally agreed to purchase, and China Xintiandi (an indirect wholly-owned subsidiary of SOL) conditionally agreed to sell, the Sale Shares and the Shareholder Loan at the Aggregate Shares Consideration, which is expected to be not more than RMB600 million. Moreover, China Xintiandi (or its affiliate) shall facilitate the completion of the Demerger. The following simplified shareholding chart illustrates the nature of the Shares Acquisition. Immediately before Shares Completion Company 100% GE Xintiandi 33% SOL 100% China Xintiandi 67% Target Company 100% Victorious Run 100% Landton Andaz Shareholders Entitled to 100% benefit 50% 100% Shanghai Li Xing 50% 100% Entitled to 100% benefit LXTD Hotel Andaz Hotel Immediately after Shares Completion and before the Demerger Company Immediately after Shares Completion and the Demerger Company 100% 100% GE Xintiandi GE Xintiandi 100% 100% Target Company Target Company 100% 100% Victorious Run Victorious Run 100% 100% Landton Andaz Shareholders Landton Entitled to 100% benefit 50% 100% Shanghai Li Xing 50% 100% Entitled to 100% benefit 100% Shanghai Li Xing 100% (or another wholly-owned subsidiary of Landton) LXTD Hotel Andaz Hotel LXTD Hotel 53

56 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER (a) The Aggregate Shares Consideration The Aggregate Shares Consideration is expected to be not more than RMB600 million, which comprises (i) the Shares Consideration (subject to adjustment); and (ii) the Loan Consideration. The Aggregate Shares Consideration shall be paid by GE Xintiandi to China Xintiandi as to (i) RMB60 million as deposit, within two days after the signing of the SPA; (ii) the balance of the unadjusted Shares Consideration and the Loan Consideration upon the Shares Completion. After the Shares Completion, either China Xintiandi or GE Xintiandi (as the case may be) shall pay the amount representing any adjustments to the Shares Consideration to the other party within 14 days of the date of receipt of the Pro Forma Closing Statements. The Shares Consideration (subject to adjustment) shall equal approximately 67% times the August Adjusted NAV, which shall be computed based on the audited accounts of the Target Business as at 31 August 2014 with (i) the aggregate net book value of the property, plant and equipment, investment properties and property, plant and equipment prepaid lease (being accounting items related to the real property of the LXTD Hotel as advised by the management of the Group) substituted with an agreed amount equal to RMB1,739 million (the Property Value ); and (ii) the exclusion of the assets and liabilities related to the deferred tax and the intangible assets of the Target Business and the assets and liabilities related to the Andaz Hotel, if any. We understand the Property Value is in line with the appraised property value of the LXTD Hotel of RMB1,737 million as at 25 August 2014 with reference to the valuation report for the LXTD Hotel prepared by the Independent Valuer set out in Appendix I to the Circular. We have reviewed the engagement terms of the Independent Valuer and interviewed the Independent Valuer as to its expertise. Based on our discussion with the Independent Valuer and the management team of the Group, we understand that (i) apart from the provision of independent valuation services, the Independent Valuer has no other current or prior relationships with the Group, the SOL Group and the connected persons of either of them; and (ii) the Group and the SOL Group have not made any formal or informal representations to the Independent Valuer in relation to the valuation of the LXTD Hotel which are not in accordance with our knowledge. We have also reviewed the valuation report and discussed with the Independent Valuer regarding the methodology of and the principal bases and assumptions adopted for the valuation of the LXTD Hotel. We understand that the Independent Valuer had primarily adopted the direct comparison approach, which is a common approach for property valuation. We also understand that (i) the cost approach was not adopted because it ignores the market trend of the property market; and (ii) the income approach was not adopted because it involves making assumptions which are subject to uncertainties. We have reviewed information on the market comparables adopted by the Independent Valuer for the valuation of the LXTD Hotel under the direct comparison approach. Given we note that the appraised unit price of the LXTD Hotel (being approximately RMB4.9 million per room) is within the range of the adjusted unit price of the market comparables (being from approximately RMB4.8 million per room to approximately 54

