THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION
If you are in any doubt about 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 advisers. If you have sold or transferred all your shares in Sunac China 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. This circular appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for any securities.
SUNAC CHINA HOLDINGS LIMITED 融創中國控股有限公司 (incorporated in the Cayman Islands with limited liability) (Stock Code: 01918)
(1) CONNECTED TRANSACTION — PROPOSED SHARE ISSUANCE UNDER SPECIFIC MANDATE AND (2) APPLICATION FOR WHITEWASH WAIVER
Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders
Capitalised terms used on this cover shall have the same meanings as those defined in the section headed “Definition” in this circular, unless the context requires otherwise. A letter from the Board is set out on pages 5 to 13 of this circular. A letter from the Independent Board Committee containing its recommendation to the Independent Shareholders is set out on pages 14 to 15 of this circular. A letter of advice from Quam Capital to the Independent Board Committee and the Independent Shareholders is set out on pages 16 to 37 of this circular. A notice convening the EGM of Sunac China Holdings Limited to be held at Conference Hall, 16/F, Building A, Far East International Plaza, No. 319 Xianxia Road, Shanghai, the PRC on 2 November 2016 (Wednesday) at 10 a.m. is set out on pages 209 to 211 of this circular. A form of proxy for use by the Shareholders at the EGM is also enclosed. Such form of proxy is also published on the website of The Stock Exchange of Hong Kong Limited (www.hkexnews.hk). Whether or not you are able to attend and vote at the EGM in person, you are requested to complete the form of proxy in accordance with the instructions printed thereon and return it to the branch share registrar of the Company in Hong Kong, Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17/F, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for the holding of the EGM or any adjournment thereof. Completion and return of the form of proxy will not preclude Shareholders from attending and voting at the EGM or any adjournment thereof (as the case may be) if they so wish. 17 October 2016 CONTENTS
Page
Definitions ...... 1
Letter from the Board ...... 5
Letter from the Independent Board Committee ...... 14
Letter from Quam Capital ...... 16
Appendix I — Financial information of the Group ...... 38
Appendix II — Summary of property valuation of the Group ...... 171
Appendix III — General information ...... 190
Notice of EGM ...... 209
—i— DEFINITIONS
In this circular, the following expressions shall have the meanings set out below unless the context requires otherwise:
“Announcement” the announcement of the Company dated 26 September 2016 in relation to, among other matters, the Subscription and the Whitewash Waiver
“associate(s)” has the meaning ascribed to it under the Listing Rules
“Board” the board of Directors
“Business Day(s)” any day(s) (excluding Saturday, Sunday and public holiday and any day on which a tropical cyclone warning signal number 8 or above is hoisted or on which a “black” rainstorm warning signal is in force between 9:00 a.m. and 5:00 p.m.) on which banks are generally open for business in Hong Kong
“Company” Sunac China Holdings Limited, a company incorporated in the Cayman Islands with limited liability, and the issued Shares of which are listed on the Main Board of the Stock Exchange (stock code: 1918)
“Completion” the completion of the issue and subscription of the Subscription Shares in accordance with the terms and conditions of the Subscription Agreement
“Completion Date” the day on which the completion of Subscription takes place, which shall be not later than the 10th Business Day after the date on which all the conditions precedent to the Subscription Agreement are fulfilled or such other date as the Company and the Subscriber may agree in writing
“connected person(s)” has the meaning ascribed to it under the Listing Rules
“controlling shareholder(s)” has the meaning ascribed to it under the Listing Rules
“Director(s)” director(s) of the Company
“Executive” the Executive Director of the Corporate Finance Division of the SFC or any delegate of the Executive Director
“EGM” an extraordinary general meeting of the Company to be convened to consider and, if thought fit, to approve the Subscription and the Whitewash Waiver
“Group” the Company and its subsidiaries
“HK$” Hong Kong dollars, the lawful currency of Hong Kong
—1— DEFINITIONS
“Hong Kong” the Hong Kong Special Administrative Region of the PRC
“Independent Board Committee” an independent board committee of the Company comprising all the non-executive Director and the independent non-executive Directors which has been established to advise the Independent Shareholders as to whether the Subscription and the Whitewash Waiver are fair and reasonable and as to voting
“Independent Financial Adviser” Quam Capital Limited, a corporation licensed to carry on type or “Quam Capital” 6 (advising on corporate finance) regulated activities under the SFO, the independent financial adviser appointed to advise the Independent Board Committee and the Independent Shareholders in connection with the Subscription and the Whitewash Waiver
“Independent Shareholders” Shareholders other than (i) the Subscriber Concert Group; and (ii) any Shareholder who is involved in or interested in the Subscription or the Whitewash Waiver, and their respective associates
“Last Trading Day” 26 September 2016, being the last day on which the Shares were traded on the Stock Exchange before prior to the entering into of the Subscription Agreement
“Latest Practicable Date” 13 October 2016, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information for inclusion in this circular
“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange
“Long Stop Date” 31 December 2016 or such other date as the Company and the Subscriber may agree in writing
“Mr. Sun” Mr. Sun Hongbin, the chairman of the Board and an executive Director
“PRC” The People’s Republic of China
“Registrar” the branch share registrar of the Company in Hong Kong, Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17/F, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong
“Relevant Period” the period commencing from 26 March 2016, being six months before the date of the Announcement and up to and including the Latest Practicable Date
—2— DEFINITIONS
“RMB” Renminbi, the lawful currency of the PRC
“SFC” the Securities and Futures Commission of Hong Kong
“SFO” Securities and Futures Ordinance, Chapter 571 of the Laws of Hong Kong
“Share(s)” ordinary share(s) of HK$0.1 each in the share capital of the Company
“Shareholder(s)” holder(s) of the Share(s)
“Share Option(s)” the outstanding option(s) held by the holders under the Share Option Schemes entitling them to subscribe for a total of 104,716,440 Shares as at the Latest Practicable Date
“Share Option Schemes” the share option scheme adopted by the Company at the annual general meeting held on 29 April 2011 and the share option scheme adopted by the Company at the annual general meeting held on 19 May 2014
“Stock Exchange” The Stock Exchange of Hong Kong Limited
“Subscriber” Sunac International Investment Holdings Ltd, a company incorporated in the British Virgin Islands with limited liability, being the subscriber as named in the Subscription Agreement and the controlling Shareholder of the Company wholly-owned by Mr. Sun
“Subscriber Concert Group” the Subscriber, Mr. Sun and parties acting in concert with any of them
“Subscription” the subscription of the Subscription Shares by the Subscriber pursuant to the terms of the Subscription Agreement
“Subscription Agreement” the subscription agreement dated 26 September 2016 entered into between the Company and the Subscriber in connection with the subscription of 453,074,433 new Shares by the Subscriber
“Subscription Price” HK$6.18 per Subscription Share
“Subscription Shares” a total of 453,074,433 new Shares to be subscribed by the Subscriber pursuant to the Subscription Agreement
“substantial shareholder(s)” has the meaning ascribed thereto in the Listing Rules
“Takeovers Code” the Code on Takeovers and Mergers
—3— DEFINITIONS
“trading day(s)” any day on which Shares are traded on the Main Board of the Stock Exchange
“US$” the lawful currency of the United States of America
“Whitewash Waiver” a waiver to be granted by the Executive pursuant to Note 1 on dispensations from Rule 26 of the Takeovers Code in respect of the obligation of the Subscriber to make a mandatory general offer for all the issued securities of the Company not already owned, controlled or agreed to be acquired by the Subscriber Concert Group which may otherwise arise as a result of the subscription of the Subscription Shares by the Subscriber pursuant to the Subscription Agreement
“%” per cent.
This circular has been printed in English and Chinese. In the event of any inconsistency, the English text of this circular shall prevail over its Chinese text.
—4— LETTER FROM THE BOARD
SUNAC CHINA HOLDINGS LIMITED 融創中國控股有限公司 (incorporated in the Cayman Islands with limited liability) (Stock Code: 01918)
Executive Directors: Registered office: Mr. SUN Hongbin (Chairman) Landmark Square Mr. WANG Mengde (Chief Executive Officer) 3rd Floor, 64 Earth Close Mr. JING Hong P.O. Box 30592 Mr. CHI Xun Grand Cayman KY1-1203 Mr. SHANG Yu Cayman Islands Mr. LI Shaozhong Headquarters and principal place Non-executive Director: of business in the PRC: Mr. ZHU Jia 10/F, Building C7 Magnetic Plaza Independent non-executive Directors: Binshuixi Road, Nankai District Mr. POON Chiu Kwok Tianjin 300381 Mr. LI Qin The PRC Mr. MA Lishan Mr. TSE Chi Wai Principal place of business in Hong Kong: 36/F, Tower Two Times Square 1 Matheson Street Causeway Bay Hong Kong
17 October 2016
To the Shareholders
Dear Sir or Madam,
(1) CONNECTED TRANSACTION — PROPOSED SHARE ISSUANCE UNDER SPECIFIC MANDATE AND (2) APPLICATION FOR WHITEWASH WAIVER
—5— LETTER FROM THE BOARD
1. INTRODUCTION
As stated in the Announcement, the Company and the Subscriber entered into the Subscription Agreement on 26 September 2016, pursuant to which the Company conditionally agreed to allot and issue to the Subscriber, and the Subscriber conditionally agreed to subscribe for, 453,074,433 Subscription Shares at the Subscription Price of HK$6.18 per Subscription Share.
The purpose of this circular is to provide you with, among others, (i) further information on the Subscription and the Whitewash Waiver; (ii) a letter of recommendation from the Independent Board Committee to the Independent Shareholders in respect of the Subscription and the Whitewash Waiver, (iii) a letter of advice from Quam Capital to the Independent Board Committee and the Independent Shareholders in respect of the Subscription and the Whitewash Waiver, (iv) other information as required under the Listing Rules and the Takeovers Code and (v) the notice of the EGM.
2. THE SUBSCRIPTION
The Subscription Agreement
Date:
26 September 2016
Parties:
(1) the Company, as the issuer; and
(2) the Subscriber, as the subscriber.
To the best of the knowledge, information and belief of the Directors, having made all reasonable enquiry, the Subscriber was solely and beneficially owned by Mr. Sun and was the controlling shareholder of the Company as at the Latest Practicable Date.
Number of Subscription Shares
Pursuant to the Subscription Agreement, the Company conditionally agreed to allot and issue, and the Subscriber conditionally agreed to subscribe for, the Subscription Shares comprising 453,074,433 Shares, which, having an aggregate nominal value of HK$45,307,443.30, represent:
(i) approximately 13.31% of the existing issued share capital of the Company as at the Subscription Agreement and the Latest Practicable Date;
(ii) approximately 11.75% of the issued share capital of the Company as enlarged by the allotment and issue of the Subscription Shares (assuming that there will not be any other changes in the issued share capital of the Company between the date of the Subscription Agreement and the Completion Date; and
—6— LETTER FROM THE BOARD
(iii) approximately 11.44% of the issued share capital of the Company as enlarged by the allotment and issue of the Subscription Shares and the Shares to be issued upon exercise of all the outstanding Share Options (assuming that there will not be any other changes in the issued share capital of the Company between the date of the Subscription Agreement and the Completion Date).
Subscription Price
The Subscription Price of HK$6.18 per Share represents:
(i) a premium of approximately 18.85% over the closing price of HK$5.2 per Share as quoted on the Stock Exchange on 13 October 2016, being the Latest Practicable Date;
(ii) a premium of approximately 6.55% over the closing price of HK$5.8 per Share as quoted on the Stock Exchange on 26 September 2016, being the date of the Subscription Agreement and the Last Trading Day;
(iii) a premium of approximately 3.34% over the average closing price of approximately HK$5.98 per Share as quoted on the Stock Exchange for the last five trading days up to and including the Last Trading Day; and
(iv) a premium of approximately 7.11% over the average closing price of approximately HK$5.77 per Share as quoted on the Stock Exchange for the last ten trading days up to and including the Last Trading Day.
The Subscription Price was agreed after arm’s length negotiations between the Company and the Subscriber with reference to recent market prices of the Shares.
Rights and ranking of the Subscription Shares
The Subscription Shares, when issued and fully paid, will rank equally in all respects among themselves and with all other Shares in issue as at the date of allotment and issue of the Subscription Shares, including the right to receive all future dividends and distributions which may be declared, made or paid by the Company with a record date falling on or after the date of allotment and issue of the Subscription Shares.
Conditions of the Subscription
The Subscription is conditional upon the following being fulfilled:
(a) the passing at the EGM of the resolution to approve the Subscription and the Whitewash Waiver by the Independent Shareholders by way of poll in accordance with the Listing Rules and the Takeovers Code;
—7— LETTER FROM THE BOARD
(b) the Executive granting the Whitewash Waiver and the satisfaction of all conditions (if any) attached to the Whitewash Waiver granted; and
(c) the listing committee of the Stock Exchange granting the listing of, and permission to deal in, the Subscription Shares.
Neither the Company nor the Subscriber may waive any of the conditions above. As at the Latest Practicable Date, none of the above conditions had been fulfilled.
In the event any of the above conditions has not been fulfilled on or before the Long Stop Date, the Subscription Agreement shall lapse automatically.
As the Subscription is subject to the fulfillment of certain conditions and may or may not proceed, Shareholders and potential investors are advised to exercise caution when dealing in the Shares, and are recommended to consult their stockbroker, bank manager, solicitor or other professional adviser if they are in any doubt about their position or as to actions they should take.
Mandate to issue the Subscription Shares
The Subscription Shares will be allotted and issued pursuant to the specific mandate to be sought at the EGM.
Application for listing
An application will be made by the Company to the listing committee of the Stock Exchange for the listing of, and permission to deal in, the Subscription Shares.
Completion of the Subscription
Pursuant to the Subscription Agreement, completion of the Subscription shall take place on the Completion Date.
3. INTENDED USE OF PROCEEDS
The gross and net aggregate proceeds after deducting all relevant costs and expenses of the Subscription is approximately HK$2,800 million and HK$2,795 million, respectively, representing a net price of approximately HK$6.17 per Subscription Share.
The Company intends to apply the net proceeds to be raised from the Subscription for repayment of offshore debts and as general working capital of the Company. In particular, the Company intends to allocate (i) the majority of the net proceeds for repayment of the offshore debts of the Group with a view to further reducing the Group’s exposure to interest rate and exchange rate risks due to offshore debts; and (ii) the balance, if any, as general working capital of the Group, including for payment of offshore management and other expenses and payables as may be incurred by the Group from time to time.
—8— LETTER FROM THE BOARD
After the Subscription, the Company will review its working capital needs, cash flow position and debt exposures from time to time and will consider other fund raising means if any additional funding is required by the Group for its business development and operation.
Having regard to the cash position of the Company (including the cash to assets ratio) and the amount and intended use of proceeds from the Subscription as set out above, the Company takes the view that the Subscription will not render the Company a cash company under the Listing Rules.
4. FUND RAISING ACTIVITIES IN THE PAST TWELVE MONTHS
The Company had not carried out any fund raising exercises by any issue of equity securities during the 12 months immediately preceding the Latest Practicable Date.
5. EFFECT ON SHAREHOLDING STRUCTURE OF THE COMPANY
Set out below is the shareholding structure of the Company (i) as at the Latest Practicable Date; (ii) immediately after completion of the Subscription; and (iii) immediately after completion of the Subscription and following the exercise of all Share Options in full, assuming that there will not be any other changes in the issued share capital and shareholding structure of the Company from the Latest Practicable Date. Shareholders should take note that the analysis under scenario (ii) and (iii) is shown for illustration purpose only.
Assuming that there will not be any other changes in the issued share capital and shareholding structure of the Company Immediately after completion of the Immediately after Subscription and exercise As at the Latest completion of the of all outstanding Share Shareholders Practicable Date Subscription Options in full (Note 2) Number of Approximate Number of Approximate Number of Approximate Shares % Shares % Shares %
Subscriber Concert Group The Subscriber (Note 1) 1,589,549,451 46.70 2,042,623,884 52.96 2,042,623,884 51.56 Mr. Sun Hongbin 10,090,000 0.30 10,090,000 0.26 11,390,000 0.29 Sub-total for the Subscriber Concert Group 1,599,639,451 47.00 2,052,713,884 53.22 2,054,013,884 51.85
Other Directors Mr. Wang Mengde 3,300,000 0.10 3,300,000 0.09 13,000,000 0.33 Mr. Jing Hong 650,000 0.02 650,000 0.02 9,600,000 0.24 Mr. Chi Xun — — — — 9,200,000 0.23 Mr. Shang Yu — — — — 7,450,000 0.19 Mr. Li Shaozhong — — — — 8,000,000 0.20
Public shareholders 1,800,252,865 52.89 1,800,252,865 46.67 1,860,369,305 46.96
Total 3,403,842,316 100 3,856,916,749 100 3,961,633,189 100
—9— LETTER FROM THE BOARD
Notes:
1. As at the Latest Practicable Date, the Subscriber was solely and beneficially owned by Mr. Sun. Mr. Sun was deemed to be interested in all the Shares in which the Subscriber was interested by virtue of the SFO.
2. As at the Latest Practicable Date, there were in aggregate 104,716,440 outstanding Share Options. Save for the Directors, none of the grantees of the Share Options are core connected persons (as defined in the Listing Rules) of the Company.
Based on the above, the Company will maintain the minimum public float of the Shares as required under the Listing Rules immediately upon completion of the Subscription.
6. INFORMATION OF THE PARTIES TO THE SUBSCRIPTION AGREEMENT
The Company is a company incorporated in the Cayman Islands with limited liability, and the shares of which are listed on the Main Board of the Stock Exchange. As specialised in integrated development of residential and commercial properties, the Company is one of the leading real estate developers in the PRC. In line with its regional focus and high-end positioning strategy, the Company has developed or is developing many high-quality property projects ranging from high-rise residences, detached villas, retail properties and offices in first-tier cities and core second-tier cities across the PRC.
The Subscriber is a company incorporated in the British Virgin Islands and is principally engaged in investment holding. The Subscriber is solely and beneficially owned by Mr. Sun, the chairman of the Board and an executive Director of the Company.
7. REASONS FOR AND BENEFITS OF THE SUBSCRIPTION
The Board considers that the Subscription will be beneficial to the Company as it will enable the Company to expand its working capital, increase its shareholders’ equity base and lower its debt ratio, thereby achieve optimization of its capital structure and improve its ability to resist financial risks, which will support the healthy and sustained development of the Company.
As at 31 August 2016, the total outstanding principal amount of the Group’s offshore debts was approximately US$2.4 billion, among which approximately US$1.6 billion carried interest at fixed rates and approximately US$0.8 billion carried interest at floating rates. The total outstanding principal amount of the Group’s offshore debts that would require repayment upon maturity before 31 December 2016 was estimated to be approximately US$0.2 billion.
In light of the recent market circumstances, including the relative ease of availability and lower cost of onshore debt financing as compared to offshore debt financing, as well as the interest rate and exchange rate risks faced by the Group due to its offshore debts, the Company considers that it is an opportune time to control and further reduce the scale of its offshore debt exposures. From a long term perspective, the Company is in a stage of rapid business development. The proceeds from the Subscription will enable the Company to repay part of the offshore debts which carry interests at floating rates. This is aligned with the Company’s long term strategy to optimize its debt structure, expand its shareholder’s equity base, lower its interest rate and exchange rate risks and improve its
—10— LETTER FROM THE BOARD profitability, in order to support the sustainable development of the Company. As compared to other equity fund raising means such as rights issue or placing of Shares, the Subscription does not involve any underwriting expenses or discount to the market price per Share which would increase the financial costs of the Company. With the Subscription Price set at a premium to the then market price for Shares, the Subscription represents the strong support from the controlling shareholder of the Company in the prospects and future development of the Company.
The Board (excluding the Independent Board Committee whose opinion has been set forth in the “Letter from the Independent Board Committee” of this circular after having been advised by Quam Capital in this regard) consider the terms of the Subscription Agreement to be normal commercial terms and the Subscription and the Whitewash Waiver are fair and reasonable and in the interests of the Company and the Shareholders as a whole.
By virtue of his interests in the Subscription through the Subscriber, Mr. Sun, the chairman of the Board and an executive Director of the Company, has abstained from voting on (and has not been counted in the quorum for) the relevant Board resolutions for approving the Subscription Agreement, the Whitewash Waiver and the transactions contemplated thereunder. Save for Mr. Sun, none of the Directors is regarded as having a material interest in, and therefore none of them is required to abstain from voting on, the relevant Board resolutions for approving the Subscription Agreement and the transactions contemplated thereunder.
8. LISTING RULES IMPLICATION
The Subscriber is solely and beneficially owned by Mr. Sun, the chairman of the Board and an executive Director of the Company. As at the Latest Practicable Date, each of the Subscriber and Mr. Sun was interested in approximately 46.70% and 0.30% of the total issued Shares of the Company respectively. As such, the Subscriber is the controlling shareholder and a connected person of the Company under the Listing Rules, and the Subscription constitutes a connected transaction for the Company and is subject to the reporting, announcement and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.
9. TAKEOVERS CODE IMPLICATIONS AND WHITEWASH WAIVER
As the Subscription will increase the aggregate interest of the Subscriber Concert Group by more than 2% from approximately 47.00% to approximately 53.22% (assuming that no outstanding Share Options are exercised and no other Shares are allotted or issued on or before the completion of the Subscription), the Subscription will give rise to an obligation on the part of the Subscriber to make a mandatory general offer for all the securities of the Company not already owned or agreed to be acquired by the Subscriber Concert Group under Rule 26 of the Takeovers Code.
The Subscriber has made an application for the Whitewash Waiver pursuant to Note 1 on Dispensations from Rule 26 of the Takeovers Code. Pursuant to the Takeovers Code, the Whitewash Waiver will be subject to, among other things, the approval of the Independent Shareholders by way of poll at the EGM in accordance with the requirements of the Takeovers Code. The Subscriber
—11— LETTER FROM THE BOARD
Concert Group and any Shareholders who are involved in or interested in the Subscription or the Whitewash Waiver or the transactions contemplated thereunder are required by the Listing Rules or the Takeovers Code to abstain from voting on the proposed resolution approving the Subscription and the Whitewash Waiver at the EGM.
As at the Latest Practicable Date, the Company did not believe that the Subscription gave rise to any concerns in relation to compliance with other applicable rules or regulations (including the Listing Rules). If a concern should arise after the Latest Practicable Date, the Company will endeavour to resolve the matter to the satisfaction of the relevant authority as soon as possible. The Company notes that the Executive may not grant the Whitewash Waiver if the Subscription does not comply with other applicable rules and regulations.
If the Whitewash Waiver is not granted by the Executive, or if granted, is not approved by the Independent Shareholders, the Subscription will not proceed.
If the Whitewash Waiver is approved by the Independent Shareholders, upon the issue of the Subscription Shares to the Subscriber (and assuming there is no other change to the issued share capital of the Company), the interest of the Subscriber in the Company will exceed 50%. The Subscriber may further increase its shareholdings in the Company without incurring any further obligations under Rule 26 of the Takeovers Code to make a general offer.
10. EGM
A notice convening the EGM is set out on pages 209 to 211 of this circular. The EGM will be convened and held at Conference Hall, 16/F, Building A, Far East International Plaza, No. 319 Xianxia Road, Shanghai, the PRC on 2 November 2016 (Wednesday) at 10 a.m. for the purpose of considering and, if thought fit, approving the Subscription and the Whitewash Waiver.
A form of proxy for use at the EGM is enclosed with this circular. Such form of proxy is also published on the website of the Stock Exchange (www.hkexnews.hk). Whether or not you are able to attend and vote at the EGM in person, you are requested to complete the form of proxy in accordance with the instructions printed thereon and return it to the branch share registrar of the Company in Hong Kong, Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17/F, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for the holding of the EGM or any adjournment thereof. Completion and return of the form of proxy will not preclude Shareholders from attending and voting at the EGM or any adjournment thereof (as the case may be) if they so wish.
The resolution proposed at the EGM will be taken by way of poll. An announcement on the poll results will be made by the Company after the EGM in the manner prescribed under Rule 13.39(5) of the Listing Rules.
—12— LETTER FROM THE BOARD
11. RECOMMENDATION
Your attention is drawn to the letter from the Independent Board Committee set out on pages 14 to 15 of this circular which contains its recommendation to the Independent Shareholders as to voting at the EGM regarding the Subscription and the Whitewash Waiver. The Independent Board Committee comprised all the non-executive Director and independent non-executive Directors, namely Mr. Zhu Jia, Mr. Poon Chiu Kwok, Mr. Li Qin, Mr. Ma Lishan and Mr. Tse Chi Wai, who have not been involved or interested in, directly or indirectly, the Subscription and the Whitewash Waiver.
Your attention is also drawn to the letter from Quam Capital set out on pages 16 to 37 of this circular which contains its advice to the Independent Board Committee and the Independent Shareholders regarding the Subscription and the Whitewash Waiver and the principal factors and reasons taken into consideration in arriving at its advice.
The Directors (including the members of the Independent Board Committee whose opinion have been set forth in the “Letter from the Independent Board Committee” of this circular after having been advised by Quam Capital in this regard) consider that the terms of the Subscription and the Whitewash Waiver are fair and reasonable and are in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors (including the members of the Independent Board Committee whose opinion have been set forth in the “Letter from the Independent Board Committee” of this circular after having been advised by Quam Capital in this regard) recommend the Independent Shareholders to vote in favour of the resolution to be proposed at the EGM to approve the Subscription and the Whitewash Waiver. You are advised to read the letter from the Independent Board Committee and the letter from Quam Capital mentioned above before deciding how to vote on the resolution to be proposed at the EGM.
12. ADDITIONAL INFORMATION
Your attention is also drawn to the additional information set out in the appendices to this circular.
By order of the Board Sunac China Holdings Limited WANG Mengde Executive Director and Chief Executive Officer
—13— LETTER FROM THE INDEPENDENT BOARD COMMITTEE
SUNAC CHINA HOLDINGS LIMITED 融創中國控股有限公司 (incorporated in the Cayman Islands with limited liability) (Stock Code: 01918)
17 October 2016
To the Independent Shareholders
Dear Sir or Madam,
(1) CONNECTED TRANSACTION — PROPOSED SHARE ISSUANCE UNDER SPECIFIC MANDATE AND (2) APPLICATION FOR WHITEWASH WAIVER
We refer to the circular of the Company dated 17 October 2016 (the “Circular”), of which this letter forms part. Unless the context requires otherwise, capitalised terms used herein have the same meanings as defined in the Circular.
We have been appointed by the Board as the Independent Board Committee to advise the Independent Shareholders as to whether the terms of the Subscription and the Whitewash Waiver are fair and reasonable as far as the Independent Shareholders are concerned and to recommend whether or not the Independent Shareholders should vote for the resolution to be proposed at the EGM to approve the Subscription and the Whitewash Waiver. The appointment of Quam Capital as the independent financial adviser to advise you and us in this regard has been approved by us. Details of its advice, together with the principal factors and reasons it has taken into consideration in arriving at such advice, are set out on pages 16 to 37 of the Circular.
Your attention is also drawn to the “Letter from the Board” in the Circular and other information set out in the appendices thereto.
—14— LETTER FROM THE INDEPENDENT BOARD COMMITTEE
Having considered the terms of the Subscription and the Whitewash Waiver and taking into account the independent advice from Quam Capital, in particular the principal factors, reasons and recommendation as set out in its letter, we are of the opinion that the terms of the Subscription are fair and reasonable, and are of the view that the Whitewash Waiver, which is to facilitate the implementation of the Subscription, is fair and reasonable and in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the resolution to be proposed at the EGM to approve the Subscription and the Whitewash Waiver.
Yours faithfully, For and on behalf of the Independent Board Committee Mr. ZHU Jia Mr. POON Chiu Kwok Mr.LIQin Mr. MA Lishan Mr. TSE Chi Wai Non-executive Director Independent Independent Independent Independent non-executive non-executive non-executive non-executive Director Director Director Director
—15— LETTER FROM QUAM CAPITAL
The following is the full text of a letter of advice from Quam Capital, the independent financial adviser to the Independent Board Committee and the Independent Shareholders, which has been prepared for the purpose of incorporation in this circular, setting out its advice to the Independent Board Committee and the Independent Shareholders in respect of the Subscription and the Whitewash Waiver.
17 October 2016
To the Independent Board Committee and the Independent Shareholders
Sunac China Holdings Limited 36/F, Tower Two Times Square 1 Matheson Street Causeway Bay Hong Kong
Dear Sirs/Madams,
(1) CONNECTED TRANSACTION — PROPOSED SHARE ISSUANCE UNDER SPECIFIC MANDATE AND (2) APPLICATION FOR WHITEWASH WAIVER
INTRODUCTION
We refer to our appointment as the independent financial adviser (the “Independent Financial Adviser”) to the Independent Board Committee and the Independent Shareholders in respect of the Subscription and the Whitewash Waiver, details of which are set out in the circular of the Company dated 17 October 2016 (the “Circular”), of which this letter forms part. Capitalised terms used in this letter shall have the same meanings as those defined in the Circular unless the context otherwise requires.
On 26 September 2016, the Company and the Subscriber entered into the Subscription Agreement, pursuant to which the Company conditionally agreed to allot and issue to the Subscriber, and the Subscriber conditionally agreed to subscribe for, 453,074,433 Subscription Shares at the Subscription Price of HK$6.18 per Subscription Share.
—16— LETTER FROM QUAM CAPITAL
The Subscriber is solely and beneficially owned by Mr. Sun, the chairman of the Board and an executive Director. As at the Latest Practicable Date, each of the Subscriber and Mr. Sun was interested in approximately 46.70% and 0.30% of the total issued Shares respectively. The Subscriber is therefore the controlling shareholder and a connected person of the Company under the Listing Rules. As a result, the Subscription constitutes a connected transaction for the Company and is subject to the reporting, announcement and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.
As the Subscription will increase the aggregate interest of the Subscriber Concert Group by more than 2% from approximately 47.00% to approximately 53.22% (assuming that no outstanding Share Options are exercised and no other Shares are allotted and issued on or before Completion), the Subscription will give rise to an obligation on the part of the Subscriber to make a mandatory general offer for all the securities of the Company not already owned or agreed to be acquired by the Subscriber Concert Group under Rule 26 of the Takeovers Code, unless the Whitewash Waiver is obtained from the Executive. In this regard, the Subscriber has made an application to the Executive for the Whitewash Waiver pursuant to Note 1 on dispensations from Rule 26 of the Takeovers Code.
The Independent Board Committee comprising all the non-executive Director and the independent non-executive Directors, namely Mr. Zhu Jia, Mr. Poon Chiu Kwok, Mr. Li Qin, Mr. Ma Lishan and Mr. Tse Chi Wai, has been established to advise the Independent Shareholders on (i) whether the terms of the Subscription Agreement and the Whitewash Waiver are fair and reasonable so far as the Independent Shareholders are concerned; (ii) whether the Subscription and the Whitewash Waiver are in the interests of the Company and the Shareholders as a whole; and (iii) the voting action that should be taken by the Independent Shareholders at the EGM. The Independent Board Committee has approved our appointment as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in the same regard.
We are not associated with the Company, the Subscriber, Mr. Sun or any of their respective substantial shareholders, or any party acting, or presumed to be acting, in concert with any of them. Apart from normal professional fees payable to us in connection with this engagement, no other arrangement exists whereby we will receive any fees or benefits from the Company, the Subscriber, Mr. Sun or any of their respective substantial shareholders, or any party acting, or presumed to be acting, in concert with any of them. In the last two years and up to the Latest Practicable Date, a fellow subsidiary of Quam Capital had provided investor identity tracking service to the Company. As the aggregate contract value of the service provided by our fellow subsidiary is immaterial, we do not consider the aforesaid relationship will affect the objectivity of our advice. Accordingly, we are considered eligible to give an independent advice on the Subscription and the Whitewash Waiver.
—17— LETTER FROM QUAM CAPITAL
BASIS OF OUR OPINION
In formulating our opinion and advice, we have relied on (i) the information and facts contained or referred to in the Circular; (ii) the information and facts supplied by the Group and its advisers; (iii) the opinions expressed by and the representations of the Directors and the management of the Group; and (iv) our review of the relevant public information. We have assumed that all the information provided and representations and opinions expressed to us or contained or referred to in the Circular were true, accurate and complete in all material respects at the time they were made and up to the Latest Practicable Date and may be relied upon. We have also sought and received confirmation from the Directors and the management of the Group that no material facts have been withheld or omitted from the information provided and opinions expressed to us by them and that all information or representations regarding the Group and the Subscriber Concert Group provided to us by the Group, the Directors, the management of the Group and the advisers of the Company are true, accurate, complete and not misleading in all material respects at the time they were made and up to the Latest Practicable Date. Shareholders will be informed as soon as possible if we become aware of any material change to such information. We have also relied on the responsibility statement made by the Directors contained in the Circular. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the Group, the Directors, the management of the Group and the advisers of the Company.
We consider that we have reviewed sufficient information currently available to reach an informed view and to justify our reliance on the accuracy of the information contained in the Circular so as to provide a reasonable basis for our recommendation. We have not, however, carried out any independent verification of the information provided, representations made or opinions expressed by the Group, the Directors, the management of the Group and the advisers of the Company, nor have we conducted any form of in-depth investigation into the business, affairs, operations, financial position or future prospects of any member of the Group or its associates.
PRINCIPAL FACTORS AND REASONS CONSIDERED
In formulating our opinion and recommendation regarding the Subscription and Whitewash Waiver, we have considered the principal factors and reasons set out below:
1. Information on the Group
(i) Background of the Group
The Group is one of the leading real estate developers in the PRC and is specialised in the integrated development of residential and commercial properties. In line with its regional focus and high-end positioning strategy, the Group has been developing many high-quality property projects ranging from high-rise residences, detached villas, retail properties and offices in the first-tier cities and core second-tier cities across the PRC.
—18— LETTER FROM QUAM CAPITAL
As at 30 June 2016, the Group was engaging in a total of 132 property development projects in 21 core first- and second-tier cities in the PRC with land bank of approximately 37.76 million square metres (“sq.m.”) and attributable land bank of approximately 24.72 million sq.m..
(ii) Financial performance
Set out below is certain key financial information of the Group as extracted from the consolidated statement of comprehensive income for the two years ended 31 December 2014 and 2015 set out in the annual report for the year ended 31 December 2015 (the “2015 Annual Report”) and for the six months ended 30 June 2015 and 2016 set out in the interim report for the six months ended 30 June 2016 (the “2016 Interim Report”):
For the six months For the year ended ended 30 June 31 December 2016 2015 2015 2014 (unaudited) (unaudited) (audited) (audited) RMB’000 RMB’000 RMB’000 RMB’000
Revenue 10,586,085 5,442,722 23,010,943 25,071,959 - Property development and investment 10,330,591 5,224,665 22,511,143 24,719,336 - Property management and others 255,494 218,057 499,800 352,623 Gross profit 1,406,115 618,051 2,857,265 4,341,880 Gross profit margin (Note) 20.9% 23.6% 19.0% 25.4% Other income and gains 1,551,361 2,220,585 4,111,990 1,020,451 Finance costs 1,578,739 698,577 (2,520,575) (1,267,380) Share of post-tax (losses)/profits of investments accounted for using equity method, net (235,504) 451,871 1,693,207 2,181,283 Profit for the year/period 102,770 1,257,663 3,608,403 3,232,629 Profit attributable to owners of the Company 72,935 951,399 3,297,828 3,222,070
Note: Excluding the impact of fair value re-measurement and provision for impairment of the properties.
The Group generates its revenue substantially from sales of residential and commercial properties which accounted for approximately 97.8% and 97.6% of total revenue of the Group for the year ended 31 December 2015 and for the six months ended 30 June 2016, respectively. Only a small portion of the Group’s revenue was derived from provision of property management services.
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Six months ended 30 June 2016 compared to six months ended 30 June 2015
Revenue of the Group increased by approximately 94.5% from approximately RMB5,442.7 million for the six months ended 30 June 2015 to approximately RMB10,586.1 million for the six months ended 30 June 2016, mainly attributable to the increase in total area of properties delivered, especially in the Hangzhou and Chengdu regions, for the six months ended 30 June 2016.
Excluding the impact of fair value re-measurement and provision for impairment of the properties, gross profit margin of the Group decreased from approximately 23.6% for the six months ended 30 June 2015 to approximately 20.9% for the six months ended 30 June 2016, mainly attributable to the decrease in the proportion of revenue derived from properties with higher gross margins in Beijing and Shanghai for the six months ended 30 June 2016.
The decrease in other income and gains from approximately RMB2,220.6 million for the six months ended 30 June 2015 to approximately RMB1,551.4 million for the six months ended 30 June 2016 was primarily due to the decrease in gains from disposal of subsidiaries, joint ventures and associates and interest income from joint ventures and associates, which was partially offset by the increase in gains from business combination and investments in joint ventures.
Finance costs increased by approximately 126.0% from approximately RMB698.6 million for the six months ended 30 June 2015 to approximately RMB1,578.7 million for the six months ended 30 June 2016, mainly attributable to (a) the increase in the Group’s net foreign exchange loss from approximately RMB4.4 million for the six months ended 30 June 2015 to approximately RMB376.0 million for the six months ended 30 June 2016; and (b) the increase in expensed finance cost from approximately RMB694.1 million for the six months ended 30 June 2015 to approximately RMB1,202.7 million for the six months ended 30 June 2016 resulting from the decrease in the capitalisation ratio. Total finance costs (including capitalised and expensed finance costs) increased from approximately RMB1,362.2 million for the six months ended 30 June 2015 to approximately RMB1,645.5 million for the six months ended 30 June 2016, mainly due to the increase in borrowings. The weighted-average effective interest rate of the Group’s borrowings however decreased from approximately 7.7% for the six months ended 30 June 2015 to approximately 6.4% for the six months ended 30 June 2016, primarily attributable to continued optimisation of debt structure through refinancing existing borrowings with corporate bonds at lower finance costs.
The Group recorded a share of net losses of investments accounted for using equity method of approximately RMB235.5 million for the six months ended 30 June 2016, as compared to a net post-tax profit of approximately RMB451.9 million for the six months ended 30 June 2015. This was primarily due to the decrease in the proportion of sales by joint ventures and associates of properties with higher gross margins, including Beijing Jinmao Residence, Beijing Jinmao Palace and Tianjin Horizon Capital, as well as the establishment of a relatively large number of new joint ventures and associates which did not generate any sales and recorded only operating expenses prior to the property delivery stage, resulting in a share of net losses of investments for the six months ended 30 June 2016.
—20— LETTER FROM QUAM CAPITAL
As a result of the aforesaid, profit attributable to owners of the Company decreased by approximately 92.3% from approximately RMB951.4 million for the six months ended 30 June 2015 to approximately RMB72.9 million for the six months ended 30 June 2016.
Year ended 31 December 2015 compared to year ended 31 December 2014
Revenue of the Group decreased by approximately 8.2% from approximately RMB25,072.0 million for the year ended 31 December 2014 to approximately RMB23,010.9 million for the year ended 31 December 2015, primarily attributable to the decrease in average selling price of properties sold from RMB15,001 per sq.m. for the year ended 31 December 2014 to RMB12,430 per sq.m. for the year ended 31 December 2015, representing a decrease of approximately 17.1%. Such decrease in average selling price of properties sold was mainly due to (a) the decrease in delivered area of properties with higher unit prices such as Tianjin Majestic Capital, Beijing West Chateau and Chongqing Asia Pacific Enterprise Valley as these projects were approaching the closure of sales; and (b) the higher percentage of total revenue derived from sales of properties with lower unit prices which were mainly located in Tianjin, Chongqing and Chengdu.
Excluding the impact of fair value re-measurement and provision for impairment of the properties, gross profit margin of the Group decreased from approximately 25.4% for the year ended 31 December 2014 to approximately 19.0% for the year ended 31 December 2015, primarily attributable to (a) the decrease in delivered area of properties with higher gross margins including Tianjin Majestic Capital, Beijing West Chateau, Chongqing Olympic Garden and Chongqing Asia Pacific Enterprise Valley as these projects were approaching the closure of sales; and (b) the higher percentage of total revenue derived from sales of properties with lower average selling price than expected which were mainly located in Tianjin and Chongqing. As a result of the decrease in revenue and gross profit margin of the Group, gross profit of the Group decreased by approximately 34.2% from approximately RMB4,341.9 million for the year ended 31 December 2014 to approximately RMB2,857.3 for the year ended 31 December 2015.
Other income and gains increased significantly from approximately RMB1,020.5 million for the year ended 31 December 2014 to approximately RMB4,112.0 million for the year ended 31 December 2015, primarily due to (a) the gains of approximately RMB2,180.0 million from disposing certain equity interests of the Group’s subsidiaries and certain equity interests and debts of the Group’s associates; and (b) the gains of approximately RMB829.5 million from business combinations and the acquisition of interests in certain joint ventures.
Finance costs increased substantially from approximately RMB1,267.4 million for the year ended 31 December 2014 to approximately RMB2,520.6 million for the year ended 31 December 2015, mainly attributable to (a) the increase in the Group’s foreign exchange net loss from approximately RMB8.3 million for the year ended 31 December 2014 to approximately RMB800.1 million for the year ended 31 December 2015; and (b) the increase in expensed finance cost from approximately RMB1,259.0 million for the year ended 31 December 2014 to approximately RMB1,680.7 million for the year ended 31 December 2015, primarily due to a lower interest capitalisation ratio. Total finance costs (including capitalised and expensed finance costs) however decreased from approximately
—21— LETTER FROM QUAM CAPITAL
RMB3,036.0 million for the year ended 31 December 2014 to approximately RMB2,908.7 million for the year ended 31 December 2015, mainly due to the decrease in the weighted-average effective interest rate of the Group’s borrowings from approximately 9.1% for the year ended 31 December 2014 to approximately 7.6% for the year ended 31 December 2015.
The decrease in share of post-tax profits of investments accounted for using equity method, net, from approximately RMB2,181.3 million for the year ended 31 December 2014 to approximately RMB1,693.2 million for the year ended 31 December 2015 was mainly due to the lower percentage of total revenue derived from sales of properties developed by joint ventures and associates with higher gross margin, including Beijing Jinmao Residence, Beijing Jinmao Palace and Tianjin Horizon Capital, resulting in a decrease in the overall operating profit of the Group’s joint ventures and associates.
As a result of the aforesaid, profit attributable to owners of the Company increased by approximately 2.4% from approximately RMB3,222.1 million for the year ended 31 December 2014 to approximately RMB3,297.8 million for the year ended 31 December 2015.
(iii) Financial position
Set out below is the summary of the consolidated balance sheets of the Group as at 31 December 2014 and 2015 and 30 June 2016 as extracted from the 2015 Annual Report and the 2016 Interim Report:
As at 30 June As at 31 December 2016 2015 2014 (Unaudited) (audited) (audited) RMB’000 RMB’000 RMB’000
Non-current assets Investments accounted for using the equity method 17,728,984 15,260,581 12,048,789 Prepayment for investments 3,230,375 4,722,036 944,991 Other non-current assets 1,964,714 1,801,657 1,901,673
22,924,073 21,784,274 14,895,453 Current assets Properties under development 48,923,225 34,142,659 35,700,545 Completed properties held for sale 15,148,069 15,727,129 13,682,451 Trade and other receivables 2,080,084 970,481 2,474,809 Amounts due from related companies 20,138,851 11,660,049 17,999,418 Prepayments 5,209,953 4,166,080 2,568,194 Restricted cash 11,809,911 4,371,010 4,384,145 Cash and cash equivalents 28,337,573 22,687,280 20,657,285
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As at 30 June As at 31 December 2016 2015 2014 (Unaudited) (audited) (audited) RMB’000 RMB’000 RMB’000
131,647,666 93,724,688 97,466,847
Total assets 154,571,739 115,508,962 112,362,300
Non-current liabilities Borrowings 38,150,191 27,214,240 20,544,113 Derivative financial instruments 10,209 — — Deferred income tax liabilities 5,317,308 4,379,412 5,886,751
43,477,708 31,593,652 26,430,864 Current liabilities Trade and other payables 10,919,393 10,943,950 11,615,723 Advanced proceeds from customers 20,118,326 13,420,386 12,270,841 Amounts due to related companies 22,176,869 18,212,922 20,713,919 Current income tax liabilities 6,615,962 7,333,489 6,508,638 Borrowings 24,648,326 14,584,393 13,839,682
84,478,876 64,495,140 64,948,803
Total liabilities 127,956,584 96,088,792 91,379,667
Net asset value 26,615,155 19,420,170 20,982,633
Equity attributable to owners of the Company 19,128,449 19,005,389 16,352,938
As at 30 June 2016, the Group’s total assets amounted to approximately RMB154,571.7 million and mainly included (a) investments accounted for using the equity method; (b) properties under development; (c) completed properties held for sale; (d) amounts due from related companies; and (e) cash and cash equivalents. As at 30 June 2016, the Group’s total liabilities were approximately RMB127,956.6 million, which mainly consisted of (a) borrowings; (b) advanced proceeds from customers; and (c) amounts due to related companies. The Group’s net gearing ratio, being total borrowings less cash and cash equivalents and restricted cash and divided by total equity, increased from approximately 75.9% as at 31 December 2015 to approximately 85.1% as at 30 June 2016.
