THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser. If you have sold or transferred all your securities in China Evergrande Group (中國恒大集團), you should at once hand this circular and the accompanying form of proxy to the purchaser or transferee or to the bank, licensed securities dealer, or other agent through whom the sale or transfer was effected for onward transmission to the purchaser or the transferee. Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular. CHINA EVERGRANDE GROUP 中 國 恒 大 集 團 (Incorporated in the Cayman Islands with limited liability) (Stock Code: 3333) MAJOR TRANSACTION ACQUISITION OF SHARES IN CHINA VANKE CO. LTD. A letter from the Board is set out on pages 3 to 7 of this circular. 13 January 2017 CONTENTS Page Definitions .......................................................................... 1 Letter from the Board ............................................................... 3 Appendix I — Financial information of the Group ................................ I-1 Appendix II — Financial information of Vanke .................................... II-1 Appendix III — Unaudited proforma financial information of the Group ............ III-1 Appendix IV — General information ............................................... IV-1 – i – DEFINITIONS In this circular, the following expressions shall have the following meanings unless the context indicates otherwise: ‘‘Acquisition’’ the acquisition of an aggregate of 161,932,084 Vanke A Shares by the Company; ‘‘Announcement’’ the announcement of the Company dated 9 November 2016 in relation to the Acquisition; ‘‘Board’’ the board of Directors of the Company; ‘‘Company’’ China Evergrande Group, a company incorporated in the Cayman Islands with limited liability, the shares of which are listed on the main board of the Stock Exchange (stock code: 3333); ‘‘connected person’’ has the meaning ascribed to it under the Listing Rules; ‘‘Director(s)’’ the directors of the Company; ‘‘Group’’ the Company and its subsidiaries; ‘‘Hshares’’ overseas listed shares of RMB1.00 each in the issued share capital of Vanke which is subscribed in foreign currency; ‘‘HK$’’ Hong Kong dollar, the lawful currency of Hong Kong; ‘‘Hong Kong’’ Hong Kong Special Administrative Region of the PRC; ‘‘Latest Practicable Date’’ 11 January 2017, being the latest practicable date prior to the printing of this circular for ascertaining certain information in the circular; ‘‘Listing Rules’’ the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited and its amendments from time to time; ‘‘PRC’’ the People’s Republic of China, excluding Hong Kong, the Macao Special Administrative Region and Taiwan for the purpose of the Acquisition Agreements; ‘‘RMB’’ Renminbi, the lawful currency of the PRC; ‘‘SFO’’ the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong); – 1 – DEFINITIONS ‘‘Spread Glory’’ Spread Glory Investments Limited, a holding company established in Hong Kong; ‘‘Shareholder(s)’’ the holder(s) of the Share(s); ‘‘Share(s)’’ ordinary share(s) with a nominal value of US$0.01 each in the issued share capital of the Company; ‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited; ‘‘Vanke’’ China Vanke Co., Ltd., a joint-stock company established in the PRC, its A shares and H shares are listed on the Shenzhen Stock Exchange and the main board of the Stock Exchange (A share stock code: 00002; H share stock code: 2202); ‘‘Vanke A Shares’’ domestic listed shares of RMB1.00 each in the issued share capital of Vanke which are subscribed in RMB; ‘‘Xin Xin’’ Xin Xin (BVI) Limited, a substantial shareholder of the Company, holding 68.46% of the share capital in issue of the Company as at the Latest Practicable Date; and ‘‘%’’ per cent. – 2 – LETTER FROM THE BOARD CHINA EVERGRANDE GROUP 中 國 恒 大 集 團 (Incorporated in the Cayman Islands with limited liability) (Stock Code: 3333) Executive Directors: Registered Office: Mr. Hui Ka Yan (Chairman) P.O. Box 309 Mr. Xia Haijun (Vice Chairman and President) Ugland House Ms. He Miaoling Grand Cayman, KY1-1104 Mr. Pan Darong Cayman Islands Mr. Xu Wen Mr. Huang Xiangui Principal place of business in the PRC: Independent Non-executive Directors: 43rd Floor, Mr. Chau Shing Yim, David Evergrande International Centre Mr. He Qi No. 78 Huangpu Avenue West Ms. Xie Hongxi Guangzhou, Guangdong Province China (Postal Code: 510620) Principal place of business in Hong Kong: Suites 1501–1507 One Pacific Place 88 Queensway, Hong Kong 13 January 2017 To the Shareholders Dear Sir or Madam, MAJOR TRANSACTION INTRODUCTION On 9 November 2016, the Board announced that the Company, through its subsidiaries have acquired on the market an aggregate of 161,932,084 Vanke A Shares. The Acquisition, when