57 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER RMB4.9 million per room), which is a narrow range, we consider the appraised unit price of the LXTD Hotel to be appropriate. For our alternative assessment and cross reference purposes, we note that the appraised property value of the LXTD Hotel does not materially deviate from the book value related to the property of the LXTD Hotel of approximately RMB1,508 million as at 30 June During the course of our discussion with the Independent Valuer, we have not identified any major factors which cause us to doubt the fairness and reasonableness of the principal bases and assumptions adopted for the property valuation of the LXTD Hotel. We are advised by the management of the Group that (i) based on the unaudited financial statements of the Target Business, the Target Business recorded deferred tax liabilities of approximately RMB1 million and did not record any intangible assets or liabilities as at 30 June 2014; and (ii) the Group may record further deferred tax liabilities of the Target Business arising from the difference between the appraised value and the book value of the LXTD Hotel upon Shares Completion. We are also advised by the management of the Group that the assets and liabilities related to the deferred tax and the intangible assets of the Target Business and the assets and liabilities related to the Andaz Hotel, if any, shall be excluded from the calculation of the Shares Consideration because (i) the assets and liabilities related to the deferred tax and the intangible assets of the Target Business are non-cash and unrealised accounting items; and (ii) the Target Business is entitled to all benefits arising from the LXTD Hotel, whereas the Andaz Shareholders are entitled to all benefits arising from the Andaz Hotel. As detailed in the letter from the Board in the Circular, after the Shares Completion, the Shares Consideration shall be adjusted, where (i) if the Closing Adjusted NAV is less than the sum of the August Adjusted NAV and the Adjusted Profit and Loss (or in the case where the Adjusted Profit and Loss is a loss, the balance of the August Adjusted NAV after deducting such loss), China Xintiandi shall pay such shortfall amount times approximately 67% to GE Xintiandi; and (ii) if the Closing Adjusted NAV is more than the sum of the August Adjusted NAV and the Adjusted Profit and Loss (or in the case where the Adjusted Profit and Loss is a loss, the balance of the August Adjusted NAV after deducting such loss), GE Xintiandi shall pay such excess amount times approximately 67% to China Xintiandi. The shortfall to be paid by China Xintiandi or the excess to be paid by GE Xintiandi (as the case may be) on the Shares Consideration shall not exceed RMB10 million. We are advised by the management of the Group that the primary purpose of the adjustment to the Shares Consideration is to reconcile the difference, if any, of the net asset value of the Target Business between 31 August 2014 and the date of the Shares Completion (other than the effect of the Adjusted Profit and Loss). The Loan Consideration shall equal the amount of the Shareholder Loan as at the Shares Completion on a dollar-to-dollar basis. 55

58 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER We are advised by the management of the Group that, based on latest available information and for illustrative purposes, the Aggregate Shares Consideration amounted to approximately RMB553 million, where the Shares Consideration amounted to approximately RMB86 million and the Loan Consideration amounted to approximately RMB467 million, as at 31 July Taking into account, in particular, (i) the Shares Consideration is primarily based on the net asset value of the Target Business and has reflected the appraised property value of the LXTD Hotel; (ii) the adjustment to the Shares Consideration is primarily for the reconciliation of difference, if any, of the net asset value of the Target Business between 31 August 2014 and the date of the Shares Completion (other than the effect of the Adjusted Profit and Loss); (iii) the Loan Consideration equals the amount of the Shareholder Loan as at the Shares Completion on a dollar-to-dollar basis; and (iv) the benefits of the Shares Acquisition as previously discussed, we consider the Aggregate Shares Consideration to be acceptable. (b) Exit Sale for the Shares Acquisition GE Xintiandi undertakes to China Xintiandi that, if a member of the Group sells the LXTD Hotel within six years from the Shares Completion Date, GE Xintiandi shall pay 10% of the capital gain (i.e. the amount which the Two-Thirds of Gross Consideration After Tax for the Shares Acquisition exceeds the product of the Hurdle Capital Value for the Shares Acquisition and the Proportion in the LXTD Hotel) to China Xintiandi. We understand the base value to derive the capital gain payment would be the Hurdle Capital Value for the Shares Acquisition, which shall be higher than the amount of the Aggregate Shares Consideration and result in a lower capital gain payment, if any. The maximum amount to be paid to China Xintiandi on the sharing of capital gain is capped at RMB10 million. The terms related to the Exit Sale for the Shares Acquisition are limited to six years. With reference to the letter from the Board in the Circular, a new hotel normally requires several years to stabilise its business operation and also takes some time to achieve growth. We are advised by the management of the Group that the Group currently intends to operate the LXTD Hotel as part of its principal business and does not intend to dispose of the Target Business after the Shares Completion in the upcoming years. Taking into account, in particular, (i) the maximum amount to be paid for the Exit Sale for the Shares Acquisition is limited to RMB10 million, which represents approximately 2% of the expected maximum amount of the Aggregate Shares Consideration and is insignificant; (ii) the terms related to the Exit Sale for the Shares Acquisition is limited to six years, the period of which is in line with the current intention of the Group to hold the LXTD Hotel in the upcoming years; (iii) the Hurdle Capital Value for the Shares Acquisition, which shall be higher than the amount of the Aggregate Shares Consideration, would be used as the base value to derive the capital gain payment; (iv) the basis of the Aggregate Shares Consideration as previously discussed; and (v) the benefits of the Shares Acquisition as previously discussed, we consider the terms related to the Exit Sale for the Shares Acquisition to be acceptable. 56