—23— LETTER FROM QUAM CAPITAL
(iv) Prospects of the Group
In 2015, despite a decrease in revenue and gross profit primarily due to the decrease in average selling prices of properties sold, the Group’s operating results remained stable with a moderate growth in profit attributable to owners of the Company of approximately 2.4% as compared to 2014. In the first half of 2016, despite a significant decrease in profit, the growth in revenue and gross profit indicated a turnaround of the Group’s business operations.
The Group upholds its regional-based development strategy by acquiring quality property projects at reasonable prices in the core first- and second-tier cities in the PRC with a balanced supply and demand. As set out in the 2016 Interim Report, although the PRC economy is still faced with relatively great pressures, the PRC government will continue to adopt positive fiscal policies and monetary policies to stabilise economic growth and real estate markets with a healthy demand and supply relationship in the first- and second-tier cities will still maintain a relatively high degree of prosperity. This provides a favourable environment for the Group to pursue its regional-based development strategy, accelerate the launch of its projects for sale and achieve a greater growth in the sales amount. On this basis, the Directors are of the view, and we concur, that prospects of the Group’s principal business are expected to remain generally positive.
To take advantage of such favourable environment and provide support for the sustainable and steady development of the Group, the Group has been supplementing its land bank by acquiring property projects in the core first- and second-tier cities in the PRC. This has a high funding requirement. Maintaining an optimal capital structure through diversification of financing channels allows the Group to control its increasing finance costs and gearing, which we consider beneficial to the Company and the Shareholders as a whole.
2. Reasons for and benefits of the Subscription
Specialised in the integrated development of residential and commercial properties, the Group adheres to the regional focus development strategy through acquiring quality property projects in the core first- and second-tier cities in the PRC. As disclosed in the 2015 Annual Report, the Group acquired land bank of approximately 10.15 million sq.m. for the year ended 31 December 2015, with all projects located in core first- and second-tier cities in the PRC. Operating in a capital intensive industry, the Group has been financing its operations, including acquisition and development of new property projects, through proceeds from, among other things, borrowings from commercial banks and other parties. This resulted in increasing finance costs and gearing for the two years ended 31 December 2015 and the six months ended 30 June 2016.
To reduce its finance costs, the Group continues to take advantage of the domestic corporate bond market by replacing its historical financing at higher cost with corporate bonds at lower cost. This led to the continued decrease in weighted-average effective interest rate of the Group’s borrowings from approximately 9.1% for the year ended 31 December 2014 to approximately 6.4% for the six months ended 30 June 2016. As mentioned in the 2016 Interim Report, the Group attributed such decline in weighted-average effective interest rate to diversification of financing channels, control of refinancing costs and replacement of existing high-cost borrowings.
—24— LETTER FROM QUAM CAPITAL
We concur with the Directors that the Subscription, which is interest-free in nature, allows the Group to expand its working capital, increase its equity base, lower its gearing and therefore optimise its capital structure for the healthy and sustainable development of the Group, as disclosed in the “Letter from the Board” contained in the Circular. The Subscription also represents an opportunity for the Group to diversify its existing debt financing channels into equity financing channels while retaining existing financial resources for acquisition and development of new property projects which have high funding requirements. As disclosed in the “Letter from the Board” contained in the Circular, the Company intends to apply the net proceeds from the Subscription to repay its existing offshore debts which carry interests at floating rates and for working capital requirements. We concur with the Directors that the repayment of part of the offshore debts with the proceeds from the Subscription allows the Group to further reduce its exposure to interest rate and exchange rate risks due to offshore debts, given the relative ease of availability and lower cost of onshore debt financing. We also consider that with continued optimisation of its capital structure, the Group will be well positioned to take advantage of the favourable environment in the real estate industry as mentioned in the sub-section headed “Prospects of the Group” above.
3. Principal terms of the Subscription Agreement
Set out below is a summary of principal terms of the Subscription Agreement. Further details of terms of the Subscription Agreement are set out in the “Letter from the Board” contained in the Circular.
(i) The Subscription
Pursuant to the Subscription Agreement, the Company conditionally agreed to allot and issue to the Subscriber, and the Subscriber conditionally agreed to subscribe for, 453,074,433 Subscription Shares at the Subscription Price of HK$6.18 per Subscription Share. The total consideration payable in cash by the Subscriber is approximately HK$2,800 million.
(ii) Rights and ranking of the Subscription Shares
The Subscription Shares will rank pari passu in all respects with the Shares in issue as at the date of allotment and issue of the Subscription Shares, including the right to receive all future dividends and distributions which may be declared, made or paid by the Company with a record date falling on or after the date of allotment and issue of the Subscription Shares.
(iii) Conditions of the Subscription Agreement
Completion of the Subscription is conditional upon (a) the passing at the EGM of the resolution to approve the Subscription and the Whitewash Waiver by the Independent Shareholders; (b) the Executive granting the Whitewash Waiver; and (c) the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in, the Subscription Shares. Neither the Company nor the Subscriber may waive any of the conditions above. As at the Latest Practicable Date, none of the above conditions had been fulfilled.
—25— LETTER FROM QUAM CAPITAL
4. Evaluation of the Subscription Price
The Subscription Price is HK$6.18 per Subscription Share. As stated in the sub-section headed “Subscription Price” in the section headed “The Subscription” in the “Letter from the Board” contained in the Circular, the Subscription Price was arrived at after arm’s length negotiations between the Company and the Subscriber after taking into account the prevailing market prices of the Shares.
(i) Comparison of the Subscription Price to market price
The Subscription Price of HK$6.18 per Share represents:
(a) a premium of approximately 6.6% over the closing price of HK$5.80 per Share as quoted on the Stock Exchange on 26 September 2016, being the Last Trading Day;
(b) a premium of approximately 3.3% over the average closing price of HK$5.98 per Share as quoted on the Stock Exchange for the last five trading days up to and including the Last Trading Day;
(c) a premium of approximately 7.1% over the average closing price of HK$5.77 per Share as quoted on the Stock Exchange for the last ten trading days up to and including the Last Trading Day;
(d) a premium of approximately 8.6% over the average closing price of HK$5.69 per Share as quoted on the Stock Exchange for the last thirty trading days up to and including the Last Trading Day; and
(e) a premium of approximately 18.8% over the closing price of HK$5.20 per Share as quoted on the Stock Exchange on 13 October 2016, being the Latest Practicable Date.
These premiums are compared with the discounts and/or premiums for comparable issues set out in the sub-section headed “Market comparables on subscription of new shares” below.
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(ii) Analysis of historical share price performance
The chart below illustrates the daily closing prices per Share and trading volume for the period from 1 September 2015 up to and including the Latest Practicable date (the “Review Period”):
HK$ per Share Number of Shares ('000) 7 140,000 Subscription Price = HK$6.18 6 120,000
5 100,000
4 80,000
3 60,000
2 40,000
1 20,000
0 0 Jul-16 Sep-16 Oct-16 Sep-15 Oct-15 Nov-15 Dec-15 Feb-16 Mar-16 Apr-16 May-16 Aug-16 Jan-16 Jun-16
Trading volume ( in thousands) Closing Share price Subscription Price
Source: Bloomberg
As shown in the chart above, during the Review Period, the closing Share prices fluctuated between HK$3.95 per Share and HK$6.08 per Share. The Subscription Price has been, at all time during the Review Period, at premiums over the closing Share prices. The Subscription Price represents a premium of 1.6% over the highest closing Share price and a premium of approximately 56.5% over the lowest closing Share price during the Review Period.
During the period from 1 September 2015 to 31 December 2015, the closing Share prices showed an upward trend in general. The Share price closed at HK$6.00 per Share on 31 December 2015, representing an increase of approximately 46.3% from HK$4.10 per Share on 1 September 2015. The Company published a number of announcements during this period in relation to, among other things, certain unaudited monthly operation data of the Group, acquisitions of a number of property projects located in Xian, Jinan, Nanjing, Chengdu and Shanghai, the change of the chief executive officer, chief financial officer and joint company secretary of the Company, the redemption of the outstanding 12.5% senior notes due 2017 in an aggregate principal amount of US$400 million and the cessation of the strategic cooperation with Yurun Holdings Group Company Limited.
The closing Share prices showed a downward trend after 31 December 2015 and reached a low of HK$4.44 per Share on 12 February 2016. The closing Share price then resumed its upward trend and reached a high of HK$5.91 per Share on 18 March 2016. From 31 December 2015 to 18 March 2016, the Company announced that the Group acquired certain property projects located in Shanghai, Suzhou and Zhengzhou.
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The closing Share price then gradually fell from HK$5.91 per Share on 18 March 2016 to HK$4.51 per Share on 16 June 2016. During this period, the Company published a number of announcements in relation to, among other things, the annual results for the year ended 31 December 2015, the acquisition of a number of property projects located in Shanghai, Nanjing, Hangzhou, Huizhou and Shenzhen, and completion of the partial redemption of the 9.375% senior notes due 2018 in an aggregate principal amount of US$200 million.
Since 16 June 2016, the closing Share prices had been on an upward trend in general. On 1 August 2016, the Company published a profit warning announcement, in which the profits attributable to Shareholders for the six month months ended 30 June 2016 was expected to record a significant decline as compared with the same period in 2015, despite an expected significant increase in revenue and gross profit of the Group. In the same month, the Company completed the redemption of the remaining outstanding 9.375% senior notes due 2018 in an aggregate principal amount of US$300 million and announced the proposed public offering of domestic corporate bonds of a wholly-owned subsidiary of the Company in the PRC with a total principal amount of up to RMB4 billion as well as the acquisition of a property project located in Hainan. On 30 August 2016, before trading hours, the Company published the interim results announcement for the six months ended 30 June 2016. The Share price closed at HK$5.45 per Share on 30 August 2016, representing an increase of approximately 20.8% from HK$4.51 per Share on 16 June 2016.
On 18 September 2016, the Company announced to acquire a total of 42 property projects located in 16 cities in China, including Beijing, Tianjin, Chongqing and Hangzhou, from Legend Holdings Corporation and its subsidiary, at a consideration of approximately RMB13,788.4 million. The closing Share price rose to HK$5.87 per Share on 19 September 2016, representing an increase of approximately 7.1% from HK$5.48 per Share on 15 September 2016. On 21 September 2016, after trading hours, it was announced that the subscription by the Group of approximately 16.96% of the issued share capital of Jinke Property Group Co., Ltd. (“Jinke Property”) was accepted for a total consideration of approximately RMB4,000.0 million. Jinke Property is a company listed on the Shenzhen Stock Exchange and is a diversified comprehensive enterprise focusing on real estate development. The Share price closed at HK$6.08 per Share on 22 September 2016.
The Announcement was published on 26 September 2016 (after trading hours). The Share price closed at HK$5.93 per Share on 27 September 2016, representing an increase of approximately 2.2% from HK$5.80 per Share on the Last Trading Day.
The Share price closed at HK$5.20 per Share as at the Latest Practicable Date. The Subscription Price represents a premium of approximately 18.8% over the closing Share price as at the Latest Practicable Date.
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(iii) Liquidity of the Shares
The following table sets out the average daily trading volume of the Shares for each month or period and the percentages such average daily trading volumes to the total issued share capital and the public float of the Company during the Review Period:
Approximate percentage of Approximate average daily percentage of trading volume average daily to total number Approximate trading volume of Shares held average daily to total number by public Total trading Number of trading volume of Shares in issue Shareholders volume for the trading days of for the as at the Latest as at the Latest Month/period month/period the Shares month/period Practicable Date Practicable Date (Note 1) (Note 2) (Note 3) (Note 4) (Number of Shares (Number of Shares in thousands) (Number of days) in thousands)
2015 September 596,128 19 31,375 0.92% 1.74% October 376,222 20 18,811 0.55% 1.04% November 206,736 21 9,845 0.29% 0.55% December 231,141 22 10,506 0.31% 0.58%
2016 January 228,901 20 11,445 0.34% 0.64% February 172,548 18 9,586 0.28% 0.53% March 285,821 21 13,611 0.40% 0.76% April 180,003 20 9,000 0.26% 0.50% May 165,954 21 7,903 0.23% 0.44% June 152,854 21 7,279 0.21% 0.40% July 395,832 20 19,792 0.58% 1.10% August 455,964 22 20,726 0.61% 1.15% September 402,019 21 19,144 0.56% 1.06% From 1 October 2016 to the Latest Practicable Date 152,628 8 19,078 0.56% 1.06%
Source: Bloomberg and the website of the Stock Exchange
Notes:
1. Number of trading days of the Shares represents number of trading days during the month/period which excludes any trading day on which trading of the Shares on the Stock Exchange was suspended for the whole trading day.
2. Average daily trading volume is calculated by dividing the total trading volume for the month/period by the number of trading days during the month/period.
—29— LETTER FROM QUAM CAPITAL
3. Based on 3,403,842,316 Shares in issue, being the total issued share capital of the Company as at the Latest Practicable Date.
4. Based on 1,800,252,865 Shares held by the public Shareholders, excluding those held by the Subscriber Concert Group and the Directors, as at the Latest Practicable Date.
As illustrated in the table above, the average daily trading volume for the respective month/period during the Review Period ranged from approximately 7,279,000 Shares to approximately 31,375,000 Shares, representing approximately 0.21% to 0.92% of the total number of Shares in issue as at the Latest Practicable Date and approximately 0.40% to 1.74% of the total number of Shares held by public Shareholders as at the Latest Practicable Date, respectively. The trading of the Shares was not active in general during the Review Period. On this basis, independent investors may find the placement of new Shares, even with a reasonable discount to the prevailing market price, less attractive.
(iv) Market comparables on subscription of new shares
We have identified from the website of the Stock Exchange, on a best efforts basis, an exhaustive list of 11 share issue transactions (the “Comparable Issues”) announced since 1 September 2015 and up to the Last Trading Day by companies listed on the Stock Exchange involving (a) subscription of new shares of the listed companies by subscribers for cash; and (b) the application of whitewash waivers by the subscribers. We have excluded those (a) which have subsequently lapsed; (b) announced by listed companies which, as at the date of announcement and/or currently, were/are under prolonged suspension of trading of the shares; (c) involving issue of other securities at the same time; and (d) involving open offers or rights issues of new shares, which are extended to all shareholders.
—30— LETTER FROM QUAM CAPITAL
It should be noted that the subject companies involved in the Comparable Issues may have different principal activities, market capitalisation, profitability and financial positions as compared to those of the Company. The circumstances surrounding such subscriptions may also be different from those relating to the Company. As a result, the Comparable Issues only provide the Shareholders with a general reference for assessing the fairness and reasonableness of the Subscription Price. The table below sets out the details of the Comparable Issues:
Premium/ (discount) of subscription price to the Average Average Potential Closing share Average closing share closing share dilution of price as at the closing share price for the price for the shareholding last day of price for the 5 10 trading 30 trading to the existing trading trading days days days public immediately immediately immediately immediately shareholders Date of Stock prior to the prior to the prior to the prior to the upon announcement Company name code announcement announcement announcement announcement completion %%%%%
12 October SRE Group Ltd (Note 1) 1207 (75.0) (74.2) (72.8) (71.4) 72.5 2015 10 December China Jiuhao Health 419 (86.2) (87.7) (87.9) (84.1) 50.7 2015 Industry Corporation Ltd. (now known as Huayi Tencent Entertainment Co. Ltd.) (Note 2) 15 December Huscoke Resources 704 (63.0) (63.8) (64.4) (65.2) 60.7 2015 Holdings Ltd 16 December FDG Electric Vehicles Ltd 729 — (3.9) (5.0) (8.2) 4.9 2015 16 February Varitronix International Ltd. 710 (3.4) (5.2) (2.8) (4.4) 54.7 2016 (Note 3) 19 February Sino Credit Holdings Ltd. 628 (55.5) (56.5) (54.5) (51.2) 72.3 2016 29 February Hang Fat Ginseng Holdings 911 (86.5) (92.3) (96.7) (98.1) 60.9 2016 Co Ltd. (Note 4) 13 April 2016 Artini China Co. Ltd. 789 (26.7) (23.7) (22.8) (27.0) 48.7 17 May 2016 New Times Energy 166 (3.1) (0.9) (3.4) 0.2 53.8 Corporation Ltd. 21 July 2016 Hua Lien International 969 (50.0) (51.5) (50.8) (46.4) 67.3 (Holding) Co. Ltd. (Note 5) 29 August China City Railway 1522 (9.4) (8.5) (8.6) (4.7) 31.8 2016 Transportation Technology Holdings Company Limited
Maximum — (0.9) (2.8) 0.2 72.5 Minimum (86.5) (92.3) (96.7) (98.1) 4.9 Average (41.7) (42.6) (42.7) (41.9) 52.6
26 September The Company 6.6 3.3 7.1 8.6 11.8 2016
Source: The website of the Stock Exchange
—31— LETTER FROM QUAM CAPITAL
Notes:
1. SRE Group Ltd published an announcement in relation to a memorandum of understanding in relation to a possible subscription of shares involving a possible application for whitewash waiver on 15 September 2015. Accordingly, we have taken 12 September 2015 (i.e. the last day of trading of the shares immediately prior to the aforesaid announcement) as the last trading day for our assessment, including calculation of the average closing share prices of different periods prior to and including 11 October 2015.
2. China Jiuhao Health Industry Corporation Ltd (“China Jiuhao”) published an announcement dated 10 December 2015 in relation to, among other things, subscription of shares and application for whitewash waiver. As set out in the aforesaid announcement, there was a distribution to shareholders of China Jiuhao of cash and shares in Eternity Investment Limited as detailed in the circular of China Jiuhao dated 23 June 2015. Such distribution was completed in October 2015 and the subscribers to the aforesaid subscription were not entitled to the distribution. The comparison of the subscription price to historical trading prices as set out in the table above was based on the theoretical ex-entitlement closing prices of China Jiuhao as set out in its announcement dated 10 December 2015.
3. As set out in the circular of Varitronix International Ltd. (“Varitronix”) dated 22 March 2016, the subscription price took into account the waiver by the subscriber of all its rights and interests to participate in the special dividend as well as the final dividend. The comparison of the subscription price to historical trading prices as set out in the table above was based on the theoretical price reduced by the amount of the special dividend and final dividend as set out in the circular of Varitronix dated 22 March 2016.
4. Hang Fat Ginseng Holdings Co. Ltd. published an announcement in relation to a non-legally binding memorandum of understanding in relation to a possible subscription of shares involving a possible application for whitewash waiver after trading hours on 15 February 2016. Accordingly, we have taken 12 February 2016 (i.e. the last day of trading of the shares immediately prior to the aforesaid announcement) as the last trading day for our assessment, including calculation of the average closing share prices of different periods prior to and including 12 February 2016.
5. Hua Lien International (Holding) Co. Ltd. published an announcement in relation to a memorandum of understanding in relation to a possible subscription of shares involving a possible application for whitewash waiver after trading hours on 25 May 2016. Accordingly, we have taken 23 May 2016 (i.e. the last day of trading of the shares immediately prior to the aforesaid announcement) as the last trading day for our assessment, including calculation of the average closing share prices of different periods prior to and including 23 May 2016.
As set out in the table above, the Comparable Issues generally involved subscriptions of new shares at discounts to their respective historical trading prices. The Subscription Price represents (i) a premium of approximately 6.6% over the closing price on the Last Trading Day; (ii) a premium of approximately 3.3% over the average closing price for the last five trading days up to and including the Last Trading Day; (iii) a premium of approximately 7.1% over the average closing price for the last ten trading days up to and including the Last Trading Day; and (iv) a premium of approximately 8.6% over the average closing price for the last thirty trading days up to and including the Last Trading Day. These premiums are more favourable than all the discounts and/or premiums of the Comparable Issues shown in the table above.
As set out in the sub-section headed “Dilution effect on shareholding interests of the public Shareholders” below, the shareholding of the existing public Shareholders would be reduced from approximately 52.89% as at the Latest Practicable Date to approximately 46.67% upon Completion (assuming that no outstanding Share Options are exercised and no other Shares are allotted and issued
—32— LETTER FROM QUAM CAPITAL on or before Completion), representing a dilution effect of approximately 11.8%. The dilution impact of shareholding to the existing public shareholders upon completion of the Comparable Issues ranged from approximately 4.9% to approximately 72.5% with an average of approximately 52.6%. As such, the dilution impact of the Subscription is within the range of the dilution impact and is much lower than the average dilution impact of the Comparable Issues. Please refer to the sub-section headed “Dilution effect on shareholding interests of the public Shareholders” below for our further analysis on the potential dilution impact.
(v) Peer comparison
As mentioned in the sub-section headed “Background of the Group” above, the Group is principally engaged in property development in the PRC. Based on the closing Share price of HK$5.80 and the number of issued Shares of 3,403,842,316 on the Latest Practicable Date, the market capitalisation of the Company was approximately HK$17.7 billion. Accordingly, we have researched, on a best efforts basis, for companies (the “Comparable Companies”) (a) listed on the Main Board of the Stock Exchange; (b) having over 70% of their revenue generated from property development in the PRC in their respective latest financial year; and (c) with closing market capitalisations ranging between HK$15 billion and HK$28 billion on the Latest Practicable Date. To the best of our knowledge, the Comparable Companies set out in the table below represent all the companies comparable to the Company based on the above criteria.
The table below sets out the comparison of historical price to earnings ratio(s)(“P/E(s)”) and price to book ratio(s)(“P/B(s)”) of the Company and the Comparable Companies:
Market capitalisation on the Latest Practicable Historical Historical Comparable Companies Date P/E P/B (HK$’million) (times) (times) (Note 1) (Note 2)
Shenzhen Investment Limited (stock code: 604) 26,211 6.90 0.77 Sino-Ocean Group Holding Ltd. (stock code: 3377) 25,472 15.8 0.52 China Jinmao Holdings Group Ltd. (stock code: 817) 22,944 6.10 0.68 Goldin Properties Holdings Ltd. (stock code: 283) 20,793 38.00 1.27 Logan Property Holdings Co. Ltd. (stock code: 3380) 17,981 5.10 0.94 Agile Group Holdings Ltd. (stock code: 3383) 16,804 14.10 0.43 Hopson Development Holdings Ltd. (stock code: 754) 16,269 7.30 0.30
—33— LETTER FROM QUAM CAPITAL
Market capitalisation on the Latest Practicable Historical Historical Comparable Companies Date P/E P/B (HK$’million) (times) (times) (Note 1) (Note 2)
Shui On Land Ltd. (stock code: 272) 15,893 34.90 0.37
Maximum 38.00 1.27 Minimum 5.10 0.30 Average 16.03 0.66
The Company 17,700 7.50 0.95 (Note 3) (Note 4)
Source: Bloomberg and the website of the Stock Exchange
Notes:
1. Calculated based on the market capitalisations of the respective Comparable Companies on the Latest Practicable Date divided by the profit attributable to owners of the respective Comparable Companies in their latest twelve months.
2. Calculated based on the market capitalisations of the respective Comparable Companies on the Latest Practicable Date dividend by the equity attributable to owners of the respective Comparable Companies as extracted from their respective latest published annual or interim results.
3. Calculated based on the Subscription Price and the profit attributable to owners of the Company for the twelve months ended 30 June 2016, using an exchange rate of RMB1 to HK$1.16.
4. Calculated based on the Subscription Price and the equity attributable to owners of the Company as at 30 June 2016, using an exchange rate of RMB1 to HK$1.16.
As set out in the table above, (i) the historical P/Es of the Comparable Companies ranged from approximately 5.10 times to approximately 38.00 times, with an average of approximately 16.03 times; and (ii) the historical P/Bs of the Comparable Companies ranged from approximately 0.30 time to approximately 1.27 times, with an average of approximately 0.66 time. The implied P/E of the Subscription of approximately 7.50 times is within the range of the historical P/Es of the Comparable Companies while the implied P/B of the Subscription based on the Subscription Price of approximately 0.95 time is higher than the average of the historical P/Bs of the Comparable Companies.
Based on the reasons for and benefits of the Subscription as set out in the sub-section headed “Reasons for and benefits of the Subscription” above and our analysis on the Subscription Price as set out in the sub-section headed “Evaluation of the Subscription Price” above, we consider the Subscription Price to be fair and reasonable.
—34— LETTER FROM QUAM CAPITAL
5. Other alternative financing methods
To optimise the capital structure of the Group, the Directors have also considered the alternative of equity financing, including a private placement of Shares to independent third party investors or a rights issue or open offer to the existing Shareholders.
A private placement, as far as the Independent Shareholders are concerned, has a similar dilutive potential as an issue to a connected person. However, private placements are normally made at a discount to the prevailing market prices whereas the Subscription is priced at a premium to the Share closing price on the Last Trading Day. As regards a rights issue or open offer, the Directors considered such factors as (i) the price of a rights issue or open offer would normally involve a substantial discount to market, based on the discounts involved for recent rights issues and open offers of companies listed on the Stock Exchange; and (ii) the likely costs involved (including the amount of underwriting commissions and other administrative and legal expenses). On this basis, the Directors did not consider a rights issue or open offer as appropriate means of raising additional fund.
6. Financial effects on the Group
(i) Net assets value
As set out in the 2016 Interim Report, equity attributable to owners of the Company (the “NAV”) was approximately RMB19,128.4 million as at 30 June 2016. Upon Completion, the Directors expect the NAV increase by approximately the amount of the net proceeds from the Subscription of approximately HK$2,795 million. Accordingly, the Subscription is expected to have a positive impact on the NAV.
As at the Latest Practicable Date, the number of Shares in issue was 3,403,842,316 Shares. Accordingly, the NAV per Share based on the NAV as at 30 June 2016 was approximately RMB5.62 (equivalent to approximately HK$6.52 based on an exchange rate of RMB1 to HK$1.16). Assuming there is no change to the Group’s NAV as at 30 June 2016 other than the net proceeds from the Subscription, the NAV per Share is expected to decrease upon Completion, given that the Subscription Price is lower than the NAV per Share as at 30 June 2016. However, we consider the decrease in the NAV per Share is acceptable in light of the benefits of the Subscription as a whole, as set out in the sub-section headed “Reasons for and benefits of the Subscription” above.
(ii) Net gearing ratio
Upon Completion, the Subscription is expected to lower the net gearing ratio of the Group. As a result, the Subscription is expected to improve the gearing and capital structure of the Group.
(iii) Working capital
Since the Subscription will facilitate the Group to raise net proceeds of approximately HK$2,795 million, the liquidity and cash position of the Group will be improved upon Completion. Accordingly, the cash position and therefore the working capital of the Group are expected to improve upon Completion.
—35— LETTER FROM QUAM CAPITAL
Shareholders should note that the aforesaid analyses are for illustrative purpose only and do not purport to represent the financial position of the Group upon Completion.
7. Dilution effect on shareholding interests of the public Shareholders
The following table summarises the effect of the Subscription on the shareholding structure of the Company (i) as at the Latest Practicable Date; (ii) immediately upon Completion (assuming there is no change to the issued share capital of the Company other than the issue of the Subscription Shares); and (iii) immediately upon Completion and the exercise in full of the outstanding Share Options. Further details on (i) the effect of the Subscription on the shareholding structure; and (ii) the accompanying notes to the shareholding table are set out in the section headed “Effect on shareholding structure of the Company” in the “Letter from the Board” contained in the Circular.
Immediately upon Completion (assuming that there is no change to the issued share capital of the Immediately upon Company other than the Completion and the exercise As at the issue of the Subscription in full of the outstanding Shareholders Latest Practicable Date Shares) Share Options Number of Approximate Number of Approximate Number of Approximate Shares % Shares % Shares %
Subscriber Concert Group The Subscriber 1,589,549,451 46.70 2,042,623,884 52.96 2,042,623,884 51.56 Mr. Sun 10,090,000 0.30 10,090,000 0.26 11,390,000 0.29
1,599,639,451 47.00 2,052,713,884 53.22 2,054,013,884 51.85 Other Directors 3,950,000 0.11 3,950,000 0.11 47,250,000 1.19 Public Shareholders Existing shareholders 1,800,252,865 52.89 1,800,252,865 46.67 1,800,252,865 45.44 Holders of Share Options — — — — 60,116,440 1.52
3,403,842,316 100.00 3,856,916,749 100.00 3,961,633,189 100.00
As illustrated above, the shareholding to the existing public Shareholders would be reduced from approximately 52.89% as at the Latest Practicable Date to approximately 46.67% immediately upon Completion and to approximately 45.44% immediately upon Completion and the exercise in full of the outstanding Share Options.
—36— LETTER FROM QUAM CAPITAL
There will be certain extent of dilution to the shareholding interest of the existing public Shareholders as a result of the Subscription. However, taking into account (i) the benefits to be derived by the Group from the Subscription as set out in the sub-section headed “Reasons for and benefits of the Subscription” above; (ii) that the Subscription Price is considered to be fair and reasonable as set out in this letter above; (iii) that the dilution impact of the Subscription is within the range of the dilution impact and is lower than the average dilution impact of the Comparable Issues; and (iv) that the Subscription is expected to improve the NAV, the gearing and capital structure and the working capital of the Group, we consider that the dilution effect to the shareholding interest of the existing public Shareholders as a result of the Subscription is acceptable.
8. The Whitewash Waiver as a condition of the Subscription
Shareholders should note that the Subscription is conditional on, among other things, (i) the Independent Shareholders having approved the Whitewash Waiver at the EGM; and (ii) the Executive having granted to the Subscriber Concert Group the Whitewash Waiver, which cannot be waived. The approval of the Whitewash Waiver by the Independent Shareholders will be therefore necessary for the Group to proceed to Completion to raise additional capital to optimise its capital structure. The Whitewash Waiver is needed to accommodate the amount of capital to be raised under the Subscription Agreement.
Shareholders should note that if the Whitewash Waiver is not approved by the Independent Shareholders, the Subscription Agreement will not become unconditional and the Company will not proceed with the Subscription. In other words, a general offer obligation on the part of the Subscriber Concert Group will not arise if it fails to obtain the Whitewash Waiver.
RECOMMENDATION
Having considered the principal factors and reasons discussed above, we consider that the terms of the Subscription Agreement and the Whitewash Waiver are fair and reasonable so far as the Independent Shareholders are concerned and are in the interests of the Company and the Shareholders as a whole. Accordingly, we advise the Independent Shareholders, as well as the Independent Board Committee to recommend the Independent Shareholders, to vote in favour of the ordinary resolution to be proposed at the EGM to approve the Subscription and the Whitewash Waiver.
Your faithfully, For and on behalf of Quam Capital Limited Noelle Hung Managing Director
Ms. Noelle Hung is a licensed person and a responsible officer of Quam Capital registered with the SFC to carry out Type 6 (advising on corporate finance) regulated activity under the SFO. She has over 15 years of experience in corporate finance.
—37— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
SUMMARY OF FINANCIAL INFORMATION
The consolidated financial information of the Group for each of the three years ended 31 December 2013, 2014 and 2015 and the six months ended 30 June 2016 are disclosed in the following documents which have been published on the respective websites of the Stock Exchange (www.hkexnews.hk) and the Company (www.sunac.com.cn) :
(i) annual report of the Company for the year ended 31 December 2013 published on 11 April 2014 (pages 64 to 150);
(ii) annual report of the Company for the year ended 31 December 2014 published on 16 April 2015 (pages 58 to 140);
(iii) annual report of the Company for the year ended 31 December 2015 published on 18 April 2016 (pages 71 to 154); and
(iv) interim report of the Company for the six months ended 30 June 2016 published on 6 September 2016 (pages 46 to 84).
The following is a summary of the audited consolidated financial information of the Group for each of the three years 31 December 2013, 2014 and 2015 and the unaudited consolidated financial information of the Group for the six months ended 30 June 2015 and 2016, as extracted from the relevant annual reports and interim report of the Company.
Six months ended 30 June Year ended 31 December 2016 2015 2015 2014 2013 (Unaudited) (Unaudited) (Audited) (Audited) (Audited) RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Revenue 10,586,085 5,442,722 23,010,943 25,071,959 30,836,714 Cost of sales (9,179,970) (4,824,671) (20,153,678) (20,730,079) (23,660,207)
Gross profit 1,406,115 618,051 2,857,265 4,341,880 7,176,507
Other income and gains 1,551,361 2,220,585 4,111,990 1,020,451 222,522 Selling and marketing costs (318,512) (284,602) (661,054) (697,299) (615,453) Administrative expenses (421,530) (298,842) (775,015) (680,743) (520,137) Other expenses and losses (54,573) (102,379) (265,628) (119,817) (145,473)
Operating profit 2,162,861 2,152,813 5,267,558 3,864,472 6,117,966
—38— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
Six months ended 30 June Year ended 31 December 2016 2015 2015 2014 2013 (Unaudited) (Unaudited) (Audited) (Audited) (Audited) RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Finance income 98,507 83,095 123,521 123,422 74,529 Finance costs (1,578,739) (698,577) (2,520,575) (1,267,380) (580,277) Share of post-taxes (losses)/profits of investments accounted for using equity method, net (235,504) 451,871 1,693,207 2,181,283 72,231
Profit before income tax 447,125 1,989,202 4,563,711 4,901,797 5,684,449
Income tax expense (344,355) (731,539) (955,308) (1,669,168) (2,190,622)
Profit for the period 102,770 1,257,663 3,608,403 3,232,629 3,493,827
Other comprehensive income for the period —————
Total comprehensive income for the period 102,770 1,257,663 3,608,403 3,232,629 3,493,827
Attributable to: - Owners of the Company 72,935 951,399 3,297,828 3,222,070 3,178,403 - Holders of perpetual capital securities 2,361 ———— - Non-controlling interests 27,474 306,264 310,575 10,559 315,424
102,770 1,257,663 3,608,403 3,232,629 3,493,827
Earnings per share attributable to owners of the Company (expressed in RMB per share): - Basic earnings per share 0.02 0.28 0.97 0.96 0.96
- Diluted earnings per share 0.02 0.28 0.96 0.95 0.95
—39— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
30 June 31 December 31 December 31 December 2016 2015 2014 2013 (Unaudited) (Audited) (Audited) (Audited) RMB’000 RMB’000 RMB’000 RMB’000
ASSETS Non-current assets Property, plant and equipment 63,158 68,959 61,815 65,381 Investment properties — — 239,000 252,000 Intangible assets 238,089 230,269 148,905 234,234 Investments accounted for using the equity method 17,728,984 15,260,581 12,048,789 7,908,864 Prepayments for investments 3,230,375 4,722,036 944,991 — Deferred income tax assets 1,663,467 1,502,429 1,451,953 1,304,554
Total non-current assets 22,924,073 21,784,274 14,895,453 9,765,033
CURRENT ASSETS Properties under development 48,923,225 34,142,659 35,700,545 40,694,597 Completed properties held for sale 15,148,069 15,727,129 13,682,451 17,411,712 Trade and other receivables 2,080,084 970,481 2,474,809 1,213,763 Amounts due from related companies 20,138,851 11,660,049 17,999,418 9,755,363 Prepayments 5,209,953 4,166,080 2,568,194 2,505,811 Restricted cash 11,809,911 4,371,010 4,384,145 2,594,666 Cash and cash equivalents 28,337,573 22,687,280 20,657,285 13,414,017
Total current assets 131,647,666 93,724,688 97,466,847 87,589,929
Total assets 154,571,739 115,508,962 112,362,300 97,354,962
EQUITY Equity attributable to owners of the Company Share capital 291,369 291,329 289,963 285,055 Other reserves 4,154,527 4,104,442 3,203,001 3,113,917 Retained earnings 14,682,553 14,609,618 12,859,974 10,206,331
19,128,449 19,005,389 16,352,938 13,605,303 Perpetual capital securities 6,825,361 — — — Non-controlling interests 661,345 414,781 4,629,695 4,606,015
Total equity 26,615,155 19,420,170 20,982,633 18,211,318
—40— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
30 June 31 December 31 December 31 December 2016 2015 2014 2013 (Unaudited) (Audited) (Audited) (Audited) RMB’000 RMB’000 RMB’000 RMB’000 LIABILITIES Non-current liabilities Borrowings 38,150,191 27,214,240 20,544,113 20,871,569 Derivative financial instruments 10,209 — — — Deferred income tax liabilities 5,317,308 4,379,412 5,886,751 6,483,025
Total non-current liabilities 43,477,708 31,593,652 26,430,864 27,354,594
Current liabilities Trade and other payables 10,919,393 10,943,950 11,615,723 16,900,347 Advanced proceeds from customers 20,118,326 13,420,386 12,270,841 13,647,124 Amounts due to related companies 22,176,869 18,212,922 20,713,919 6,894,723 Current income tax liabilities 6,615,962 7,333,489 6,508,638 6,512,135 Borrowings 24,648,326 14,584,393 13,839,682 7,834,721
Total current liabilities 84,478,876 64,495,140 64,948,803 51,789,050
Total liabilities 127,956,584 96,088,792 91,379,667 79,143,644
Total equity and liabilities 154,571,739 115,508,962 112,362,300 97,354,962
There were no audit qualifications issued by the auditors of the Company for the years ended 31 December 2013, 2014 and 2015.
The Group did not have any items which are exceptional because of size, nature or incidence for each of the years ended 31 December 2013, 2014 and 2015 and the six months ended 30 June 2016.
—41— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
The following is the full text of the audited consolidated financial statements of the Group for the year ended 31 December 2015 as extracted from the annual report of the Company for the year ended 31 December 2015:
CONSOLIDATED BALANCE SHEET
As at 31 December Note 2015 2014 RMB’000 RMB’000
ASSETS Non-current assets Property, plant and equipment 7 68,959 61,815 Investment properties 8 — 239,000 Intangible assets 9 230,269 148,905 Investments accounted for using the equity method 10 15,260,581 12,048,789 Prepayment for equity investments 15 4,722,036 944,991 Deferred income tax assets 11 1,502,429 1,451,953
21,784,274 14,895,453
Current assets Properties under development 12 34,142,659 35,700,545 Completed properties held for sale 13 15,727,129 13,682,451 Trade and other receivables 14 970,481 2,474,809 Amounts due from related companies 37(d) 11,660,049 17,999,418 Prepayments 15 4,166,080 2,568,194 Restricted cash 16 4,371,010 4,384,145 Cash and cash equivalents 17 22,687,280 20,657,285
93,724,688 97,466,847
Total assets 115,508,962 112,362,300
EQUITY AND LIABILITY Equity attributable to owners of the Company Share capital 18 291,329 289,963 Other reserves 20 4,104,442 3,203,001 Retained earnings 14,609,618 12,859,974
19,005,389 16,352,938 Non-controlling interests 414,781 4,629,695
Total equity 19,420,170 20,982,633
—42— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
As at 31 December Note 2015 2014 RMB’000 RMB’000
Liabilities Non-current liabilities Borrowings 22 27,214,240 20,544,113 Deferred income tax liabilities 11 4,379,412 5,886,751
31,593,652 26,430,864
Current liabilities Trade and other payables 21 10,943,950 11,615,723 Advanced proceeds from customers 13,420,386 12,270,841 Amounts due to related companies 37(d) 18,212,922 20,713,919 Current income tax liabilities 7,333,489 6,508,638 Borrowings 22 14,584,393 13,839,682
64,495,140 64,948,803
Total liabilities 96,088,792 91,379,667
Total equity and liabilities 115,508,962 112,362,300
The notes on pages 48 to 127 are an integral part of these consolidated financial statements.
—43— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended 31 December Note 2015 2014 RMB’000 RMB’000
Revenue 6 23,010,943 25,071,959 Cost of sales 23 (20,153,678) (20,730,079)
Gross profit 2,857,265 4,341,880
Selling and marketing costs 23 (661,054) (697,299) Administrative expenses 23 (775,015) (680,743) Other income and gains 26 4,111,990 1,020,451 Other expenses and losses 27 (265,628) (119,817)
Operating profit 5,267,558 3,864,472
Finance income 28 123,521 123,422 Finance expenses 28 (2,520,575) (1,267,380)
Finance expenses — net 28 (2,397,054) (1,143,958) Share of post-tax profits of investments accounted for using equity method, net 10 1,693,207 2,181,283
Profit before income tax 4,563,711 4,901,797
Income tax expenses 29 (955,308) (1,669,168)
Profit for the year 3,608,403 3,232,629
Other comprehensive income for the year ——
Total comprehensive income for the year 3,608,403 3,232,629
Profit and total comprehensive income attributable to: — Owners of the Company 3,297,828 3,222,070 — Non-controlling interests 310,575 10,559
3,608,403 3,232,629
Earnings per share attributable to owners of the Company (expressed in RMB per share): 30 — Basic earnings per share 0.97 0.96
— Diluted earnings per share 0.96 0.95
The notes on pages 48 to 127 are an integral part of these consolidated financial statements.
—44— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to owners of the Company
Non- Share Other Retained controlling Total Note capital reserves earnings Total interests equity RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Balance at 1 January 2014 285,055 3,113,917 10,206,331 13,605,303 4,606,015 18,211,318
Total comprehensive income — — 3,222,070 3,222,070 10,559 3,232,629
Disposal of a subsidiary ————13,121 13,121 Employees share option schemes: — Value of employee services 20, 25 — 35,456 — 35,456 — 35,456 — Proceeds from shares issued 20, 18 4,908 120,882 — 125,790 — 125,790 Statutory reserve — 568,427 (568,427) — — — Dividends relating to 2013 — (635,681) — (635,681) — (635,681)
4,908 89,084 (568,427) (474,435) 13,121 (461,314)
Balance at 31 December 2014 289,963 3,203,001 12,859,974 16,352,938 4,629,695 20,982,633
Total comprehensive income — — 3,297,828 3,297,828 310,575 3,608,403
Transactions with non-controlling interests 34 — (93,853) — (93,853) (2,556,016) (2,649,869) Dividends to non-controlling interests ————(1,699,837) (1,699,837) Non-controlling interests arising on business combination 35(c) ————(30,040) (30,040) Disposal of subsidiaries 36(e) ————(239,596) (239,596) Employees share option schemes: — Value of employee services 20, 25 — 47,395 — 47,395 — 47,395 — Proceeds from shares issued 20, 18 1,366 44,129 — 45,495 — 45,495 Statutory reserve — 1,548,184 (1,548,184) — — — Dividends relating to 2014 40 — (644,414) — (644,414) — (644,414)
1,366 901,441 (1,548,184) (645,377) (4,525,489) (5,170,866)
Balance at 31 December 2015 291,329 4,104,442 14,609,618 19,005,389 414,781 19,420,170
The notes on pages 48 to 127 are an integral part of these consolidated financial statements.
—45— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended 31 December Note 2015 2014 RMB’000 RMB’000
Cash flows from operating activities Cash generated from operations 31 17,670,853 19,452,340 Income tax paid (1,728,822) (2,734,976)
Net cash generated from operating activities 15,942,031 16,717,364
Cash flows from investing activities Cash paid for business combinations, net 35 (6,491,835) — Disposal of subsidiaries 36 1,372,011 (582,419) Prepayments of consideration for equity acquisitions (4,079,258) (5,734,526) Receiving of returned prepayments for equity acquisitions 2,856,238 4,789,535 Interest received on prepayments for equity acquisitions 122,640 190,333 Proceeds from disposal of an associate 10.2 191,373 — Equity investments in joint ventures and associates (2,558,789) (3,064,609) Dividend received from joint ventures 248,970 26,667 Loans granted to joint ventures and associates (6,448,164) (6,065,146) Loan repayments received from joint ventures and associates 2,028,725 1,306,614 Interest received from joint ventures and associates 65,142 271,404 Purchases of property, plant and equipment (“PP&E”) and intangible assets 7 (16,133) (26,020) Proceeds from disposals of PP&E 2,195 3,184 Proceeds from disposal of investment properties 8 175,000 —
Net cash used in investing activities (12,531,885) (8,884,983)
—46— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
Year ended 31 December Note 2015 2014 RMB’000 RMB’000
Cash flows from financing activities Proceeds from issue of ordinary shares 45,495 125,790 Proceeds from issue of senior notes, net — 2,423,236 Proceeds from issue of corporate bonds 22 5,964,000 — Proceeds from borrowings 22 28,628,153 16,762,741 Repayments of borrowings 22 (26,247,463) (13,013,609) Dividends paid to Company’s shareholders 41 (646,367) (635,681) Dividend paid to non-controlling interests (1,713,829) — Loans from non-controlling interests 631,456 — Loan repayments to non-controlling interests (2,380,263) (1,449,024) Acquisition of additional interests in subsidiaries 34(b) (2,824,927) — Interest paid (2,741,312) (2,913,717) Restricted cash guaranteed for bank borrowings (337,898) (1,882,476)
Net cash used from financing activities (1,622,955) (582,740)
Net increase in cash and equivalents 1,787,191 7,249,641 Cash and cash equivalents at beginning of year 20,657,285 13,414,017 Effects of exchange rate difference 242,804 (6,373)
Cash and cash equivalents at end of year 17 22,687,280 20,657,285
The notes on pages 48 to 127 are an integral part of these consolidated financial statements.
—47— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2015
1 GENERAL INFORMATION
Sunac China Holdings Limited (the “Company”) and its subsidiaries (together, the “Group”) are principally engaged in property development and property management services business in the People’s Republic of China (the “PRC”).
The Company is a limited liability company incorporated in Cayman Islands. The address of its registered office is Landmark Square, 3rd Floor, 64 Earth Close, P.O. Box 30592, Grand Cayman KY1-1203, Cayman Islands. The Company has its primary listing on The Stock Exchange of Hong Kong Limited.