aggregated with the Vanke A Shares previously acquired by the Company in August 2016, constitutes a major transaction of the Company under Rule 14.07 of the Listing Rules. – 3 – LETTER FROM THE BOARD The purpose of this circular is to provide you with information in respect of, among other things, the details of the Acquisition and certain information about Vanke. THE ACQUISITION Reference is made to the announcements of the Company dated 4 August 2016 and 15 August 2016. The Board announced on 9 November 2016 that from 15 August 2016 to 9 November 2016, the Company, through its subsidiaries, has further acquired on the market an aggregate of 161,932,084 Vanke A Shares. Together with the Vanke A Shares previously acquired by the Group, the Company was interested in a total 914,595,375 Vanke A Shares, representing approximately 8.285% of the total issued share capital of Vanke as at the date of the Announcement. The aggregate consideration for the Acquisition and the previous acquisitions was approximately RMB18.76 billion. To the best of the knowledge, information and belief of the Directors, having made all reasonable enquiries, the vendors of the Vanke A Shares and their ultimate beneficial owners are third parties independent of the Company and its connected persons. Acquisition of the Vanke A Shares An aggregate of 161,932,084 Vanke A Shares were acquired under the Acquisition, representing approximately 1.467% of the total issued share capital of Vanke as at the date of the Announcement. The aggregate consideration for the Acquisition was approximately RMB4.2 billion. The consideration was determined based on the market price of the Vanke A Shares at the time of purchase. The consideration was settled through the internal resources of the Company. The Company announced on 4 August 2016 and 15 August 2016 that it had acquired an aggregate of 752,633,291 Vanke A Shares, which together with the additional 161,932,084 Vanke A Shares acquired under the Acquisition, the Company held in total 914,595,375 Vanke A Shares, representing approximately 8.285% of the total issued share capital of Vanke as at the date of the Announcement. – 4 – LETTER FROM THE BOARD Further acquisitions subsequent to the Acquisition From the date of the Announcement and up to the Latest Practicable Date, the Group has further acquired in aggregate 638,615,599 Vanke A Shares. The details of such further acquisitions are set out below: Applicable size of Number of transaction under Implication Dates of further Method of shares Chapter 14 of the under the acquisition purchase purchased Consideration Listing Rules Listing Rules RMB’billion 10 November 2016 to On market 128,784,376 3.48 Over 5% but less Discloseable 17 November 2016 than 25% transaction 18 November 2016 to On market and 509,831,223 14.01 Over 5% but less Discloseable 29 November 2016 block trade than 25% transaction As at the Latest Practicable Date, the Group was interested in 1,553,210,974 Vanke A Shares, representing approximately 14.07% of the issued share capital of Vanke. The aggregate consideration paid by the Group for the purchase of such Vanke A Shares was approximately RMB36.273 billion. The Company’s interest in Vanke will be accounted for as available-for-sale financial assets in the financial statements of the Group and the results of Vanke will not be consolidated in the financial statements of the Group. INFORMATION ABOUT VANKE Vanke is a joint stock company established in the PRC, the A shares and H shares of which are listed on the Shenzhen Stock Exchange and the main board of the Stock Exchange (A share stock code: 00002; H share stock code: 2202), respectively. Vanke is principally engaged in the business of property development in the PRC. According to the published financial statements of Vanke, the financial results of Vanke for the two years ended 31 December 2014 and 2015 are as follows: For the year ended 31 December 2014 2015 RMB’000 RMB’000 (audited) (audited) Net profit before tax 29,986,822 40,516,708 Net profit after tax 19,287,524 25,949,438 The net asset value of Vanke as at 31 December 2015 was RMB136,309,617,000. – 5 – LETTER FROM THE BOARD REASON FOR THE ACQUISITION The Group is principally engaged in the development of large scale residential properties and integrated commercial properties in the PRC. Vanke is one of the largest property developers in the PRC with strong results. The Acquisition is an investment of the Group. In view of the strong financial performance of Vanke, the Directors believe that the investment in Vanke will provide a good investment opportunity for the Company and enable the Group to generate sustainable and attractive returns for the Shareholders.