59 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER (c) Demerger China Xintiandi (or its affiliate) shall facilitate the completion of the Demerger on or before the Demerger Long Stop Date and shall bear two-thirds of the costs of the Demerger. China Xintiandi may pay RMB10 million to GE Xintiandi to extend the Demerger Long Stop Date by a period of one year. In the ultimate case where GE Xintiandi has to procure the sale of the LXTD Hotel by Shanghai Li Xing to a member of the Group to achieve the effect similar to a Demerger, China Xintiandi shall bear two-thirds of the costs under such sale. Further details of the Demerger are set out in the letter from the Board in the Circular. Given (i) China Xintiandi, even after the disposal of its two-thirds interests in the Target Company, shall be responsible for two-thirds of the costs in relation to the Demerger; and (ii) GE Xintiandi owns one-third of the Target Company immediately prior to the entering into of the SPA, GE Xintiandi will bear the remaining one-third of the costs in relation to the Demerger. As stated in the letter from the Board in the Circular, the estimated costs for the Demerger cannot be ascertained at this stage as the Demerger is a future event and the amount of the costs associated with the Demerger (including the taxes payable for the Demerger) will be subject to the actual circumstances (including the applicable laws and regulations) when the Demerger takes place. Taking into account, in particular, (i) the RMB10 million payment for the extension of the Demerger Long Stop Date is an incentive to China Xintiandi to facilitate the completion of the Demerger before the Demerger Long Stop Date; (ii) China Xintiandi, even after the disposal of its two-thirds interests in the Target Company, shall be responsible for two-thirds of the costs in relation to the Demerger; and (iii) GE Xintiandi will bear the remaining one-third of the costs in relation to the Demerger in light of its one-third ownership in the Target Company immediately prior to the entering into of the SPA, we consider the terms related to the Demerger to be acceptable. (d) Conclusion Having considered the aforementioned factors, we are of the view that the terms of the Shares Acquisition are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned. 9. Effects of the Acquisitions Immediately upon Asset Completion, the interest of the Company in the Target Asset will increase from nil to 100%. Immediately upon Shares Completion, the interest of the Company in the Target Business will increase from approximately 33% to 100%, where the Target Company will transform from an associate to a wholly-owned subsidiary of the Company. 57