These financial statements are presented in Renminbi (“RMB”), unless otherwise stated.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
2.1 Basis of preparation
The consolidated financial statements of the Company have been prepared in accordance with all applicable Hong Kong Financial Reporting Standards (“HKFRS”). The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets and investment properties, which are carried at fair value.
The preparation of financial statements in conformity with the HKFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 5.
2.1.1 Going concern
The Group meets its day-to-day working capital requirements through its bank facilities. The current economic conditions continue to create uncertainty particularly over (a) the level of demand for the Group’s developed properties; and (b) the availability of bank finance for the foreseeable future. The Group’s forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of its current facilities. After making enquiries, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The Group therefore continues to adopt the going concern basis in preparing its consolidated financial statements.
—48— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
2.1.2 Changes in accounting policy and disclosures
(a) New and amended standards adopted by the Group
The following amendments to standards have been adopted by the Group for the first time for the financial year beginning on or after 1 January 2015:
Amendment to HKAS 19 on contributions from employees or third parties to defined benefit plans. The amendment distinguishes between contributions that are linked to service only in the period in which they arise and those linked to service in more than one period. The amendment allows contributions that are linked to service, and do not vary with the length of employee service, to be deducted from the cost of benefits earned in the period that the service is provided. Contributions that are linked to service, and vary according to the length of employee service, must be spread over the service period using the same attribution method that is applied to the benefits.
Amendments from annual improvements to HKFRSs — 2010-2012 Cycle, on HKFRS 8, ‘Operating segments’, HKAS 16, ‘Property, plant and equipment’ and HKAS 38, ‘Intangible assets’ and HKAS 24, ‘Related party disclosures’.
Amendments from annual improvements to HKFRSs — 2011-2013 Cycle, on HKFRS 3, ‘Business combinations’, HKFRS 13, ‘Fair value measurement’ and HKAS 40, ‘Investment property’.
The adoption of the improvements made in the 2010-2012 Cycle has required additional disclosures in the segment note. Other than that, the remaining amendments are not material to the Group.
(b) New Hong Kong Companies Ordinance (Cap. 622)
In addition, the requirements of Part 9 “Accounts and Audit” of the new Hong Kong Companies Ordinance (Cap. 622) come into operation during the financial year, as a result, there are changes to presentation and disclosures of certain information in the consolidated financial statements.
(c) New standards and interpretations not yet adopted
A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2015 and have not been applied in preparing these consolidated financial statements. None of these is expected to have a significant effect on the consolidated financial statements of the group, except the following set out below:
HKFRS 9, ‘Financial instruments’, addresses the classification, measurement and recognition of financial assets and financial liabilities. The complete version of HKFRS 9 was issued in July 2014. It replaces the guidance in HKAS 39 that relates to the classification and measurement of financial instruments. HKFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortised cost, fair value through OCI and fair value through P&L. The basis of classification depends on the entity’s business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are
—49— APPENDIX I FINANCIAL INFORMATION OF THE GROUP required to be measured at fair value through profit or loss with the irrevocable option at inception to present changes in fair value in OCI not recycling. There is now a new expected credit losses model that replaces the incurred loss impairment model used in HKAS 39. For financial liabilities there were no changes to classification and measurement except for the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at fair value through profit or loss. HKFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic relationship between the hedged item and hedging instrument and for the ‘hedged ratio’ to be the same as the one management actually use for risk management purposes.
Contemporaneous documentation is still required but is different to that currently prepared under HKAS 39. The standard is effective for accounting periods beginning on or after 1 January 2018. Early adoption is permitted. The Group is yet to assess HKAS 9’s full impact.
HKFRS 15, ‘Revenue from contracts with customers’ deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. The standard replaces HKAS 18 ‘Revenue’ and HKAS 11 ‘Construction contracts’ and related interpretations. HKFRS 15 is effective for annual periods beginning on or after 1 January 2018 and earlier application is permitted. The group is assessing the impact of HKAS 15.
There are no other HKFRSs or HK(IFRIC) interpretations that are not yet effective that would be expected to have a material impact on the Group.
2.2 Subsidiaries
2.2.1 Consolidation
A subsidiary is an entity (including a structured entity) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
(a) Business combinations
The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.
—50— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis. Non-controlling interests in the acquiree that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation are measured at either fair value or the present ownership interests’ proportionate share in the recognised amounts of the acquiree’s identifiable net assets. All other components of non-controlling interests are measured at their acquisition date fair value, unless another measurement basis is required by HKFRS.
Acquisition related costs are expensed as incurred.
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is re-measured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognised in profit or loss.
Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with HKAS 39 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for within equity.
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recorded as goodwill. If the total of consideration transferred, non-controlling interest recognised and previously held interest measured is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the income statement.
Intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. When necessary, amounts reported by subsidiaries have been adjusted to conform with the group’s accounting policies.
(b) Changes in ownership interests in subsidiaries without change of control
Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions — that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.
(c) Disposal of subsidiaries
When the Group ceases to have control, any retained interest in the entity is re-measured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the
—51— APPENDIX I FINANCIAL INFORMATION OF THE GROUP retained interest as an associate, joint ventures or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to income statement.
2.2.2 Separate financial statements
Investments in subsidiaries are accounted for at cost less impairment. Cost also includes direct attributable costs of investment. The results of subsidiaries are accounted for by the Company on the basis of dividend and receivable.
Impairment testing of the investments in subsidiaries is required upon receiving dividends from these investments if the dividend exceeds the total comprehensive income of the subsidiary in the period the dividend is declared or if the carrying amount of the investment in the separate financial statements exceeds the carrying amount in the consolidated financial statements of the investee’s net assets including goodwill.
2.3 Associates
An associate is an entity over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting. Under the equity method, the investment is initially recognised at cost, and the carrying amount is increased or decreased to recognise the investor’s share of the profit or loss of the investee after the date of acquisition. The group’s investments in associates include goodwill identified on acquisition. Upon the acquisition of the ownership interest in an associate, any difference between the cost of the associate and the group’s share of the net fair value of the associate’s identifiable assets and liabilities is accounted for as goodwill.
If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income is reclassified to profit or loss where appropriate.
The Group’s share of post-acquisition profit or loss is recognised in the profit or loss, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income with a corresponding adjustment to the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associates, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associates.
The Group determines at each reporting date whether there is any objective evidence that the investment in the associates is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associates and its carrying value and recognises the amount adjacent to “share of profit investments accounted for using equity method” in the income statement.
—52— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
Profits and losses resulting from upstream and downstream transactions between the Group and its associates are recognised in the Group’s financial statements only to the extent of unrelated investor’s interests in the associates. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group.
Gains or losses on dilution of equity interest in associates are recognised in the income statement.
2.4 Joint arrangements
The Group has applied HKFRS 11 to all joint arrangements. Under HKFRS 11 investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations each investor. The Group has assessed the nature of its joint arrangements and determined them to be joint ventures. Joint ventures are accounted for using the equity method.
Under the equity method of accounting, interests in joint ventures are initially recognised at cost and adjusted thereafter to recognise the Group’s share of the post-acquisition profits or losses and movements in other comprehensive income. The Group’s investments in joint ventures include goodwill identified on acquisition. Upon the acquisition of the ownership interest in a joint venture, any difference between the cost of the joint venture and the Group’s share of the net fair value of the joint venture’s identifiable assets and liabilities is accounted for as goodwill. When the Group’s share of losses in a joint venture equals or exceeds its interests in the joint ventures (which includes any long-term interests that, in substance, form part of the group’s net investment in the joint ventures), the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the joint ventures.
Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s interest in the joint ventures. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of the joint ventures have been changed where necessary to ensure consistency with the policies adopted by the Group.
2.5 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the executive directors of the Company that makes strategic decisions.
—53— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
2.6 Foreign currency translation
(a) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are presented in RMB, which is the Company’s functional and the Group’s presentation currency.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in other comprehensive income as qualifying cash flow hedges and qualifying net investment hedges.
Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the income statement within ‘finance income or expenses’. All other foreign exchange gains and losses are presented in the income statement within ‘other gains — net’.
Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss.
(c) Group companies
The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
(i) assets and liabilities for each balance sheet presented at the closing rate at the date of that balance sheet;
(ii) income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and
(iii) all resulting exchange differences are recognised in other comprehensive income.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. Currency translation differences arising are recognised in other comprehensive income.
—54— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
2.7 Property, plant and equipment
Property, plant and equipment are stated at historical cost less depreciation and any impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriately when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the profit or loss during the year in which they are incurred.
Depreciation on property, plant and equipment is calculated using the straight-line method to allocate their costs to their residual values over their estimated useful lives, as follows:
Vehicles 5 years Furniture and office equipment 5 years Leasehold improvements Shorter of 5 years or the lease periods
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within “Other gains — net” in the income statement.
2.8 Investment properties
Investment properties, principally comprising properties that are held for long-term rental yields and are not occupied by the Group. Investment property is initially measured at cost, including related development costs. After initial recognition at cost, investment properties are carried at fair value, representing open market value determined at each reporting date by external valuers. Fair value is based on active market prices, adjusted, if necessary, for any difference in the nature, location or condition of the specific asset. If the information is not available, the Group uses alternative valuation method such as recent prices on less active markets or discounted cash flow projections. These valuations are reviewed annually at each balance sheet date by independent valuers. Changes in fair values are recorded in the profit or loss as part of a valuation gain or loss in “Other gains — net”.
2.9 Goodwill
Goodwill arises on the acquisition of subsidiaries represents the excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identified net assets acquired.
—55— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of cash generating units (“CGUs”), or groups of CGUs, that is expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of the CGU containing the goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs to sell. Any impairment is recognised immediately as an expense and is not subsequently reversed.
2.10 Land use rights
All land in the PRC is state-owned and no individual land ownership right exists. The Group acquired the rights to use certain land and the premiums paid for such rights are recorded as land use rights.
Land use rights which are held for development for sale are inventories and measured at lower of cost and net realisable value.
2.11 Impairment of non-financial assets
Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (CGUs). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.
2.12 Financial assets
2.12.1 Classification
The Group classifies its financial assets in the following categories: loans and receivables and available for sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.
—56— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
(a) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for the amounts that are settled or expected to be settled more than 12 months after the end of the reporting period. These are classified as non-current assets. The Group’s loans and receivables comprise trade and other receivables, amounts due from related companies, restricted cash and cash and cash equivalent in the balance sheet.
(b) Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose of it within 12 months of the end of the reporting period.
2.12.2 Recognition and measurement
Regular way purchases and sales of financial assets are recognised on the trade-date — the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Loans and receivables are subsequently carried at amortised cost using the effective interest method.
Changes in the fair value of monetary and non-monetary securities classified as available for sale are recognised in other comprehensive income.
2.12.3 Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty.
—57— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
2.13 Impairment of financial assets carried at amortized cost
(a) Assets carried at amortised cost
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a “loss event”) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.
Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation, and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.
For loans and receivables category, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognized in the profit or loss. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument’s fair value using an observable market price.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized (such as an improvement in the debtor’s credit rating), the reversal of the previously recognized impairment loss is recognized in the profit or loss.
(b) Assets classified as available-for-sale financial assets
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired.
2.14 Properties under development
Properties under development are stated at the lower of cost and net realisable value. Net realisable value takes into account the price ultimately expected to be realised, less applicable variable selling expenses and anticipated cost to completion.
Development cost of property comprises construction costs, land use rights cost, capitalised borrowing costs and professional fees incurred during the development period. On completion, the properties are transferred to completed properties held for sale.
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2.15 Completed properties held for sale
Completed properties remaining unsold as at the balance sheet dates are stated at the lower of cost and net realisable value.
Cost comprises development costs attributable to the unsold properties.
Net realisable value is determined by reference to the sale proceeds of properties sold in the ordinary course of business, less applicable variable selling expenses, or by management estimates based on prevailing marketing conditions.
2.16 Trade and other receivables
Trade receivables are amounts due from customers for properties sold or services performed in the ordinary course of business. If collection of trade and other receivables is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets.
Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less allowance for impairment.
2.17 Cash and cash equivalents
In the consolidated statement of cash flows, cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less.
2.18 Share capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
2.19 Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
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2.20 Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the profit or loss over the period of the borrowings using the effective interest method.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the end of the reporting period.
2.21 Borrowing costs
General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
2.22 Current and deferred income tax
The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement.
(a) Current income tax
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company’s subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
—60— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
(b) Deferred income tax
Inside basis differences
Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
Outside basis differences
Deferred income tax liabilities are provided on taxable temporary differences arising from investments in subsidiaries, associates and joint arrangements, except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Generally the Group is unable to control the reversal of the temporary difference for associates. Only where there is an agreement in place that gives the Group the ability to control the reversal of the temporary difference not recognised.
Deferred income tax assets are recognised on deductible temporary differences arising from investments in subsidiaries, associates and joint arrangements only to the extent that it is probable the temporary difference will reverse in the future and there is sufficient taxable profit available against which the temporary difference can be utilised.
(c) Offsetting
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
—61— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
2.23 Employee benefits
(a) Employee leave entitlement
Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by employees up to the balance sheet date.
Employee entitlements to sick leave and maternity leave are not recognised until the time of leave.
(b) Retirement benefits
In accordance with the rules and regulations in the PRC, the PRC based employees of the Group participate in various defined contribution retirement benefit plans organised by the relevant municipal and provincial governments in the PRC under which the Group and the PRC based employees are required to make monthly contributions to these plans calculated as a percentage of the employees’ salaries.
The municipal and provincial governments undertake to assume the retirement benefit obligations of all existing and future retired PRC based employees’ payable under the plans described above. Other than the monthly contributions, the Group has no further obligation for the payment of retirement and other post-retirement benefits of its employees. The assets of these plans are held separately from those of the Group in independently administrated funds managed by the governments.
2.24 Share-based payments
(a) Equity-settled share-based payment transactions
The Group operates a number of equity-settled, share-based compensation plans, under which the entity receives services from employees as consideration for equity instruments (options) of the group. The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of the options granted:
• including any market performance conditions (for example, an entity’s share price);
• excluding the impact of any service and non-market performance vesting conditions (for example, profitability, sales growth targets and remaining an employee of the entity over a specified time period); and
• including the impact of any non-vesting conditions (for example, the requirement for employees to save or holding shares for a specified period of time).
—62— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
At the end of each reporting period, the group revises its estimates of the number of options that are expected to vest based on the non-marketing performance and service conditions. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity.
In addition, in some circumstances employees may provide services in advance of the grant date and therefore the grant date fair value is estimated for the purposes of recognising the expense during the period between service commencement period and grant date.
When the options are exercised, the Company issues new shares. The proceeds received net of any directly attributable transaction costs are credited to share capital (and share premium).
(b) Share-based payment transactions among group entities
The grant by the Company of options over its equity instruments to the employees of subsidiary undertakings in the group is treated as a capital contribution. The fair value of employee services received, measured by reference to the grant date fair value, is recognised over the vesting period as an increase to investment in subsidiary undertakings, with a corresponding credit to equity in the parent entity accounts.
2.25 Provisions
Provisions for legal claims are recognised when: the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessment of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense.
2.26 Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable, and represents amounts receivable for goods supplied, stated net of discounts returns and value added taxes. The Group recognises revenue when the amount of revenue can be reliably measured; when it is probable that future economic benefits will flow to the entity; and when specific criteria have been met for each of the Group’s activities, as described below. The Group bases its estimates of return on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.
—63— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
(a) Sales of properties
Revenue from sales of properties is recognised when the risks and rewards of properties are transferred to the purchasers, which is when the construction of relevant properties has been completed and the properties have been delivered to the purchasers and recoverability of related receivables is reasonably assured. Deposits and instalments received on properties sold prior to the date of revenue recognition are included in the consolidated balance sheets as “Advanced proceeds from customers” within current liabilities.
(b) Rental income
Rental income from investment property is recognised in the profit or loss on a straight-line basis over the term of the lease.
(c) Property management
Property management services income is recognised when the services are provided, the total amount of revenue and costs arising from provision of the services can be estimated reliably, and it is probable that the economic benefits associated with the transaction will flow in.
(d) Interest income
Interest income is recognised using the effective interest method. When a loan or receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loan or receivables is recognised using the original effective interest rate.
(e) Dividend income
Dividend income is recognised when the right to receive payment is established.
2.27 Government grants
Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions.
Government grants relating to costs are deferred and recognised in the profit or loss over the year necessary to match them with the costs that they are intended to compensate.
Government grants relating to property, plant and equipment are included in non-current liabilities as deferred government grants and are credited to the profit or loss on a straight-line basis over the expected lives of the related assets.
—64— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
2.28 Leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lesser are classified as operating leases. Payments made under operating leases (net of any incentives received from the lesser) are charged to the profit or loss on a straight-line basis over the year of the lease.
2.29 Dividend distribution
Dividend distributions to the Company’s shareholders is recognised as liabilities in the Group’s and the Company’s financial statements in the period in which the dividends are approved by the Company’s shareholders or directors, where appropriate.
2.30 Insurance contracts
An insurance contract is a contract under which one party (the issuer) accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specific uncertain future event (the insured event) adversely affects the policyholder. Insurance risk is a pre-existing risk transferred from the policyholder to the insurer, and is significant only if an insured event could cause an insurer to pay significant additional benefits in any scenario, excluding scenarios that lack commercial substance (i.e. have no discernible effect on the economics of the transaction).
The Group regards its financial guarantee contracts provided in respect of mortgage facilities for certain property purchasers and financial guarantee contracts provided to its related parties as insurance contracts.
The Group assesses at each reporting date whether its guarantee insurance liabilities are adequate, using current estimates of future cash flows under its insurance contracts. If that assessment shows that the carrying amount of its insurance liabilities is inadequate in the light of the estimated future cash flow, the entire deficiency is recognised in the profit or loss.
3 FINANCIAL RISK MANAGEMENT
3.1 Financial risk factors
The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance.
—65— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
Risk management is carried out by a central treasury department (Group treasury) under policies approved by the board of directors. Group treasury identifies, evaluates and hedges financial risks in close co-operation with the Group’s operating units. The board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.
(a) Market risk
(i) Foreign exchange risk
The Group’s normal operating activities are principally conducted in RMB since all of the operating entities are based in the PRC. The foreign currency balances as at 31 December 2015 were primarily related to bank deposits, borrowings and the senior notes denominated in United States dollar (“USD”) or Hong Kong dollar (“HKD”). The Group currently does not have a foreign currency hedging policy.
The carrying amount of the Group’s foreign currency denominated monetary assets and liabilities are as follows:
31 December 31 December 2015 2014 RMB’000 RMB’000
Assets HKD 262,113 13,025 USD 1,896,504 3,195,901
2,158,617 3,208,926
Liabilities HKD 176,436 1,599,828 USD 18,872,365 11,457,816
19,048,801 13,057,644
As at 31 December 2015, if RMB strengthened/weakened by 5% against the HK dollar with all other variables held constant, the post-tax profit for the year would have been RMB4 million lower/higher (2014: RMB60 million higher/lower).
As at 31 December 2015, if RMB strengthened/weakened by 5% against the US dollar with all other variables held constant, the post-tax profit for the year would have been RMB849 million higher/lower (2014: RMB310 million higher/lower).
—66— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
(ii) Price risk
The Group is not exposed to equity securities price or commodity price risk.
(iii) Cash flow and fair value interest rate risk
As the Group has no significant interest-bearing assets, the Group’s income and operating cash flows are substantially independent from changes in market interest rates.
The Group’s interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the Group to cash flow interest-rate risk which is partially offset by cash held at variable rates. Borrowings issued at fixed rates expose the Group to fair value interest-rate risk. In 2015, the Group’s borrowings were denominated in RMB, HKD and USD. (2014: RMB, USD and HKD).
The Group has not used any interest rate swaps to hedge its exposure to interest rate risk.
The table below sets out the Group’s exposure to interest rate risks. Included in the table are the liabilities at carrying amounts, categorised by maturity dates.
Floating rates Fixed rates Less Less than 1to5 Sub- than 1to5 Sub- RMB million 1 year years total 1 year years total Total
Borrowings At 31 December 2015 5,751 12,182 17,933 8,833 15,033 23,866 41,799
At 31 December 2014 5,406 9,258 14,664 8,434 11,286 19,720 34,384
As at 31 December 2015, if the interest rates on borrowings had been 100 basis points higher/lower with all other variables held constant, the post-tax profit for the year would have been lower/higher by RMB72.2 million (2014: lower/higher by RMB40.5 million) and the capitalised interest for the year would have been higher/lower by RMB69.3 million. (2014: higher/lower by RMB76.2million) respectively.
The Group’s management team centrally authorises all loans entered into by operating entities and sets a benchmark interest rate within which the entity management teams can negotiate loans with their local lenders prior to obtaining central approval from the Group management. The interest rate benchmark is reassessed annually by the Group management team.
The Group also analyses its interest rate exposure monthly by considering refinancing, renewal of existing positions and alternative financing.
—67— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
(b) Credit risk
The Group has no significant concentrations of credit risk. The maximum extent of the Group’s credit exposure in relation to financial assets is represented by the aggregate balance of cash and cash equivalents, restricted cash, trade and other receivable, amount due from related parties included in the consolidated balance sheets. Cash transactions are limited to high-credit-quality banks. The Group has policies in place to ensure that sales of properties are made to customers with an appropriate financial strength and appropriate percentage of down payment. Credit is granted to customers with sufficient financial strength. It also has continuous monitoring procedures to ensure the collection of the receivables as scheduled and follow up action is taken to recover overdue debts, if any.
Certain customers of the Group have arranged bank financing for their purchases of the properties. The Group entities have provided guarantees to secure obligations of such customers for repayments, normally up to the time when the customers obtain the legal certificates of the property ownership. Detailed disclosure of these guarantees is made in Note 33(a).
(c) Liquidity risk
Management aims to maintain sufficient cash to meet funding requirement for operations and monitor rolling forecasts of the Group’s cash on the basis of expected cash flow. The directors of the Company have prepared cash flow projections for the year ending 31 December 2016. Key assumptions used in the preparation of the cash flow projections for the year ending 31 December 2016 include: (1) proceeds from pre-sales in 2016 is expected to be maintained at the same level as that of 2015; (2) construction payments match receipt of the relevant proceeds from pre-sales; (3) available project loan facility is expected to be no less than that of 2015 and (4) no breach of debt covenants is anticipated in 2016.
The Group has a number of alternative plans to mitigate the potential impacts on anticipated cash flows should there be significant adverse changes in economic environment. These include adjusting and further slowing down the construction progress as appropriate to ensure available resources for the development of properties for sale, implementing cost control measures, accelerating sales with more flexible pricing and issuing senior notes. The Group, will base on its assessment of the relevant future costs and benefits, pursue such options as are appropriate. The directors consider that the Group will be able to maintain sufficient financial resources to meet its operation needs.
Due to the dynamic nature of the underlying businesses, the Group’s central treasury department maintains flexibility in funding by its ability to move cash and cash equivalents between different entities through entrusted loan arrangements.
—68— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
The table below analyses the Group’s financial liabilities into relevant maturity grouping based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.
Between Between Less than 1 and 2 and In RMB million 1 year 2 years 5 years Total
At 31 December 2015 Borrowings and interest payments 16,840 10,701 21,155 48,696 Trade and other payables (Note 21) 10,272 — — 10,272 Amounts due to related companies (Note 37(d)) 18,213 — — 18,213
At 31 December 2014 Borrowings and interest payments 16,215 6,081 17,559 39,855 Trade and other payables (Note 21) 11,116 — — 11,116 Amounts due to related companies (Note 37(d)) 20,714 — — 20,714
Note:
— The interest payments on borrowings are calculated based on borrowings held as at 31 December 2015 and 2014 without taking into account future borrowings. Floating-rate interest is estimated using the current interest rate at 31 December 2015 and 2014 respectively.
— Trade and other payables in this analysis do not include the taxes payables and payroll and welfare payables.
3.2 Capital management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to equity holders, return capital to equity holders, issue new shares or sell assets to reduce debt.
Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total equity. Net debt is calculated as total borrowings (including current and non-current borrowings as shown in the consolidated balance sheet) less cash and cash equivalents (including restricted cash).
—69— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
The gearing ratios of the Group as at 31 December 2015 and 2014 were as follows:
31 December 31 December 2015 2014 RMB’000 RMB’000
Total borrowings (Note 22) 41,798,633 34,383,795 Less: Restricted cash (Note 16) 4,371,010 (4,384,145) Cash and cash equivalents (Note 17) 22,687,280 (20,657,285)
Net debts 14,740,343 9,342,365 Total equity 19,420,170 20,982,633
Gearing ratio 75.9% 44.5%
The directors of the Company are of the view that the Group’s gearing ratio is healthy.
4 FAIR VALUE ESTIMATION
The carrying value less impairment provisions of trade and other receivables and the nominal value of trade and other payables approximate their fair values due to their short maturities.
The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments. See Note 22 for disclosures of the financial liabilities that are not measured at fair value but fair value disclosures are required.
(a) Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
(b) Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).
(c) Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).
5 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
—70— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.
(A) PRC corporate income taxes and deferred taxation
The Group’s subsidiaries that operate in the PRC are subject to income tax in the PRC. Significant judgement is required in determining the provision for income tax and withholding tax on undistributed earnings of PRC subsidiaries. There are many transactions and calculations for which the ultimate determination is uncertain during the ordinary course of business. Where the final tax outcome of these matters (including the effect of change in the dividend policies of PRC subsidiaries) is different from the amounts that were initially recorded, such difference is made.
Deferred tax assets relating to certain temporary differences and tax losses are recognised when management considers to be probable that future taxable profit will be available against which the temporary differences or tax losses can be utilised. The outcome of their actual utilisation may be different.
(B) PRC land appreciation taxes
The Group is subject to land appreciation taxes (“LAT”) in numerous jurisdictions. However, since the implementation and settlement of these taxes varies among various tax jurisdictions in cities of the PRC, significant judgement is required in determining the amount of the land appreciation and its related taxes. The Group recognised these land appreciation taxes based on management’s best estimates according to its understanding of the interpretation of tax rules by various tax authorities. The final tax outcome could be different from the amounts that were initially recorded, and these differences will impact the income taxes and deferred income tax provisions in the years in which such taxes have been finalised with local tax authorities.
(C) Estimated net realizable value of properties under development and completed properties held for sale
The Group assesses the carrying amounts of properties under development and completed properties held for sale based on the net realisable value of these properties, taking into account costs to completion based on past experience and net sales value based on prevailing market conditions. Provision is made when events or changes in circumstances indicate that the carrying amounts may not be realised. The assessment requires the use of judgement and estimates. If the estimated future selling prices had been 5% lower, the Group would have recognised further impairment against properties under development and completed properties held for sale and the net profit for the year ended 31 December 2015 would have decreased by RMB17 million (2014: RMB109 million).
—71— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
(D) Estimated impairment of goodwill
The Group tests at least annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in Note 2.9. The recoverable amounts of CGUs have been determined based on fair value less costs of disposals calculations method. These calculations require the use of estimates.
6 SEGMENT INFORMATION
The executive directors of the Company review the Group’s internal reporting in order to assess performance and allocate resources of the Group. The executive directors of the Company have determined the operating segments based on these reports. The executive directors assess the performance of property development, property investment business and property management business of the Group respectively. The performance of such operating segments is assessed based on a measure of profit/(loss) before income tax.
Segment assets primarily consist of all assets excluding deferred income tax assets and segment liabilities primarily consist of all liabilities excluding deferred income tax liabilities and current income tax liabilities.
The analysis of the Group’s profit/(loss) before income tax by segment is as follows:
Year ended 31 December 2015 Property Property management development and others Total RMB’000 RMB’000 RMB’000
Total segment revenue 22,511,143 561,416 23,072,559 Inter-segment revenue — (61,616) (61,616)
Revenue from external customers 22,511,143 499,800 23,010,943 Segment gross profit 2,810,857 46,408 2,857,265
Selling and marketing costs (633,674) (27,380) (661,054) Administrative expenses (715,095) (59,920) (775,015) Other income and gains 4,109,545 2,445 4,111,990 Other expenses and losses (258,404) (7,224) (265,628) Finance income 123,521 — 123,521 Finance costs (2,514,592) (5,983) (2,520,575) Share of profit of investments accounted for using equity method, net 1,693,207 — 1,693,207
Profit/(loss) before income tax 4,615,365 (51,654) 4,563,711
—72— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
As at 31 December 2015 Property Property Management development and others Total RMB’000 RMB’000 RMB’000
Total segment assets 113,644,985 361,548 114,006,533
Total segment liabilities 83,840,268 535,623 84,375,891
Year ended 31 December 2014 Property Property management development and others Total RMB’000 RMB’000 RMB’000
Total segment revenue 24,719,336 417,762 25,137,098 Inter-segment revenue — (65,139) (65,139)
Revenue from external customers 24,719,336 352,623 25,071,959 Segment gross profit 4,326,524 15,356 4,341,880
Selling and marketing costs (671,986) (25,313) (697,299) Administrative expenses (629,161) (51,582) (680,743) Other income and gains 1,017,918 2,533 1,020,451 Other expenses (117,859) (1,958) (119,817) Finance income 123,422 — 123,422 Finance costs (1,267,380) — (1,267,380) Share of profit of investment accounted for using equity method, net 2,181,283 — 2,181,283
Profit/(loss) before income tax 4,962,761 (60,964) 4,901,797
—73— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
As at 31 December 2014 Property Property management development and others Total RMB’000 RMB’000 RMB’000
Total segment assets 110,725,396 184,951 110,910,347
Total segment liabilities 78,651,367 332,911 78,984,278
Reportable segments’ assets and liabilities are reconciled to total assets and liabilities as follows:
31 December 31 December 2015 2014 RMB’000 RMB’000
Total segment assets 114,006,533 110,910,347 Deferred income tax assets 1,502,429 1,451,953
Total assets per balance sheet 115,508,962 112,362,300
Total segment liabilities 84,375,891 78,984,278 Deferred income tax liabilities 4,379,412 5,886,751 Current income tax liabilities 7,333,489 6,508,638
Total liabilities per balance sheet 96,088,792 91,379,667
—74— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
7 PROPERTY, PLANT AND EQUIPMENT
Furniture and office Leasehold Vehicles equipment improvements Total RMB’000 RMB’000 RMB’000 RMB’000
At 1 January 2014 Cost 62,879 31,049 22,331 116,259 Accumulated depreciation (26,284) (16,688) (7,906) (50,878)
Net book amount 36,595 14,361 14,425 65,381
Year ended 31 December 2014 At 1 January 2014 36,595 14,361 14,425 65,381 Additions 20,982 1,804 2,837 25,623 Disposal of subsidiaries (1,118) (545) (55) (1,718) Disposals (2,512) (293) — (2,805) Depreciation charges (13,389) (7,182) (4,095) (24,666)
At 31 December 2014 40,558 8,145 13,112 61,815
At 31 December 2014 Cost 72,762 31,387 25,040 129,189 Accumulated depreciation (32,204) (23,242) (11,928) (67,374)
Net book amount 40,558 8,145 13,112 61,815
Year ended 31 December 2015 At 1 January 2015 40,558 8,145 13,112 61,815 Additions 5,320 4,920 5,378 15,618 Acquisition of subsidiaries 6,462 5,130 12,470 24,062 Disposal of subsidiaries (2,254) (724) — (2,978) Disposals (365) (580) (901) (1,846) Depreciation charges (11,188) (8,934) (7,590) (27,712)
At 31 December 2015 38,533 7,957 22,469 68,959
At 31 December 2015 Cost 74,295 44,666 38,834 157,795 Accumulated depreciation (35,762) (36,709) (16,365) (88,836)
Net book amount 38,533 7,957 22,469 68,959
—75— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
Depreciation expense of RMB4 million (2014: RMB3 million) has been charged to “cost of sales”, RMB2 million (2014: RMB1 million) in “selling and marketing costs” and RMB22 million (2014: RMB21 million) in “administrative expenses”.
8 INVESTMENT PROPERTIES
Commercial properties and car parks at fair value
2015 2014 RMB’000 RMB’000
Opening balance at 1 January 239,000 252,000 Net losses from fair value adjustment — (13,000) Disposals (239,000) —
Closing balance at 31 December — 239,000
The Group measures its investment properties at fair value. In February 2015, the Group disposed all investment properties to an independent third party at the price of RMB175 million, resulting in an after tax net loss of RMB81.3 million (Note 27).
9 INTANGIBLE ASSETS
31 December 31 December 2015 2014 RMB’000 RMB’000
Goodwill (Note (a)) 228,699 147,985 Others 1,570 920
230,269 148,905
(A) Goodwill
2015 2014 RMB’000 RMB’000
At beginning of year 147,985 233,694 Acquisition of subsidiaries (Note 35(a)) 80,714 — Impairment charges (Note 27) — (85,709)
At end of year 228,699 147,985
—76— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
Goodwill was generated from business combination and allocated to each project or a group of projects, which is expected to benefit from the synergies of the combination. Each project or a group of projects is identified as a CGU. Management reviews the business performance and monitors the goodwill on individual CGU basis. The recoverable amount of a CGU is determined based on fair value less costs of disposal calculations. A post-tax discount rate of 14% was used for the analysis of each CGU in the operating entities as at 31 December 2015 (2014: 15%).
There is no individual CGU, for which the carrying amount of goodwill is significant in comparison with the total carrying amount of goodwill. The goodwill mainly attributed to the segment of property development.
10 INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
The amounts recognised in the balance sheet are as follows:
31 December 31 December 2015 2014 RMB’000 RMB’000
Joint ventures (“JVs”) 10,691,975 7,927,863 Associates 4,568,606 4,120,926
Total 15,260,581 12,048,789
The share of profits/(losses) from investment recognised in the income statement were as follows:
2015 2014 RMB’000 RMB’000
JVs 1,501,411 1,043,884 Associates 191,796 1,137,399
Total 1,693,207 2,181,283
—77— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
10.1 Investments in JVs
An analysis of the movement of investments in JVs is as follows:
2015 2014 RMB’000 RMB’000
At beginning of year 7,927,863 4,925,337 Investments in new JVs (Note (a)) 2,225,123 1,985,309 Additional investments in existing JVs 236,000 — JVs changing to subsidiaries (Note 35) (1,153,375) — Investment in JVs owned by newly acquired subsidiaries (Note 35) 67,840 — JVs changed from subsidiaries (Note 36) 1,231,459 — Disposal of interests in a joint venture (“JV”) (49,995) — Share of profit of JVs, net 1,501,411 1,043,884 Share of JVs’ declared dividends (1,294,351) (26,667)
At end of year 10,691,975 7,927,863
Note:
(a) In June 2015, the Group acquired a 51% equity interest of Nanjing Foshouhu Architectural Art Development Co., Ltd. (“Nanjing Foshouhu”) at the consideration of RMB77 million. Upon the completion of the acquisition, Nanjing Foshouhu became a JV of the Company, the fair value of the net assets acquired amounted to was RMB131 million and a net gain of RMB54 million was resulted.
According to a new project acquisition plan, the Group targeted to obtain 69% equity interest in a project development company named Wuhan Tazihu Real Estate Co., Ltd. (“Wuhan Tazihu”) by equity acquisitions from third parties. As of 31 December 2015, the Group has completed the acquisition of 46% equity interest of Wuhan Tazihu at a consideration of RMB487 million, which lower than the relevant fair value acquired at the transaction date, resulting in a net gain of RMB72 million attributed to the Group, and Wuhan Tazihu has become a JV of the Group.
(b) All joint ventures are non-listed companies. A JV named Summer Sky Investments Limited is incorporated in Hong Kong, all remaining JVs of the Group are incorporated in the PRC.
—78— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
(c) As at 31 December 2015 and 2014, the Group had interests in the following principal JVs:
Equity interest % Registered owned by the Group capital 31 December 31 December Name of JVs (RMB million) 2015 2014 Principal activities
Beijing Franshion Sunac Real Estate Development Co., Ltd. 100 49% 49% Real estate development Beijing Sunac Hengyu Real Estate Co., Ltd. 2,500 51% 51% Real estate development Beijing Zhuzong Zhongbang Real Estate Co., Ltd. 1,000 48% 48% Real estate development Beijing Xiangyuan Da Dao Industrial Co., Ltd. 167 40% 40% Real estate development *Tianjin Greentown National Game Village Construction and Development Co., Ltd. 2,500 39.2% — Real estate development Tianjin TEDA City Development Co., Ltd. 340 47% 47% Real estate development Shanghai Poly Hongrong Real Estate Co., Ltd. 2,000 49% 24.5% Real estate development Shanghai Long Xiang Real Estate Development Co., Ltd. 30 50% 25% Real estate development Hangzhou Wangjiangfu Real Estate Co., Ltd. 650 50% 50% Real estate development China Energy Conservation Lvjian (Hangzhou) Technology Development Co., Ltd. 600 65% 65% Real estate development *Wuhan Tazihu Real Estate Co., Ltd. 80 46% — Real estate development Summer Sky Investments Co. Ltd. 0 49% 49% Real estate development
* New JVs of the Group acquired in 2015.
The above table lists the principal JVs of the Group. To give details of other JVs would, in the view of the directors, result in particulars of excessive length.
The Group’s control over decisions about the relevant activities requires unanimous consent with other business partners in the JVs in accordance with the JVs’ articles of associations.
(d) Summarised financial information of material JVs
Set out below is the summarised financial information for two major JVs.
—79— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
Summarised balance sheets
JV - A JV - B 2015 2014 2015 2014 RMB’000 RMB’000 RMB’000 RMB’000
Summarised assets and liabilities Current assets 1,767,748 4,840,497 3,794,958 6,733,256 Non-current assets 97,868 76,146 22,620 24,063 Current liabilities 1,678,338 3,290,683 918,793 4,828,393 Net assets 187,278 1,625,960 2,898,785 1,928,926
Included in the above assets and liabilities:
Cash and cash equivalents 1,214,027 775,893 52,031 415,489 Financial liabilities, excluding trade and other payables and provisions — Current ———— — Non-current ————
Summarised profit or loss and other comprehensive income Revenue 2,725,759 7,431,265 5,343,504 — Net profit/(loss) 761,318 1,617,279 972,653 (37,313) Total comprehensive income 761,318 1,617,279 972,653 (37,313)
Included in the above profit or loss:
Depreciation and amortisation 342 395 196 171 Interest income 33,451 14,208 6,591 4,280 Interest expense ———— Income tax expense 439,591 997,128 504,108 (11,944)
The information above reflects the amounts presented in the financial statements of the JVs, adjusted for differences in accounting policies between the Group and the JVs, and not the Company’s shares of those amounts.
(e) Reconciliation of summarised financial information
Reconciliation of the above financial information presented to the carrying amount of the Group’s interests in the JVs:
JV - A JV - B 2015 2014 2015 2014 RMB’000 RMB’000 RMB’000 RMB’000
Net assets of JVs 187,278 1,625,960 2,898,785 1,928,926 The Group’s equity interest shares 49% 49% 49% 49% Carrying amount 91,766 796,720 1,420,405 945,174
—80— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
Aggregate information of JVs that are not individually material:
2015 2014 RMB’000 RMB’000
Aggregate carrying amount of the Group’s interests in these JVs 9,179,804 6,185,969
The Group’s share of post-tax profits, net 651,765 269,701
The Group’s shares of total comprehensive income 651,765 269,701
As at 31 December 2015, there were no contingent liabilities relating to the Group’s interests in the JVs (2014: Nil), except that disclosed in Note 33.
10.2 Investments in associates
An analysis of the movement of equity investments in associates is as follows:
2015 2014 RMB’000 RMB’000
At beginning of year 4,120,926 2,983,527 Investment in a new associate 1,593,075 — An associate changing to a subsidiary (Note (a), 35) (86,975) — Disposal of an associate (Note (a)) (18,406) — Share of profit of associates, net 191,796 1,137,399 Shares of associates’ declared dividends (1,231,810) —
At end of year 4,568,606 4,120,926
All associates of the Group are incorporated in the PRC and are non-listed companies. No associate was individually material to the Group for the year.
As at 31 December 2015, there were no contingent liabilities relating to the Group’s interests in the associates (2014: Nil), except that disclosed in Note 33.
(a) In 2015 the Group completed a series of equity transactions with Greentown China Holdings Limited and its certain subsidiaries (“Greentown Group”), independent third parties of the Company, which included (i) an addition of 50% equity interest of an previously 50% owned associate named Shanghai Forest Golf Villa Development Co., Ltd. (“Shanghai Forest Golf”) and (ii) a disposal of a 45% owned associate named Beijing Xingye Wanfa Real Estate Development Co., Ltd. (“Xingye Wanfa”).
Details of the above transaction (i) is disclosed in Note 35. For the transaction (ii), on 30 June 2015, the Group disposed its owned 45% equity interest of Beijing Xingye Wanfa at the equity consideration of RMB191.37 million, resulted in a gain of RMB173 million (Note 26).
—81— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
As at 31 December 2015 and 2014, the Group had interests in the following principal associates:
Equity interest attributable to the Group Registered capital (RMB 31 December 31 December Name of associates million) 2015 2014 Principal activities
Beijing Poly Sunac Real Estate Development Co., Ltd 2,000 49.5% 49.5% Real estate development Tianjin Poly Sunac Investment Co., Ltd. 2,000 49% 49% Real estate development Shanghai Fuyuan Binjiang Development Co., Ltd. 1,320 47% — Real estate development Shanghai Gezhouba Greentown Sunac Real Estate Co., Ltd. 100 49% 24.5% Real estate development Wuxi Taihu Greentown Real Estate Co., Ltd. 300 39% 19.5% Real estate development
11 DEFERRED INCOME TAX
31 December 31 December 2015 2014 RMB’000 RMB’000
Deferred income tax assets (hereafter “DTA”): — to be recovered within 12 months 892,312 971,309 — to be recovered after more than 12 months 610,117 480,644
1,502,429 1,451,953
Deferred income tax liabilities (hereafter “DTL”): — to be settled within 12 months 1,327,584 521,655 — to be settled after more than 12 months 3,051,828 5,365,096
4,379,412 5,886,751
Deferred tax liabilities — net 2,876,983 4,434,798
—82— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
The movement on DTA and DTL during the year, without taking into consideration of offsetting of balance within the same tax jurisdiction, is as follows:
(A) DTA
Deferred Impairment DTA on expenses provision unpaid for tax Deductible for LAT purpose tax loss properties Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At 1 January 2014 936,397 59,713 227,572 80,872 1,304,554 Credited/(charged) to profit or loss 55,409 (4,829) 62,120 50,844 163,544 Disposal of subsidiaries — (2,386) (13,759) — (16,145)
At 31 December 2014 991,806 52,498 275,933 131,716 1,451,953
Credited/(charged) to profit or loss 46,703 (36,644) 75,449 28,108 113,616 Acquisition of subsidiaries (Note 35) 77,887 4,851 79,327 — 162,065 Disposal of subsidiaries (Note 36) (41,327) (934) (149,922) (33,022) (225,205)
At 31 December 2015 1,075,069 19,771 280,787 126,802 1,502,429
DTA are recognised for tax losses carry-forwards to the extent that the realisation of the related benefit through the future taxable profits is probable. The Group did not recognise DTA of RMB227 million (2014: RMB127 million) in respect of accumulated losses amounting to RMB907 million (2014: RMB510 million) that can be carried forward against future taxable income. Accumulated losses amounting to, RMB24 million, RMB72 million, RMB35 million, RMB398 million and RMB378 million, as at 31 December 2015 will expire in 2016, 2017, 2018, 2019 and 2020, respectively.
As of 31 December 2015, the Group has deductible temporary differences of RMB370 million (2014: RMB437 million) in respect of which no DTA have been recognised as it is not probable that taxable profit will be available against which the deductible temporary differences can be utilised.
—83— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
(B) DTL
Deferred LAT Deferred corporate income tax Fair value Dividend Acquisition Fair value gains of tax for of gains on investment Prepaid PRC subsidiaries acquisitions properties LAT entities Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At 1 January 2014 3,991,073 2,156,721 6,683 70,923 257,625 6,483,025 (Credited)/charged to profit or loss — (283,086) (3,250) 29,651 94,907 (161,778) Transfer to LAT payable (434,496) ————(434,496)
At 31 December 2014 3,556,577 1,873,635 3,433 100,574 352,532 5,886,751
(Credited)/charged to profit or loss — (247,385) (3,433) (89,342) 94,957 (245,203) Transfer to LAT payable (548,959) ————(548,959) Acquisition of subsidiaries 900,701 883,869 — 127,491 — 1,912,061 Disposal of subsidiaries (2,173,341) (434,163) — (17,734) — (2,625,238)
At 31 December 2015 1,734,978 2,075,956 — 120,989 447,489 4,379,412
—84— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
12 PROPERTIES UNDER DEVELOPMENT
31 December 31 December 2015 2014 RMB’000 RMB’000
Comprising: Land use rights costs 23,865,555 24,735,044 Other development costs 5,936,959 7,433,155 Capitalised finance costs 4,390,220 3,637,130
34,192,734 35,805,329 Less: Provision for loss on realisable value (50,075) (104,784)
34,142,659 35,700,545
Including: To be completed within 12 months 10,910,407 12,157,060 To be completed after 12 months 23,232,252 23,543,485
34,142,659 35,700,545
The properties under developments (“PUDs”) are all located in the PRC.
As at 31 December 2015, PUDs with net carrying amount of RMB17,550 million (2014: RMB23,879 million) were pledged as collateral for the Group’s borrowings (Note 22).
13 COMPLETED PROPERTIES HELD FOR SALE
31 December 31 December 2015 2014 RMB’000 RMB’000
Completed properties held for sale 16,413,728 14,406,993 Less: Provision for loss on realisable value (686,599) (724,542)
15,727,129 13,682,451
The completed properties held for sale are all located in the PRC.
As at 31 December 2015, certain completed properties held for sale with net carrying amount of RMB6,291 million (2014: RMB8,303 million) were pledged as collaterals for the Group’s borrowings (Note 22).
—85— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
14 TRADE AND OTHER RECEIVABLES
31 December 31 December 2015 2014 RMB’000 RMB’000
Receivables from non-controlling interests 334,024 1,392,778 Trade receivables (Note (b)) 92,011 368,868 Notes receivables 200 4,110 Receivables from a disposal of PUD — 335,000 Other receivables — Deposits 212,349 166,587 — Payments on behalf of customers 132,291 140,171 — Interests 22,810 — — Others 204,474 94,973
998,159 2,502,487 Less: Bad debt provision for other receivables (27,678) (27,678)
970,481 2,474,809
Notes:
(a) As at 31 December 2015 and 2014, the carrying amounts of trade and other receivables were all denominated in RMB and approximated their fair value.
(b) At 31 December 2015, the ageing analysis at the trade receivable is performed based on the date of the revenue recognition. The ageing analysis of trade receivables at respective balance sheet dates is as follows:
31 December 31 December 2015 2014 RMB’000 RMB’000
Within 90 days 55,160 243,987 90 - 180 days — 52,477 181 - 365 days 34,521 72,404 Over 365 days 2,330 —
92,011 368,868
Trade receivables are analysed as follows:
31 December 31 December 2015 2014 RMB’000 RMB’000
Fully performing and under credit terms 79,384 351,422 Past due but not impaired 12,627 17,446
92,011 368,868
—86— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
During the year ended 31 December 2015, the Group granted a credit period of 90-365 days to certain customers.
As the Group normally holds collateral of the properties before collection of full contract amount and transfer of the legal titles to the customers, the Directors are of the view that the past due trade receivables would be recovered and no provision was made as at 31 December 2015.
15 PREPAYMENTS
31 December 31 December 2015 2014 RMB’000 RMB’000
Non-current Prepayments for equity investment 4,722,036 944,991
Current Prepaid taxes — LAT 1,214,360 985,483 — Business tax and surcharge 697,978 699,397 — Corporate income tax 725,876 499,671 Prepayments for land use rights acquisition 1,465,969 342,109 Prepayments for project development costs 61,897 41,534
4,166,080 2,568,194
As at 31 December 2015 and 2014, the carrying amounts of the Group’s prepayments were all denominated in RMB.
16 RESTRICTED CASH
31 December 31 December 2015 2014 RMB’000 RMB’000
Guarantee deposits as reserve for bank loans 3,070,505 3,038,476 Restricted cash from property presale proceeds 1,287,734 1,276,274 Others 12,771 69,395
4,371,010 4,384,145
—87— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
17 CASH AND CASH EQUIVALENTS
31 December 31 December 2015 2014 RMB’000 RMB’000
Denominated in RMB 20,528,663 17,448,359 Denominated in USD 1,896,504 3,195,901 Denominated in HKD 262,113 13,025
22,687,280 20,657,285
The conversion of RMB denominated balances into foreign currencies, and the remittance of foreign currencies-denominated bank balances and cash out of the PRC are subject to restrictive foreign exchange control rules and regulations.
The Group earns interest on cash at bank, at floating bank deposit rates and there was no bank overdraft in the Group.
18 SHARE CAPITAL
Shares capital Number of shares Equivalent to (thousands) HK$’000 RMB’000
Ordinary shares of HK$0.1 each, issued and fully paid: 10,000,000 1,000,000 —
As at 1 January 2014 3,320,311 332,032 285,055 Proceeds from shares issued upon exercise of employees’ share options 61,885 6,188 4,908
As at 31 December 2014 3,382,196 338,220 289,963
Proceeds from shares issued upon exercise of employees’ share options 17,253 1,725 1,366
As at 31 December 2015 3,399,449 339,945 291,329
—88— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
19 SHARE OPTION SCHEMES
(I) Post-IPO share option scheme
A Post-IPO Share Option Scheme was approved and adopted by all shareholders of the Company on the annual general meeting held on 29 April 2011 (the “Post-IPO Option Scheme Adoption Date”). As at 31 December 2014, all the share options have been granted within the Post-IPO Share Option Scheme. The options are not conditional on the employees’ performance target before an option can be exercised. The Post-IPO share options, once vested, shall be exercisable within a period of six years from the Post-IPO Scheme Adoption Date or the most recent anniversary of the Post-IPO Scheme Adoption Date.
(II) 2014 share option scheme
A share option scheme (“2014 Share Option Scheme”) was approved and adopted by the shareholders of the Company at the annual general meeting held on 19 May 2014 (the “2014 Share Option Scheme Adoption Date”).The maximum number of shares in respect of which options (“2014 Options”) may be granted should not exceed 166,374,246 shares, representing 5% of the total number of shares in issue as at the 2014 Share Option Scheme Adoption Date. The options are to be granted during a grant period of three years from the 2014 Share Option Scheme Adoption Date. Such options will vest in accordance with the following schedule: 30% upon the grant, an additional 30% upon the first anniversary of the 2014 Share Option Scheme Adoption Date and additional 40% upon the second anniversary. The options are not conditional on the employees’ performance target before an option can be exercised. The subscription price for each grant should be at least the higher of (1) the closing price of the shares as stated in the Hong Kong Stock Exchange’s daily quotations sheets on the grant dates, (2) the average of the closing prices of the shares as stated in the Hong Kong Stock Exchange’s daily quotation sheets for the five business days immediately preceding the grant date, and (3) the nominal value of the shares of the Company. The 2014 share options, once vested, shall be exercisable within a period of five years from the 2014 Share Option Scheme Adoption Date or the most recent anniversary of the 2014 Share Option Scheme Adoption Date.
The weighted-average fair value of options granted during the period determined using the Binomial valuation model was HK$2.23 per option (2014: HK$1.36). The significant inputs into the model were weighted average share price of HK$7.27 at the grant date (2014: HK$4.07), exercise price of HK$7.27 (2014: HK$4.07), volatility of 44.91% (2014: 44.53%), dividend yield of 2.1% (2014: 1.66%), an expected option life of five years, and an annual risk-free interest rate of 1.129% (2014: 1.272%). The expected volatility is determined by calculating the historical volatility of the price of listed companies with similar business to the Group. The expected dividend yield is determined by the Directors based on the expected future performance and dividend policy of the Group. The total expense recognised in the profit or loss for share options granted to directors and employees for the year ended 31 December 2015 was RMB47.40 million (2014: RMB35.46 million) (Note 25).
The Group has no legal or constructive obligation to repurchase or settle all above mentioned options in cash.
—89— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
Movement in the share options and their related weighted-average exercise prices are as follows:
2015 2014 Average Average price in price in HK$ per Options HK$ per Options share (thousand) share (thousand)
At beginning of year 3.95 99,434 3.23 130,669 Granted 7.27 33,267 4.07 33,267 Exercised 3.34 (17,253) 2.56 (61,885) Expired — — 2.78 (2,457) Abandoned 5.11 (4,578) 2.33 (160)
At end of year 5.00 110,870 3.95 99,434
As at 31 December 2015, 52,640 thousand shares in Post-IPO Share Option Scheme and 26,214 thousand shares in the 2014 Share Option Scheme were exercisable (2014: 55,004 thousand shares in the Post-IPO Share Option Scheme and 8,782 thousand shares in the 2014 Share Option Scheme).
Share options outstanding at the end of the year have the following expiry date and exercise prices:
Exercise price Number of share options in HK$ per (thousands) Expiry date share option 2015 2014
28 April 2017 1.48 13,058 18,785 28 April 2018 2.33 12,611 18,326 28 April 2019 6.32 24,313 30,254 5 June 2019 4.07 28,042 32,069 9 July 2020 7.27 32,846 —
110,870 99,434
—90— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
20 RESERVES
Share Other Note premium reserves Total RMB’000 RMB’000 RMB’000
Year ended 31 December 2014 At 1 January 2014 3,070,058 43,859 3,113,917 Employees share option scheme: — Value of employee services 25 — 35,456 35,456 — Proceeds from shares issued 120,882 — 120,882 Dividend relating to 2013 (635,681) — (635,681) Statutory reserve (a) — 568,427 568,427
At 31 December 2014 2,555,259 647,742 3,203,001
Year ended 31 December 2015 At 1 January 2015 2,555,259 647,742 3,203,001 Transaction with non-controlling interests 34 — (93,853) (93,853) Employees share option scheme: — Value of employee services 25 — 47,395 47,395 — Proceeds from shares issued 44,129 — 44,129 Statutory reserve — 1,548,184 1,548,184 Dividend relating to 2014 40 (644,414) — (644,414)
At 31 December 2015 1,954,974 2,149,468 4,104,442
(a) Statutory reserves
In accordance with the relevant government regulations in the PRC and the provisions of the articles of association of the PRC companies now comprising the Group, 10% of its net profit as shown in the accounts prepared under PRC accounting regulations is required to be appropriated to statutory reserve, until the reserve reaches 50% of the registered capital. Appropriation of statutory reserve must be made before distribution of dividends to equity holders. This reserve shall only be used to make up losses; to expand the entities’ production operation; or to increase the capital of the entities. Upon approval by a resolution of equity holders, the entities may convert this reserve into share capital, provided that the unconverted remaining amount of reserve is not less than 25% of the registered capital.
The PRC entities of the Group directly owned by the Group’s entities outside the PRC are required, in accordance with relevant rules and regulations concerning foreign investment enterprise established in the PRC and the Articles of Association of these companies, to make appropriations from net profit to the reserve fund and staff and workers’ bonus and welfare fund, after offsetting
—91— APPENDIX I FINANCIAL INFORMATION OF THE GROUP accumulated losses from prior years, and before profit distributions are made to investors. The percentage of profits to be appropriated to the above funds is solely determined by the board of directors of the PRC entities now comprising the Group. For those which are wholly foreign owned enterprises in the PRC, no less than 10% of the profit of each year to the reserve fund is mandatory. The appropriation of the statutory reserve ceases when the accumulated statutory reserve balance reaches 50% of their registered capital.
21 TRADE AND OTHER PAYABLES
31 December 31 December 2015 2014 RMB’000 RMB’000
Trade payables (Note (a)) 7,303,339 6,258,615 Payables for acquisition consideration 1,031,517 48,026 Amount due to non-controlling interests 206,777 3,217,086 Notes payables 193,495 765,284 Interests payable 416,012 307,188 Advanced deed tax from customers 243,707 284,214 Other taxes payable 462,031 312,936 Payroll and welfare payables 210,160 186,778 Deposits payable 386,874 34,754 Others 490,038 200,842
10,943,950 11,615,723
(a) At 31 December 2015, the ageing analysis at the trade payable is performed based on the date of the liability recognition on accrual basis. The ageing analysis of the Group’s trade payables is as follows:
31 December 31 December 2015 2014 RMB’000 RMB’000
Within 90 days 4,628,637 3,382,318 90-180 days 581,236 285,542 180-365 days 354,035 744,725 Over 365 days 1,739,431 1,846,030
7,303,339 6,258,615
—92— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
22 BORROWINGS
31 December 31 December 2015 2014 RMB’000 RMB’000
Non-current Secured, — Bank borrowings 23,094,089 16,608,622 — Other borrowings 1,520,000 5,150,000 — Senior notes (Note (a)) 8,389,829 7,869,165
33,003,918 29,627,787 Unsecured, — Corporate bonds (Note (b)) 5,967,000 —
38,970,918 29,627,787 Less: Current portion of long-term borrowings (Note (c) (i)) (11,756,678) (9,083,674)
27,214,240 20,544,113
Current Secured, — Bank borrowings 1,481,715 1,514,708 — Other borrowings 1,300,000 3,195,300
2,781,715 4,710,008 Unsecured, — Other borrowings 46,000 46,000
2,827,715 4,756,008 Current portion of long-term borrowings (Note (c) (i)) 11,756,678 9,083,674
14,584,393 13,839,682
Total borrowings 41,798,633 34,383,795
—93— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
(A) Senior notes
The Company issued senior notes (“Senior notes”) on the Singapore Exchange Securities Trading Limited, payable semi-annually in arrears. The issued dates, principals and interest rates are shown as below:
Issue dates Principal Interest rate USD million
19 October 2012 400 12.5% 5 April 2013 500 9.375% 5 December 2014 400 8.75%
1,300
According to the terms of the Senior Notes, at any time and from time to time on or after 16 October 2015, 5 April 2016 and 5 December 2017 respectively, the Company may redeem the Notes, in whole or in part, at a redemption price equal to the percentage of principal amount set forth below plus accrued and unpaid interests, if any, to (but not including) the redemption date if redeemed during the twelve month period beginning on 16 October, 5 April and 5 December of each of the years indicated below respectively.
—94— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
The redemption prices are shown as below:
Redemption time Redemption prices
(i) USD400 million: Prior to 16 October 2015 112.5% 16 October 2015 to 15 October 2016 (Note (i)) 106.3% 16 October 2016 and beyond 103.1%
(ii) USD500 million: Prior to 5 April 2016 — Redemption up to 35% 109.4% — Redemption in whole but not in part (Note (ii)) 100%+ applicable premium 5 April 2016 to 31 December 2016 104.7% 2017 and beyond 102.3%
(iii) USD400 million: Prior to 5 December 2017 — Redemption up to 35% 108.75% — Redemption in whole but not in part (Note (iii)) 100%+ customary make-whole premium 5 December 2017 to 31 December 2017 104.4% 2018 and beyond 102.2%
Note (i): The Company announced on 4 December 2015 that it had informed the trustee, DB Trustees (Hong Kong) Limited, that all the outstanding 12.5% senior notes would be redeemed in full on 6 January 2016 (the “Redemption Date”) at a redemption price equal to 106.25% of the principal amount thereof, plus accrued and unpaid interest, if any, to (but not including) the Redemption Date. The Company had reclassified this part to current liabilities in the consolidated balance sheet.
Note (ii): The applicable premium is the greater of (1) 1% of the principal amount and (2) the excess of the present value of 104.7% of the principal plus the scheduled interest cost amount for the period from the redemption date to 5 April 2016 over the principal amount at the redemption date and the fair value of the above early redemption option is not material on initial recognition and as at 31 December 2015.
Note (iii): The customary make-whole premium is the greater of (1) 1% of the principal amount and (2) the excess of the present value of 104.4% of the principal plus the accrued and unpaid interest amount for the period from the redemption date to 5 December 2017 over the principal amount at the redemption date and the fair value of the above early redemption option is not material on initial recognition and as at 31 December 2015.
These early redemption options are regarded as embedded derivatives not closely related to the host contract. The directors are of the view that the fair value of the above early redemption option is not material on initial recognition and as at 31 December 2015.
—95— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
(B) Corporate bonds
The Company issued corporate bonds (the “Corporate Bond”) on the Shanghai Stock Exchange, payable annually in arrears. The issued dates, principals and interest rates are shown as below:
Issue dates Principal Interest rate RMB’000
15 August 2015 (“Type 1 Bond”) 2,500,000 4.50% 15 August 2015 (“Type 2 Bond”) 2,500,000 5.70% 1 September 2015 (“Type 3 Bond”) 1,000,000 4.48%
6,000,000
According to the terms of the Corporate Bond, Type 1 Bond has a term of five years and after the end of the third year the issuer has the option to raise the coupon rate and the investors are entitled to sell back the bonds, and its coupon rate was fixed at 4.5% with an issue size of RMB2.5 billion, while Type 2 Bond has a term of five years and its coupon rate was fixed at 5.7% with an issue size of RMB2.5 billion. Type 3 Bond has a term of five years with the issuer’s option to raise the coupon rate after the end of the third year and the investors’ entitlement to sell back the bonds, and its coupon rate was fixed at 4.48% with an issue size of RMB1 billion. The underwriting fee of the Corporate Bond was charged at 0.6% of the issue size. The net proceeds, after deducting the direct issuance costs, amounted to approximately RMB5,964 billion.
The options embedded in the Type 1 Bond and Type 3 Bond host contracts are not closely related to the host contracts, and the fair value of which is not material on initial recognition date and as at 31 December 2015.
(C) Long-term borrowings
(i) As at 31 December 2015, included in long-term borrowing, RMB2,766 million (2014: RMB7,081 million) of borrowings for property development projects will be due for repayment upon an aggregated 20% - 80% pre-sale status in term of gross floor area of the respective projects were achieved. Based on the management’s sales forecast, RMB491 million (2014: RMB1,756 million) of borrowings will be due for repayment in the year ending 31 December 2016 and are included in current liabilities.
—96— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
(ii) The Group’s long-term borrowings as at 31 December 2015 were repayable as follows:
31 December 31 December 2015 2014 RMB’000 RMB’000
Between 1 and 2 years 8,514,824 4,683,192 Between 2 and 5 years 18,699,416 15,860,921
27,214,240 20,544,113
The weighted-average effective interest rates for the year ended 31 December 2015 was 7.6% (2014: 9.12%).
(iii) Fair value of financial liabilities is not measured at fair value on a recurring basis (but fair value disclosures are required).
The carrying amounts of bank borrowings, borrowings from other financial institution are approximate their fair values. The fair values of senior notes as at 31 December 2015 amounted to RMB8,941 million, which were calculated based on the market price of the traded senior notes at the balance sheet date. The fair values of Corporate bonds as at 31 December 2015 amounted to RMB6,222 million, which were calculated based on the active market price at the balance sheet date. The fair values of senior notes are within level 2 of the fair value hierarchy and the fair values of corporate bonds are within level 1 of the fair value hierarchy.
(D) The exposure of the Group’s borrowings with variable interest rates to interest-rate changes and the contractual re-pricing dates are as follows:
31 December 31 December 2015 2014 RMB’000 RMB’000
6 months or less 12,201,428 11,248,010 6 -12 months 5,731,950 3,096,336 Over 12 months — 320,000
17,933,378 14,664,346
(E) As at 31 December 2015, the Group’s borrowings of RMB35,786 million (2014: RMB34,338 million) were secured or joint secured by the Group’s properties under development and completed properties held for sale with total carrying amount of RMB23,841 million (2014: RMB32,182 million), and the Group’s certain equity interests of certain subsidiaries.
—97— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
(F) Movement in borrowings
RMB’000
Year ended 31 December 2015 At 1 January 2015 34,383,795 Additions 34,592,153 Disposal of subsidiaries (Note 36) (7,495,095) Acquisition of subsidiaries (Note 35) 5,420,790 Repayments (26,247,463) Amortization of financial costs 136,753 Exchange loss 1,007,700
At 31 December 2015 41,798,633
Year ended 31 December 2014 At 1 January 2014 28,706,290 Additions 19,185,977 Disposal of subsidiaries (556,000) Repayments (13,013,609) Amortization of financial costs 59,071 Exchange loss 2,066
At 31 December 2014 34,383,795
(G) The carrying amounts of the Group’s borrowings are denominated in the following currencies:
31 December 31 December 2015 2014 RMB’000 RMB’000
RMB 22,749,832 21,326,151 HKD 18,872,365 1,599,828 USD 176,436 11,457,816
41,798,633 34,383,795
—98— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
23 EXPENSES BY NATURE
2015 2014 RMB’000 RMB’000
Costs of completed properties sold 18,384,161 18,495,001 Business tax and related surcharges 1,266,692 1,389,572 Staff costs (Note 25) 616,745 625,892 Impairment provision for properties 45,433 533,518 Advertisement and promotion costs 337,126 333,366 Consulting expenses 145,516 81,613 Depreciation and amortisation 27,938 24,684 Auditors’ remunerations — Audit services 8,764 5,100 — Non-audit services 14,613 300
24 BUSINESS TAX AND RELATED SURCHARGES
The PRC companies of the Group are subject to business tax on their revenues at the following rates:
Type Tax rate Tax base a) Business tax 5% — Sales of properties 5% — Rental income 5% — Property management services revenue b) Urban construction and 7% — Business tax paid maintenance tax c) Education surcharge 3% — Business tax paid d) Local education surcharge 0%-2% — Business tax paid e) Anti-flood fund 0%-2% — Business tax paid
25 EMPLOYEE BENEFIT EXPENSES
2015 2014 RMB’000 RMB’000
Wages and salaries 458,109 486,033 Pension costs 67,392 52,199 Staff welfare 43,849 52,204 Share options granted to directors and employees (Note 19) 47,395 35,456
616,745 625,892
—99— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
26 OTHER INCOME AND GAINS
2015 2014 RMB’000 RMB’000
Gains from disposals of subsidiaries (Note 36) 1,857,061 1,496 Gains from business combinations (Note 35) 702,875 — Gain on disposal of an associate (Note 10.2) 172,967 — Gain from arrangement of assignment of debt (Note 35(a) (i)) 150,000 — Gains from acquisition of JVs (Note 10.1) 126,622 2,833 Interest income (Note (a)) 1,000,644 974,683 Others 101,821 41,439
4,111,990 1,020,451
(a) Details of interest income are as follows:
2015 2014 RMB’000 RMB’000
Interest income from related companies (Note 37) 590,089 784,350 Other interest income 410,555 190,333
1,000,644 974,683
27 OTHER EXPENSES AND LOSSES
2015 2014 RMB’000 RMB’000
Loss from disposal of a subsidiary (Note 36) 147,791 — Losses from disposal of investment properties (Note 8) 81,284 — Impairment provision for goodwill — 85,709 Losses of valuation of investment properties — 13,000 Others 36,553 21,108
265,628 119,817
— 100 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
28 FINANCE INCOME AND COSTS
2015 2014 RMB’000 RMB’000
Interest expenses 2,908,656 3,035,959 Other finance costs 39,763 — Less: Capitalised finance costs (1,227,932) (1,776,914)
1,720,487 1,259,045 Exchange loss 800,088 8,335
2,520,575 1,267,380
Finance income: — Interest income on bank deposits (123,521) (123,422)
Net finance costs 2,397,054 1,143,958
The capitalisation rate used to determine the amount of the interests incurred eligible for capitalisation in 2015 was 7.6% (2014: 9.12%).
29 INCOME TAX EXPENSES
2015 2014 RMB’000 RMB’000
Corporate income tax (“CIT”) — Current income tax 1,667,990 1,158,896 — Deferred income tax (358,819) (325,322)
1,309,171 833,574 LAT (353,863) 835,594
955,308 1,669,168
— 101 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
(A) CIT
The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the weighted-average tax rate applicable to profits of the consolidated entities as follows:
2015 2014 RMB’000 RMB’000
Profit before income tax 4,563,711 4,901,797
Income tax calculated at the applicable income tax rates in respective countries or regions 1,586,767 1,277,790 LAT 88,466 (208,898) Share of profits of investments accounted for using equity method (415,435) (524,350) Other income and gains not subject to tax (158,270) (1,471) Tax on losses for which no DTA were recognised 94,541 96,127 Tax on temporary differences for which no DTA were recognised 7,452 82,536 Utilisation of tax losses with no DTA recognition — (4,085) Tax write-back on temporary differences with no DTA recognition (18,388) (17,056) Non-deductible expenses 29,079 38,074 Dividends tax for PRC subsidiaries, JVs and associates 94,959 94,907
1,309,171 833,574
Hong Kong profits tax has been provided at the rate of 16.5% (2014: 16.5%) on the estimated assessable profit for the year. Taxation on overseas profits has been calculated on the estimated assessable profit for the year at the rates of taxation prevailing in the countries or regions in which the Group operates.
Pursuant to the applicable rules and regulations of Cayman Islands and British Virgin Islands (“BVI”), the Company and the BVI subsidiaries of the Group are not subject to any income tax in those jurisdictions.
The income tax provision of the Group in respect of operations in the PRC has been calculated at the applicable tax rate of 25%.
In accordance with the PRC Corporate Income Tax Law, a 10% withholding income tax is levied on dividends declared to foreign investors from the enterprises with foreign investments established in the PRC. The Group is therefore liable to withholding taxes on dividends distributable by those subsidiaries established in the PRC in respect of their earnings generated from 1 January 2008.
— 102 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
(B) LAT
PRC LAT is levied at progressive rates ranging from 30% to 60% on the appreciation of land value, being the proceeds of sales of properties less deductible expenditures including lease charges for land use rights and all property development expenditures. LAT is included in the income statement as income tax expense.
30 EARNINGS PER SHARE
(A) Basic
Basic earnings per share are calculated by dividing the profit attributable to owners of the Company by the weighted-average number of ordinary shares in issue during the year.
2015 2014
Profit attributable to owners of the parent company (RMB’000) 3,297,828 3,222,070
Weighted-average number of ordinary shares in issue (thousand) 3,394,387 3,350,372
(B) Diluted
Diluted earnings per share are calculated by adjusting the weighted-average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company has one category of dilutive potential ordinary shares: share options. For the share options, a calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company’s shares) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options.
2015 2014
Profit attributable to owners of the parent company (RMB’000) 3,297,828 3,222,070
Weighted-average number of ordinary shares in issue (thousand) 3,394,387 3,350,372 Adjusted for share options (thousand) 34,558 34,455
Weighted-average number of ordinary shares for diluted earnings per share (thousand) 3,428,945 3,384,827
— 103 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
31 CASH USED IN OPERATIONS
Note 2015 2014 RMB’000 RMB’000
Profit before income taxes 4,563,711 4,901,797 Adjustments for: — Finance costs 28 2,520,575 1,267,380 — Gain from disposal of subsidiaries 26 (1,857,061) (1,496) — Loss from disposal of a subsidiary 27 147,791 — — Gain from disposal of JVs and associates 26 (172,967) — — Gain from business combination 26 (702,875) — — Gain from acquisition of JVs and associates 26 (126,622) (2,833) — Gain on disposal of PP&E (349) (379) — Loss of valuation of investment properties 27 — 13,000 — Losses from disposals of investment properties 27 81,284 — — Impairment provision for goodwill 27 — 85,709 — Amortisation of intangible assets 226 17 — Depreciation 7 27,712 24,666 — Share of profits from JVs and associates 10 (1,693,207) (2,181,283) — Interest income 26 (1,000,644) (974,683) — Value of employee services 25 47,395 35,456
Changes in working capital — Restricted cash from pre-sale of properties 45,164 92,997 — Properties under development and completed properties held for sale, net 10,939,546 5,951,656 — Trade and other receivables and prepayments 1,303,393 (1,029,139) — Advanced proceeds from customers (3,801,252) 328,687 — Trade and other payables (2,697,565) (1,709,915) — Amount due from/to related companies 10,046,598 12,650,703
Cash generated from operations 17,670,853 19,452,340
— 104 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
32 COMMITMENTS
(A) Property development expenditures at the balance sheet date but not yet incurred is as follows:
31 December 31 December 2015 2014 RMB’000 RMB’000
Property development expenditures — Contracted but not provided for 4,643,498 4,673,875 — Authorised but not contracted 19,770,172 30,217,687
24,413,670 34,891,562
(B) Investments
31 December 31 December 2015 2014 RMB’000 RMB’000
Investment in new JVs — Contracted but not provided for 247,228 1,547,994
24,660,898 36,439,556
(C) Operating lease commitments
The future aggregate minimum lease rental expense in respect of certain office buildings under non-cancellable operating leases contracts are payable in the following periods:
31 December 31 December 2015 2014 RMB’000 RMB’000
No later than 1 year 6,352 6,310 Later than 1 year and no later than 5 years 19,749 15,201 Later than 5 years — 5,198
26,101 26,709
— 105 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
33 CONTINGENT LIABILITIES
(A) Guarantee on mortgage facilities
The Group and the Company had the following contingent liabilities in respect of financial guarantees on mortgage facilities:
31 December 31 December 2015 2014 RMB’000 RMB’000
Guarantees in respect of mortgage facilities for certain purchasers of the Group’s property units 4,879,760 5,090,815
The Group has arranged bank financing for certain purchasers of the Group’s property units and provided guarantees to secure obligations of such purchasers for repayments. Such guarantees terminate upon the earlier of (i) the transfer of the real estate ownership certificate to the purchaser which will generally occur within an average period of six months of the properties delivery dates; or (ii) the satisfaction of mortgage loans by the purchasers of the properties.
Pursuant to the terms of the guarantees, upon default of mortgage payments by these purchasers, the Group is responsible to repay the outstanding mortgage principal together with accrued interest and penalties owed by the defaulting purchasers to the banks and the Group is entitled to take over the legal title and possession of the related properties. The Group’s guarantee period starts from the date of grant of the mortgage. The directors consider that the likelihood of default of payments by purchasers is minimal.
In addition, the Group had provided guarantees for approximately RMB10.36 billion (2014: RMB9.57 billion) in its portion of equity interests in certain JVs and associates for their borrowings.
34 TRANSACTIONS WITH NON-CONTROLLING INTERESTS
(A) Transfer of equity interests of project entities among subsidiaries of the company
On 30 June 2015, Tianjin Sunac Ao Cheng Investment Co., Ltd. (“Tianjin Ao Cheng”), a wholly owned subsidiary of the Company incorporated in the PRC, completed the acquisition from Shanghai Sunac Greentown Investment Holdings Ltd. (“SG Shanghai”), a 50% owned subsidiary of the Company incorporated in the PRC, of the equity interests of a bunch of SG Shanghai’s subsidiaries, JVs and associates and certain debts owing by these entities to Shanghai Sunac Greentown at the equity interest consideration of RMB3,654 million.
— 106 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
On the same day, Lead Sunny Investment Ltd. (“Lead Sunny”), another wholly owned subsidiary of the Company incorporated in BVI, completed an acquisition from Sunac Greentown Investment Holdings Ltd. (“SG BVI”), a 50% owned subsidiary of the Company incorporated in BVI, of the entire equity interest of SG BVI’s wholly owned subsidiary, Elegant Trend Limited (“Elegant Trend”), and certain debts owing by Elegant Trend to SG BVI at the equity interest consideration of RMB5,676 million.
The total consideration of RMB9,330 million for the above transactions were settled between subsidiaries of the Company and the total carrying value of the related non-controlling interests of RMB8,445 million as at the transaction date effectively resulted in an increase in non-controlling interest of RMB442.5 million and a decrease in the equity attributable to the owners of the Company of RMB442.5 million. Further, SG Shanghai enjoyed a tax benefit from the above mentioned domestic transactions according to the PRC tax laws and regulations, which resulted in an increase of RMB87.5 million to the equity owners of the Company and the non-controlling interests respectively. In summary, these transactions had a result of RMB355 million net decrease of equity attributable to the owners of the Company and a total increase of RMB530 million to the non-controlling interests.
(B) Equity transactions with Greentown Group
In July 2015, the Group completed the acquisitions of 25% equity interest of Hangzhou Sunac Greentown, 50% equity interest of SG BVI and 50% of SG Shanghai, from Greentown Group at total consideration of RMB2,825 million. Upon the completion of these transactions, all the three subsidiaries became wholly owned by the Company. As at the transaction date, the carrying value of the related non-controlling interests was RMB3,086 million. These transactions with non-controlling interests of existing subsidiaries resulted in a total increase of RMB261 million in the equity attributable to the owners of the Company.
Together with the above transactions, the Group also completed certain acquisitions of additional equity interests in existing associates from, and disposal of subsidiaries, to Greentown Group. Further details are disclosed in Note 10, Note 35 and Note 36, respectively.
35 BUSINESS COMBINATION
2015 2014 RMB’000 RMB’000
Gain from business combinations — Step-acquisitions (Note (a)) 218,325 — — Acquisition of subsidiaries (Note (b)) 484,550 —
702,875 —
— 107 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
(A) Step-acquisitions
During the year ended 31 December 2015, the Group completed the step-acquisitions in Shanghai Forest Golf, Beijing Zhongtou Sunac and another three entities (the “Three Entities”) as follows:
Beijing Zhongtou Sunac & Shanghai Three Forest Golf Entities Total (Note (i)) (Note (ii))
Cash consideration for the additional equity interest 991,582 368,269 1,359,851 Re-measurement of previously held interests 454,730 991,365 1,446,095
1,446,312 1,359,634 2,805,946 Less: Fair value of net identifiable assets and liabilities of the acquirees (1,380,046) (1,357,766) (2,737,812)
66,266 1,868 68,134 Breakdown into: Goodwill 66,266 14,448 80,714 Acquisition gains — 12,580 12,580
Re-measurement: Re-measurement of previously held interests 454,730 991,365 1,446,095 Less: Book value of previously held interests (Note 10.1 & 10.2) (316,848) (923,502) (1,240,350)
Gains/(losses) on re-measurement 137,882 67,863 205,745
Gains credited to income statement 137,882 80,443 218,325
Notes:
(i) On 30 June 2015, the Group completed the acquisition from Greentown Group of the 50% equity interest in Shanghai Forest Golf, previously which was an 50% owned associate of the Group, at a consideration of RMB104.54 million, together with a series of assets transfers and debt assignments among Shanghai Forest Golf, the Group and Greentown Group (Note 26). Upon completion of this transaction, Shanghai Forest Golf became a wholly owned subsidiary of the Company (Note 10.2).
— 108 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
Prior to the transaction, Shanghai Forest Golf held 39.82% equity interest in Shanghai Haochuan Property Co., Ltd. (“Shanghai Haochuan”), the remaining 60.18% equity interest was held by the Group and which was treated as a JV of the Company. Upon the completion of the acquisition of Shanghai Forest Golf, Shanghai Haochuan became a wholly owned subsidiary of the Company. The directors of the Company are of the view that the consideration for the acquisition of Shanghai Forest Golf has also taken into account the value of the control take-over in Shanghai Haochuan, the assessment of the financial impact from the business combination was made for Shanghai Forest Golf and Shanghai Haochuan on a combination basis.
(ii) On 23 October 2015, the Group acquired an additional 50% equity interest of a previously 50% owned JV of the Company, Beijing Zhongtou Sunac Real Estate Co., Ltd. (“Beijing Zhongtou Sunac”), at a consideration of RMB5 million. Upon completion of the transaction, Beijing Zhongtou Sunac became a wholly owned subsidiary of the Company.
On 31 December 2015, the Company acquired an additional 49% equity interest of three previously 51% owned jointly controlled entities of the Company, namely Shanghai Ronglv Huiyi Real Estate Co., Ltd. Shanghai Ronglv Qiwei Real Estate Co., Ltd. and Suzhou Rongding Real Estate Co., Ltd. (collectively the “Three Entities”) from third parties, at a respective consideration of RMB100 million, RMB233.81 million and RMB29.456 million, respectively. Upon completion of these transactions, the Three Entities became wholly owned subsidiaries of the Company.
(B) Acquisitions of subsidiaries
In 2015, the major acquisitions of new subsidiaries are summarized as follows:
Subsidiaries Subsidiaries acquired Subsidiaries acquired related to acquired relating to a projects in from Titan new project Chengdu Group in Shanghai Total RMB’000 RMB’000 RMB’000 RMB’000 (Note (i)) (Note (ii)) (Note (iii))
Fair value of total interests acquired 3,479,589 280,514 3,375,740 7,135,843 Cash considerations for acquisition of — equity interest 2,225,200 10,000 2,894,528 5,129,728 — debt due to shareholders 980,353 60,000 481,212 1,521,565
3,205,553 70,000 3,375,740 6,651,293
Gains from acquisition of new subsidiaries 274,036 210,514 — 484,550
— 109 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
Note:
(i) Subsidiaries acquired related to projects in Chengdu
In October 2015, the Group acquired the entire equity interests of a company named Chengdu Guojia Zhidi Co., Ltd. (“Chengdu Guojia”) and its respective debts due to shareholders at a total amount equivalent to RMB3,205.55 million. Chengdu Guojia is incorporated in Chengdu, the PRC and is engaged in property project development business.
(ii) Subsidiaries acquired from Titan Group
In September 2015, the Group acquired the entire equity interest of Sichuan Hongling Sichuan Hongling Investment Co., Ltd. (“Sichuan Hongling”), respectively from Xian Titan Real Estate Group Co., Ltd. (“Xian Titan”) and its subsidiaries (together “Titan Group”), which are independent third parties of the Company, at the consideration of RMB10 million.
In December 2015, the Group acquired entire equity interest of Tianmao Property (Nanjing) Co., Ltd. from Titan Group and its respective amounts due to the shareholders at a total amount of RMB60 million.
(iii) Subsidiaries acquired relating to a new project in Shanghai (“Target Project”)
In September 2015, the Group acquired of 62.145% equity interest of Shanghai Fengdan Lishe Real Estate Development Co., Ltd. (“Fengdan”) at the consideration of RMB1,976 million. Fengdan owned a 50% equity interest in a JV named Shanghai Huafeng Real Estate Development Co., Ltd. (“Huafeng”) which has the development right of the Target Project.
Further, in November 2015, the Group completed an acquisition of entire equity interest of Shanghai Lingwu Investment Management Co., Ltd. (“Lingwu”), which owns a 35% equity interest in Shanghai Huaxia Cultural Tourism Development Co., Ltd. (“Huaxia”), at the consideration of RMB1,400 million. Huaxia owns the remaining 50% interest in Huafeng. According to the agreement with the seller of Lingwu, the Group only takes the rights and obligations in Lingwu in relation to its interest share in the Target Project owned by Huaxia.
—110— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
(C) The fair value of the identifiable assets and liabilities and cash and cash equivalent impact arising from the acquisitions of subsidiaries in above transactions are summarized as follows:
New Shanghai subsidiaries Forest Golf& acquired Fengdan& Shanghai Other step Chengdu from Titan Shanghai Haochuan acquisitions Guojia Group Lingwu Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(1) Fair value of net assets
Non-current assets Property, plant and equipment 19,230 1,396 2,875 506 55 24,062 Intangible assets 312 — 51 — — 363 Investments in JVs (Notes 10.1) — 54,340 — — 13,500 67,840 Deferred income tax assets 90,324 30,541 20,095 21,105 — 162,065 Current assets Properties under development 3,495,000 6,372,000 4,507,373 1,558,115 476 15,932,964 Completed properties held for sale 1,655,774 — 4,422,427 — — 6,078,201 Trade and other receivables 650,065 313,194 256,161 322,459 2,302 1,544,181 Amounts due from related companies 2,446,595 2,176,525 2,807,587 — 300,000 7,730,707 Prepayments ————3,497,962 3,497,962 Restricted cash 86 20,602 13,439 — — 34,127 Cash and cash equivalents 122,080 74,477 499,065 11,795 35,335 742,752 Non-current liabilities Borrowings (2,400,000) (2,520,000) (112,000) (172,790) — (5,204,790) Deferred income tax liabilities (893,184) (49,451) (820,377) (149,049) — (1,912,061) Current liabilities Trade and other payables (2,252,897) (190,629) (1,461,141) (790,121) (145,581) (4,840,369) Advanced proceeds from customers (296,042) (3,950,855) (3,397,990) (489,506) — (8,134,393) Amounts due to related companies (1,073,256) (450,100) (1,827,168) (32,000) (358,343) (3,740,867) Borrowings — (520,000) (1,196,000) — — (1,716,000) Current income tax liabilities (184,041) (4,274) (234,808) — (6) (423,129)
Net assets 1,380,046 1,357,766 3,479,589 280,514 3,345,700 9,843,615 Less: Non-controlling interests ————30,040 30,040
Fair value of the net assets acquired 1,380,046 1,357,766 3,479,589 280,514 3,375,740 9,873,655
(2) Cash effect Consideration settled by cash (991,582) (21,212) (3,205,553) (70,000) (2,946,240) (7,234,587) Cash and cash equivalents in the subsidiaries acquired 122,080 74,477 499,065 11,795 35,335 742,752
Net cash impact on acquisition (869,502) 53,265 (2,706,488) (58,205) (2,910,905) (6,491,835)
— 111 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
36 DISPOSAL OF SUBSIDIARIES
During the year ended 31 December 2015, the Group disposed four subsidiaries as follows:
Shanghai Tianjin Huazhe Sunac Wuxi Hubin Suzhou Bund Huikai Real Estate Rongding RMB’000 RMB’000 RMB’000 RMB’000 (Note (a)) (Note (b)) (Note (c)) (Note (d))
Consideration 1,970,285 209,600 — 24,500 Carrying value of the respective equity interest disposed by the Group (840,895) (77,588) — (24,476)
Gains/(losses) on the disposal 1,129,390 132,012 — 24
Fair value of the remaining equity interest held by the Group at disposal — 905,985 — 325,474 Carrying value of the remaining equity interest held by the Group at disposal — (310,350) (147,791) (325,474)
Gains/(losses) on re-measurement — 595,635 (147,791) —
The following table set out a summary of the financial impacts:
Shanghai Tianjin Huazhe Sunac Wuxi Suzhou Bund Huikai Hubin Rongding Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Gains from disposal of subsidiaries 1,129,390 727,647 — 24 1,857,061 Loss from disposal of a subsidiary — — (147,791) — (147,791)
Note:
(a) On 30 June 2015, the Group disposed its entire 51% equity interest of Shanghai Huazhe Bund Real Estate Co., Ltd. (“Shanghai Huazhe Bund”) to Greentown Group at a consideration of RMB1,970.29 million.
(b) In October 2015, Sunac Real Estate Group Co., Ltd transferred 20% equity interest in Tianjin Sunac Huikai Property Management Co., Ltd. (“Tianjin Sunac Huikai”), a previously wholly owned subsidiary of the Company, to an independent third party at the consideration of RMB209.6 million. Upon the completion of the transaction, Tianjin Sunac Huikai became a JV of the Company according to the updated Articles of Association.
—112— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
(c) On 9 November 2015, the board of directors of Wuxi Sunac Greentown Hubin Real Estate Co., Ltd. (“Wuxi Hubin”), which is a previously 51% owned subsidiary of the Company, resolved to change the rules of voting rights over the decisions in Wuxi Hubin to unanimous consent by shareholders. Wuxi Hubin was changed from a subsidiary of the Company to a JV.
(d) In February 2015, the Group transferred its 49% equity interest of Suzhou Rongding Real Estate Co., Ltd (“Suzhou Rongding”) to an independent third party, at the consideration of RMB24.5 million. Upon the completion of the disposal, Suzhou Rongding became a 51% owned JV of the Company according to its Articles of Association.
(e) The cash impact arising from the disposals in above transactions are summarized as follows:
Shanghai Tianjin Huazhe Sunac Wuxi Suzhou Bund Huikai Hubin Rongding Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Non-current assets Property, plant and equipment 1,623 — 1,355 — 2,978 Deferred income tax assets 85,793 — 139,412 — 225,205 Current assets Properties under development 7,101,570 — 3,214,611 640,262 10,956,443 Completed properties held for sale 103,123 — 753,193 — 856,316 Trade and other receivables 338,877 — 186,319 60 525,256 Amounts due from related companies 57,912 6,369,962 440,550 — 6,868,424 Restricted cash 234,492 — 105,504 — 339,996 Cash and cash equivalents 495,384 200 128,605 8,585 632,774 Non-current liabilities Borrowings (1,616,095) (4,990,000) (419,000) — (7,025,095) Deferred income tax liabilities (2,399,302) — (225,936) — (2,625,238) Current liabilities Trade and other payables (669,761) (31,054) (685,491) (3,853) (1,390,159) Advanced proceeds from customers (2,299,738) — (883,859) — (3,183,597) Amount due to related parties — (831,523) (2,270,134) (295,104) (3,396,761) Borrowings — — (470,000) — (470,000) Current income tax liabilities (160,724) (129,647) (60,001) — (350,372)
Net assets/(liabilities) 1,273,154 387,938 (44,872) 349,950 1,966,170 Less: Non-controlling interests (432,259) — 192,663 — (239,596)
The carrying value of assets and liabilities deconsolidated at the date of disposal 840,895 387,938 147,791 349,950 1,726,574
Cash effect
Cash consideration received 1,970,285 10,000 — 24,500 2,004,785 Cash disposed (495,384) (200) (128,605) (8,585) (632,774)
1,474,901 9,800 (128,605) 15,915 1,372,011
—113— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
37 RELATED PARTY TRANSACTIONS
(A) Name and relationship with related parties
Name Relationship with the Company
Sunac International Largest shareholder of the Company
Mr. Sun Hongbin The controlling shareholder of Sunac International and the chairman of the Board of Directors of the Company
(B) Transactions with related parties
In addition to the related party information disclosed elsewhere in the consolidated financial statements, the Group had the following significant transactions entered into the ordinary course of business between the Group and the related parties:
(1) Cash advance
Years ended 31 December 2015 2014 RMB’000 RMB’000
— Cash paid to JVs and associates (16,704,027) (8,538,358) — Cash received from JVs and associates 22,231,186 16,430,529
5,527,159 7,892,171
(2) Interest income
Years ended 31 December 2015 2014 RMB’000 RMB’000
Interest income from JVs 578,520 775,516 Interest income from associates 11,569 8,834
590,089 784,350
—114— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
(C) Compensation of key management personnel
Years ended 31 December 2015 2014 RMB’000 RMB’000
Salaries and other short-term benefits 24,177 21,528 Share-option scheme 19,142 35,456
43,319 56,984
(D) Related parties balances
31 December 31 December 2015 2014 RMB’000 RMB’000
(1) Amounts due from related parties — JVs — Amounts with interest free 5,763,589 8,420,552 — Amounts bearing interest 4,536,783 7,337,671 — Interest receivable 978,818 746,931
11,279,190 16,505,154
Associates — Amounts with interest free 260,304 1,420,043 — Amounts bearing interest 34,765 — — Interest receivable 85,790 74,221
380,859 1,494,264
11,660,049 17,999,418
(2) Amounts due to related parties — JVs 13,513,680 14,070,108 Associates 4,699,242 6,643,811
18,212,922 20,713,919
—115— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
The amounts due from JVs and associates have no fixed repayment date, bearing interest rate at 4.35% to 12% per annum for the period ended 31 December 2015.