60 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER (a) Net profit With reference to the 2013 Annual Report, the Group recorded core profit after tax attributable to equity holders of approximately HK$1,680 million for the year ended 31 December The financial performance of the Target Asset and the Target Business will be consolidated into the income statement of the Group immediately upon Asset Completion and Shares Completion, respectively. As stated in the letter from the Board in the Circular, (i) the Target Asset has not yet generated any profit; and (ii) the Target Business recorded net loss of approximately RMB79 million for the year ended 31 December We are advised by the management of the Group that (i) the HUB Hotel is still under construction and development, which is expected to commence commercial operation in the first half of 2016; and (ii) the LXTD Hotel is newly operated, which had its grand opening in September 2012, therefore the financial performance of the HUB Hotel and the LXTD Hotel might improve in future. (b) Net assets With reference to the 2014 Interim Results, the Group recorded equity attributable to owners of the Company of approximately HK$50 billion as at 30 June The financial position of the Target Asset and the Target Business will be consolidated into the statement of financial position of the Group immediately upon Asset Completion and Shares Completion, respectively. As stated in the letter from the Board in the Circular, (i) the development cost of the Target Asset by the SOL Group is approximately RMB898 million; and (ii) the Target Business had net liabilities of approximately RMB102 million as at 30 June We are advised by the management of the Group that, given the scale of the Acquisitions, the impact of the Acquisitions on the net assets of the Group, if any, is not expected to be material immediately upon the completion of the Acquisitions. (c) Working capital With reference to the 2014 Interim Results, the Group had bank balances and cash of approximately HK$10 billion as at 30 June The Asset Consideration amounts to RMB965 million and the Aggregate Shares Consideration is expected to be not more than RMB600 million. We are advised by the management of the Group that, given the scale of the Acquisitions, the Acquisitions are not expected to have any material impact on the working capital of the Group immediately upon their completion. 58

61 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER 10. Recommendation Having considered the above principal factors, in particular: the Acquisitions are expected to bring forward a variety of benefits to the Group, where the Group can, among other things, (i) expand its hotel portfolio in the PRC; (ii) set foot in prime areas in Shanghai and enjoy potential growth; and (iii) utilise its cash resources to strengthen its principal business; our analysis of the pricing terms and other principal terms of the Acquisitions, including but not limited to our understanding that the considerations for the Acquisitions have taken the appraised value of the hotel properties into account; and the Group is not expected to experience any material adverse financial impact immediately following completion of the Acquisitions, we are of the opinion that each of the Acquisitions is in the interests of the Company and the Shareholders as a whole and the terms of each of the Acquisitions are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, we advise the Independent Board Committee to recommend, and we also recommend the Independent Shareholders, to vote in favour of the ordinary resolutions to be proposed at the SGM to approve the Framework Deed, the PRC SPAs, the SPA and the transactions contemplated thereunder. The Independent Shareholders should note that the Asset Acquisition and the Shares Acquisition are two separate and independent transactions for the Group and are not inter-conditional upon each other. Yours faithfully, For and on behalf of First Shanghai Capital Limited Eric Lee Managing Director Fanny Lee Managing Director Note: Mr. Eric Lee and Ms. Fanny Lee have been responsible officers of Type 6 (advising on corporate finance) regulated activity under the SFO since Both of them have participated in the provision of independent financial advisory services for various connected transactions involving companies listed in Hong Kong. 59

62 APPENDIX I PROPERTY VALUATION REPORT OF THE TARGET ASSET AND THE LXTD HOTEL The following is the text of a letter, summary of valuations and valuation certificates prepared for the purpose of incorporation in this circular received from DTZ Debenham Tie Leung Limited, an independent property valuer, in connection with its opinion of market values of the Target Asset and the LXTD Hotel in the PRC as at 25 August th Floor Jardine House 1 Connaught Place Central Hong Kong 26 September 2014 The Board of Directors Great Eagle Holdings Limited 33rd Floor, Great Eagle Centre 23 Harbour Road Wanchai Hong Kong Dear Sirs, Re: 1. The Langham Xintiandi Hotel located at 4/1 Qiu, Jiefang 108, Huaihai Middle Road, Luwan District (now known as Huangpu District), Shanghai, the People s Republic of China 2. The HUB Hotel located at Building #4, D17 Block, Land Plot 06, Phase I of Hongqiao Commercial Core Zone, Minhang District, Shanghai, the People s Republic of China INSTRUCTIONS, PURPOSE & VALUATION DATE In accordance with the instructions for us to carry out the valuations of the market values of the captioned properties (the Properties ), of which the Langham Xintiandi Hotel is jointly held by Great Eagle Holdings Limited (the Company ) and its subsidiaries (together referred to as the Group ) and Shui On Land Limited and its subsidiaries (together referred to as the Shui On Land Group ), whereas The HUB Hotel is held by the Shui On Land Group in the People s Republic of China (the PRC ), we confirm that we have carried out inspection, made relevant enquiries and obtained such further information as we considered necessary for the purpose of providing the Company with our opinion of the market values of the Properties as at 25 August 2014 (the Valuation Date ). I-1