The amounts due to JVs and associates are unsecured, interest-free and repayable on demand.
38 SUBSIDIARIES
The following is a list of the principal subsidiaries at 31 December 2015 and 2014:
Nominal value of issued and Equity interests held Date of fully paid share incorporation/ capital/registered 31 December 2015 31 December 2014 Name establishment capital Directly Indirectly Directly Indirectly Principal activities
Incorporated in the British Virgin Islands: Sunac Real Estate Investment 2 January 2007 USD10,000 100% — 100% — Investment holding Holdings Ltd. Qiwei Real Estate Investment 6 June 2007 USD1 100% — 100% — Investment holding Holdings Ltd. Yingzi Real Estate Investment 31 August 2007 USD1 100% — 100% — Investment holding Holdings Ltd. Jujin Real Estate Investment 6 September 2007 USD1 100% — 100% — Investment holding Holdings Ltd. Zhuoyue Real Estate 13 September 2007 USD1 100% — 100% — Investment holding Investment Holdings Ltd. Dingsheng Real Estate 6 September 2007 USD1 100% — 100% — Investment holding Investment Holdings Ltd. Elegant Trend Limited 17 July 2013 HKD15.6 — 100% — 50% Investment holding Sunac Greentown Investment 25 April 2013 RMB3,277 100% — 50% — Investment holding Holdings Limited million Ease Success Holdings Limited 2 January 2013 USD50,000 100% — 100% — Investment holding Lead Sunny Investments 27 February 2013 USD50,000 100% — 100% — Investment holding Limited
Incorporated in Hong Kong: Jujin Property Investment 14 September 2007 HKD1 — 100% — 100% Investment holding Holdings Ltd. Dingsheng Property Investment 14 September 2007 HKD1 — 100% — 100% Investment holding Holdings Ltd. Zhuoyue Property Investment 20 September 2007 HKD1 — 100% — 100% Investment holding Holdings Ltd. Pacific Max Investment 14 February 2013 HKD1 — 100% — 100% Investment holding Limited World Lucky Investment 27 February 2013 HKD1 — 100% — 100% Investment holding Limited Wisdom Collection Holdings 13 July 2013 HKD10,000 — 100% — 50% Investment holding (Hong Kong) Limited
—116— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
Nominal value of issued and Equity interests held Date of fully paid share incorporation/ capital/registered 31 December 2015 31 December 2014 Name establishment capital Directly Indirectly Directly Indirectly Principal activities
Incorporated in the Liberta: Wisdom Collection Holdings 17 July 2013 HKD780 — 100% — 50% Investment Holding (International) Inc.
Incorporated in the Cayman Islands: Titan International Investment 29 November 2015 USD1 — 100% — — Investment Holding Group Limited
Incorporated in the PRC: Tianjin Sunac Real Estate 6 February 2007 RMB460 million — 100% — 100% Investment holding Investment Management Co Ltd. Tianjin Qiwei Real Estate 20 July 2007 RMB225 million — 100% — 100% Investment holding Investment Management Co Ltd. Tianjin Yingzihuijin Property 26 September 2007 RMB220 million — 100% — 100% Investment holding Management Ltd. Tianjin Jujin Property 31 October 2007 RMB200 million — 100% — 100% Investment holding Management Ltd. Tianjin Dingsheng Juxian 31 October 2007 RMB200 million — 100% — 100% Investment holding Property Management Ltd. Tianjin Zhuoyue Property 31 October 2007 USD15 million — 100% — 100% Investment holding Management Ltd. Sunac Real Estate Group 31 January 2003 RMB 10,000 — 100% — 100% Real estate Co.,Ltd. million development Tianjin Sunac Ao Cheng 25 February 2003 RMB222 million — 100% — 100% Real estate Investment Co., Ltd. development Tianjin Sunac Mingxiang 6 April 2010 RMB1,421 — 100% — 100% Real estate Investment Development million development Co., Ltd. Tianjin Xiangchi Investment 25 September 2006 RMB160 million — 100% — 100% Real estate Co., Ltd. development Tianjin Sunac Dingsheng Zhidi 4 January 2011 HKD1,700 — 100% — 100% Real estate Co., Ltd. million development Tianjin Sunac Huijie Zhidi 21 January 2011 HKD700 million — 100% — 100% Real estate Co., Ltd. development Sunac Property Management 21 March 2010 RMB10 million — 100% — 100% Property management Service Group Co., Ltd. Sunac Zhidi (Tianjin) Business 21 March 2010 RMB5 million — 100% — 100% Property management Operation Management Co., Ltd. Tianjin Rongxing Investment 7 February 2013 RMB100 million — 90% — 90% Real estate Limited development Tianjin Changsheng Real 5 May 2014 RMB30 million — 100% — 100% Real estate Estate Co., Ltd. development
—117— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
Nominal value of issued and Equity interests held Date of fully paid share incorporation/ capital/registered 31 December 2015 31 December 2014 Name establishment capital Directly Indirectly Directly Indirectly Principal activities
Tianjin Mingze Real Estate 5 May 2014 RMB30 million — 100% — 100% Real estate Co., Ltd. development Tianjin Tengyao Real Estate 6 May 2014 RMB30 million — 100% — 100% Real estate Co., Ltd. development Tianjin Rongyao Investment 7 March 2013 RMB500 million — 54% — 54% Real estate limited development Tianjin Rongzheng Investment 12 July 2013 RMB504 million — 100% — 100% Real estate Limited development Tianjin Yijun Investment Co., 1 July 2012 RMB30 million — 80% — 40% Real estate Ltd. development Wuxi Sunac Real Estate Co., 27 February 2004 RMB204million — 100% — 100% Real estate Ltd. development Wuxi Sunac City Construction 11 May 2005 RMB448 million — 100% — 100% Real estate Co., Ltd. development Suzhou Chunshen Lake 8 February 2005 RMB140 million — 100% — 100% Real estate Property Development Co., development Ltd. Yixing Sunac Dongjiu Real 9 March 2010 RMB1,100 — 100% — 100% Real estate Estate Co.,Ltd. million development Wuxi Greentown Real Estate 1 July 2012 RMB175 million — 85% — 42.5% Real estate Development Co., Ltd. development Wuxi Sunac Investment Co. 28 July 2010 RMB 5 million — 100% — 100% Real estate Ltd. development Chongqing Sunac Jiye Real 24 April 2004 RMB180 million — 100% — 100% Real estate Estate Limited development Chongqing Yatai Shiye Real 2 January 2011 RMB280 million — 100% — 100% Real estate Estate Co., Ltd. development Chongqing Sunac Shangfeng 21 February 2011 RMB1,200 — 100% — 100% Real estate Real Estate Co., Ltd. million development Chongqing Sunac Shijin Real 12 December 2012 HKD1,229 — 100% — 100% Real estate Estate Co., Ltd. million development Chongqing Sunac Property 21 March 2010 RMB5 million — 100% — 100% Property management Management Co., Ltd. Chongqing APEV Property 30 September 2012 RMB0.5 million — 100% — 100% Property management Management Co., Ltd. Chongqing Sunac Business 21 March 2010 RMB0.5 million — 100% — 100% Property management Operation Management Co., Ltd. Chongqing Sunac Qiyang Real 18 September 2013 HKD2,280 — 100% — 100% Real estate Estate Co., Ltd. million development Chongqing Jiandao Culture 29 September 2014 RMB5 million — 100% — 100% Media Media Co., Ltd. Sichuan Hongling Investment 7 September 2015 RMB10 million — 100% — — Real estate Co., Ltd. development Chengdu Guojia Zhide Real 22 October 2015 RMB1,375 — 100% — — Real estate Estate Co., Ltd. million development
—118— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
Nominal value of issued and Equity interests held Date of fully paid share incorporation/ capital/registered 31 December 2015 31 December 2014 Name establishment capital Directly Indirectly Directly Indirectly Principal activities
Chengdu Yongping Real Estate 22 October 2015 RMB20 million — 100% — — Real estate Co., Ltd. development Chengdu Zhongyi Real Estate 22 October 2015 RMB200 million — 100% — — Real estate Co., Ltd. development Chengdu Guojia Zhongyu Real 22 October 2015 RMB50 million — 100% — — Real estate Estate Co., Ltd. development Chengdu Hejia Real Estate 22 October 2015 RM8 million — 100% — — Real estate Co., Ltd. development Wuhan Sunac Jiye Investment 13 August 2015 RMB10 million — 100% — — Real estate Holdings Limited development Xian Xixu Real Estate Co., 6 September 2015 RMB80 million — 100% — — Real estate Ltd. development Tianmao Real Estate (Nanjing) 4 December 2015 RMB1 — 100% — — Real estate Co., Ltd. development Beijing Sunac Hengji Real 27 September 2011 RMB100 million — 100% — 100% Real estate Estate Co., Ltd. development Beijing Sunac Construction 16 August 2010 RMB10 million — 100% — 100% Real estate Investment Real Estate Co., development Ltd Beijing Sunac Jiye Real estate 1 June 2011 RMB400 million — 100% — 100% Real estate Co., Ltd. development Beijing Ruifeng Xingye Real 26 March 2014 RMB10 million — 100% — 100% Real estate Estate Development Co., development Ltd. Beijing Zhongtou Sunac Real 23 October 2015 RMB 10 million — 100% — — Real estate Estate Co., Ltd. development Shanghai Sunac Greentown 9 August 2012 RMB2,000 — 100% — 50% Investment holding Investment Holdings million Limited Shanghai Lvshun Real Estate 1 July 2012 RMB1,000 — 100% — 50% Real estate Development Co., Ltd. million development Shanghai Ronglv Ruijiang 28 August 2014 RMB50 million — 100% — 75.5% Real estate Real Estate Co.,Ltd. development Shanghai Sunac Ruifeng 10 February 2015 RMB100 million — 100% — — Real estate Investment Co., Ltd. development Shanghai Fengdan Lishe Real 25 September 2015 RMB10 million — 62% — — Real estate Estate Development Co., development Ltd. Shanghai Mingsheng 26 August 2015 RMB100 million — 100% — — Investment Holding Investment Limited Shanghai Gurong Real Estate 26 June 2015 RMB10 million — 90% — — Real estate Co., Ltd. development Shanghai Mingxiang 10 September 2015 RMB10 million — 100% — — Investment Holding Investment Co., Ltd. Shanghai Lingwu Investment 23 November 2015 RMB12 million — 100% — — Investment Holding Mangement Co., Ltd.
—119— APPENDIX I FINANCIAL INFORMATION OF THE GROUP
Nominal value of issued and Equity interests held Date of fully paid share incorporation/ capital/registered 31 December 2015 31 December 2014 Name establishment capital Directly Indirectly Directly Indirectly Principal activities
Shanghai Sunac Real Estate 18 December 2014 RMB2,000 — 100% — 100% Real estate Development Co., Ltd. million development Shanghai Forest Golf Villa 18 December 2002 RMB196 million — 100% — 50% Real estate Development Co., Ltd. development Shanghai Haochuan Property 19 June 2002 RMB50 million — 100% — 50% Real estate Co., Ltd. development Hangzhou Sunac Greentown 20 December 2012 USD102 million — 100% — 75% Real estate Real Estate Development development Co., Ltd. Hangzhou Yingzi Investment 27 August 2013 RMB10 million — 100% — 100% Real estate Limited development Hangzhou Guorong Zhidi Co., 9 August 2013 RMB460 million — 60% — 60% Real estate Ltd. development Hangzhou Fuyang Sunac Real 7 March 2014 RMB630 million — 100% — 100% Real estate Estate Co., Ltd. development Hangzhou Rongxinheng 27 August 2013 RMB10 million — 100% — 100% Investment Holding Investment Limited Hangzhou Dinghui Investment 30 June 2014 RMB2 million — 100% — 100% Investment Holding Management Co., Ltd. Suzhou Greentown Yuyuan 1 July 2012 RMB250 million — 100% — 50% Real estate Real Estate Development development Co., Ltd. Suzhou Rongding Real Estate 26 December 2014 RMB8million — 100% — 100% Real estate Co., Ltd. development Suzhou Ronglv Fanting Real 5 December 2014 RMB50 million — 100% — 50% Real estate Estate Co., Ltd. development Changzhou Greentown Real 15 January 2013 RMB838 million — 97% — 48.5% Real estate Estate Co., Ltd. development New Richport Property 17 July 2013 RMB2,250 — 100% — 50% Real estate Development Shanghai Co., million development Ltd. Everbright Property 17 July 2013 RMB135 million — 100% — 50% Real estate Development Shanghai Co., development Ltd. Fung Seng Estate Development 17 July 2013 RMB85 million — 100% — 50% Real estate (Shanghai) Co., Ltd. development Sunac (Shenzhen) Real Estate 9 March 2015 RMB10 million — 100% — — Investment Holding Co., Ltd. Shenzhen Chuangrun Real 13 March 2015 RMB10 million — 100% — — Investment Holding Estate Co., Ltd.
— 120 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
39 FINANCIAL INSTRUMENTS BY CATEGORY
31 December 31 December 2015 2014 RMB’000 RMB’000
Loans and receivables Trade and other receivables 970,481 2,474,809 Restricted cash 4,371,010 4,384,145 Cash and cash equivalents 22,687,280 20,657,285 Amounts due from related companies 11,660,049 17,999,418
39,688,820 45,515,657
31 December 31 December 2015 2014 RMB’000 RMB’000
Financial liabilities at amortized costs Borrowings 41,798,633 34,383,795 Amounts due to related companies 18,212,922 20,713,919 Trade and other payables 10,271,759 11,116,009
70,283,314 66,213,723
Note: Trade and other payables in this analysis do not include the taxes payables and payroll and welfare payables.
40 DIVIDENDS
The dividends paid in 2015 and 2014 were RMB646.4 million (RMB0.19 per share) and RMB635.7 million (RMB0.191 per share) respectively. A dividend in respect of the year ended 31 December 2015 of RMB0.194 per share, amounting to a total dividend of RMB660 million, is to be proposed at the annual general meeting. These financial statements did not reflect this dividend payable.
Year ended 31 December 2015 2014 RMB’000 RMB’000
Interim dividend paid of RMB0 (2014: Nil) per ordinary share — —
Proposed final dividend of RMB0.194 (2014: RMB0.190) per ordinary share 659,566 644,414
— 121 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
41 EVENTS AFTER THE BALANCE SHEET DATE
(1) Acquisition of interests in Huafeng
Subsequent to the equity transaction as disclosed in Note 35(b) (iii), the Group completed the following equity acquisitions relating to the Target Project which is developed by Huafeng:
(a) On 4 January 2016, the Group effectively acquired an 9.4% interest in Huafeng at a consideration of RMB752 million from Shanghai Pudong Development (Group) Company Limited (“Shanghai Pudong Development”), another ultimate equity owner of Huafeng. According to the agreement, Shanghai Pudong Development is entrusted to hold this acquired equity interest in Huafeng on behalf of the Group.
(b) On 15 January 2016, the Group proposed to acquire the remaining 37.855% equity interest and debts in Shanghai Fengdan Lishe Estate Development Co., Ltd. (“Fengdan”) at a consideration of RMB1,324.9 million. This transaction has yet to be approved by the shareholders of the Company in compliance with relevant rules and regulation.
In summary, upon completion of the above trasnaction, the Group will have an effective totaling 76.9% interest in Huafeng.
(2) Acquisition of equity interest and debts in Suzhou Xinyou Real Estate Co., Ltd. (“Suzhou Xinyou”)
On 13 January 2016, the Group acquired 95% equity interest of Suzhou Xinyou from a third party at the equity consideration of RMB183.65 million and an amount of RMB854.58 million due by Suzhou Xinyou to the seller. The total consideration of which is RMB1,038.23 million. Upon completion of the acquisition, Suzhou Xinyou became a subsidiary of the Company.
(3) Acquisition of equity interests and debts in Suzhou Der Taihu Bay Properties Co., Ltd. (“Suzhou Der Taihu Bay”) and Suzhou Der Taihu Town Real Estate Co., Ltd. (“Suzhou Der Taihu Town”)
On 1 February 2016, the Group entered into agreeements with third parties (the “Sellers”), pursuant to which, the Group agreed to acquire from the Sellers 100% equity interest of Suzhou Der Taihu Bay at the equity consideration of RMB404.46 million and an amount of RMB685.54 million due by Suzhou Der Taihu Bay to the Sellers. The total consideration of which is RMB1,090 million, and 100% equity interest of Suzhou Der Taihu Town at the equity consideration of RMB28.31 million and an amount of RMB51.69 million due by Suzhou Der Taihu Town to the Sellers. The total consideration of which is RMB80 million. Total consideration for the two transactions was RMB1,170 million. Up to the date of this report, the acquisitions have yet to be completed. Upon completion of the transactions, Suzhou Der Taihu Bay and Suzhou Der Taihu Town will become subsidiaries of the Company.
— 122 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
(4) Acquisition of 70% equity interests and debts in Zhongmu Meisheng Real Estate Co., Ltd. (“Zhongmu Meisheng”)
On 25 February 2016, the Group entered into an equity acquisition agreement with a third party, pursuant to which the Group agreed to acquire 70% equity interest of Zhengzhou Meisheng from the third party at the equity consideration of RMB708.4 million, and an amount of RMB45.52 million due by Zhongmu Meisheng to the seller. The total consideration of which is RMB753.92 million. Up to the date of this report, the acquisition has yet to be completed. Upon completion of the transaction, Zhongmu Meisheng will become a subsidiary of the Company.
(5) Entered into the cooperation agreement in Shanghai Projects
On 18 March 2016, Shanghai Sunac Property Development Co., Ltd. (“Shanghai Sunac”), a wholly owned subsidiary of the Company, entered into the cooperation agreement with an independent third party Shanghai Moke Real Estate Co., Ltd. (“Shanghai Moke”), pursuant to which, Shanghai Sunac and Shanghai Moke will cooperate in the development of two property projects (the “Target projects”) in Shanghai through a new jointly invested project company (the “Project company”). Shanghai Sunac and Shanghai Moke will initially hold 40% and 60% equity interests of the Project company respectively. The Project company will acquire the Target projects from Shanghai Moke at the total consideration of RMB4,031.6 million, which is to be fully financed from Shanghai Sunac and Shanghai Moke on 80%:20% basis in form of shareholders’ loans by two equal amount batches, i.e. the total loan amounts to be provided by Shanghai Sunac and Shanghai Moke are RMB3,225.3 million and RMB806.3 million respectively. A 50% of the consideration is to be made within five business days after entering into the cooperation agreement. Within two business days after (i) the expiry of the 270-day period after entering into the cooperation agreement or (ii) within 5 business days before the remaining Target projects have completed the transfer registration (whichever is earlier), the Project company will pay the remaining 50% consideration amount to Shanghai Moke and the Target projects will be transferred to the Project company. Then Shanghai Sunac will acquire an additional 40% equity interest of the Project company from Shanghai Moke at the consideration of RMB40 million plus the interest cost, which is estimated not exceeding RMB72.6 million, being the interest accrued on the payables in the amount of RMB1,612 million by Shanghai Sunac in the second shareholder’s loan to the Project company, which Shanghai Moke shall receive at an interest rate of 6% per annum for the period commencing from the fifth business day after the date of the cooperation agreement up till the day when Shanghai Sunac has fully paid the second shareholder’s loan. In summary, the total investment amount attributable to the Group will be no exceeding RMB3,337.9 million.
— 123 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
42 BALANCE SHEET AND RESERVE MOVEMENT OF THE COMPANY
31 December 31 December 2015 2014 RMB’000 RMB’000
ASSETS
Non-current assets Investments in subsidiaries 12,930,894 8,419,621
Current assets Amounts due from subsidiaries 8,096,001 5,463,734 Other receivables 345 1,905 Cash and cash equivalents 3,245,867 28,728
11,342,213 5,494,367
Total assets 24,273,107 13,913,988
EQUITY AND LIABILITIES Equity attributable to owners of the Company Share capital 291,329 289,963 Other reserves Note (a) 3,572,997 4,125,887 Accumulated losses Note (a) (2,451,763) (1,309,349)
Total equity 1,412,563 3,106,501
Liabilities Non-current liabilities Borrowings 8,778,815 9,262,956 Current liabilities Borrowings 5,726,528 1,378,905 Other payables 192,303 156,435 Amounts due to subsidiaries 8,162,898 9,191
14,081,729 1,544,531
Total liabilities 22,860,544 10,807,487
Total equity and liabilities 24,273,107 13,913,988
— 124 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
Note (a) Reserve movement of the Company
Share Other Accumulated premium reserves losses Total RMB’000 RMB’000 RMB’000 RMB’000
Year ended 31 December 2014 At 1 January 2014 3,070,058 1,535,172 (600,520) 4,004,710 Loss for the year — — (708,829) (708,829) Employees share option scheme: — Value of employee services — 35,456 — 35,456 — Proceeds from shares issued 120,882 — — 120,882 Dividends relating to 2013 (635,681) — — (635,681)
At 31 December 2014 2,555,259 1,570,628 (1,309,349) 2,816,538
Year ended 31 December 2015 At 1 January 2015 2,555,259 1,570,628 (1,309,349) 2,816,538 Loss for the year — — (1,142,414) (1,142,414) Employees share option scheme: — Value of employee services — 47,395 — 47,395 — Proceeds from shares issued 44,129 — — 44,129 Dividends relating to 2014 (644,414) — — (644,414)
At 31 December 2015 1,954,974 1,618,023 (2,451,763) 1,121,234
— 125 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
43 BENEFITS AND INTERESTS OF DIRECTORS
(A) Directors and chief executive’s emoluments
The Directors’ and senior management’s emoluments are set out below:
Employer’s contribution Compensation Share retirement for loss of Discretionary options benefit Other office as Name of Director Fees Salary bonuses expenses scheme benefits director Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Year ended 31 December 2015: Directors: Sun Hongbin — 1,200 1,053 473 — — — 2,726 Wang Mengde — 932 967 1,851 34 51 — 3,835 Li Shaozhong — 757 416 1,592 34 51 — 2,850 Chi Xun — 819 1,095 1,690 34 51 — 3,689 Shang Yu — 736 620 1,690 34 51 — 3,131 Jing Hong — 894 1,429 1,690 44 55 — 4,112 ZhuJia —— ———— —— Poon Chiu Kwoh 242 — ———— —242 LiQin 242— ———— —242 Ma Lishan 242 — ———— —242 TseChiWai 242— ———— —242
Year ended 31 December 2014: Directors: Sun Hongbin — 1,200 638 847 ‘ — — 2,685 Wang Mengde — 881 602 1,494 34 55 — 3,066 Li Shaozhong — 552 357 1,299 18 28 — 2,254 Chi Xun — 720 568 1,299 31 48 — 2,666 Shang Yu — 734 516 1,299 37 52 — 2,638 Jing Hong — 801 819 1,299 40 48 — 3,007 Zhu Jia — — — — — — — Hu Xiaoling (i) — — — — — — — Poon Chiu Kwoh 237 — — — — — 237 Li Qin 237 — — — — — 237 Ma Lishan 237 — — — — — 237 Tse Chi Wai 237 — — — — — 237
— 126 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
For the year ended 31 December 2015 and 2014, no housing allowance, estimated money value of other benefits, remunerations paid or receivable in respect of accepting office as director, emoluments paid or receivable in respect of director’s other services in connection with the management of the affairs of the company or its subsidiary undertaking were provided by the Group to directors or chief executive.
Notes:
(i) Resigned on 12 August 2014.
(B) The five individuals whose emoluments were the highest in the Group included five directors (2014: Five) for the year ended 31 December 2015, whose emoluments are reflected in the analysis presented above.
— 127 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The following is the full text of the unaudited consolidated financial statements of the Group for the six months ended 30 June 2016 as extracted from the interim report of the Company for the six months ended 30 June 2016:
INTERIM CONDENSED CONSOLIDATED BALANCE SHEET As at 30 June 2016
30 June 31 December Note 2016 2015 (Unaudited) (Audited) RMB’000 RMB’000
ASSETS Non-current assets Property, plant and equipment 7 63,158 68,959 Intangible assets 7 238,089 230,269 Investments accounted for using the equity method 8 17,728,984 15,260,581 Prepayments for investments 12 3,230,375 4,722,036 Deferred income tax assets 1,663,467 1,502,429
Total non-current assets 22,924,073 21,784,274
CURRENT ASSETS Properties under development 9 48,923,225 34,142,659 Completed properties held for sale 10 15,148,069 15,727,129 Trade and other receivables 11 2,080,084 970,481 Amounts due from related companies 32 20,138,851 11,660,049 Prepayments 12 5,209,953 4,166,080 Restricted cash 13 11,809,911 4,371,010 Cash and cash equivalents 28,337,573 22,687,280
Total current assets 131,647,666 93,724,688
Total assets 154,571,739 115,508,962
EQUITY Equity attributable to owners of the Company Share capital 14 291,369 291,329 Other reserves 15 4,154,527 4,104,442 Retained earnings 14,682,553 14,609,618
19,128,449 19,005,389 Perpetual capital securities 16 6,825,361 — Non-controlling interests 661,345 414,781
Total equity 26,615,155 19,420,170
— 128 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
30 June 31 December Note 2016 2015 (Unaudited) (Audited) RMB’000 RMB’000
LIABILITIES Non-current liabilities Borrowings 18 38,150,191 27,214,240 Derivative financial instruments 19 10,209 — Deferred income tax liabilities 5,317,308 4,379,412
Total non-current liabilities 43,477,708 31,593,652
Current liabilities Trade and other payables 17 10,919,393 10,943,950 Advanced proceeds from customers 20,118,326 13,420,386 Amounts due to related companies 32 22,176,869 18,212,922 Current income tax liabilities 6,615,962 7,333,489 Borrowings 18 24,648,326 14,584,393
Total current liabilities 84,478,876 64,495,140
Total liabilities 127,956,584 96,088,792
Total equity and liabilities 154,571,739 115,508,962
The notes on pages 134 to 167 form an integral part of this interim condensed consolidated financial information.
— 129 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
INTERIM CONDENSED CONSOLIDATED STATEMENT 0F COMPREHENSIVE INCOME For the six months ended 30 June 2016
Six months ended 30 June Note 2016 2015 (Unaudited) (Unaudited) RMB’000 RMB’000
Revenue 6 10,586,085 5,442,722 Cost of sales (9,179,970) (4,824,671)
Gross profit 1,406,115 618,051 Other income and gains 22 1,551,361 2,220,585 Selling and marketing costs (318,512) (284,602) Administrative expenses (421,530) (298,842) Other expenses and losses 23 (54,573) (102,379)
Operating profit 2,162,861 2,152,813
Finance income 24 98,507 83,095 Finance costs 24 (1,578,739) (698,577) Share of post-taxes (losses)/profits of investments accounted for using equity method, net 8 (235,504) 451,871
Profit before income tax 447,125 1,989,202
Income tax expense 25 (344,355) (731,539)
Profit for the period 102,770 1,257,663
Other comprehensive income for the period ——
Total comprehensive income for the period 102,770 1,257,663
Attributable to: — Owners of the Company 72,935 951,399 — Holders of perpetual capital securities 16 2,361 — — Non-controlling interests 27,474 306,264
102,770 1,257,663
Earnings per share attributable to owners of the Company (expressed in RMB per share): 26 — Basic earnings per share 0.02 0.28
— Diluted earnings per share 0.02 0.28
The notes on pages 134 to 167 form an integral part of this interim condensed consolidated financial information.
— 130 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the six months ended 30 June 2016
Unaudited Attributable to owners of the Company Perpetual Non- Share Other Retained capital controlling Total Note capital reserves earnings Total securities interests equity RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Note 14) (Note 15) (Note 16)
Balance at 1 January 2016 291,329 4,104,442 14,609,618 19,005,389 — 414,781 19,420,170
Total comprehensive income for the period ended 30 June 2016 — — 72,935 72,935 2,361 27,474 102,770
Transactions with owners, recognised directly in equity Non-controlling interests arising on business combination 30 —————84,39884,398 Capital contributions from non-controlling interests —————122,900 122,900 Transactions with non-controlling interests 29 — 11,953 — 11,953 — 11,792 23,745 Issue of perpetual capital securities 16 ————6,823,000 — 6,823,000 Employees share option schemes: — Value of employee services 15 — 36,546 — 36,546 — — 36,546 — Proceeds from shares issued 14, 15 40 1,586 — 1,626 — — 1,626
40 50,085 — 50,125 6,823,000 219,090 7,092,215
Balance at 30 June 2016 291,369 4,154,527 14,682,553 19,128,449 6,825,361 661,345 26,615,155
Balance at 1 January 2015 289,963 3,203,001 12,859,974 16,352,938 — 4,629,695 20,982,633
Total comprehensive income for the period ended 30 June 2015 — — 951,399 951,399 — 306,264 1,257,663
Transactions with owners, recognised directly in equity Transactions with non-controlling interests — (354,985) — (354,985) — 530,043 175,058 Dividends to non-controlling interests —————(1,699,837) (1,699,837) Disposal of a subsidiary —————(432,259) (432,259) Employees share option schemes: — Value of employee services 15 — 11,296 — 11,296 — — 11,296 — Proceeds from shares issued 14, 15 1,310 42,454 — 43,764 — — 43,764
1,310 (301,235) — (299,925) — (1,602,053) (1,901,978)
Balance at 30 June 2015 291,273 2,901,766 13,811,373 17,004,412 — 3,333,906 20,338,318
The notes on pages 134 to 167 form an integral part of this interim condensed consolidated financial information.
— 131 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS For the six months ended 30 June 2016
Unaudited Six months ended 30 June Note 2016 2015 RMB’000 RMB’000
Cash flows from operating activities (1,016,199) 1,395,598 Income tax paid (1,768,938) (984,736)
Net cash (used in)/generated from operating activities (2,785,137) 410,862
Cash flows from investing activities Cash paid for business combinations, net 30 (2,808,357) 80,264 Disposal of subsidiaries, net 31 (264,891) 292,730 Prepayments for current year equity investments (3,086,922) (4,701,321) Payments for previous year equity investments (317,601) — Withdrawal of prepayment for equity transactions — 1,939,479 Interest received on prepayment of equity acquisitions 44,910 35,124 Equity investments in joint ventures and associates (2,463,990) (1,546,326) Dividend received from joint ventures 261,403 — Proceeds from disposal of investment in a joint venture 60,000 — Loan to a joint ventures and associates (5,861,957) (659,039) Collection of loans from joint ventures and associates 3,420,184 2,150,288 Interest received from joint ventures and associates 15,906 72,231 Cash advanced from joint venture partner — 350,000 Proceeds from disposal of investment properties — 175,000 Loan to a business partner relating to a joint arrangement 11(b) (332,637) — Others (9,845) 50,825
Net cash used in investing activities (11,343,797) (1,760,745)
— 132 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
Unaudited Six months ended 30 June Note 2016 2015 RMB’000 RMB’000
Cash flows from financing activities Proceeds from issue of ordinary shares 1,626 43,764 Proceed from issue of private domestic bonds 18(e) 14,947,300 — Proceeds from issuance of perpetual capital securities 16 6,873,000 — Proceeds from borrowings 18(e) 22,442,033 11,354,825 Repayments of borrowings 18(e) (15,445,788) (13,898,156) Payment for other financial costs 24 (224,073) — Dividend paid to non-controlling interests — (956,092) Repayment of loans from non-controlling interests (158,074) (1,153,361) Loans from non-controlling interests — 252,582 Loans to non-controlling interests (139,976) (80,000) Acquisitions of additional interests in subsidiaries (11,619) (1,055,396) Interest paid (1,182,659) (1,369,313) Restricted cash guaranteed for bank borrowings (6,288,430) (10,258) Restricted cash guaranteed for joint ventures’ borrowings (1,000,000) — Contribution from non-controlling interests 44,900 — Others (20,011) —
Net cash generated from/(used in) financing activities 19,838,229 (6,871,405)
Net increase/(decrease) in cash and cash equivalents 5,709,295 (8,221,288) Cash and cash equivalents at beginning of period 22,687,280 20,657,285 Effect of exchange difference (59,002) (1,044)
Cash and cash equivalents at end of period 28,337,573 12,434,953
The notes on pages 134 to 167 form an integral part of this interim condensed consolidated financial information.
— 133 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (UNAUDITED) For the six months ended 30 June 2016
1 GENERAL INFORMATION
Sunac China Holdings Limited (the “Company”) and its subsidiaries (together, the “Group”) are principally engaged in property development and property management services in the People’s Republic of China (the “PRC”).
The Company is a limited company incorporated in the Cayman Islands. The address of its registered office is Landmark Square, 3rd Floor, 64 Earth Close, P.O. Box 30592, Grand Cayman KY1-1203, Cayman Islands.
The Company has its primary listing on The Stock Exchange of Hong Kong Limited.
This condensed consolidated interim financial information is presented in Renminbi (“RMB”), unless otherwise stated. This condensed consolidated interim financial information had been approved for issue by the board of directors of the Company (the “Board”) on 29 August 2016.
2 BASIS OF PREPARATION
This condensed consolidated interim financial information for the six months ended 30 June 2016 has been prepared in accordance with Hong Kong Accounting Standards (“HKAS”) 34, “Interim financial reporting”. The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2015, which have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRS”).
2.1 Going-concern basis
The Group meets its day-to-day working capital requirements through its bank facilities and other financing facilities. The current economic conditions continue to create uncertainty particularly over (a) the level of demand for the Group’s products; and (b) the availability of bank finance and other finance for the foreseeable future. The Group’s forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of its current facilities. After making enquiries, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The Group therefore continues to adopt the going concern basis in preparing its consolidated financial statements. Further information on the Group’s borrowings is given in Note 18.
3 ACCOUNTING POLICIES
The accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2015, as described in those annual financial statements except for the adoption of amendments to HKFRSs effective for the financial year ending 31 December 2016.
— 134 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
(A) A mendments to HKFRS effective for the financial year ending 31 December 2016 do not have a material impact on the group
Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.
(B) Impact of standards issued but not yet applied by the entity
(i) HKFRS 9 Financial instruments
HKFRS 9 Financial Instruments addresses the classification, measurement and derecognition of financial assets and financial liabilities, introduces new rules for hedge accounting and a new impairment model for financial assets. The standard does not need to be applied until 1 January 2018 but is available for early adoption.
(ii) HKFRS 15 Revenue from contracts with customers
The HKICPA has issued a new standard for the recognition of revenue. This will replace HKAS 18 which covers revenue arising from the sale of goods and the rendering of services and HKAS 11 which covers construction contracts.
The new standard is based on the principle that revenue is recognised when control of a good or service transfers to a customer.
The standard permits either a full retrospective or a modified retrospective approach for the adoption. The new standard is effective for first interim periods within annual reporting periods beginning on or after 1 January 2018, and will allow early adoption.
Management is currently assessing the effects of applying the new standard on the Group’s financial statements and is not able to estimate the effect of the new rules at this stage. The Group will make more detailed assessments of the effect over the next twelve months. The Group does not expect to adopt the new standard before 1 January 2018.
4 ESTIMATES
The preparation of the interim financial information requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
In preparing this condensed consolidated interim financial information, the significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2015.
— 135 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
5 FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS
5.1 Financial risk factors
The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk.
The interim condensed consolidated financial information do not include all financial risk management information and disclosures required in the annual financial statements, and should be read in conjunction with the Group’s annual financial statements as at 31 December 2015.
There have been no significant changes in the risk or in any risk management policies since 31 December 2015.
5.2 Fair value estimation
The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:
• Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
• Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).
• Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).
The following table presents the Group’s financial liabilities that are measured at fair value at 30 June 2016 (2015: Nil).
Level 1 Level 2 Level 3 Total RMB’000 RMB’000 RMB’000 RMB’000
Liabilities Derivative financial instruments — 10,209 — 10,209
During the six months ended 30 June 2016, there were no reclassifications of financial liabilities and no transfers between different levels.
— 136 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
The financial instruments classified as level 2 include currency derivative contracts entered into with certain commercial banks. The contracts do not qualify for hedge accounting, so that they are classified as derivative financial instrument on the balance sheet and with fair value changes recognised in the profit or loss.
5.3 Valuation techniques used to derive level 2 fair values
The currency derivative contracts have been fair valued using the option pricing model.
5.4 Fair value of financial liabilities measured at amortised cost
The carrying amounts of bank borrowings, borrowings from other financial institutions are approximate their fair values. The fair values of senior notes as at 30 June 2016 amounted to RMB4,998 million (31 December 2015: RMB8,941 million), which were calculated based on the market price of the traded senior notes at the balance sheet date. The fair values of corporate bonds, private domestic corporate bonds and asset-backed securities as at 30 June 2016 amounted to RMB6,140 million, RMB15,393 million, RMB1,119 million respectively (31 December 2015: RMB6,222 million for corporate bonds), which were calculated based on the active market price at the balance sheet date. The fair values of senior notes, private domestic corporate bonds and assets-backed securities are within level 2 of the fair value hierarchy and the fair values of corporate bonds are within level 1 of the fair value hierarchy.
The fair value of the following financial assets and liabilities approximate their carrying amount:
— Cash and cash equivalents, restricted cash
— Trade and other receivables
— Amounts due from related companies
— Trade and other payables
— Amounts due to related companies
6 SEGMENT INFORMATION
The executive directors review the Group’s internal reporting in order to assess performance and allocate resources. The executive directors have determined the operating segments based on these reports.
The executive directors assess the performance of property development business and property management service business respectively. The performance of the operating segments is assessed based on a measure of profit/(loss) before income tax.
— 137 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
The analysis of the Group’s profit before income tax by segment is as follows:
Six months ended 30 June 2016 Property development Property and management investment and others Total RMB’000 RMB’000 RMB’000
Total segment revenue 10,330,591 277,518 10,608,109 Inter-segment revenue — (22,024) (22,024)
Revenue from external customers 10,330,591 255,494 10,586,085
Profit/(loss) before income tax 462,596 (15,471) 447,125
As at 30 June 2016 Property development Property and management investment and others Total RMB’000 RMB’000 RMB’000
Total segment assets 152,577,978 330,294 152,908,272
Total segment liabilities 115,574,749 448,565 116,023,314
Six months ended 30 June 2015 Property development Property and management investment and others Total RMB’000 RMB’000 RMB’000
Total segment revenue 5,224,665 237,541 5,462,206 Inter-segment revenue — (19,484) (19,484)
Revenue from external customers 5,224,665 218,057 5,442,722
Profit/(loss) before income tax 2,031,267 (42,065) 1,989,202
— 138 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
As at 31 December 2015 Property development Property and management investment and others Total RMB’000 RMB’000 RMB’000
Total segment assets 113,644,985 361,548 114,006,533
Total segment liabilities 83,840,268 535,623 84,375,891
7 PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS
Intangible assets Property, plant and Computer equipment Goodwill software Total RMB’000 RMB’000 RMB’000 RMB’000
Six months ended 30 June 2016 Net book value or valuation As at 1 January 2016 68,959 228,699 1,570 230,269 Additions 13,723 — — — Disposals (3,878) — — — Depreciation and amortization (16,102) — (111) (111) Acquisition of subsidiaries (Note 30) 484 7,903 28 7,931 Disposal of a subsidiary (Note 31) (28) — — —
As at 30 June 2016 63,158 236,602 1,487 238,089
— 139 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
Intangible assets Property, plant and Computer equipment Goodwill software Total RMB’000 RMB’000 RMB’000 RMB’000
Six months ended 30 June 2015 Net book value or valuation As at 1 January 2015 61,815 147,985 920 148,905 Additions 8,047 — — — Disposals (1,404) — — — Depreciation and amortization (10,959) — (187) (187) Acquisition of subsidiaries 19,230 66,266 312 66,578 Disposal of subsidiaries (1,623) — — —
As at 30 June 2015 75,106 214,251 1,045 215,296
8 INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
The investment amounts recognised in the balance sheet were as follows:
As at 30 June 31 December 2016 2015 RMB’000 RMB’000
Joint ventures 13,090,324 10,691,975 Associates 4,638,660 4,568,606
17,728,984 15,260,581
The amounts of the shares of the results of the investees recognised in the profit/(loss) using the equity method were as follows:
Six months ended 30 June 2016 2015 RMB’000 RMB’000
Joint ventures (305,558) 464,081 Associates 70,054 (12,210)
(235,504) 451,871
— 140 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
8.1 Investments in joint ventures
The following table analyses, on an aggregate basis, the movement of the carrying amount of the Group’s investments in the joint ventures, and the shares of results of these joint ventures.
Six months ended 30 June 2016 2015 RMB’000 RMB’000
At beginning of period 10,691,975 7,927,863 Additions: - Capital contributions to joint ventures established by the Group 682,500 202,500 - Acquisition of joint ventures (Note (a)) 1,693,430 1,284,371 - Further investments in existing joint ventures (Note (b)) 589,008 33,500 - Subsidiaries becoming joint ventures 40,901 325,474 - Interest in joint ventures owned by a newly acquired subsidiary 37,758 — Disposals: - Disposal of investments in joint ventures (49,870) — - Joint ventures becoming subsidiaries (28,417) (229,873) Share of (losses)/profits of joint ventures, net (305,558) 464,081 Dividends from joint ventures (261,403) (875,685)
At end of period 13,090,324 9,132,231
Notes:
(a) During the six months ended 30 June 2016, the Company acquired equity interests in 8 joint ventures, which resulted in total gain of RMB415.1 million from the difference between the consideration and the fair value of equity interests acquired.
(b) During the six months ended 30 June 2016, the Group increased its investments in two existing joint ventures through equity acquisitions at total consideration of RMB543.35 million and resulted in a net gain of RMB45.66 million.
— 141 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
8.2 Investments in associates
The following table analyses, on an aggregate basis, the movement of the carrying amount of the Group’s investments in the associates, and its share of results of these associates.
Six months ended 30 June 2016 2015 RMB’000 RMB’000
At beginning of period 4,568,606 4,120,926 Share of profits/(losses) of associates, net 70,054 (12,210) Investments in a new associate — 977,375 An associate becoming a subsidiary — (86,975) Disposal of an associate — (18,406) Dividends from associates — (1,009,507)
At end of period 4,638,660 3,971,203
9 PROPERTIES UNDER DEVELOPMENT (“PUD”)
As at 30 June 31 December 2016 2015 RMB’000 RMB’000
Land use rights 37,931,207 23,865,555 Construction costs and capitalized expenditures 6,297,070 5,936,959 Capitalized finance costs 4,740,656 4,390,220 Less: Provision for loss on realisable value (45,708) (50,075)
48,923,225 34,142,659
To be completed within 12 months 18,820,047 10,910,407 To be completed after 12 months 30,103,178 23,232,252
48,923,225 34,142,659
The PUD are all located in the PRC.
As at 30 June 2016, certain PUD amounted to RMB30,208 million were pledged as collateral for the Group’s borrowings (31 December 2015: RMB17,550 million) (Note 18).
— 142 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
10 COMPLETED PROPERTIES HELD FOR SALE
As at 30 June 31 December 2016 2015 RMB’000 RMB’000
Completed properties held for sale, gross 15,910,637 16,413,728 Less: Provision for loss on realisable value (762,568) (686,599)
15,148,069 15,727,129
The completed properties held for sale are all located in the PRC.
As at 30 June 2016 certain completed properties held for sale amounting to RMB4,164 million (31 December 2015: RMB6,291 million) were pledged as collateral for the Group’s borrowings (Note 18).
11 TRADE AND OTHER RECEIVABLES
As at 30 June 31 December 2016 2015 RMB’000 RMB’000
Amounts due from non-controlling interests and their related parties 663,491 334,024 Trade receivables (Note (a)) 126,848 92,011 Amounts due from a business partner relating to a joint arrangement (Note (b)) 332,637 — Notes receivables — 200 Other receivables — Payments on behalf of customers 229,806 132,291 — Deposits 535,176 212,349 — Interests receivable 59,612 22,810 — Others 181,578 204,474
2,129,148 998,159 Less: Bad debt provision for other receivables (49,064) (27,678)
2,080,084 970,481
— 143 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
As at 30 June 2016 and 31 December 2015, the carrying amounts of the Group’s trade and other receivables were all denominated in RMB and the carrying amounts of trade and other receivables approximated their fair values.
Notes:
(a) In the six months ended 30 June 2016, the Group provided a credit period of 90-365 days to certain customers having good credit standing.
(b) According to a cooperation agreement entered into in March 2016 the Group and two independent third parties target to obtain and share a land use right in Tianjin, the PRC. As of 30 June 2016, the Group has made a total payment of RMB1,319.21 million for the land use right tendering, in which, RMB332.64million was paid on behalf of one business partner and therefore was recorded as a receivable. In connection with this cooperation, the business partner has already made a guarantee deposit amounted to RMB500 million to the Group.
Taking into account of the credit terms agreed in the property sale contract, the ageing analysis of trade receivables primarily arising from sales of properties is as follows:
As at 30 June 31 December 2016 2015 RMB’000 RMB’000
Within 90 days 101,960 55,160 90 - 180 days 1,166 — 181 - 365 days 16,416 34,521 Over 365 days 7,306 2,330
126,848 92,011
As the Group normally holds collateral of the properties before collection of the outstanding balances and passing the titles to the property purchasers, the Directors are of the view that the Group has no material bad debt risk on the trade receivables and no provision was made as at 30 June 2016 (31 December 2015: Nil).
— 144 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
12 PREPAYMENTS
As at 30 June 31 December 2016 2015 RMB’000 RMB’000
Non-current - Prepayments for investments (Note(a)) 3,230,375 4,722,036
Current - Prepaid taxes — Land appreciation tax 1,412,850 1,214,360 — Corporate income tax 756,629 725,876 — Business tax and surcharge 976,482 697,978 Prepayments for land use rights acquisition 1,968,134 1,465,969 Prepayments for project development costs 95,858 61,897
5,209,953 4,166,080
(a) As at 30 June 2016, the prepayments for investments included primarily the following two items:
(i) In May 2016, the Company proposed to acquire from Top Spring International Holdings Limited, an independent third party, the equity interests of seven project entities and certain receivables from the target entities to the seller at a total consideration equivalent to RMB4,225 million. As at 30 June 2016, the Group has made a prepayment of RMB2,000 million for the proposed acquisition and the transaction has been approved by the shareholders on 16 August 2016.
(ii) As at 30 June 2016, the Group had prepayments totalling RMB1,048 million for future cooperation in target real estate projects located in Xi’an, the PRC.
The carrying amounts of the Group’s prepayments were all denominated in RMB.
— 145 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
13 RESTRICTED CASH
As at 30 June 31 December 2016 2015 RMB’000 RMB’000
Guarantee deposits for bank loans 9,358,935 3,070,505 Restricted cash from presales of properties (Note (a)) 1,426,377 1,287,734 Others (Note(b)) 1,024,599 12,771
11,809,911 4,371,010
Note (a): In certain subsidiaries of the Company, a portion of the proceeds from pre-sale of properties is saved as guarantee bank deposits in accordance with the municipal regulations and is released in line with certain development progress milestones.
Note (b): The Group paid deposits as guarantee for the Group’s certain joint ventures’ bank borrowings.
14 SHARE CAPITAL
Number of shares Share capital Equivalent (thousands) HK$’000 to RMB’000
Ordinary shares of HK$0.1 each, issued and fully paid 10,000,000 1,000,000 —
As at 31 December 2015 3,399,449 339,945 291,329 Shares issued upon exercise of employees’ share options (Note (a)) 477 48 40
As at 30 June 2016 3,399,926 339,993 291,369
Note (a): As disclosed in details in the Company’s annual financial statements for the year ended 31 December 2015, the Company adopted a Post-IPO Share Option Scheme on 29 April 2011 and a 2014 Share Option Scheme on 19 May 2014 respectively. On 20 June 2016, the Company granted 39,920,000 share options within the 2014 Share Option Scheme.
The total expense recognised in the profit or loss for share options granted to directors and employees for the six months ended 30 June 2016 was RMB36.55 million (2015: RMB11.29 million).
— 146 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
The weighted-average fair value of options granted during the period determined using the Binomial valuation model was HK$1.65 per option (2015: HK$2.23). The significant inputs into the model were weighted-average share price of HK$4.56 at the grant date (2015: HK$7.27), exercise price of HK$4.62 (2015: HK$7.27), volatility of 53.12% (2015: 44.91%), dividend yield of 2.6% (2015: 2.1%), an expected option life of five years, and an annual risk-free interest rate of 0.827% (2015: 1.129%). The expected volatility is determined by calculating the historical volatility of the price of listed companies with similar business to the Group. The expected dividend yield is determined by the Directors based on the expected future performance and dividend policy of the Group.
For the six months ended 30 June 2016, 477,600 shares in connection with the 2014 Share Option Scheme were exercised by the employees, which resulted in an increase of RMB0.04 million in the share capital and RMB1.586 million in share premium (Note 15).
As at 30 June 2016, 49,901 thousand shares of the Post-IPO Share Option Scheme and 49,241 thousand shares of the 2014 Share Option Scheme were exercisable (31 December 2015: 52,640 thousand shares in the Post-IPO Share Option Scheme and 26,214 thousand shares in the 2014 Share Option Scheme).
15 RESERVES
Share Other Note premium reserves Total RMB’000 RMB’000 RMB’000
Six months ended 30 June 2016 At 1 January 2016 1,954,974 2,149,468 4,104,442 Transactions with non-controlling interests 29 — 11,953 11,953 Employees share option schemes: — Value of employee services — 36,546 36,546 — Exercise of employees’ share options 14 1,586 — 1,586
At 30 June 2016 1,956,560 2,197,967 4,154,527
Six months ended 30 June 2015 At 1 January 2015 2,555,259 647,742 3,203,001 Transactions with non-controlling interests — (354,985) (354,985) Employees share option schemes: — Value of employee services — 11,296 11,296 — Exercise of employees’ share options 42,454 — 42,454
At 30 June 2015 2,597,713 304,053 2,901,766
— 147 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
16 PERPETUAL CAPITAL SECURITIES
During six months ended 30 June 2016, certain wholly owned subsidiaries of the Company (the “Instrument issuers”) issued three perpetual bonds, among which, one of these perpetual bonds contracts were guaranteed by Sunac Real Estate Group Co., Ltd. (the “Sunac Real Estate”), an indirect wholly owned subsidiary of the Company, and secured using the equity interests of the Instrument issuers. Another perpetual bonds contract was guaranteed by Sunac Real Estate and secured by the equity investments owned by the joint ventures of the Instrument issuers. The perpetual bonds have no maturity date. The Instrument issuers may elect to defer interest payment, and are not subject to any limit as to the number of times interest payment can be deferred. The perpetual bonds are callable by the Instrument issuers.
The compensation for default under the uncontrollable condition was limited to RMB50 million according to the contracts and was classified as financial liabilities. The aggregate net proceeds of the perpetual bonds, deducting the compensation, amounted to RMB6,823 million. As the perpetual bonds only impose contractual obligations on the Group to repay principal or to pay any distribution under certain circumstances, which are at Group’s discretion, they have in substance offered the Group an unconditional right to avoid delivering cash or other financial asset to settle contractual obligation. Therefore, the net proceeds of the perpetual bonds are classified as capital instruments presented in the equity of the Group. The accrual of respective nominal interests according to the bond terms are treated as distribution to the holders of these perpetual capital instruments.
17 TRADE AND OTHER PAYABLES
As at 30 June 31 December 2016 2015 RMB’000 RMB’000
Trade payables 6,934,092 7,303,339 Deposits received 1,370,243 386,874 Notes payables 235,592 193,495 Payables for acquisition consideration 582,279 1,031,517 Amount due to non-controlling interests and their related parties 267,886 206,777 Other taxes payable 242,906 462,031 Interests payable 847,901 416,012 Advanced deed tax from customers 193,503 243,707 Payroll and welfare payables 62,110 210,160 Others 182,881 490,038
10,919,393 10,943,950
— 148 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
The ageing analysis of the Group’s trade payables is as follows:
As at 30 June 31 December 2016 2015 RMB’000 RMB’000
Within 90 days 2,310,618 4,628,637 90-180 days 580,678 581,236 180-365 days 1,952,204 354,035 Over 365 days 2,090,592 1,739,431
6,934,092 7,303,339
18 BORROWINGS
As at 30 June 31 December 2016 2015 RMB’000 RMB’000
Non-current
Secured, — Banks borrowings 18,126,690 23,094,089 — Other borrowings 8,138,780 1,520,000 — Senior notes (Note (A)) 4,614,288 8,389,829 — Asset-backed securities (Note (D)) 905,456 —
31,785,214 33,003,918
Unsecured, — Corporate bonds (Note (B)) 5,970,600 5,967,000 — Private domestic corporate bonds (Note (C)) 14,951,050 —
20,921,650 5,967,000
52,706,864 38,970,918 Less: Current portion of long-term borrowings (Note (E)) (14,556,673) (11,756,678)
38,150,191 27,214,240
— 149 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
As at 30 June 31 December 2016 2015 RMB’000 RMB’000
Current Secured, — Banks borrowings 7,936,353 1,481,715 — Other borrowings 1,922,100 1,300,000 — Asset-backed securities (Note (D)) 187,200 —
10,045,653 2,781,715 Unsecured, — Other borrowings 46,000 46,000
10,091,653 2,827,715 Current portion of long-term borrowings (Note (E)) 14,556,673 11,756,678
24,648,326 14,584,393
Total borrowings 62,798,517 41,798,633
(A) Senior notes
The Company issued senior notes (“Senior Notes”) on the Singapore Exchange Securities Trading Limited, payable semi-annually in arrears. As at 30 June 2016, the issue dates, principals and interest rates of the outstanding Senior Notes were shown as below:
Issue dates Principal Interest rate USD million
Senior Note 1 5 April 2013 500 9.375% Senior Note 2 5 December 2014 400 8.75%
900
According to the terms of the Senior Notes, at any time and from time to time on or after 5 April 2016 and 5 December 2017 respectively, the Company may redeem the Senior Notes, in whole or in part, at a redemption price equal to the percentage of principal amount set forth below plus accrued and unpaid interests, if any, to (but not including) the redemption date if redeemed during the twelve month period beginning on 5 April and 5 December of each of the years indicated below respectively.
— 150 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
The redemption prices are shown as below:
Redemption time Redemption prices
Senior Note 1: Prior to 5 April 2016 — Redemption up to 35% 109.4% — Redemption in whole but not in part (Note (i)) 100%+applicable premium 5 April 2016 to 31 December 2016 104.7% 2017 and thereafter 102.3%
Senior Note 2: Prior to 5 December 2017 — Redemption up to 35% 108.75% — Redemption in whole but not in part (Note (ii)) 100%+ customary make-whole premium 5 December 2017 to 31 December 2017 104.4% 2018 and thereafter 102.2%
Notes:
(i) The Company announced on 8 June 2016 that it had redeemed an aggregate principal amount of US$200 million of outstanding 9.375% Senior Notes.
The Company announced on 6 July 2016 that it had informed the trustee, DB Trustees (Hong Kong) Limited, that all the remaining outstanding 9.375% Senior Notes of an aggregate principal amount of US$300 million would be redeemed in full on 5 August 2016 (the “Redemption Date”) at a redemption price equal to 104.69% of the principal amount thereof, plus accrued and unpaid interest, if any, to (but not including) the Redemption Date. On 5 August 2016 the Company announced that it had completed this redemption. The Company had reclassified this part to current liabilities in the consolidated balance sheet.
(ii) The customary make-whole premium is the greater of (1) 1% of the principal amount and (2) the excess of the present value of 104.4% of the principal plus the accrued and unpaid interest amount for the period from the redemption date to 5 December 2017 over the principal amount at the redemption date.
These early redemption options are regarded as embedded derivatives not closely related to the host contract. The directors are of the view that the fair value of the above early redemption option is not material as at 31 December 2015 and 30 June 2016.
— 151 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
(B) Corporate bonds
The Company issued corporate bonds (the “Corporate Bonds”) on the Shanghai Stock Exchange and payable annually in arrears. The issue dates, principals and interest rates are shown as below:
Issue dates Principal Interest rate RMB’000
15 August 2015 (“Type 1 Bond”) 2,500,000 4.50% 15 August 2015 (“Type 2 Bond”) 2,500,000 5.70% 1 September 2015 (“Type 3 Bond”) 1,000,000 4.48%
6,000,000
According to the terms of the Corporate Bonds, Type 1 Bond has a term of five years and after the end of the third year the issuer has the option to raise the coupon rate and the investors are entitled to sell back the bonds, and its coupon rate was fixed at 4.5% with an issue size of RMB2.5 billion. Type 2 Bond has a term of five years and its coupon rate was fixed at 5.7% with an issue size of RMB2.5 billion. Type 3 Bond has a term of five years with the issuer’s option to raise the coupon rate after the end of the third year and the investors’ entitlement to sell back the bonds, and its coupon rate was fixed at 4.48%. The underwriting fee of the Corporate Bond was charged at 0.6% of the issue size.
The options embedded in the Type 1 Bond and Type 3 Bond host contracts are not closely related to the host contracts, and the directors are of the view that the fair value of the above early redemption option is not material as at 31 December 2015 and 30 June 2016.
(C) Private domestic corporate bonds
During the six months ended 30 June 2016, the Company issued private domestic corporate bonds on Shanghai Stock Exchange and Shenzhen Stock Exchange. The details are shown as below:
Principal Interest Issue date amount rate Maturity RMB’000
21 January 2016 1,500,000 5.20% 4years 22 January 2016 5,000,000 6.39% 7years 7 March 2016 3,500,000 5.40% 5years 3 May 2016 2,700,000 5.85% 6years 13 June 2016 2,300,000 5.45% 6years
15,000,000
— 152 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
The net proceeds after deducting the direct issuance costs, amounted to RMB14,947.3 million. All the private domestic corporate bonds are with the issuer’s option to raise the coupon rate and the investors’ option to sell back the bonds at the end of the second, third or fifth years.
The options embedded are not closely related to the host contracts. The directors are of the view that the fair value of the embedded options is not material as at the time of initial recognition and 30 June 2016.
(D) Asset-backed securities
Sunac Property Management Service Group Co., Ltd, a wholly owned subsidiary of the Company engaged in property management services in the PRC, entered into asset-backed special agreement with a third-party financing institution in the form of asset securitisation. Asset-backed securities are backed by the right of receipt of the property management service fee with a principal amount of RMB1,158 million and have respective fixed repayment dates, bearing interest rate ranging from 4.5% to 5.7% per annum. The securities were guaranteed by Sunac Real Estate.
(E) Long-term borrowings
As at 30 June 2016, RMB7,057 million (31 December 2015: RMB2,766 million) of borrowings for property development projects will be due for full repayment upon an aggregated 20%~80% pre-sale status in term of gross floor area of the respective projects were achieved. Based on the management’s sales forecast, RMB3,804 million (31 December 2015: RMB491 million) of borrowings will be due for repayment during the twelve months ending 30 June 2017 and therefore were included in current liabilities as at 30 June 2016.
— 153 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
Movements in borrowings are analysed as follows:
RMB’000
Six months ended 30 June 2016 Opening amount as at 1 January 2016 41,798,633 Additions in borrowings 37,389,333 Disposal of a subsidiary (Note 31) (1,988,000) Acquisition of subsidiaries (Note 30) 656,800 Repayments of borrowings (15,445,788) Adjustment of financial costs using effective interest rate 70,507 Exchange loss 317,032
Closing amount as at 30 June 2016 62,798,517
Six months ended 30 June 2015 Opening amount as at 1 January 2015 34,383,795 Additions in borrowings 11,354,825 Disposal of a subsidiary (1,616,095) Acquisition of subsidiaries 900,000 Repayments of borrowings (13,898,156) Adjustment of financial costs using effective interest rate 45,389 Exchange loss 3,390
Closing amount as at 30 June 2015 31,173,148
As at 30 June 2016, the Group’s borrowings totalling RMB41,831 million (31 December 2015: RMB35,786 million) were secured or jointly secured using the Group’s properties under development and completed properties held for sale totalling RMB34,372 million (31 December 2015: RMB23,841 million) and the Group’s equity interests in certain subsidiaries, and certain restricted cash.
19 DERIVATIVE FINANCIAL INSTRUMENTS
As at 30 June 2016, the currency derivative contracts comprised various contracts with nominal amount totalling USD600 million (2015: Nil), the settlement dates of which are between January and April 2019. The derivative contracts were not designated as hedging instruments. According to the contracts, the Group will be able to buy USD nominal amount at the agreed strike price with CNY on the settlement date.
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair values. The change of fair value is recognised immediately in profit or loss.
— 154 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
20 EXPENSES BY NATURE
Six months ended 30 June 2016 2015 RMB’000 RMB’000
Costs of completed properties delivered 8,399,468 4,319,723 Business tax and other levies 489,503 294,961 Staff costs 305,237 215,753 Advertisement and promotion costs 148,513 159,281 Provision for decline in value of properties 71,602 142,855 Impairment of receivables 30,004 — Depreciation and amortisation 16,213 11,146
21 BUSINESS TAX AND VALUE-ADDED TAX
From 1 January 2016 to 30 April 2016, sales of properties and property management service income of the PRC companies of the Group were subject to business tax of 5%.
In accordance with the Circular on the full implementation of Levying Value-added Tax (“VAT”) in place of Business Tax (Caishui No.36, 2016) (the “Circular”) jointly issued by the Ministry of Finance and the State Administration of Taxation of the PRC, taxpayers providing taxable services included in the Circular would be subject to VAT and no longer to business tax starting from 1 May 2016. Since 1 May 2016, the Group has applied the provisions stipulated in the Circular.
22 OTHER INCOME AND GAINS
Six months ended 30 June 2016 2015 RMB’000 RMB’000
Gains from business combination (Note 30) 560,379 137,882 Gains from investments in joint ventures (Note 8) 460,758 — Interest income 421,642 608,249 Gain on disposal of a subsidiary (Note 31) 11,536 1,129,390 Gain on disposal of a joint venture 22,705 172,967 Gain on the debts assignment — 150,000 Government grants 8,647 530 Others 65,694 21,567
1,551,361 2,220,585
— 155 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
23 OTHER EXPENSES AND LOSSES
Six months ended 30 June 2016 2015 RMB’000 RMB’000
Fair value loss on derivative financial instruments 30,253 — Loss on disposal of investment properties — 81,284 Others 24,320 21,095
54,573 102,379
24 FINANCE INCOME AND FINANCE COSTS
Six months ended 30 June 2016 2015 RMB’000 RMB’000
Interest expenses 1,645,474 1,362,173 Other finance costs 224,073 — Less: Capitalised finance costs (666,843) (668,030)
1,202,704 694,143 Exchange loss 376,035 4,434
1,578,739 698,577 Finance income: — Interest income on bank deposits (98,507) (83,095)
Net finance costs 1,480,232 615,482
— 156 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
25 INCOME TAX EXPENSES
Six months ended 30 June 2016 2015 RMB’000 RMB’000
Corporate income tax (“CIT”) charge — Current income tax 520,973 899,165 — Deferred income tax (273,679) (197,116)
247,294 702,049 Land appreciation tax (“LAT”) 97,061 29,490
344,355 731,539
(A) CIT
The income tax provision of the Group in respect of operations in the PRC has been calculated at the applicable tax rate of 25% and the estimated assessable profits for the six months ended 30 June 2016 based on existing legislations, interpretations and practices.
Hong Kong profits tax has been provided at the rate of 16.5% (2015: 16.5%) on the estimated assessable profit for the year. Taxation on overseas profits has been calculated on the estimated assessable profit for the period at the rates of taxation prevailing in the countries in which the group operates.
No Hong Kong profits tax has been provided as the Group has no profit derived in Hong Kong.
Pursuant to the applicable rules and regulations of Cayman Islands and British Virgin Islands (“BVI”), the Company and the BVI subsidiaries of the Group are not subject to any income tax in those jurisdictions.
Income tax expense is recognised based on management’s estimate of the weighted-average annual income tax rate expected for the full financial year. The estimated average annual tax rate used for the six months ended 30 June 2016 was 25% (2015: 25%).
In accordance with the PRC Corporate Income Tax Law, a 10% withholding income tax is levied on dividends declared to foreign investors from the enterprises with foreign investments established in the Mainland China. The Group is therefore liable to withholding taxes on dividends distributable by those subsidiaries established in Mainland China in respect of their earnings generated from 1 January 2008.
— 157 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
(B) LAT
PRC LAT is levied at progressive rates ranging from 30% to 60% on the appreciation of land value, being the proceeds of sales of properties less deductible expenditures including lease charges for land use rights and all property development expenditures. LAT is included in the profit or loss as income tax expense.
26 EARNINGS PER SHARE
(A) Basic
Basic earnings per share are calculated by dividing the profit attributable to owners of the Company by the weighted-average number of ordinary shares in issue during the period.
Six months ended 30 June 2016 2015
Profit attributable to owners of the Company (RMB’000) 72,935 951,399
Weighted-average number of ordinary shares in issue (thousand) 3,399,661 3,389,687
(B) Diluted
Diluted earnings per share are calculated by adjusting the weighted-average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company has one category of dilutive potential ordinary shares: share options. For the share options, a calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company’s shares) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options.
Six months ended 30 June 2016 2015
Profit attributable to owners of the Company (RMB’000) 72,935 951,399
Weighted-average number of ordinary shares in issue (thousand) 3,399,661 3,389,687 Adjusted for share options (thousand) 24,775 46,074
3,424,436 3,435,761
— 158 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
27 COMMITMENTS
(A) Property development expenditures for existing property projects
As at 30 June 31 December 2016 2015 RMB’000 RMB’000
— Contracted but not provided for 10,779,507 4,643,498 — Authorised but not contracted for 32,424,065 19,770,172
43,203,572 24,413,670
(B) Commitments on equity investments
As at 30 June 31 December 2016 2015 RMB’000 RMB’000
— Contracted but not provided for 5,730,932 247,228
(C) Operating lease commitments
The future aggregate minimum lease rental expense in respect of certain office buildings under non-cancellable operating leases contracts are payable in the following periods:
As at 30 June 31 December 2016 2015 RMB’000 RMB’000
No later than 1 year 10,124 6,352 Later than 1 year and no later than 5 years 27,433 19,749 Later than 5 years 3,845 —
41,402 26,101
— 159 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
28 CONTINGENT LIABILITIES
(A) Guarantee on mortgage facilities
The Group had the following contingent liabilities in respect of financial guarantees on mortgage facilities:
As at 30 June 31 December 2016 2015 RMB’000 RMB’000
Guarantees in respect of mortgage facilities for certain purchasers of the Group’s property units 7,649,572 4,879,760
The Group has arranged bank financing for certain purchasers of the Group’s property units and provided guarantees to secure obligations of such purchasers for repayments. Such guarantees terminate upon the earlier of (i) the transfer of the real estate ownership certificate to the purchaser which will generally occur within an average period of six months of properties delivery dates; or (ii) the satisfaction of mortgage loans by the purchasers of the properties.
Pursuant to the terms of the guarantees, upon default of mortgage payments by these purchasers, the Group is responsible to repay the outstanding mortgage principal together with accrued interest and penalties owed by the defaulting purchasers to the banks and the Group is entitled to take over the legal title and possession of the related properties. The Group’s guarantee period starts from the date of grant of the mortgage. The directors consider that the likelihood of default of payments by purchasers is minimal and therefore the financial guarantee measured at fair value is immaterial.
(B) As at 30 June 2016, the Group provided guarantees amounted to RMB10.21 billion for borrowings of certain joint ventures and associates (31 December 2015: RMB10.36 billion). The directors consider that the likelihood of default in payments is minimal and the financial guarantees measured at fair value is immaterial.
29 TRANSACTIONS WITH NON-CONTROLLING INTERESTS
(A) In January 2016, the Group completed the acquisition of additional 15% equity interest of a 85% owned subsidiary, Wuxi Greentown Real Estate Development Co., Ltd. This transaction resulted in a decrease in non-controlling interest of RMB29.37 million and an increase in net assets attributable to the owners of the Company of RMB11.95 million.
— 160 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
(B) As at 1 January 2016, Shanghai Fengdan Lishe Estate Development Co., Ltd. (“Fengdan”) was a 62.145% owned subsidiary of the Company. In May 2016, the Group acquired an additional 37.855% equity interest and debts due to non-controlling interests of Fengdan at a total consideration of RMB1,324.9 million. This transaction resulted in an increase in non-controlling interest of RMB41.16 million. Currently Fengdan invested in a property project in Shanghai through a joint venture. The excess of the consideration over the carrying value of the non-controlling interests of Fengdan was considered as attributable to the land use right acquisition costs.
30 BUSINESS COMBINATION
Acquisitions of subsidiaries
During the six months ended 30 June 2016, the major acquisitions of new subsidiaries are summarized as follows:
Chongqing Wuhan Suzhou Der Hezhong Xinghaiyuan Taihu Bay Lianyi Others Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Note (i)) (Note (ii)) (Note (iii)) (Note (iv))
Fair value of total interests acquired 432,375 1,771,577 37,889 1,350,112 3,591,953
Less: Previously held interest — — 28,417 — 28,417 Cash considerations for acquisition of — equity interest 233,573 724,459 17,375 241,249 1,216,656 — debt due to shareholders — 685,541 — 1,108,863 1,794,404
198,802 361,577 (7,903) — 552,476
Breaking down into: Goodwill — — 7,903 — 7,903 Acquisition gains 198,802 361,577 — — 560,379
— 161 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
Note:
(i) Acquisition of Wuhan Xinghaiyuan Real Estate Development Co., Ltd. (“Wuhan Xinghaiyuan”)
In February 2016, the Group acquired 90% equity interest of a company named Wuhan Xinghaiyuan at a total consideration equivalent to RMB233.58 million.
(ii) Acquisition of Suzhou Der Taihu Bay Properties Co., Ltd. (“Suzhou Der Taihu Bay”)
In February 2016, the Group acquired the entire equity interest of a company named Suzhou Der Taihu Bay and its respective debts due to shareholders at a total amount equivalent to RMB1,410 million.
(iii) Acquisition of Chongqing Hezhong Lianyi Investment Co., Ltd. (“Chongqing Hezhong Lianyi”)
In January 2016, the Group acquired an additional 25% equity interest of a previously 75% owned JV of the Company, Chongqing Hezhong Lianyi, at a consideration of RMB17.375 million. Upon completion of the transaction, Chongqing Hezhong Lianyi became a wholly owned subsidiary of the Company.
(iv) Acquisition of other companies
During the six months ended 30 June 2016, the Company acquired equity interests of other five project companies from third parties, at a total consideration of RMB1,350 million. Upon completion of these transactions, these five entities became subsidiaries of the Company. At the acquisition date, the projects of these five companies had yet come into the development phase and the acquisitions of these entities were regarded as assets deals.
— 162 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
The fair value of the identifiable assets and liabilities and cash and cash equivalent impact arising from the acquisitions of subsidiaries in above transactions are summarized as follows:
Chongqing Wuhan Suzhou Der Hezhong Xinghaiyuan Taihu Bay Lianyi Others Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(1) Fair value of net assets Non-current assets Property, plant and equipment — — — 484 484 Intangible assets — — — 28 28 Investments in joint ventures (Notes 8.1) — — 37,758 — 37,758 Deferred income tax assets — 212 — — 212 Current assets Properties under development 1,451,000 2,909,000 — 1,907,945 6,267,945 Trade and other receivables 25,048 22 — 350,039 375,109 Amounts due from related companies — — 205,800 — 205,800 Cash and cash equivalents — 14 931 53,365 54,310 Non-current liabilities Borrowings (448,800) — — (208,000) (656,800) Deferred income tax liabilities (113,183) (1,137,158) — — (1,250,341) Current liabilities Trade and other payables (433,648) (507) — (596,321) (1,030,476) Advanced proceeds from customers — — — (119,873) (119,873) Amounts due to related companies — — (206,600) — (206,600) Current income tax liabilities — (6) — (1,199) (1,205) Net assets 480,417 1,771,577 37,889 1,386,468 3,676,351 Less: Non-controlling interests (48,042) — — (36,356) (84,398)
Fair value of the net assets acquired 432,375 1,771,577 37,889 1,350,112 3,591,953
(2) Cash effects Consideration settled by cash (100,000) (1,403,055) (9,500) (1,350,112) (2,862,667) Cash and cash equivalents in the subsidiaries acquired — 14 931 53,365 54,310
Net cash impact on acquisitions (100,000) (1,403,041) (8,569) (1,296,747) (2,808,357)
— 163 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
31 DISPOSAL OF A SUBSIDIARY
In May 2016, the Group disposed of 45% equity interest of Shanghai Sunac Ruifeng Investment Co., Ltd. (“Shanghai Ruifeng”) to a third party at a consideration of RMB45 million. After the disposal, Shanghai Ruifeng become a 55% owned joint venture of the Group.
(a) The financial impacts arising from the disposal in above transaction are summarized as follows:
RMB’000
Consideration satisfied by cash 45,000 Fair value of the remaining equity interest held by the Group at disposal (Note 8) 40,901 Carrying value of the equity owned by the Group (74,365)
Gain on the disposal (Note 22) 11,536
(b) Carrying value of the equity owned by the Group
RMB’000
Non-current assets Property, plant and equipment 28 Deferred income tax assets 1,050 Prepayments 5,457,151 Investment in a jointly controlled entity 14,454 Current assets Properties under development 545 Trade and other receivables 6,800 Amounts due from related companies 2,062,241 Cash and cash equivalents 309,891 Non-current liabilities Borrowings (1,988,000) Current liabilities Trade and other payables (1,281,470) Amounts due to related companies (4,510,613) Current income tax liabilities 2,288
Net assets 74,365 Less: Non-controlling interests —
Carrying value of the equity owned by the Group 74,365
— 164 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
(c) Cash effect
RMB’000
Cash consideration received as of 30 June 2016 45,000 Cash disposed (309,891)
(264,891)
32 Related party transactions
(A) Name and relationship with related parties
Name Relationship
Sunac International Largest shareholder of the Company Mr. Sun Hongbin The controlling shareholder of Sunac International and the chairman of the Board
(B) Transactions with related parties
In addition to the related party information disclosed elsewhere in the condensed consolidated interim financial information, the Group had the following significant transactions entered into the ordinary course of business between the Group and the related parties:
(i) Funds advance
Six months ended 30 June 2016 2015 RMB’000 RMB’000
Cash paid to joint ventures and associates (18,544,036) (9,629,189) Cash received from joint ventures and associates 16,920,082 9,702,255
(1,623,954) 73,066
(ii) Interest income
Six months ended 30 June 2016 2015 RMB’000 RMB’000
Interest income from joint ventures 397,480 402,873 Interest income from associates — 5,474
397,480 408,347
— 165 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
(C) Compensation of key management personnel
Six months ended 30 June 2016 2015 RMB’000 RMB’000
Salaries and other short-term benefits 6,868 5,065 Share-based payments 8,991 2,836
15,859 7,901
(D) Related parties balances
As at 30 June 31 December 2016 2015 RMB’000 RMB’000
Amounts due from joint ventures — Interest free 13,277,310 5,763,589 — Interest bearing 5,315,883 4,536,783 — Interest receivable 1,182,112 978,818
19,775,305 11,279,190
Amounts due from associates — Interest free 242,991 260,304 — Interest bearing 34,765 34,765 — Interest receivable 85,790 85,790
363,546 380,859
20,138,851 11,660,049
Amounts due to joint ventures 18,619,269 13,513,680 Amounts due to associates 3,557,600 4,699,242
22,176,869 18,212,922
— 166 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
The amounts due from joint ventures and associates have no fixed repayment date, bearing interest rate at 4.35% to 11% per annum for the six months ended 30 June 2016.
The amounts due to joint ventures and associates are unsecured, interest-free and repayable on demand.
33 DIVIDENDS
No interim dividend for the six months ended 30 June 2016 was proposed by the Board (Six months ended 30 June 2015: Nil).
34 EVENTS AFTER THE BALANCE SHEET DATE
(a) On 14 August 2016, Sunac Real Estate issued domestic corporate bonds with two types (“Type A Bonds” and”Type B Bonds”), of which the Type A Bonds, having a term of five years with Sunac Real Estate’s option to raise the coupon rate after the end of the third year and the investors’ entitlement to sell back the bonds, shall have a coupon rate of 3.44% with an issue size of RMB1.2 billion; while the Type B Bonds, having a term of seven years with Sunac Real Estate’s option to raise the coupon rate after the end of the fifth year and the investors’ entitlement to sell back the bonds, shall have a coupon rate of 4.0% with an issue size of RMB2.8 billion.
(b) On 22 August 2016, Hainan Sunac Properties Co., Ltd. (“Hainan Sunac”), an indirect wholly owned subsidiary of the Company, entered into an equity acquisition with a third party, pursuant to which Hainan Sunac agreed to acquire 50% equity interest of Hangzhou Heming Investment Co., Ltd., Zhejiang Yuecheng Investment Co., Ltd. and Hangzhou Rongyue Investment Co., Ltd. (collectively, the “Target Companies”) from a third party at the equity consideration of RMB1,954.72 million, and an amount of RMB99.12 million due by Target Companies. The Target Companies engage in developing a project in Qionghai City of Hainan Province. Up to the date of this report, the acquisition has yet to be completed. Upon completion of the transaction, the Target Companies will become joint ventures of the Company.
— 167 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
INDEBTEDNESS STATEMENT
(i) Borrowings and debts
As at the close of business on 31 August 2016, being the latest practicable date for the purpose of this statement of indebtedness prior to the printing of this circular, the Group had outstanding borrowings of approximately RMB74,445.3 million, of which RMB49,486.3 million were secured or jointly secured by properties under development, completed properties held for sale and certain equity interests of the Company’s subsidiaries (including those legally transferred as collateral).
The Group’s contingent liabilities at the close of 31 August 2016 are as follows:
RMB million
Guarantees in respect of mortgage facilities for certain purchasers of the Group’s properties 6,006.6 Guarantees in respect of borrowings owed by joint ventures and associates of the Group 10,502.9
(ii) General
Save as disclosed as above and apart from intra-group liabilities and normal trade payables in the normal course of business, as at the close of business on 31 August 2016, the Group did not have any debt securities issued and outstanding, and authorised or otherwise created but unissued, bank overdrafts, charges or debentures, mortgages, loans or other similar indebtedness or any finance lease commitments, hire purchase commitments, liabilities under acceptances (other than normal trade bills), acceptance credits or any guarantees.
The Directors have confirmed that there have been no material changes in the indebtedness and contingent liabilities of the Group since 31 August 2016 up to the Latest Practicable Date.
FINANCIAL AND TRADING PROSPECTS OF THE GROUP
The Group will continue to insist on the strategy of regional in-depth development to further consolidate and develop its market position and influence in the existing regions and cities. On the other hand, the Group will continue to focus on the development and management of high-end properties and focus on building high-end premium properties for customers in a persistent way.
Through the Subscription, the Company will expand its working capital and broaden its shareholders’ equity base, thereby optimizing its capital structure and enhancing its ability to resist financial risks so as to further support the healthy and sustained development of the Company.
— 168 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
MATERIAL CHANGE
Based on the monthly unaudited operation data announced by the Company since 31 December 2015, being the date to which the latest published audited financial statements of the Company were made up, the Group has achieved an increase in sales amount. Despite the increase in revenue, the Group recorded a significant decrease in profit attributable to the owners of the Company primarily due to, among other things, the increase in foreign exchange loss and the increase in expensed finance cost, which was disclosed in the Company’s interim report for the six months ended 30 June 2016.
As at 30 June 2016, the borrowings and net gearing ratio of the Group were approximately RMB62,798.5 million and 85.1%, compared with approximately RMB41,798.6 million and 75.9% as at 31 December 2015, respectively. Net gearing ratio was calculated as net debt divided by total equity, and net debt was calculated as total borrowings (including current and long-term borrowings) less cash and cash equivalents (including restricted cash). The increase in borrowings and net gearing ratio were mainly attributable to the addition of a relatively large number of borrowings to support the real estate development activities with the aim of enlarging the business scale of the Group during the six months ended 30 June 2016. In August 2016, the Company proposed to issue non-guaranteed domestic bonds and the total issue size of which was determined to be RMB4 billion with terms of five and seven years. On 5 August 2016, the Company completed the redemption of the outstanding 9.375% senior notes due 2018 at a total redemption price of US$323,437,500. Borrowings of the Group further increased to approximately RMB74,445.3 million as at 31 August 2016.
As disclosed in the Company’s circular dated 29 July 2016, the Company entered into a major transaction in relation to an acquisition of six property projects located in Shanghai, Nanjing, Shenzhen, Huizhou and Hangzhou at a total consideration of RMB4,225,230,000, being financed by the Group’s internal resources. Based on the relevant pro forma financial information, the net assets of the Group is expected to increase by approximately RMB406.5 million.
As disclosed in the Company’s announcement dated 22 August 2016, the Company entered into a discloseable transaction in relation to an acquisition of 50% equity and debt interests in companies which operated a property project located in Hainan at a total consideration of RMB2,053,835,000, being financed by the Group’s internal resources.
As disclosed in the Company’s announcement dated 18 September 2016, the Company entered into a major transaction in relation to an acquisition of a total of 42 property projects located in 16 cities in China, including Beijing, Tianjin, Chongqing and Hangzhou, from Legend Holdings Corporation and its subsidiary, at a consideration of approximately RMB13,788.4 million, being financed by the Group’s internal resources.
— 169 — APPENDIX I FINANCIAL INFORMATION OF THE GROUP
As disclosed in the Company’s announcement dated 21 September 2016, the Company entered into a discloseable transaction in relation to a subscription of approximately 16.96% of the issued share capital of Jinke Property Group Co., Ltd. at a total consideration of approximately RMB4,000.0 million, being financed by the Group’s internal resources.
Save as disclosed above, the Directors confirm that there had been no material change in the financial or trading position of the Group since 31 December 2015, being the date to which the latest published audited financial statements of the Company were made up, up to the Latest Practicable Date.
— 170 — APPENDIX II SUMMARY OF PROPERTY VALUATION OF THE GROUP
The following is the text of a letter and summary of valuations prepared for the purpose of incorporation in this circular received from DTZ Cushman & Wakefield Limited, an independent property valuer, in connection with its opinion of value of the property interests of Sunac China Holdings Limited as at 31 August 2016.
17 October 2016
The Directors Sunac China Holdings Limited 10/F, Building C7 Magnetic Plaza Binshuixi Road Nankai District Tianjin The People’s Republic of China
Dear Sirs,
Instructions, Purpose & Valuation Date
In accordance with your instructions for us to value the property interests of Sunac China Holdings Limited (the “Company”) and its subsidiaries (together referred to as the “Group”) in the People’s Republic of China (the “PRC”) (as more particularly described in the attached valuation summary), we confirm that we have inspected the properties, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the values of such property interests as at 31 August 2016.
Definition of Market Value
Our valuations of each of the properties represent its Market Value. The definition of Market Value adopted in The HKIS Valuation Standards 2012 Edition follows the International Valuation Standards published by the International Valuation Standards Council (“IVSC”). Market Value is defined by the IVSC as “the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion”.
Valuation Basis and Assumptions
In valuing the properties, we have complied with the requirements set out in Chapter 5 and Practice Note 12 of the Rules Governing the Listing of Securities published by The Stock Exchange of the Hong Kong Limited, The Codes on Takeovers and Mergers issued by the Securities and Futures Commission and The HKIS Valuation Standards 2012 Edition published by the Hong Kong Institute of Surveyors.
— 171 — APPENDIX II SUMMARY OF PROPERTY VALUATION OF THE GROUP
Our valuations exclude an estimated price inflated or deflated by special terms or circumstances such as atypical financing, sale and leaseback arrangement, special considerations or concessions granted by anyone associated with the sale, or any element of special value.
In the course of our valuation of the properties in the PRC, we have relied on the information and advice given by the Group and its legal adviser, Jincheng Tongda & Neal Law Firm (金城同達律 師事務所) regarding the title to each of the properties and the interests of the Group in the properties.
No allowance has been made in our valuations for any charges, mortgages or amounts owing on the properties nor for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the properties are free from encumbrances, restrictions and outgoings of an onerous nature which could affect their values.
For the purpose of compliance with Rule 11.3 of The Code on Takeovers and Mergers and as advised by the Group, the potential tax liabilities which may arise from the sale of the properties include:
(a) business tax at a rate of 5% of consideration for the property in the PRC;
(b) profits tax on the profit from the sale at rate of 25% for the property in the PRC; and
(c) land value appreciation tax for the property in the PRC at progressive tax rates as follows:
For the portion of appreciation in property value Progressive tax rate
not more than 50% 30% more than 50% but not more than 100% 40% more than 100% but not more than 200% 50% more than 200% 60%
For the properties in Group A, they are held by the Group sale purpose. The Group advises that the potential tax liabilities estimated to be approximately RMB8,943 million would arise if such properties were to be sold at the amount of the valuation. The above amount is for indicative purpose and is calculated based on prevailing rules and information available as at the Latest Practicable Date.
For the properties in Groups B to D, they are continued to be held by the Group and with no intention for disposal. Hence, the likelihood of any potential tax liability of these properties being crystallized is remote.
— 172 — APPENDIX II SUMMARY OF PROPERTY VALUATION OF THE GROUP
Method of Valuation
In valuing properties in Group A, which are held by the Group for sale in the PRC, we have used the direct comparison approach assuming sale of these properties in its existing state with the benefit of vacant possession by making reference to comparables sales transactions as available in the relevant market.
In valuing properties in Group B, C and D, which are held by the Group under development, for future development and contracted to be acquired by the Group for future development in the PRC, we have valued them on the basis that they will be developed and completed in accordance with the latest development proposals provided to us by the Group (if any). We have assumed that all consents, approvals and licenses from relevant government authorities for the development proposals have been or will be obtained without onerous conditions or delays. We have also assumed that the design and construction of the developments are in compliance with the local planning and other relevant regulations and have been or will be approved by the relevant authorities. In arriving at our valuations, we have adopted the direct comparison approach by making reference to comparable sales evidence as available in the relevant market and have also taken into account the expended construction costs as well as the costs that will be expended to complete the developments. The “market value when completed” represents our opinion of the aggregate selling prices of the development assuming that it were completed as at the valuation date.
Sources of Information
We have been provided by the Group with extracts of documents in relation to the titles to the properties. However, we have not inspected the original documents to ascertain any amendments which may not appear on the copies handed to us.
In the course of our valuation, we have relied to a very considerable extent on the information given to us by the Group and its legal adviser, Jincheng Tongda & Neal Law Firm (金城同達律師事 務所) regarding the title to each of the properties and the interests of the Group in the properties. We have accepted advice given by the Group on such matters as planning approvals or statutory notices, easements, tenure, identification of land and buildings, completion date of buildings, number of car parking spaces, particulars of occupancy, site and floor areas, interest attributable to the Group and all other relevant matters.
For the properties in Group B, C and D, the respective planning or other regulatory consents which have been obtained in accordance with the information provided by the Group, such as Planning Permit for Construction Use of Land, Planning Permits for Construction Works and Permit for Commencements of Construction Works are set out in the notes of the respective valuation certificates of these properties.
Dimensions, measurements and areas included in the valuation report are based on information provided to us and are therefore only approximations. We have had no reason to doubt the truth and accuracy of the information provided to us by the Group which is material to the valuations. We were also advised by the Group that no material facts have been omitted from the information provided.
— 173 — APPENDIX II SUMMARY OF PROPERTY VALUATION OF THE GROUP
Title Investigation
We have been provided with extracts of documents relating to the titles of the properties in the PRC, but no searches have been made in respect of the properties. We have not searched the original documents to verify ownership or to ascertain any amendment which may not appear on the copies handed to us. We are also unable to ascertain the title of the properties in the PRC and we have therefore relied on the advice given by the Group regarding the Group’s interests in the PRC properties.
Site Inspection
Our DTZ PRC Office valuers, Ivan Zhang and Powell Li of Beijing Office, May Fan of Chengdu Office, Taowei Liu of Chongqing Office, Andy He of Guangzhou Office, Delly Chen, Simon Dong, Sammie Tse, Tom Zhen, Leo Li and Grace Zhang of Hangzhou Office, Louis Xing, Kevin Li and Kelly Song of Nanjing Office, Nicola Zhou, Jenny Liang, Rick Sun, Eric Fan, Shirline Qi, David Zhu and Jack Sun of Shanghai Office, Candy Gan of Shenzhen Office, Robert Liang, Nina Niu, Stella Su, Lisa Li, Darren Lv of Tianjin Office, Frank Wang of Wuhan Office, have inspected the exterior and, wherever possible, the interior of the Properties in between August 2016 and September 2016. However, no structural survey has been made, but in the course of our inspection, we did not note any serious defects. We are not, however, able to report whether the Properties are free of rot, infestation or any other structural defects. No tests were carried out to any of the services. Moreover, we have not carried out any soil investigations to determine the suitability of the soil conditions and the services etc. for any future development. Our valuations are prepared on the assumption that these aspects are satisfactory and that no extraordinary expenses or delays will be incurred during the construction period.
Unless otherwise stated, we have not been able to carry out detailed on-site measurements to verify the site and floor area of the Properties and we have assumed that the areas shown on the copies of documents handed to us are correct.
Currency
Unless otherwise stated, all sums stated in our valuations are in Renminbi, the official currency of the PRC.
We enclose herewith a summary of our valuations.
Yours faithfully, for and on behalf of DTZ Cushman & Wakefield Limited Andrew K. F. Chan Registered Professional Surveyor (General Practice) Registered China Real Estate Appraiser MSc., M.H.K.I.S. Regional Director
Note: Mr. Andrew K. F. Chan is a Registered Professional Surveyor who has over 29 years of experience in the valuation of properties in the PRC.
— 174 — SUMMARY OF VALUATIONS GROUP THE OF VALUATION PROPERTY OF SUMMARY II APPENDIX
GROUP A - PPROPERTIES HELD BY THE GROUP FOR SALE IN THE PRC Valuation Summary as at 31 August 2016
(2) Market value in existing state (2) attributable to Market value the Group as at Holding entity in existing Interest the Valuation Property (subsidiaries of Expiry date of Year of state as at the attributable to Date No. Property name the Company) City District Land use land use term Type of property(1) completion GFAValuation Date the Group (sq.m.) (RMB million) (%) (RMB million)
A1 West Chateau Beijing Sunac Hengji Beijing Haidian Residential, 8 Mar 2049 to 8 Residential and 26,138.61 2012-2015 257.00 100% 257.00 Real Estate Co., Ltd. Commercial, Mar 2079 commercial Composite A2 Magnetic Tianjin Sunac Ao Tianjin Nankai Commercial, 8 Mar 2054 to Residential, 138,364.77 2005-2013 161.00 100% 161.00 Capital Cheng Investment Co., Residential 19 May 2077 commercial and 7 — 175 — Ltd. apartment A3 Mind-Land Sunac Real Estate Tianjin Hexi Residential 27 Oct 2073 Residential and 19,455.63 2006-2012 94.00 100% 94.00 International Group Co., Ltd. commercial A4 Glorious Tianjin Sunac Tianjin Binhai New Residential, 25 May 2051 to Residential and 57,203.87 2013 321.00 100% 321.00 Mansion Dingsheng Zhidi Co., Commercial 25 May 2081 commercial Ltd. A5 Central Tianjin Sunac Huijie Tianjin Jinnan Residential 30 May 2081 Residential and 92,651.21 2012-2015 752.00 100% 752.00 Academy Zhidi Co., Ltd. commercial A6 PL Du Pantheon Tianjin Sunac Tianjin Nankai Residential 24 Aug 2080 Residential and 43,427.94 2013-2014 505.00 100% 505.00 Mingxiang Investment commercial Development Co., Ltd. A7 Bay Island Tianjin Rongyao Real Tianjin Beichen Residential 22 Oct 2083 Residential and 32,333.04 2015 457.00 54% 246.78 Estate Development commercial Co., Ltd. A8 Top Mansion of Tianjin Rongzheng Tianjin Binhai New Residential 15 Dec 2049 to Residential and 25,126.81 2014-2015 195.00 100% 195.00 the Dongting Investment Limited 15 Dec 2079 commercial PEDXI UMR FPOET AUTO FTEGROUP THE OF VALUATION PROPERTY OF (2) SUMMARY II APPENDIX Market value in existing state (2) attributable to Market value the Group as at Holding entity in existing Interest the Valuation Property (subsidiaries of Expiry date of Year of state as at the attributable to Date No. Property name the Company) City District Land use land use term Type of property(1) completion GFAValuation Date the Group (sq.m.) (RMB million) (%) (RMB million)
A9 Olympic Garden Chongqing Sunac Jiye Chongqing Jingkai Composite 28 Aug 2043 to Residential, 334,153.67 2005-2015 1,369.00 100% 1,369.00 Real Estate 9 Apr 2063 commercial and Development Co.,Ltd office A10 Eton Manor Chongqing Sunac Chongqing Nanan Residential 30 Jul 2061 Residential, 45,931.31 2013-2014 182.00 100% 182.00 Shangfeng Real Estate commercial and Co., Ltd. apartment A11 Guardian Manor Chongqing Sunac Chongqing Yubei Residential 27 Mar 2063 Residential, 134,144.81 2014 495.00 100% 495.00 Shijin Real Estate Co., commercial and Ltd. apartment A12 Asia Pacific Chongqing Sunac Chongqing Jingkai Residential, 12 Aug 2045 to Residential, 50,311.58 2008-2013 539.00 100% 539.00 Enterprise Yatai Shiye Real Commercial 12 Aug 2055 commercial and Valley Estate Co., Ltd. apartment
A13 The European — 176 — Chongqing Sunac Chongqing Banan Residential, 29 Sep 2053 to Residential and 122,993.03 2015 820.00 100% 820.00 Garden for City Qiyang Real Estate Commercial 29 Sep 2063 commercial -West Co., Ltd. A14 Sky Villa Chengdu Guojia Zhide Chengdu Jinjiang Residential, 4 Mar 2050 to 4 Residential and 88,138.72 2010-2016 1,057.00 100% 1,057.00 Real Estate Co., Ltd. Commercial Mar 2080 commercial A15 Sky Villa Chengdu Guojia Zhide Chengdu Jinjiang Residential, 4 Mar 2050 to 4 Residential and 22,276.45 2015-2016 91.00 100% 91.00 Condominiums Real Estate Co., Ltd. Commercial Mar 2080 commercial A16 Guanghua Chengdu Guojia Zhide Chengdu Qingyang Residential, 23 Jun 2051 to Residential, 107,862.88 2014-2015 846.00 100% 846.00 Center Real Estate Co., Ltd. Commercial 23 Jun 2081 commercial and office A17 Villa Royale Chengdu Zhongyi Real Chengdu Shuangliu Residential, 28 Mar 2045 to Residential and 76,627.92 2012-2015 1,083.00 100% 1,083.00 Estate Co., Ltd. Commercial 28 Mar 2075 commercial A18 Residence du Chengdu Guojia Chengdu Shuangliu Commercal, Nov 2052 to Residential and 60,413.94 2015 356.00 100% 356.00 Lac Zhongyu Real Estate Residential Nov 2082 commercial Co., Ltd. A19 Resicence Du Chengdu Yongping Chengdu Longquanyi Residential 14 Jan 2083 Residential and Paradis Real Estate Co., Ltd.
73,227.06 2015 467.00 100% 467.00 commercial PEDXI UMR FPOET AUTO FTEGROUP THE OF VALUATION PROPERTY OF (2) SUMMARY II APPENDIX Market value in existing state (2) attributable to Market value the Group as at Holding entity in existing Interest the Valuation Property (subsidiaries of Expiry date of Year of state as at the attributable to Date No. Property name the Company) City District Land use land use term Type of property(1) completion GFAValuation Date the Group (sq.m.) (RMB million) (%) (RMB million)
A20 Fairview House Sichuan Hongling Chengdu Wuhou Residential 21 Aug 2082 Residential and 25,250.55 2016 232.00 100% 232.00 Investment Co., Ltd. commercial A21 Shanghai Shanghai Lvshun Real Shanghai Pudong Residential 31 Jan 2080 Residential 4,986.78 2012-2013 41.00 100% 41.00 Magnolia Estate Development Garden Co., Ltd. A22 Shanghai Rose Shanghai Greentown Shanghai Minhang Residential 29 Jun 2073 to Residential 1,654.96 2008-2014 96.00 100% 96.00 Garden Woods Golf Villas 27 Feb 2076 Development Co,. Ltd. A23 Shanghai One New Richport Property Shanghai Huangpu Composite 15 Jul 2045 to Residential and 160,022.41 2012-2016 4,733.00 100% 4,733.00 Sino Park Development Shanghai 30 Apr 2069 commercial Co., Ltd.; Everbright Property Development
7 — 177 — Shanghai Co., Ltd.; Fung Seng Estate Development (Shanghai) Co., Ltd. A24 Central Garden Shanghai Haochuan Shanghai Putuo Office, 30 May 2043 to Residential and 34,558.66 2009-2014 528.00 100% 528.00 Property Co., Ltd. Education, 20 Jul 2076 commercial Municipal, Greenery, Residential, Commercial, Hotel, Cultural A25 Grand Pujian Shanghai Li Te Man Shanghai Pudong Commercial, 23 May 2054 Residential and 25,961.00 2014 810.00 100% 810.00 Residence Real Estate Co., Ltd. office and commercial residential PEDXI UMR FPOET AUTO FTEGROUP THE OF VALUATION PROPERTY OF (2) SUMMARY II APPENDIX Market value in existing state (2) attributable to Market value the Group as at Holding entity in existing Interest the Valuation Property (subsidiaries of Expiry date of Year of state as at the attributable to Date No. Property name the Company) City District Land use land use term Type of property(1) completion GFAValuation Date the Group (sq.m.) (RMB million) (%) (RMB million)
A26 Magnolia Changzhou Greentown Changzhou Wujin Residential 27 Feb 2081 to Residential and 145,338.07 2014-2015 790.00 97% 766.30 Square Real Estate Co., Ltd. 22 Oct 2083 commercial A27 Suzhou Majestic Suzhou Greentown Suzhou Suzhou Residential, 11 Jan 2050 to Residential 37,377.71 2013 951.00 100% 951.00 Mansion Yuyuan Real Estate Industrial Commercial 11 Jan 2080 Development Co., Ltd. A28 Wuxi Magnolia Wuxi Greentown Real Wuxi Binjiang Commercial, 31 Jan 2048 to Residential and 68,163.35 2011-2015 168.00 100% 168.00 Garden Estate Development Residential 31 Jan 2078 commercial Co., Ltd. A29 Royal Garden Yixing Sunac Dongjiu Wuxi Yixing Residential 1 Apr 2080 Residential and 65,948.40 2011-2015 451.00 100% 451.00 Real Estate Co.,Ltd. commercial A30 Swan Lake Wuxi Sunac Real Wuxi Binhu Commercial, 28 Nov 2044 to Residential, 185,435.68 2007-2015 312.00 100% 312.00 Estate Co., Ltd. Residential 19 March 2084 commercial and
7 — 178 — apartment A31 Dream of City Wuxi Sunac City Wuxi Huishan New Residential 30 Dec 2073 Residential and 65,491.92 2006-2014 135.00 100% 135.00 Construction Co., Ltd. City commercial A32 Melodious Hangzhou Sunac Hangzhou Yuhang Residential 5 Jan 2083 Residential 305.14 2014 7.00 100% 7.00 Manor Greentown Real Estate Development Co., Ltd. A33 In Hangzhou Hangzhou Guorong Hangzhou Binjiang Commercial 7 Nov 2049 Commercial, office 97,672.30 2016 1,542.00 60% 925.20 Zhidi Co., Ltd. and apartment A34 Fuchun Chateau Hangzhou Fuyang Hangzhou Fuyang Wholesale, 6 Jul 2054 to 5 Residential and 11,841.60 2016 143.00 100% 143.00 Sunac Real Estate Co., Residential Jul 2084 commercial Ltd. A35 Riverside City Hangzhou Yingzi Hangzhou Xihu Residential 1 Sep 2084 Residential and 105,971.42 2016 1,351.00 100% 1,351.00 Ⅱ Investment Limited commercial A36 Shuixieshan Top Spring Zhiye Hangzhou Fuyang Residential, 31 Dec 2050 to Residential 51,562.09 2013-2014 388.00 100% 388.00 (Fuyang) Co., Ltd. Travelling 13 Dec 2080 PEDXI UMR FPOET AUTO FTEGROUP THE OF VALUATION PROPERTY OF (2) SUMMARY II APPENDIX Market value in existing state (2) attributable to Market value the Group as at Holding entity in existing Interest the Valuation Property (subsidiaries of Expiry date of Year of state as at the attributable to Date No. Property name the Company) City District Land use land use term Type of property(1) completion GFAValuation Date the Group (sq.m.) (RMB million) (%) (RMB million)
A37 Hidden Bay Hui Dong Lai Hai Huizhou Huidong Residential, 7 Mar 2051 to 7 Commercial and 29,664.18 2014 117.00 100% 117.00 Tian Properties Co., Commercial Mar 2081 apartment Ltd.
Sub-total of Group A 2,667,989.47 22,842.00 21,991.28
Notes:
(1) All areas are stated in approximations. 7 — 179 — (2) All values are stated in approximations. GROUP B - PROPERTIES HELD BY THE GROUP UNDER DEVELOPMENT IN THE PRC GROUP THE OF VALUATION PROPERTY OF SUMMARY II APPENDIX Valuation Summary as at 31 August 2016
Market (2) in value existing state Market (2) Market(2) attributable as value in value to the Group if completedexisting state Scheduled as at the as at the as at the Interest Holding entity Year of year of Construction Valuation Valuation Valuation attributable Property Property (subsidiaries of Expiry date of Plannedcommencement of completion of Construction cost to be Date Date Date to the Group construction construction cost incurred incurred No. Name the Company) City District Land use (sq.m.)land use (sq.m.) term Type(1) of propertyGFA(1) Site area (RMB million) (RMB million) (RMB million) (RMB million) (%) (RMB million)
B1 Central Tianjin Sunac Huijie Zhidi Tianjin Jinnan Residential 30 May 2081 Residential and 268,424.70 136,926.10 2015 2016 108.15 409.01 1,208.00 511.00 100% 511.00 Academy Co., Ltd. commercial
B2 Binhai Center Tianjin Yijun Investment Tianjin Binhai New Commercial 23 Nov 2049 Commercial, office 17,160.60 106,486.00 2010 2018 410.88 17.06 1,164.00 923.00 80% 738.40 Co., Ltd. and apartment
B3 Bay Island Tianjin Rongyao Real Tianjin Beichen Residential 22 Oct 2083 Residential, 248,119.40 254,726.40 2014 2019 341.05 828.58 2,455.00 960.00 54% 518.40 Estate Development Co., commercial and Ltd. apartment
B4 Sunac City Tianjin Sunac Yuanhao Tianjin Dongli Residential, 13 Jun 2077 Residential and 261,353.10 264,750.92 2016 2017 101.77 1,231.41 4,882.00 3,239.00 75% 2,429.25 Real Estate Co., Ltd. Commercial commercial
B5 The European Chongqing — 180 Sunac— Qiyang Chongqing Banan Residential, 29 Sep 2053 to Residential and 469,927.00 198,162.71 2015 2017 49.94 615.99 1,848.00 754.00 100% 754.00 Garden for Real Estate Co., Ltd. Commercial 29 Sep 2063 commercial City -West
B6 Villa Royale Chengdu Zhongyi Real Chengdu Shuangliu Residential, 28 Mar 2045 to Residential 205,254.26 57,693.59 2014 2018 41.25 253.73 731.00 275.00 100% 275.00 Estate Co., Ltd. Commercial 28 Mar 2075
B7 Residence du Chengdu Guojia Zhongyu Chengdu Shuangliu Commercal, Nov 2052 to Residential and 99,893.44 189,068.27 2014 2018 90.68 402.45 1,192.00 531.00 100% 531.00 Lac Real Estate Co., Ltd. Residential Nov 2082 commercial
B8 Resicence Du Chengdu Yongping Real Chengdu Longquanyi Residential 14 Jan 2083 Residential and 99,609.00 575,726.35 2014 2018 413.34 1,032.45 3,432.00 1,628.00 100% 1,628.00 Paradis Estate Co., Ltd. commercial
B9 Kaixuan Chengdu Tianhe Ruitong Chengdu Xindu Residential 12 Oct 2084 Residential and 56,766.61 225,834.44 2015 2018 138.77 442.18 1,444.00 664.00 100% 664.00 Dongan Investment Co., Ltd. commercial
B10 Shanghai One New Richport Property Shanghai Huangpu Composite 15 Jul 2045 to Residential 114,826.00 301,852.62 2013 2018 903.14 2,678.87 10,404.00 5,224.00 100% 5,224.00 Sino Park Development Shanghai 30 Apr 2069 Co., Ltd.; Everbright Property Development Shanghai Co., Ltd.; Fung Seng Estate Development (Shanghai) Co., Ltd.
B11 The Bund 188 Shanghai Ronglv Qiwei Shanghai Hongkou Commercial, Office 12 Sep 2053 to Commercial and 10,239.20 57,866.00 2014 2016 316.21 163.11 2,169.00 1,649.00 100% 1,649.00 Real Estate Co., Ltd. 12 Sep 2063 apartment PEDXI UMR FPOET AUTO FTEGROUP THE OF VALUATION PROPERTY OF SUMMARY II APPENDIX
Market (2) in value existing state Market (2) Market(2) attributable as value in value to the Group if completedexisting state Scheduled as at the as at the as at the Interest Holding entity Year of year of Construction Valuation Valuation Valuation attributable Property Property (subsidiaries of Expiry date of Plannedcommencement of completion of Construction cost to be Date Date Date to the Group construction construction cost incurred incurred No. Name the Company) City District Land use (sq.m.)land use (sq.m.) term Type(1) of propertyGFA(1) Site area (RMB million) (RMB million) (RMB million) (RMB million) (%) (RMB million)
B12 Central Shanghai Haochuan Shanghai Putuo Office, Education, 30 May 2043 Residential, 129,669.00 224,643.15 2015 2018 142.46 1,808.57 8,302.00 4,822.00 100% 4,822.00 Garden Property Co., Ltd. Municipal, Greenery, to 20 Jul 2076 commercial and Residential, apartment Commercial, Hotel, Cultural
B13 Daning North Shanghai Ronglv Huiyi Shanghai Baoshan Residential 28 Jul 2084 Residential 66,169.60 178,903.26 2014 2017 693.49 473.43 4,872.00 3,509.00 100% 3,509.00 Magnolia Real Estate Co., Ltd. Mansion
B14 Puxing Shanghai Huan Jian Shanghai Pudong Office, Commercial 23 Apr 2055 to Commercial 21,253.40 55,552.00 2016 2017 52.84 339.25 1,402.00 692.00 100% 692.00 Project Investment Co., Ltd. 23 Apr 2065
B15 Nanjing Tianmao Real Estate Nanjing Pukou Composite 27 Aug 2082 Residential and 62,210.30 147,133.78 2016 2017 86.87 521.45 2,419.00 1,227.00 100% 1,227.00 Glorious (Nanjing) Co., Ltd. commercial Garden
B16 Top Spring Nanjing Top Spring Nanjing Gulou Composite 19 Dec 2053 Commercial and 16,052.04 58,803.00 2016 2017 131.40 235.37 1,057.00 593.00 100% 593.00
Metropolitan Metropolitan — 181 — Property apartment Development Co., Ltd.
B17 Magnolia Changzhou Greentown Changzhou Wujin Residential 27 Feb 2081 to Residential and 413,224.80 263,055.84 2014 2018 143.55 962.25 2,156.00 757.00 97% 734.29 Square Real Estate Co., Ltd. 22 Oct 2083 commercial
B18 Shishan Suzhou Rongding Real Suzhou Gaoxin Residential 11 May 2085 Residential 104,401.20 180,514.00 2015 2017 517.40 327.76 3,088.00 2,149.00 100% 2,149.00 Majestic Estate Co., Ltd. Mansion
B19 Shihu Fairy Suzhou Xinyou Real Suzhou Gusu Residential 6 Mar 2081 Residential 74,472.83 133,111.24 2016 2017 129.42 518.99 2,608.00 1,403.00 95% 1,332.85 Land Estate Co., Ltd.
B20 Swan Lake Wuxi Sunac Real Estate Wuxi Binhu Commercial, 28 Nov 2044 Commercial 733,888.60 20,648.00 2014 2016 58.03 7.83 195.00 162.00 100% 162.00 Co., Ltd. Residential to 19 March 2084
B21 Dream of City Wuxi Sunac City Wuxi Huishan New Residential 30 Dec 2073 Residential 561,749.10 50,000.00 2015 2018 16.75 183.25 400.00 122.00 100% 122.00 Construction Co., Ltd. City
B22 Fuchun Hangzhou Fuyang Sunac Hangzhou Fuyang Wholesale, 6 Jul 2054 to Residential 98,024.00 83,594.19 2014 2017 78.27 278.57 970.00 467.00 100% 467.00 Chateau Real Estate Co., Ltd. Residential 6 Jul 2084
B23 Jiuzhangtai Hangzhou Xinrong Hangzhou Jianggan Residential 11 Oct 2056 to Residential and 53,770.00 176,664.00 2016 2019 31.81 847.08 3,775.00 1,781.00 100% 1,781.00 Shengyao Real Estate Co., 11 Oct 2086 commercial Ltd. PEDXI UMR FPOET AUTO FTEGROUP THE OF VALUATION PROPERTY OF SUMMARY II APPENDIX
Market (2) in value existing state Market (2) Market(2) attributable as value in value to the Group if completedexisting state Scheduled as at the as at the as at the Interest Holding entity Year of year of Construction Valuation Valuation Valuation attributable Property Property (subsidiaries of Expiry date of Plannedcommencement of completion of Construction cost to be Date Date Date to the Group construction construction cost incurred incurred No. Name the Company) City District Land use (sq.m.)land use (sq.m.) term Type(1) of propertyGFA(1) Site area (RMB million) (RMB million) (RMB million) (RMB million) (%) (RMB million)
B24 Smart Venture Shenzhen Panye Shenzhen Longhua Industrial 22 Dec 2064 Commercial, office 17,727.72 134,694.00 2015 2017 159.31 551.19 1,598.00 716.00 100% 716.00 Valley Technology Development and apartment Co., Ltd.
B25 Hidden Bay Hui Dong Lai Hai Tian Huizhou Huidong Residential, 7 Mar 2051 to Apartment 254,655.10 126,305.77 2012 2014 297.42 253.09 1,074.00 530.00 100% 530.00 Properties Co., Ltd. Commercial 7 Mar 2081
Sub-total of Group B 4,458,841.00 4,202,715.63 5,454.20 15,382.91 64,845.00 35,288.00 33,759.19 8 — 182 — Notes:
(1) All areas are stated in approximations.
(2) All values are stated in approximations. GROUP C - PROPERTIES HELD BY THE GROUP FOR FUTURE DEVELOPMENT IN THE PRC GROUP THE OF VALUATION PROPERTY OF SUMMARY II APPENDIX Valuation Summary as at 31 August 2016
(2) Market value in existing state Market value(2) attributable to the Group as at Holding entity in existing Interest the Valuation Property (subsidiaries of Expiry date of state as at the attributable to Date Valuation Date the Group No. Property name the Company) City District Land use land use term Type of property(1) Planned GFA Site(1) area (sq.m.) (sq.m.) (RMB million) (%) (RMB million)
C1 Xuefu Yihao Taiyuan Sunac Taiyuan Wanbolin Residential, 31 May 2056 to Residential and 98,379.00 413,246.79 816.00 100% 816.00 Huifeng Real Estate Wholesale, 31 May 2086 commercial Development Co., Ltd. Education C2 Binhai Center Tianjin Yijun Tianjin Binhai New Commercial 23 Nov 2049 Commercial and 17,160.60 103,201.00 435.00 80% 348.00 Investment Co., Ltd. office C3 Bay Island Tianjin Rongyao Real Tianjin Beichen Residential 22 Oct 2083 Residential, 248,119.40 218,615.50 1,035.00 54% 558.90 Estate Development commercial and Co., Ltd. office
C4 Sunac — 183 City— Tianjin Sunac Yuanhao Tianjin Dongli Residential, 13 Jun 2077 Residential and 261,353.10 403,919.68 3,279.00 75% 2,459.25 Real Estate Co., Ltd. Commercial commercial C5 Tianjin Tianjin Qirun Real Tianjin Beichen Residential 7 Jul 2086 Residential and 285,566.10 470,420.09 2,022.00 60% 1,213.20 Glorious Estate Development commercial Garden Co., Ltd. C6 One Guanland Zhengzhou Qianshan Zhengzhou Zhongyuan Residential 11 Jul 2086 Residential and 142,854.00 506,290.22 708.00 80% 566.40 Real Estate Co., Ltd. commercial C7 The European Chongqing Sunac Chongqing Banan Residential, 29 Sep 2053 to Residential, 469,927.00 708,611.57 817.00 100% 817.00 Garden for City Qiyang Real Estate Commercial 29 Sep 2063 commercial and -West Co., Ltd. apartment C8 Nano Residence Chengdu Hejia Real Chengdu Tianfu New Commercal, 28 Apr 2049 to Residential, 16,833.23 112,590.21 353.00 100% 353.00 Estate Co., Ltd. Residential 28 Apr 2079 commercial and office C9 Dianxin Road Sichuan Hongling Chengdu Wuhou Residential 21 Aug 2082 Residential and 11,858.25 91,205.44 384.00 100% 384.00 Project Investment Co., Ltd. commercial PEDXI UMR FPOET AUTO FTEGROUP THE OF VALUATION PROPERTY OF (2) SUMMARY II APPENDIX Market value in existing state Market value(2) attributable to the Group as at Holding entity in existing Interest the Valuation Property (subsidiaries of Expiry date of state as at the attributable to Date Valuation Date the Group No. Property name the Company) City District Land use land use term Type of property(1) Planned GFA Site(1) area (sq.m.) (sq.m.) (RMB million) (%) (RMB million)
C10 Shanghai One New Richport Property Shanghai Huangpu Composite 15 Jul 2045 to Commercial 114,826.00 44,008.54 847.00 100% 847.00 Sino Park Development Shanghai 30 Apr 2069 Co., Ltd.; Everbright Property Development Shanghai Co., Ltd.; Fung Seng Estate Development (Shanghai) Co., Ltd. C11 Central Garden Shanghai Haochuan Shanghai Putuo Office, 30 May 2043 to Office 129,669.00 29,762.97 670.00 100% 670.00 Property Co., Ltd. Education, 20 Jul 2076 Municipal, Greenery, Residential, 8 — 184 — Commercial, Hotel, Cultural C12 Songjiang Shanghai Sunac Shanghai Songjiang Residential 22 Jun 2086 Residential 43,598.50 126,100.00 3,201.00 60% 1,920.60 Sijing Project Tianheng Real Estate Development Co., Ltd. C13 Magnolia Changzhou Greentown Changzhou Wujin Residential 27 Feb 2081 to Residential and 413,224.80 325,638.00 914.00 97% 886.58 Square Real Estate Co., Ltd. 22 Oct 2083 commercial C14 Taihu Town Suzhou Der Taihu City Suzhou Wujiang Commercial, 15 Feb 2054 to Residential and 26,905.20 110,757.32 98.00 100% 98.00 Properties Co., Ltd. Residential, 15 Feb 2084 commercial Accommodation & Catering C15 Suzhou The Suzhou Der Taihu Bay Suzhou Wuzhong Residential, 28 Oct 2054 to Residential, 71,842.20 407,471.42 2,909.00 100% 2,909.00 One Park Properties Co., Ltd. Wholesale 28 Oct 2084 commercial and apartment C16 Royal Garden Yixing Sunac Dongjiu Wuxi Yixing Residential 1 Apr 2080 Residential 297,534.61 29,831.58 144.00 100% 144.00 Real Estate Co.,Ltd. PEDXI UMR FPOET AUTO FTEGROUP THE OF VALUATION PROPERTY OF (2) SUMMARY II APPENDIX Market value in existing state Market value(2) attributable to the Group as at Holding entity in existing Interest the Valuation Property (subsidiaries of Expiry date of state as at the attributable to Date Valuation Date the Group No. Property name the Company) City District Land use land use term Type of property(1) Planned GFA Site(1) area (sq.m.) (sq.m.) (RMB million) (%) (RMB million)
C17 Baiqugang Wuxi Sunac Real Wuxi Huishan New Residential 30 Dec 2086 Residential and 100,539.20 293,912.00 415.00 100% 415.00 Project Estate Development City commercial Co., Ltd. C18 The Times Hangzhou Rongyu Hangzhou Nankai Residential, 8 Mar 2054 to Residential and 61,871.00 221,496.00 694.00 100% 694.00 Real Estate Co., Ltd. Commercial 19 May 2077 commercial C19 Wealth Mansion Hangzhou Ronghui Hangzhou Jianggan Residential 11 Oct 2056 to Residential and 18,844.00 75,891.39 1,057.00 80% 845.60 Qianjiang Real Estate 11 Oct 2086 commercial Co., Ltd. C20 Shuixieshan Top Spring Zhiye Hangzhou Fuyang Residential, 31 Dec 2050 to Residential 302,599.18 278,900.42 2,110.00 100% 2,110.00 (Fuyang) Co., Ltd. Travelling 13 Dec 2080 C21 Xijiantang Hangzhou Lima Real Hangzhou Yuhang Residential 24 Apr 2083 Residential 20,680.10 53,894.00 317.00 100% 317.00 Estate Development
8 — 185 — Co., Ltd. C22 Hefei One Hefei Sunac Xinling Hefei Zhengwu Commercial, 14 Jan 2056 to Residential, 56,746.74 236,426.00 2,582.00 100% 2,582.00 Central Real Estate Co., Ltd. Residential 14 Jan 2086 commercial and apartment C23 Wuhan Dream Wuhan Xinghai Wuhan Jiangan Residential 14 Oct 2084 Residential and 26,855.70 339,763.20 1,451.00 90% 1,305.90 Of Mansion Yuantou Real Estate commercial Development Co., Ltd. C24 Lake Mansion Foshan Rongteng Real Foshan Chancheng Commercial, 12 Jan 2056 to Residential and 74,013.09 274,388.61 1,020.00 95% 969.00 Estate Co., Ltd. Residential 12 Jan 2086 commercial C25 Majestic Foshan Rongxing Real Foshan Nanhai Residential, 17 Feb 2056 to Residential and 62,097.10 266,973.00 1,677.00 51% 855.27 Mansion Estate Co., Ltd. Wholesale 17 Feb 2086 commercial C26 Qingxi Manor Donguan Rongsheng Dongguagn Qingxi Residential, 26 Mar 2056 to Residential, 32,571.37 92,536.07 658.00 100% 658.00 Real Estate Commercial 26 Mar 2086 commercial and Development Co., Ltd. office PEDXI UMR FPOET AUTO FTEGROUP THE OF VALUATION PROPERTY OF (2) SUMMARY II APPENDIX Market value in existing state Market value(2) attributable to the Group as at Holding entity in existing Interest the Valuation Property (subsidiaries of Expiry date of state as at the attributable to Date Valuation Date the Group No. Property name the Company) City District Land use land use term Type of property(1) Planned GFA Site(1) area (sq.m.) (sq.m.) (RMB million) (%) (RMB million)
C27 Hidden Bay Hui Dong Lai Hai Huizhou Huidong Residential, 7 Mar 2051 to Residential, 254,655.10 321,882.15 109.00 100% 109.00 Tian Properties Co., Commercial 7 Mar 2081 commercial and Ltd. apartment
Sub-total of Group C 3,661,123.57 6,557,733.18 30,722.00 25,851.70
Notes:
8 — 186 — (1) All areas are stated in approximations.
(2) All values are stated in approximations. GROUP D - PROPERTIES CONTRACTED TO BE ACQUIRED BY THE GROUP FOR FUTURE DEVELOPMENT IN THE PRC GROUP THE OF VALUATION PROPERTY OF SUMMARY II APPENDIX Valuation Summary as at 31 August 2016
(2) Market value in existing state Market value(2) attributable to the Group as at Holding entity in existing Interest the Valuation Property (subsidiaries of state as at the attributable to Date Valuation Date the Group No. Property name the Company) City District Land use Land use term Type of property(1) Planned GFA Site(1) area (sq.m.) (sq.m.) (RMB million) (%) (RMB million)
D1 Jinbindadao Tianjin Sunac Yuanhao Tianjin Dongli Residential and Residential: 70 Residential, 129,777.00 455,974.00 No Commercial Project Real Estate Co., Ltd. commercial years commercial, office Value 100% No Commercial Commercial: 40 and apartment (3) Value(3) years
D2 North Longhu Henan Quanjie Real Zhengzhou Zhengdong New Residential 70 years Residential 46,893.00 96,042.00100% No Commercial No Commercial No.13 Land Estate Co., Ltd. (4) Value Value(4)
8 — 187 — Plot
D3 Xinchuan Chengdu Sunac Chengdu Gaoxin Residential, Residential: 70 Residential, 37,517.39 37,517.39100% No Commercial No Commercial Project Renyuan Real Estate Commercial years commercial and (5) Value Value(5) Development Co., Ltd. Commercial: 40 apartment years
D4 Nahuangdadao Nanning Sunac Nanning Wuxiang New Residential, Residential: 70 Residential and 97,278.83 340,475.91100% No Commercial No Commercial Project Zhenghe Real Estate Wholesale & years Wholesale commercial (6) Value Value(6) Co., Ltd. Retail & Retail: 40 years
D5 Xigangchang Shanghai Sunac Wuxi Liangxi Residential and Residential: 70 Residential and 150,680.00 484,441.00100% No Commercial No Commercial Land Plot Zhansheng Real Estate commercial years commercial (7) Value Value(7) Development Co., Ltd. Commercial: 40 years
D6 Gaoxinqu GX08 Ningbo Sunac Ningbo Gaoxin Residential 70 years Residential 23,768.00 47,536.00100% No Commercial No Commercial Project Gaoxing Real Estate (8) Value Value(8) Co., Ltd.
D7 Peiluo Ningbo Sunac Ningbo Yinzhou Residential 70 years Residential 84,095.00 168,190.00100% No Commercial No Commercial Changfang Yingzhou Real Estate (9) Value Value(9) Land Plot Co., Ltd.
D8 Dongxihu Wuhan Sunac Jinyuan Wuhan Yinzhou Residential 70 years Residential and 86,178.16 386,300.00100% No Commercial No Commercial Project Real Estate Co., Ltd. commercial (10) Value Value(10) PEDXI UMR FPOET AUTO FTEGROUP THE OF VALUATION PROPERTY OF (2) SUMMARY II APPENDIX Market value in existing state Market value(2) attributable to the Group as at Holding entity in existing Interest the Valuation Property (subsidiaries of state as at the attributable to Date Valuation Date the Group No. Property name the Company) City District Land use Land use term Type of property(1) Planned GFA Site(1) area (sq.m.) (sq.m.) (RMB million) (%) (RMB million)
D9 Shunde Daliang Shenzhen Chuangrun Foshan Shunde Daliang Residential and Residential: 70 Residential and 10,914.00 52,585.00 No Commercial Project Real Estate Co., Ltd. South commercial years commercial Value 100% No Commercial Commercial: 40 (11) Value(11) years
D10 Chancheng Foxi Foshan Ronghong Foshan Chancheng Residential and Residential: 70 Residential and 72,963.00 321,643.00100% No Commercial No Commercial Project Real Estate Co., Ltd. recreational years commercial (12) Value Value(12) Recreational: 40 years
8 — 188 — Sub-total of Group D 740,064.38 2,390,704.30 No Commercial No Commercial Value Value
Notes:
(1) All areas are stated in approximations. (2) All values are stated in approximations. (3) We have ascribed no commercial value to the property as a valid State-owned Land Use Rights Certificate has not been obtained by the Group and the consideration has not been settled in full. Had the Group obtained a valid State-owned Land Use Rights Certificate for the property, the market value of the property in its existing statte as at the valutaion date would be RMB6,100,000,000 (100% interest attributable to the Group: RMB6,100,000,000). (4) We have ascribed no commercial value to the property as a valid State-owned Land Use Rights Certificate has not been obtained by the Group and the consideration has not been settled in full. Had the Group obtained a valid State-owned Land Use Rights Certificate for the property, the market value of the property in its existing statte as at the valutaion date would be RMB2,554,000,000 (100% interest attributable to the Group: RMB2,554,000,000). (5) We have ascribed no commercial value to the property as a valid State-owned Land Use Rights Certificate has not been obtained by the Group and the consideration has not been settled in full. Had the Group obtained a valid State-owned Land Use Rights Certificate for the property, the market value of the property in its existing statte as at the valutaion date would be RMB945,000,000 (100% interest attributable to the Group: RMB945,000,000). (6) We have ascribed no commercial value to the property as a valid State-owned Land Use Rights Certificate has not been obtained by the Group and the consideration has not been settled in full. Had the Group obtained a valid State-owned Land Use Rights Certificate for the property, the market value of the property in its existing statte as at the valutaion date would be RMB1,798,000,000 (100% interest attributable to the Group: RMB1,798,000,000). (7) We have ascribed no commercial value to the property as a valid State-owned Land Use Rights Certificate has not been obtained by the Group and the consideration GROUP THE OF VALUATION has PROPERTY OF SUMMARY II APPENDIX not been settled in full. Had the Group obtained a valid State-owned Land Use Rights Certificate for the property, the market value of the property in its existing statte as at the valutaion date would be RMB3,620,000,000 (100% interest attributable to the Group: RMB3,620,000,000).
(8) We have ascribed no commercial value to the property as a valid State-owned Land Use Rights Certificate has not been obtained by the Group and the consideration has not been settled in full. Had the Group obtained a valid State-owned Land Use Rights Certificate for the property, the market value of the property in its existing statte as at the valutaion date would be RMB726,000,000 (100% interest attributable to the Group: RMB726,000,000).
(9) We have ascribed no commercial value to the property as a valid State-owned Land Use Rights Certificate has not been obtained by the Group and the consideration has not been settled in full. Had the Group obtained a valid State-owned Land Use Rights Certificate for the property, the market value of the property in its existing statte as at the valutaion date would be RMB2,089,000,000 (100% interest attributable to the Group: RMB2,089,000,000).
(10) We have ascribed no commercial value to the property as a valid State-owned Land Use Rights Certificate has not been obtained by the Group and the consideration has not been settled in full. Had the Group obtained a valid State-owned Land Use Rights Certificate for the property, the market value of the property in its existing statte as at the valutaion date would be RMB2,892,000,000 (100% interest attributable to the Group: RMB2,892,000,000).
(11) We have ascribed no commercial value to the property as a valid State-owned Land Use Rights Certificate has not been obtained by the Group and the consideration has not been settled in full. Had the Group obtained a valid State-owned Land Use Rights Certificate for the property, the market value of the property in its existing statte as at the valutaion date would be RMB327,000,000 (100% interest attributable to the Group: RMB327,000,000). 8 — 189 — (12) We have ascribed no commercial value to the property as a valid State-owned Land Use Rights Certificate has not been obtained by the Group and the consideration has not been settled in full. Had the Group obtained a valid State-owned Land Use Rights Certificate for the property, the market value of the property in its existing statte as at the valutaion date would be RMB2,268,000,000 (100% interest attributable to the Group: RMB2,268,000,000). APPENDIX III GENERAL INFORMATION
1. RESPONSIBILITY STATEMENT
This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules and the Takeovers Code for the purpose of giving information with regard to the Group.
The Directors jointly and severally accept full responsibility for accuracy of the information contained in this circular (other than the information relating to the Subscriber Concert Group) and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this circular have been arrived at after due and careful consideration and there are no other facts not contained in this circular, the omission of which would make any statement in this circular misleading.
Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief, the information contained in this circular (other than the information relating to the Subscriber Concert Group) is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.
The sole director of the Subscriber, Mr. Sun Hongbin, accepts full responsibility for the accuracy of the information contained in this circular relating to the Subscriber Concert Group and confirms, having made all reasonable enquiries, that to the best of his knowledge, opinions expressed in this circular have been arrived at after due and careful consideration and there are no other facts not contained in this circular, the omission of which would make any statement in this circular misleading.
2. SHARE CAPITAL
The authorised and issued share capital of the Company (i) as at the Latest Practicable Date; and (ii) immediately upon completion of the Subscription (assuming there is no other change to the authorised and issued share capital of the Company) is set out as follows:
(i) As at the Latest Practicable Date
Authorised: HK$ 10,000,000,000 Shares 1,000,000,000
Issued and fully paid: 3,403,842,316 Shares in issue as at the Latest Practicable Date 340,384,231.60
— 190 — APPENDIX III GENERAL INFORMATION
(ii) Immediately upon completion of the Subscription
(a) Assuming no issue or buy-back of Shares from the Latest Practicable Date up to and including the date of completion of the Subscription
Authorised: HK$ 10,000,000,000 Shares 1,000,000,000
Issued and fully paid: 3,403,842,316 Shares in issue as at the Latest Practicable Date 340,384,231.60
453,074,433 Subscription Shares to be allotted and issued under 45,307,443.30 the Subscription 3,856,916,749 Shares in issue immediately after completion of the 385,691,674.90 Subscription
(b) Assuming all Share Options outstanding as at the Latest Practicable Date are fully exercised on or before completion of the Subscription
Authorised: HK$ 10,000,000,000 Shares 1,000,000,000
Issued and fully paid: 3,403,842,316 Shares in issue as at the Latest Practicable Date 340,384,231.60
453,074,433 Subscription Shares to be allotted and issued under 45,307,443.30 the Subscription 104,716,440 Shares to be issued upon exercise of all Share Options 10,471,644.00 outstanding as at the Latest Practicable Date
3,961,633,189 Shares in issue immediately after completion of the 396,163,318.90 Subscription
Since 31 December 2015 (being the end of the last financial year of the Company) up to the Latest Practicable Date, in aggregate 4,393,700 Shares have been issued pursuant to the exercise of Share Options granted under the Share Option Schemes.
All the Shares currently in issue rank pari passu in all respects with each other, including, as to dividends, voting rights and return of capital.
The Subsciption Shares, when alloted and fully paid, will rank pari passu in all respects among themselves and with the Shares then in issue, including as to voting rights, return on capital and the rights to any dividends or distributions made or declared on or after the date of allotment of the Subscription Shares.
— 191 — APPENDIX III GENERAL INFORMATION
Save for the Share Options, as at the Latest Practicable Date, there were no outstanding options, warrants or conversion rights in issue or similar rights which are convertible or exchangeable into or confer any right to subscribe for Shares.
3. MARKET PRICES
The table below shows the closing price of the Shares on the Stock Exchange on (i) the last trading day of each of the calendar months during the Relevant Period; (ii) the Last Trading Day; and (iii) the Latest Practicable Date:
Closing price Date of the Shares (HK$)
31 March 2016 5.22 29 April 2016 4.98 31 May 2016 4.83 30 June 2016 4.80 29 July 2016 4.87 31 August 2016 5.39 26 September 2016 (being the Last Trading Day) 5.80 30 September 2016 5.58 13 October 2016 (being the Latest Practicable Date) 5.20
The highest and lowest closing prices of the Shares as recorded on the Stock Exchange during the Relevant Period were HK$6.08 per Share on 22 September 2016 and 23 September 2016 and HK$4.51 per Share on 13 May 2016, 24 May 2016 and 16 June 2016, respectively.
4. DISCLOSURE OF INTERESTS
(a) Director’s interest in the securities of the Company
As at the date of the Latest Practicable Date, save as disclosed below, none of the Directors or the chief executive of the Company or their respective associates had or was deemed to have any interests and short positions in the shares, underlying shares, debentures or relevant securities (as defined in Note 4 of Rule 22 of the Takeovers Code) of the Company or any associated corporation (within the meaning of Part XV of the SFO) which were required (i) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) pursuant to section 352 of the SFO to be entered in the register referred to therein; or (iii) to be
— 192 — APPENDIX III GENERAL INFORMATION notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) contained in the Listing Rules, to be notified to the Company and the Stock Exchange:
(i) Interest in shares of the Company and/or associated corporation
Approximate Relevant company percentage of (including Number of shares interest in associated of the relevant the relevant Name of Director Capacity corporations) company (1) company
Mr. Sun Interest in a controlled The Company 2,042,623,884 (L)(5) 52.96%(2) corporation (3) Beneficial interest The Company 10,090,000 (L) 0.26%(2) Beneficial interest The Subscriber (4) 1 (L) 100% Mr. Wang Mengde Beneficial interest The Company 3,300,000 (L) 0.09%(2) Mr. Jing Hong Beneficial interest The Company 650,000 (L) 0.02%(2)
Notes:
(1) The letter “L” denotes the person’s long position in such shares.
(2) Based on 3,403,842,316 Shares in issue as at the Latest Practicable Date and assuming the issue of 453,074,433 Subscription Shares pursuant to the Subscription Agreement was completed.
(3) Mr. Sun is the sole director of the Subscriber and is solely and beneficially interested in the entire issued share capital of the Subscriber. Mr. Sun is deemed to be interested in the Shares held by the Subscriber pursuant to the SFO.
(4) The Subscriber is the holding company of the Company and therefore an “associated corporation” of the Company within the meaning of Part XV of the SFO.
(5) As at the Latest Practicable Date, the Subscriber was interested in (i) 1,589,549,451 existing Shares and (ii) 453,074,433 Subscription Shares pursuant to the Subscription Agreement.
— 193 — APPENDIX III GENERAL INFORMATION
(ii) Interest in the underlying shares of the Company
As at the Latest Practicable Date, the following Directors had personal interest in the Share Options to subscribe for the Shares granted under the Share Option Schemes:
Number of outstanding Exercise Share price for Name of Directors Options Date of grant Share Exercise period (HK$)
Mr. Sun 1,300,000 5 June 2014 4.07 See Note (4)
Mr. Wang Mengde 2,300,000 30 September 2011 1.484 See Note (1) 1,300,000 21 May 2012 2.33 See Note (2) 1,600,000 2 May 2013 6.32 See Note (3) 1,200,000 5 June 2014 4.07 See Note (4) 1,300,000 9 July 2015 7.27 See Note (5) 2,000,000 20 June 2016 4.62 See Note (6)
9,700,000
Mr. Jing Hong 2,150,000 30 September 2011 1.484 See Note (1) 1,200,000 21 May 2012 2.33 See Note (2) 1,300,000 2 May 2013 6.32 See Note (3) 1,100,000 5 June 2014 4.07 See Note (4) 1,200,000 9 July 2015 7.27 See Note (5) 2,000,000 20 June 2016 4.62 See Note (6)
8,950,000
Mr. Chi Xun 2,400,000 30 September 2011 1.484 See Note (1) 1,200,000 21 May 2012 2.33 See Note (2) 1,300,000 2 May 2013 6.32 See Note (3) 1,100,000 5 June 2014 4.07 See Note (4) 1,200,000 9 July 2015 7.27 See Note (5) 2,000,000 20 June 2016 4.62 See Note (6)
9,200,000
— 194 — APPENDIX III GENERAL INFORMATION
Number of outstanding Exercise Share price for Name of Directors Options Date of grant Share Exercise period (HK$)
Mr. Shang Yu 1,150,000 30 September 2011 1.484 See Note (1) 1,200,000 21 May 2012 2.33 See Note (2) 1,300,000 2 May 2013 6.32 See Note (3) 1,100,000 5 June 2014 4.07 See Note (4) 1,200,000 9 July 2015 7.27 See Note (5) 1,500,000 20 June 2016 4.62 See Note (6)
7,450,000
Mr. Li Shaozhong 2,300,000 30 September 2011 1.484 See Note (1) 1,200,000 21 May 2012 2.33 See Note (2) 1,300,000 2 May 2013 6.32 See Note (3) 1,100,000 5 June 2014 4.07 See Note (4) 1,100,000 9 July 2015 7.27 See Note (5) 1,000,000 20 June 2016 4.62 See Note (6)
8,000,000
Notes:
(1) The exercise period of these Share Options is from 30 September 2011 to 28 April 2017. These Share Options were vested in accordance with the following vesting dates: (i) 30% of the Share Options were vested on the date of grant (i.e. 30 September 2011); (ii) an additional 30% of the Share Options were vested on 29 April 2012; and (iii) the remaining 40% of the Share Options were vested on 29 April 2013.
(2) The exercise period of these Share Options is from 21 May 2012 to 28 April 2018. These Share Options were vested in accordance with the following vesting dates: (i) 30% of the Share Options were vested on the date of grant (i.e. 21 May 2012); (ii) an additional 30% of the Share Options were vested on 29 April 2013; and (iii) the remaining 40% of the Share Options were vested on 29 April 2014.
(3) The exercise period of these Share Options is from 2 May 2013 to 28 April 2019. These Share Options were vested in accordance with the following vesting dates: (i) 30% of the Share Options were vested on the date of grant (i.e. 2 May 2013); (ii) an additional 30% of the Share Options were vested on 29 April 2014; and (iii) the remaining 40% of the Share Options were vested on 29 April 2015.
(4) The exercise period of these Share Options is from 5 June 2014 to 4 June 2019. These Share Options were vested in accordance with the following vesting dates: (i) 30% of the Share Options were vested on the date of grant (i.e. 5 June 2014); (ii) an additional 30% of the Share Options were vested on 5 June 2015; and (iii) the remaining 40% of the Share Options were vested on 5 June 2016.
— 195 — APPENDIX III GENERAL INFORMATION
(5) The exercise period of these Share Options is from 9 July 2015 to 8 July 2020. These Share Options were or shall be vested in accordance with the following vesting dates: (i) 30% of the Share Options were vested on the date of grant (i.e. 9 July 2015); (ii) an additional 30% of the Share Options were vested on 9 July 2016; and (iii) the remaining 40% of the Share Options shall be vested on 9 July 2017.
(6) The exercise period of these Share Options is from 20 June 2016 to 19 June 2021. These Share Options were or shall be vested in accordance with the following vesting dates: (i) 30% of the Share Options were vested on 20 June 2016; (ii) an additional 30% of the Share Options shall be vested on 20 June 2017; and (iii) the remaining 40% of the Share Options shall be vested on 20 June 2018.
(b) Substantial shareholders’ and other persons’ interests in Shares and underlying Shares
As at the Latest Practicable Date, other than the interests disclosed above in respect of certain directors and chief executive of the Company, the interests and short positions of persons in the shares and underlying shares of the Company as recorded in the register required to be kept by the Company under Section 336 of the SFO, or who were, directly or indirectly, interested in 5% or more of the nominal value of any class of share capital or relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company were as follows:
Approximate %of shareholding Name of shareholder Capacity Number of Shares (1) (2)
The Subscriber Beneficial interest 2,042,623,884 (L)(3) 52.96%
Notes:
(1) The letter “L” denotes the person’s long position in such shares.
(2) Based on 3,403,842,316 Shares in issue as at the Latest Practicable Date and assuming the issue of 453,074,433 Subscription Shares pursuant to the Subscription Agreement was completed.
(3) As at the Latest Practicable Date, the Subscriber was interested in (i) 1,589,549,451 existing Shares and (ii) 453,074,433 Subscription Shares pursuant to the Subscription Agreement.
5. ADDITIONAL DISCLOSURE UNDER THE TAKEOVERS CODE
(a) There was no agreement, arrangement or understanding pursuant to which the Subscription Shares to be acquired by the Subscriber Concert Group would be transferred, charged or pledged to any other persons as at the Latest Practicable Date.
— 196 — APPENDIX III GENERAL INFORMATION
(b) Save as disclosed in the section headed “Shareholding structure of the Company” in the “Letter from the Board” of this circular and “4. Disclosure of interests” in this appendix, none of the Directors, the sole director of the Subscriber and members of the Subscriber Concert Group held, owned, controlled, had direction over or were interested in any other Shares, convertible securities, warrants, options, derivatives or relevant securities (as defined in Note 4 of Rule 22 of the Takeovers Code) of the Company as at the Latest Practicable Date.
(c) Save for the Subscription and the entering into of the Subscription Agreement, none of the Directors, the sole director of the Subscriber and members of the Subscriber Concert Group had dealt for value in any Shares, convertible securities, warrants, options or derivatives of the Company during the Relevant Period.
(d) Save that the Subscriber was solely and beneficially owned by Mr. Sun, none of the Company and the Directors were interested in or owned or controlled any shares, convertible securities, warrants, options or derivatives of the Subscriber nor had any of them dealt for value in any shares, convertible securities, warrants, options or derivatives of the Subscriber during the Relevant Period.
(e) None of the subsidiaries of the Company, or pension fund or any member of the Group or the advisers to the Company as specified in class (2) of the definition of associate in the Takeovers Code (excluding exempt principal traders) owned or controlled any Shares, convertible securities, warrants, options or derivatives of the Company as at the Latest Practicable Date nor had any of them dealt for value in any Shares, convertible securities, warrants, options or derivatives of the Company during the period beginning from the date of the Announcement and ending on the Latest Practicable Date.
(f) No fund managers (other than exempt fund managers) connected with the Company managed any Shares, convertible securities, warrants, options or derivatives of the Company on a discretionary basis as at the Latest Practicable Date nor had any of them dealt for value in any Shares, convertible securities, warrants, options or derivatives of the Company which were managed on a discretionary basis during the period beginning from the date of the Announcement and ending on the Latest Practicable Date.
(g) As at the Latest Practicable Date, save as disclosed in paragraph 5(m) below, no other persons who owned or controlled any Shares, convertible securities, warrants, options or derivatives of the Company had irrevocably committed themselves to vote for or against the Subscription and/or the Whitewash Waiver or to accept or reject the Subscription, and no irrevocable commitment were received by the Subscriber Concert Group to vote for or against the Subscription and/ or the Whitewash Waiver.
(h) As at the Latest Practicable Date, save for the Subscription Agreement, no agreement, arrangement or understanding (including any compensation arrangement) existed between any member of the Subscriber Concert Group and any of the Directors, recent Directors, Shareholders or recent Shareholders having any connection with or dependence upon the Subscription and/or the Whitewash Waiver.
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(i) As at the Latest Practicable Date, none of the members of the Subscriber Concert Group had borrowed or lent any Shares, convertible securities, warrants, options, derivatives or any relevant securities (as defined in the Note 4 to Rule 22 of the Takeovers Code) of the Company.
(j) As at the Latest Practicable Date, no person had any arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code with the Company or any person who is an associate of the Company by virtue of classes (1), (2), (3) and (4) of the definition of associate in the Takeovers Code or any member of the Subscriber Concert Group.
(k) As at the Latest Practicable Date, neither the Company nor the Directors had borrowed or lent any Shares, convertible securities, warrants, options or derivatives of the Company.
(l) It is the intention of the Subscriber to continue the existing business of the Group and the employment of the employees of the Group. The Subscriber has no intention to redeploy the fixed assets of the Group or to introduce major changes to the business of the Group.
(m) As at the Latest Practicable Date, each of Mr. Wang Mengde and Mr. Jing Hong intended to vote for the resolution in relation to the Subscription and the Whitewash Waiver at the EGM in respect of his own beneficial shareholdings. Mr. Sun will abstain from voting on the resolution to approve the Subscription and the Whitewash Waiver at the EGM. The other Directors of the Company, namely Mr. Li Shaozhong, Mr. Chi Xun, Mr. Shang Yu, Mr. Zhu Jia, Mr. Poon Chiu Kwok, Mr. Li Qin, Mr. Ma Lishan and Mr. Tse Chi Wai, had no beneficial interest in any Shares as at the Latest Practicable Date which would not confer any voting rights to any of them at the EGM.
(n) As at the Latest Practicable Date, save for the Subscription Agreement, there was no agreement or arrangement to which any member of the Subscriber Concert Group was a party which related to the circumstances in which it may or may not invoke or seek to invoke a pre-condition or a condition to the Subscription /or the Whitewash Waiver.
(o) As at the Latest Practicable Date, (i) the principal members of the Subscriber Concert Group were the Subscriber and Mr. Sun; (ii) the sole director of the Subscriber was Mr. Sun; (iii) the registered office of the Subscriber was at 3rd Floor, Omar Hodge Building, Wickhams Cay 1, Road Town, Tortola, British Virgin Islands; and (iv) the correspondence addresses of the Subscriber and Mr. Sun were 10/F, C7, Magnetic Plaza, West Binshui Road, Nankai District, Tianjin.
6. ARRANGEMENTS AFFECTING DIRECTORS AND DIRECTORS’ INTEREST IN CONTRACTS AND ASSETS
(a) No benefit has been or will be given to any Director as compensation for loss of office or otherwise in connection with the Subscription and/or the Whitewash Waiver.
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(b) As at the Latest Practicable Date, save for the Subscription Agreement which was conditional upon the Whitewash Waiver being granted and the Independent Shareholders’ approval at the EGM, there was no other agreement or arrangement between any of the Directors and any other person which was conditional on or dependent upon the outcome of the Subscription and/or the Whitewash Waiver or otherwise connected with the Subscription and/or the Whitewash Waiver.
(c) As at the Latest Practicable Date, save for the Subscription Agreement, there was no material contract entered into by the Subscriber in which any Director had a material personal interest.
(d) As at the Latest Practicable Date, none of the Directors had any interest, direct or indirect, in any asset which had been, since 31 December 2015 (being the date to which the latest published audited financial statements of the Group were made up), acquired or disposed of by or leased to any member of the Group or were proposed to be acquired or disposed of by or leased to any member of the Group.
(e) As at the Latest Practicable Date, save for the Subscription Agreement, there was no contract or arrangement subsisting in which any Director was materially interested and which was significant in relation to the business of the Group.
7. DIRECTORS’ SERVICE CONTRACTS
As at the Latest Practicable Date, (i) none of the Directors had any service contract with the Company or any of its subsidiaries or associated companies in force which (a) (including both continuous and fixed term contracts) have been entered into or amended within 6 months before the date of the Announcement; (b) are continuous contracts with a notice period of 12 months or more; or (c) are fixed term contracts with more than 12 months to run irrespective of the notice period; and (ii) none of the Directors had any existing or proposed service contracts with any member of the Group which does not expire or is not determinable by such member of the Group within one year without payment of compensation (other than statutory compensation).
8. DIRECTORS’ COMPETING INTEREST
As at the Latest Practicable Date, none of the Directors and their respective close associates (as defined in the Listing Rules) was interested in any business apart from the Group’s businesses which competes or may compete, directly or indirectly, with the business of the Group.
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9. LITIGATION
As at the Latest Practicable Date, none of the members of the Group was engaged in any litigation, arbitration or claim of material importance and so far as the Directors were aware, no litigation, arbitration or claim of material importance was pending or threatened by or against any member of the Group or to which the Company or any of its subsidiaries was, or might become, a party.
10. MATERIAL CONTRACTS
The following contracts (being contracts entered into outside the ordinary course of business carried on by the Group) have been entered into by members of the Group within the two years immediately preceding the date of the Announcement and up to the Latest Practicable Date:
(a) the Subscription Agreement;
(b) the subscription agreement dated September 2016 entered into between Tianjin Jujin Property Management Ltd. (天津聚金物業管理有限公司)(“Jujin Property”), an indirect wholly-owned subsidiary of the Company, and Jinke Property Group Co., Ltd. (金科地產 集團股份有限公司)(“Jinke Property”), pursuant to which Jujin Property agreed to subscribe for 907,029,478 shares in Jinke Property at a subscription price of RMB4.41 per share, representing a total consideration of RMB3,999,999,997.98;
(c) the two framework agreements dated 16 September 2016 entered into between Sunac Real Estate Group Co., Ltd. (“Sunac Real Estate”), an indirect wholly-owned subsidiary of the Company, as purchaser and Legend Holdings Corporation (“Legend Holdings”) and (as the case may be) Raycom Real Estate Development Co., Ltd. (“Raycom”) as sellers, pursuant to which the sellers conditionally agreed to sell, and the purchaser conditionally agreed to purchase the relevant equity interests and debts of 41 target companies which mainly own interests in 42 property projects (details of which are set out in the joint announcement of the Company and Legend Holdings dated 18 September 2016) at the total consideration of approximately RMB13,788,430,000 (subject to adjustments pursuant to the terms of the framework agreements);
(d) the equity transfer framework agreement dated 22 August 2016 entered into between Hainan Sunac Properties Co., Ltd. (海南融創基業房地產有限公司)(“Hainan Sunac”), an indirect wholly-owned subsidiary of the Company, and Hangzhou Jinhan Investment Co., Ltd. (杭州金翰投資有限公司)(“Hangzhou Jinhan”), pursuant to which Hainan Sunac agreed to acquire and Hangzhou Jinhan agreed to dispose of 50% equity and debt interests in each of the Target Companies, of which (i) the consideration for the equity interests was RMB1,954,717,510; and (ii) the relevant outstanding shareholder’s borrowings owed by the relevant Target Companies to Hangzhou Jinhan was RMB99,117,490. Therefore, the aggregate consideration for the Acquisition was RMB2,053,835,000.
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(e) the framework agreement dated 19 May 2016 (as supplemented by two supplemental agreements both dated 22 July 2016) entered into between the Company and Top Spring International Holdings Limited, pursuant to which the Company agreed to (a) acquire the entire equity interest in six target companies and (b) settle the inter-company loans among the six target companies and/or the project companies owned by such target companies, which are holding interests in property development projects in Shanghai, Nanjing, Shenzhen, Huizhou and Hangzhou in the PRC, at a total adjusted consideration of RMB4,225,230,000;
(f) the cooperation agreement dated 18 March 2016 entered into between Shanghai Sunac Property Development Co., Ltd. (“Shanghai Sunac”), a wholly-owned subsidiary of the Company, and Shanghai Moke Real Estate Co. Ltd (上海摩克房地產有限公司)(“Shanghai Moke”) in connection with the formation of a joint venture and the acquisition of two target projects. Pursuant to the cooperation agreement, the equity interests of the joint venture will ultimately be held as to 80% and 20% by Shanghai Sunac and Shanghai Moke, respectively, and the joint venture will be responsible for the development of the two target projects. The aggregate amount payable by Shanghai Sunac under the cooperation agreement is approximately RMB3,305,347,400 together with accrued interest;
(g) the cooperation agreement dated 25 February 2016 entered into between Tianjin Sunac Ao Cheng Investment Co., Ltd (“Tianjin Sunac Ao Cheng”), a wholly-owned subsidiary of the Company, as purchaser, Sunac Real Estate, as guarantor of the purchaser, Zhengzhou Meisheng Real Estate Development Co. Ltd. (鄭州美盛房地產開發有限公司)(“Zhengzhou Meisheng”) as vendor and Henan Zhaoteng Investment Co. Ltd (河南省兆騰投資有限公司) , as guarantor of the vendor, pursuant to which, Tianjin Sunac Ao Cheng agreed to acquire and Zhengzhou Meisheng agreed to dispose of 70% equity and debt interests in Zhongmu Meisheng Real Estate Co., Ltd (中牟美盛置業有限公司)(“Zhongmu Meisheng”) at a total consideration of RMB753,916,863.21;
(h) the two equity transfer agreements dated 1 February 2016 entered into between Shanghai Sunac as purchaser and Der Group Co. Ltd. (“Der Group”) and Mr. HE Yonggang as vendors (collectively the “Suzhou Vendors”), pursuant to which (i) Shanghai Sunac agreed to acquire and the Suzhou Vendors agreed to dispose of the entire equity and debt interests in Suzhou Der Taihu Bay Properties Co., Ltd. (“Suzhou Der Taihu Bay”), of which the consideration for (a) the equity interests amounted to RMB404,459,419; and (b) the entire outstanding shareholder ’s loan owed by Suzhou Der Taihu Bay to the Suzhou Vendors amounted to RMB685,540,581, representing an aggregate consideration of RMB1,090,000,000 (“Acquisition I”); and (ii) Shanghai Sunac agreed to acquire and the Suzhou Vendors agreed to dispose of the entire equity and debt interests in Suzhou Der Taihu Town Real Estate Co., Ltd. (“Suzhou Der Taihu Town”), of which the consideration for (a) the equity interests amounted to RMB28,308,318; and (b) the entire outstanding shareholder ’s loan owed by Suzhou Der Taihu Town to the Suzhou Vendors amounted to RMB51,691,682, representing an aggregate consideration of RMB80,000,000 (“Acquisition II”). As such, the total consideration for the transactions contemplated under Acquisition I and Acquisition II is RMB1,170,000,000;
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(i) the equity transfer agreement dated 15 January 2016 entered into between Shanghai Sunac Ruifeng Investment Co., Ltd. (上海融創睿豐投資有限公司)(“Shanghai Sunac Ruifeng”), a wholly-owned subsidiary of the Company, as purhcaser and Beijing Fengdan Investment Management Co., Ltd. (北京楓丹投資管理有限公司)(“Beijing Fengdan”) as vendor in relation to the acquisition of 12.5% equity interest in Shanghai Fengdan Lishe Real Estate Development Co., Ltd. (上海楓丹麗舍房地產開發有限公司)(“Shanghai Fengdan”) and the outstanding shareholder’s loan owing by Shanghai Fengdan to Beijing Fengdan at a total consideration of RMB437,500,000;
(j) the equity transfer agreement dated 15 January 2016 entered into between Shanghai Sunac Ruifeng as purhcaser and Shenzhen Zhongshan Xingye Trading Co., Ltd. (深圳市仲山興業 貿易有限公司)(“Shenzhen Zhongshan”) as vendor in relation to the acquisition of 5% equity interest in Shanghai Fengdan and the outstanding shareholder’s loan owing by Shanghai Fengdan to Shenzhen Zhongshan at a total consideration of RMB175,000,000;
(k) the equity transfer agreement dated 15 January 2016 entered into between Shanghai Sunac Ruifeng as purhcaser and Shenzhen Hua Shun Digital Technology Co., Ltd. (深圳市華順數 碼科技有限公司)(“Shenzhen Hua Shun”) as vendor in relation to the acquisition of 12.5% equity interest in Shanghai Fengdan and the outstanding shareholder’s loan owing by Shanghai Fengdan to Shenzhen Hua Shun at a total consideration of RMB437,500,000;
(l) the equity transfer agreement dated 15 January 2016 entered into between Shanghai Sunac Ruifeng as purhcaser and Shenzhen SZITIC Property Development Co., Ltd. (深圳深國投 房地產開發有限公司)(“SZITIC Property”) as vendor in relation to the acquisition of 7.855% equity interest in Shanghai Fengdan and the outstanding shareholder’s loan owing by Shanghai Fengdan to SZITIC Property at a total consideration of RMB274,925,000;
(m) the equity transfer agreement dated 13 January 2016 entered into between Shanghai Sunac and Jiangsu Youyi Hesheng Property Development Co., Ltd. (“Jiangsu Youyi”) for an aggregate consideration of RMB1,038,234,731, pursuant to which (i) Shanghai Sunac agreed to acquire and Jiangsu Youyi agreed to dispose of, 95% equity interest in Suzhou Xinyou Real Estate Co. Ltd. (蘇州新友置地有限公司)(“Suzhou Xinyou”), for RMB183,652,145, and (ii) Shanghai Sunac agreed to repay on behalf of Suzhou Xinyou the entire outstanding shareholder’s loan in the amount of RMB854,582,586 owing by it to Jiangsu Youyi;
(n) the agreement dated 4 January 2016 entered into between Shanghai Sunac Ruifeng and Shanghai Pudong Development Group Limited (上海浦東發展(集團)有限公司)(“Shanghai Pudong Development”), pursuant to which Shanghai Sunac Ruifeng agreed to acquire 9.4% interest in Shanghai Huafeng for a consideration of RMB752,000,000 and Shanghai Pudong Development was entrusted to hold the 9.4% indirect interest in Shanghai Huafeng on behalf of Shanghai Sunac Ruifeng;
(o) the supplemental agreement dated 30 November 2015 entered into between, among others, Tianjin Sunac Ao Cheng and Sunac Real Estate, which are both wholly-owned subsidiaries of the Company and Xian Titan Real Estate Group Co., Ltd (“Xian Titan”), pursuant to
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which the parties thereto agreed to amend and supplement the cooperative agreement dated 2 September 2015 with respect to the acquisition of Jinan Lihao Properties Co., Ltd. (濟南立皓置業有限公司) and Jinan Liyuan Properties Co., Ltd. (濟南立遠置業有限公司);
(p) the supplemental agreement dated 30 November 2015 entered into between, among others, Tianjin Sunac Ao Cheng, Sunac Real Estate and Xian Titan, pursuant to which the parties thereto agreed to amend and supplement the cooperative agreement dated 2 September 2015 with respect to the acquisition of Tianmao Properties (Nanjing)., Ltd. (天茂置業（南京）有 限公司), Titan International Investment Group Limited and Nanjing Titan Technology Investment Development Co., Ltd. (南京天朗科技投資發展有限公司);
(q) equity transfer agreement dated 29 October 2015 entered into between Shanghai Sunac Real Estate Development Co., Ltd (“Shanghai Sunac Real Estate”), a wholly-owned subsidiary of the Company, as purchaser, and Shanghai Yuehua Kangjian Investment Management Co., Ltd (“Shanghai Yuehua”) as vendor, pursuant to which Shanghai Sunac Real Estate agreed to, or would procure its designated wholly-owned subsidiary to, acquire and Shanghai Yuehua agreed to dispose of, the entire equity interest in Shanghai Lingwu Investment Management Co., Ltd. (“Shanghai Lingwu”) and the outstanding shareholder’s loan owing by Shanghai Lingwu to Shanghai Yuehua at a total consideration of RMB1,400,000,000;
(r) the cooperative agreement dated 2 September 2015 entered into between, among others, Tianjin Sunac Ao Cheng and Beijing Sunac Construction Investment Real Estate Co., Ltd (“Sunac Zhidi”), which are both wholly-owned subsidiaries of the Company, and Xian Titan, pursuant to which Tianjin Sunac Ao Cheng and Xian Titan agreed to cooperate to establish a joint venture company in Xian, the PRC (the “Joint Venture”) with a registered capital of RMB100 million, and was contributed as to 80% by Tianjian Sunac Ao Cheng and 20% by Xian Titan. Upon establishment of the Joint Venture, it (i) shall acquire the equity interest in the two property projects under development in Xian, the PRC held by Xian Titan for a total consideration of RMB187.9 million; (ii) can acquire and develop the projects to be developed by Xian Tital or its affiliated companies in Xian, the PRC by participating in the process of tender, auction and listing; and (iii) shall cooperate with Xian Titan in the acquisition and development of the reserve projects in Xian to be participated or intended to be acquired by Xian Titan or its affiliated companies and subsidiaries in the future by way of joint injection of funds for the establishment of project companies of which Xian Titan and the Joint Venture shall hold no more than 30% and no less than 70% equity interest in such project companies, respectively. Further, pursuant to the cooperative agreement, Tianjin Sunac Ao Cheng agreed to acquire (by itself or through its designated company) the 100% equity interest in the project companies of Xian Titan with property projects located in Jinan, Nanjing and Chengdu of the PRC for a total consideration of RMB496.17 million;
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(s) the equity transfer agreement dated 26 August 2015 entered into between Shanghai Sunac Ruifeng as purchaser and Shenzhen Shenshangzhi Management Co., Ltd. (“SZ Shenshangzhi”) as vendor, pursuant to which Shanghai Sunac Ruifeng agreed to acquire and SZ Shenshangzhi agreed to dispose of 14% equity interest in Shanghai Fengdan and the outstanding shareholder’s loan owing by Shanghai Fengdan to SZ Shenshangzhi at a total consideration of RMB329,000,000;
(t) the equity transfer agreement dated 26 August 2015 entered into between Shanghai Sunac Ruifeng as purchaser and China Resources SZITIC Investment Ltd. (“CR SZITIC Investment”) as vendor, pursuant to which Shanghai Sunac Ruifeng agreed to acquire and CR SZITIC Investment agreed to dispose of 10.29% equity interest in Shanghai Fengdan and the outstanding shareholder’s loan owing by Shanghai Fengdan to CR SZITIC Investment at a total consideration of RMB241,815,000;
(u) the acquisition agreement dated 24 July 2015 entered into between, among others, Ease Success Holdings Limited (“Ease Success”), a wholly-owned subsidiary of the Company, as purchaser, and Marvel Leader Investments Limited (“Marvel Leader”) as vendor, pursuant to which Ease Success conditionally agreed to acquire and Marvel Leader conditionally agreed to dispose of (i) the entire issued shares in Joyview Group Limited (“Joyview”) which in turn indirectly owned 80% equity interest in Chengdu Guojia Zhide Zhiye Co., Ltd. (成都國嘉志得置業有限公司)(“Chengdu Guojia”) and (ii) the outstanding shareholder’s loan owing by Joyview to Marvel Leader, at a total consideration of RMB2,755,553,457.92;
(v) the acquisition agreement dated 24 July 2015 entered into between, among others, Chongqing Sunac Foundation Real Estate Development Co. Ltd. (“Chongqing Sunac Foundation”), a wholly-owned subsidiary of the Company, as purchaser, and Sichuan Guojia Real Estate Co. Ltd. (“Sichuan Guojia”) as vendor, pursuant to which Chongqing Sunac Foundation conditionally agreed to acquire and Sichuan Guojia conditionally agreed to dispose of 20% equity interest in Chengdu Guojia and the outstanding shareholder’s loan and interest owing by Chengdu Guojia to Sichuan Guojia at a total consideration of RMB450,000,000;
(w) framework agreement dated 15 May 2015 between the Company and Greentown China Holdings Limited (“Greentown China”) pursuant to which it is conditionally agreed that the Group would transact with the Greentown China and its subsidiaries (the “Greentown Group”) in relation to the following proposed transactions: (i) disposal of 50% equity interests by Shanghai Greentown Forest Golf Villa Development Co., Ltd (“Shanghai Forest Golf”), and assignment of shareholder’s loan of Zhejiang Jinying Realty Co., Ltd (“Zhejiang Jinying”) by Sunac Zhidi to Greentown Real Estate Group Co., Ltd (“Greentown Real Estate”); (ii) disposal of 45% equity interests in and assignment of shareholder’s loan of Beijing Xingye Wanfa Real Estate Development Co., Ltd (“Beijing Xingye Wanfa”) by Sunac Zhidi to Greentown Real Estate; (iii) disposal of the return on investment of 51% equity interests in Shanghai Huazhe Bund held by Shanghai Sunac Greentown Investment Holdings Limited (上海融創綠城投資控股有限公司)(“Shanghai Sunac Greentown”) to Greetown Real Estate; (iv) acquisition of 50% equity interests in
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Shanghai Forest Golf by Sunac Zhidi from Greentown Real Estate; (v) acquisition of 25% equity interests in Hangzhou Sunac Greentown Real Estate Development Co., Ltd (“Hangzhou Sunac Greentown”) by Zhuo Yue Property Investment Holdings Limited (“Zhuo Yue Property”) from On Centuary Investment Limited (“On Centuary Investment”); (vi) development of the Tianjin National Game Village Project on a joint venture basis in the proportion of 49:51 by the Company and Greentown China; (vii) acquisition of 50% equity interests in Shanghai Sunac Greentown by Shanghai Sunac Real Estate from Greentown Investment; and (viii) acquisition of 50% issued share capital of Sunac Greentown by the Company from Greentown China;
(x) the equity transfer agreement dated 16 February 2015 entered into between Shanghai Sunac Ruifeng Investment Co., Ltd (“Shanghai Sunac Ruifeng”) (a wholly-owned subsidiary of the Company) as the purchaser and Beijing Fengdan Investment Management Co., Ltd. (“ Beijing Fengdan”) as the seller with respect to the acquisition of 12.5% equity interests in Shanghai Fengdan Lishe Real Estate Development Co., Ltd. (“Shanghai Fengdan”) and outstanding shareholder’s loan owing by Shanghai Fengdan to Beijing Fengdan for a total consideration of RMB437,500,000;
(y) the equity transfer agreement dated 16 February 2015 and entered into between Shanghai Sunac Ruifeng as the purchaser and Shenzhen Zhongshan Xingye Trading Co., Ltd. (“Shenzhen Zhongshan”) as the seller with respect to the acquisition of 5% equity interests in Shanghai Fengdan and outstanding shareholder’s loan owing by Shanghai Fengdan to Shenzhen Zhongshan for a total consideration of RMB175,000,000;
(z) the equity transfer agreement dated 16 February 2015 and entered into between Shanghai Sunac Ruifeng as the purchaser and Shenzhen Hua Shun Digital Technology Co., Ltd. (“Shenzhen Hua Shun”) as the seller with respect to the acquisition of 12.5% equity interests in Shanghai Fengdan and outstanding shareholder’s loan owing by Shanghai Fengdan to Shenzhen Hua Shun for a total consideration of RMB437,500,000;
(aa) the equity transfer agreement dated 16 February 2015 and entered into between Shanghai Sunac Ruifeng as the purchaser and Shenzhen SZITIC Property Development Co., Ltd. (“Shenzhen SZITIC”) as the seller with respect to the acquisition of 7.855% equity interests in Shanghai Fengdan and outstanding shareholder’s loan owing by Shanghai Fengdan to Shenzhen SZITIC for a total consideration of RMB274,925,000;
(ab) share sale and purchase agreement dated 30 December 2014 (the “Offshore SP Agreement”) entered into among Lead Sunny Investments Limited (“Lead Sunny”), a wholly-owned subsidiary of the Company, as purchaser, Sunac Greentown Investment Holdings Limited (“Sunac Greentown”), a non wholly-owned subsidiary of the Company, as vendor and the Company as the purchaser’s guarantor in relation to the acquisition of the entire issued share capital and debt in Elegant Trend Limited (the “Offshore Target Company”) held by Sunac Greentown at a total consideration of approximately RMB6,401,740,000 (the “Offshore Transaction”) which was subject to adjustment (Note: as disclosed in the Company’s announcement dated 4 May 2015, the consideration was adjusted to RMB6,433,049,608.3);
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(ac) equity sale and purchase framework agreement (the “Equity Framework Agreement”) dated 30 December 2014 entered into by and among Tianjin Sunac Ao Cheng as purchaser and Shanghai Sunac Greentown as vendor in relation to the sale and purchase of the entire or certain equity interests in 15 Onshore Target Companies (as defined in the announcement of the Company dated 31 December 2014) at a total consideration of approximately RMB5,614,920,000 which was subject to adjustment (Note: as disclosed in the Company’s announcement dated 4 May 2015, the consideration was adjusted to RMB5,498,989,189.52);
(ad) debt undertaking framework agreement (the “Debt Framework Agreement”, together with the Equity Framework Agreement, the “Onshore Framework Agreements”) dated 30 December 2014 entered into between Tianjin Sunac Ao Cheng and Shanghai Sunac Greentown in relation to the assignment of certain debt due and owing by the Onshore Target Companies (as defined in the announcement of the Company dated 31 December 2014) to Shanghai Sunac Greentown at a total consideration of approximately RMB3,529,380,000 which was subject to adjustment (Note: as disclosed in the Company’s announcement dated 4 May 2015, the consideration was adjusted to RMB3,465,188,197.26); and
(ae) equity transfer agreement dated 7 November 2014 entered into among Shanghai Ronglv Ruijiang Real Estate Company Ltd, a non-wholly owned subsidiary of the Company, as the purchaser, Shanghai Shenjiang Cross-strait Development and Construction Investment (Group) Company Limited (“Shanghai Shenjiang Cross-strait”), as the vendor, pursuant to which the purchaser agreed to acquire the 47% equity interest in Shanghai Fuyuan Binjiang Development Company Limited (“Shanghai Fuyuan Binjiang”) for a total consideration of RMB1,574,986,146.76, comprising of (i) a transfer price of RMB977,374,550.83 in relation to the 47% equity interest in Shanghai Fuyuan Binjiang; and (ii) a debt amount of RMB597,611,595.93 owing by Shanghai Fuyuan Binjiang to Shanghai Shenjiang Cross-strait.
11. EXPERTS AND CONSENTS
The following are the qualificatons of the experts who have given opinion or advice which are contained in this circular:
Name Qualification
Quam Capital Limited a corporation licensed to carry out type 6 (advising on corporate finance) regulated activities under the SFO
DTZ Cushman & Wakefield an independent professional valuer Limited As at the Latest Practicable Date, each of the experts named above:
(i) had no shareholding in any member of the Group and did not have any right, whether legally enforceable or not, to subscribe for or to nominate persons to subscribe for securities in any member of the Group;
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(ii) had no direct or indirect interest in any assets which had been, since 31 December 2015 (being the date to which the latest published audited consolidated financial statements of the Group were made up), acquired, disposed of by, or leased to any member of the Group, or were proposed to be acquired, disposed of by, or leased to any member of the Group; and
(iii) has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter and the reference to its name included herein in the form and context in which it appears.
12. MISCELLANEOUS INFORMATION
(a) The registered office of the Company is at Landmark Square, 3rd floor, 64 Earth Close, P.O. box 30592, Grand Cayman KY1-1203, Cayman Islands.
(b) The principal place of business of the Company in Hong Kong is at 36/F, Tower Two, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong.
(c) The Cayman Islands principal share registrar and transfer office of the Company is Royal Bank of Canada Trust Company, (Cayman) Limited at 4th Floor, Royal Bank House, 24 Shedden Road, George Town, Grand Cayman KY1-1110, Cayman Islands.
(d) The Hong Kong branch share registrar and transfer office of the Company is Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17/F, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.
(e) The Independent Financial Adviser is Quam Capital Limited whose address is at 19th Floor, China Building, 29 Queen’s Road Central, Hong Kong.
13. DOCUMENTS AVAILABLE FOR INSPECTION
Copies of the following documents are avaialble for inspection (i) at the principal place of business of the Company in Hong Kong at 36/F, Tower Two, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong during normal busienss hours on any Business Day; (ii) on the website of the SFC (www.sfc.hk); and (iii) on the Company’s website (www.sunac.com.cn) from the date of this circular up to and including the date of the EGM:
(a) the memorandum and articles of association of the Company;
(b) the memorandum and articles of association of the Subscriber;
(c) the annual reports of the Company for the years ended 31 December 2014 and 2015 and the interim report of the Company for the six months ended 30 June 2016;
(d) the letter from the Board, the text of which is set out in the section headed “Letter from the Board” in this circular;
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(e) the letter from the Independent Board Committee, the text of which is set out in the section headed “Letter from the Independent Board Committee” in this circular;
(f) the letter from Quam Capital Limited, the text of which is set out in the section headed “Letter from Quam Capital” in this circular;
(g) the full property valuation report of the Group (including the valuation certificates) prepared by DTZ Cushman & Wakefield Limited, a summary of which is set out in Appendix II to this circular;
(h) the material contracts referred to in the paragraph headed “10. Material Contracts” in this appendix;
(i) the written consents referred to in the paragraph headed “11. Experts and Consents” in this appendix; and
(j) this circular.
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SUNAC CHINA HOLDINGS LIMITED 融創中國控股有限公司 (incorporated in the Cayman Islands with limited liability) (Stock Code: 01918)
NOTICE OF EXTRAORDINARY GENERAL MEETING
NOTICE IS HEREBY GIVEN that an extraordinary general meeting (the “Meeting”) of Sunac China Holdings Limited (the “Company”) will be held at Conference Hall, 16/F, Building A, Far East International Plaza, No. 319 Xianxia Road, Shanghai, the PRC on 2 November 2016 (Wednesday) at 10 a.m. for the purpose of considering and, if thought fit, passing (with or without amendments) the following resolution as ordinary resolution:
“THAT:
(1) the subscription agreement (the “Subscription Agreement”) dated 26 September 2016 entered into between the Company as issuer and Sunac International Investment Holdings Ltd as subscriber (the “Subscriber”) (a copy of which has been produced to this meeting marked “A” and signed by the chairman of this meeting for the purpose of identification) in relation to the subscription by the Subscriber of 453,074,433 new ordinary shares (the “Subscription Share(s)”) of HK$0.1 each in the Company at the subscription price of HK$6.18 per Subscription Share (the “Subscription”) and the transactions contemplated thereby be and are hereby approved, confirmed and ratified;
(2) the specific mandate for the allotment and issue of the Subscription Shares, credited as fully paid, in accordance with the terms and conditions of the Subscription Agreement be and is hereby approved;
(3) any one director of the Company (“Director(s)”) or (if affixing of seal is required) any two Directors be authorised for and on behalf of the Company, among others, to execute, perfect, deliver (including under seal where applicable) all such other documents and deeds, and to do or authorise doing all such acts, matters and things, as he may in his absolute discretion consider necessary, expedient or desirable to give effect to and implement and/or complete all matters in connection with:
(a) the Subscription, the Subscription Agreement and all other transactions contemplated thereunder, and the closing and implementation thereof;
(b) securing the fulfilment of the conditions precedent of completion of the Subscription; and
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(c) the approval of any amendments or variations to the Subscription Agreement or the granting of waivers of any matters contemplated thereby that are, in the Director’s opinion, not fundamental to the transactions contemplated thereby and are in the best interests of the Company, including without limitation the signing (under the common seal of the Company where required or expedient) of any supplemental or ancillary agreements and instruments and the giving of any undertakings and confirmations for any such purposes; and
(4) subject to the Executive (as defined in the circular of the Company dated 17 October 2016 (the “Circular”)) granting the Whitewash Waiver (as defined in the Circular) to the Subscriber and the satisfaction of any conditions attached to the Whitewash Waiver granted, the waiver pursuant to Note 1 on dispensations from Rule 26 of the Code on Takeovers and Mergers (the “Takeovers Code”) waiving any obligation on the part of the Subscriber to make a general offer under the Takeovers Code for all the issued securities of the Company (other than those owned, controlled or agreed to be acquired by the Subscriber, Mr. Sun Hongbin and parties acting in concert with any of them) which would otherwise arise as a result of the subscription of Subscription Shares by the Subscriber pursuant to the Subscription Agreement be and is hereby approved and any one or more Directors be and is/are hereby authorised to do all things and acts and sign all documents which they consider desirable or expedient to implement and/or give full effect to any matters relating to or in connection with the Whitewash Waiver.”
By order of the Board Sunac China Holdings Limited WANG Mengde Executive Director and Chief Executive Officer
Hong Kong, 17 October 2016
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Registered office: Headquarters and principal place Landmark Square of business in the PRC: 3rd Floor 10/F, Building C7 64 Earth Close Magnetic Plaza P.O. Box 30592 Binshuixi Road, Nankai District Grand Cayman KY1-1203 Tianjin 300381 Cayman Islands The PRC
Principal place of business in Hong Kong: 36/F, Tower Two, Times Square 1 Matheson Street Causeway Bay Hong Kong
Notes:
(i) A shareholder entitled to attend and vote at the above Meeting is entitled to appoint another person as his/her proxy to attend and, subject to the provisions of the articles of association of the Company, to vote on his/her behalf. A proxy need not be a shareholder of the Company. If more than one proxy is so appointed, the appointment shall specify the number and class of shares in respect of which each proxy is so appointed.
(ii) In the case of joint holders, the vote of the senior who tenders a vote, whether in person or by proxy, will be accepted to the exclusion of the vote(s) of the other joint holder(s) and for this purpose seniority shall be determined as that one of the persons so present whose name stands first on the register of shareholders in respect of such share shall alone be entitled to vote in respect thereof.
(iii) In order to be valid, a form of proxy in the prescribed form must be deposited at the Hong Kong share registrar of the Company, Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17/F, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong together with the power of attorney or other authority (if any) under which it is signed (or a certified copy thereof) not less than 48 hours before the time appointed for the holding of the above Meeting or any adjournment thereof. The completion and return of the form of proxy shall not preclude shareholders of the Company from attending and voting in person at the above Meeting (or any adjourned meeting thereof) if they so wish.
(iv) The transfer books and register of shareholders will be closed from 31 October 2016 (Monday) to 2 November 2016 (Wednesday), both days inclusive, in order to determine the entitlement of shareholders to attend the above Meeting, during which period no share transfers can be registered. All transfers accompanied by the relevant share certificates must be lodged with the Hong Kong share registrar of the Company, Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not later than 4:30 p.m. on 28 October 2016 (Friday).
(v) As at the date of this notice, the executive directors of the Company are Mr. SUN Hongbin, Mr. WANG Mengde, Mr. JING Hong, Mr. CHI Xun, Mr. SHANG Yu and Mr. LI Shaozhong; the non-executive director of the Company is Mr. ZHU Jia; and the independent non-executive directors of the Company are Mr. POON Chiu Kwok, Mr. LI Qin, Mr. MA Lishan and Mr. TSE Chi Wai.
—211— SUNAC CHINA HOLDINGS LIMITED 融創中國控股有限公司 (incorporated in the Cayman Islands with limited liability) (Stock Code: 01918)
FORM OF PROXY FOR USE AT EXTRAORDINARY GENERAL MEETING
I/We (Name) (Block capitals, please) of
(Address) being the registered holder(s) of (see Note 1) shares of HK$0.10 each in the capital of Sunac China Holdings Limited (the “Company”) hereby appoint (Name) of (Address) or failing him/her (Name) of (Address)
or failing him/her, the chairman of the meeting (see Note 2) as my/our proxy to attend and vote for me/us and on my/our behalf at the extraordinary general meeting of the Company to be held at Conference Hall, 16/F, Building A, Far East International Plaza, No. 319 Xianxia Road, Shanghai, the PRC on 2 November 2016 (Wednesday) at 10 a.m., and at any adjournment thereof or on any resolution or motion which is proposed thereat. My/Our proxy is authorised and instructed to vote as indicated (see Note 3) in respect of the undermentioned resolution:
Ordinary Resolution For Against (see Note 8) (see Note 3) (see Note 3) To approve the Subscription Agreement, the Subscription, the Whitewash Waiver and the transactions contemplated thereunder and any Director be and is authorised to do all things to give effect to the same.
Dated this day of , 2016 Signature(s) (see Note 5)
Notes:
1. Please insert the number of shares registered in your name(s); if no number is inserted, this form of proxy will be deemed to relate to all the shares in the capital of the Company registered in your name(s).
2. A shareholder may appoint more than one proxy of his/her own choice. If such an appointment is made, strike out the words “the chairman of the meeting”, and insert the name(s) of the person(s) appointed as proxy(ies) in spaces provided. Any alteration made to this form of proxy must be initialled by the person who signs it.
3. IMPORTANT: IF YOU WISH TO VOTE FOR THE RESOLUTION, PLEASE TICK THE BOX MARKED “For”. IF YOU WISH TO VOTE AGAINST THE RESOLUTION, PLEASE TICK THE BOX MARKED “Against”. Failure to tick a box will entitle your proxy to cast your vote at his/her discretion. Your proxy will also be entitled to vote at his/her discretion on any resolution properly put to the meeting other than those referred to in the notice convening the meeting.
4. If the appointor is a corporation, this form must be under its seal or under the hand of an officer, attorney, or other person duly authorised to sign the same.
5. In the case of joint holders, the signature of any one holder will be sufficient but the names of all the joint holders should be stated. Where there are joint holders of any share of the Company, any one of such joint holders may vote at the meeting, either in person or by proxy, in respect of such share as if he/she were solely entitled thereto, but if more than one of such joint holders be present at the meeting, the vote of the senior holder who tenders a vote, whether in person or by proxy, will be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the register of members of the Company in respect of the joint holding.
6. To be valid, this form of proxy must be completed, signed and deposited at the Hong Kong share registrar of the Company, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, together with the power of attorney or other authority (if any) under which it is signed (or a certified copy of such power or authority), not less than 48 hours before the time appointed for holding the meeting or adjourned meeting. The completion and return of this form of proxy shall not preclude shareholders of the Company from attending and voting in person at the above meeting (or any adjourned meeting thereof) if they so wish and in such event, this form of proxy shall be deemed to be revoked.
7. A proxy need not be a shareholder of the Company.
8. The description of the resolution is by way of summary only. The full text of the resolution appears in the notice convening the meeting.