Continental Aerospace Technologies Holding Limited - Proxy Solicitation & Information Statement 2018

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular, you should consult a stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other appropriate independent adviser.

If you have sold or transferred all your shares in AVIC International Holding (HK) Limited, you should at once hand this circular and the accompanying form of proxy to the purchaser or the transferee or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

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(Incorporated in Bermuda with limited liability)

(Stock code: 232)

PROPOSED MANDATE IN RELATION TO THE PROPOSED VERY SUBSTANTIAL DISPOSAL

AND

NOTICE OF SPECIAL GENERAL MEETING

Financial Adviser to the Company

A letter from the Board is set out on pages 4 to 14 of this circular.

A notice convening the SGM to be held at Forum Room 1, Basement 2, Regal Hongkong Hotel, 88 Yee Wo Street, Causeway Bay, Hong Kong on Friday, 15 June 2018 at 11:00 a.m. is set out on pages SGM-1 to SGM-2 of this circular. A form of proxy for use at the SGM is also enclosed with this circular. Whether or not you are able to attend the meeting, please complete the enclosed form of proxy in accordance with the instructions printed thereon and return the same to the branch share registrar and transfer office of the Company in Hong Kong, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong as soon as possible and in any event by not less than 48 hours before the time appointed for the holding of the SGM or any adjournment thereof. Completion and return of a form of proxy will not preclude you from attending and voting at the meeting should you so wish and in such event, the instrument appointing a proxy shall be deemed to be revoked.

31 May 2018

			Pages
DEFINITIONS	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			4
APPENDIX I	—	FINANCIAL INFORMATION OF THE GROUP. . . . . . . . . . . . . .	15
APPENDIX II	—	UNAUDITED FINANCIAL INFORMATION OF THE
		DISPOSAL GROUP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
APPENDIX III	—	MANAGEMENT DISCUSSION AND ANALYSIS OF THE
		REMAINING GROUP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	26
APPENDIX IV	—	UNAUDITED PRO FORMA FINANCIAL INFORMATION OF
		THE REMAINING GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . .	33
APPENDIX V	—	PROPERTY VALUATION REPORT . . . . . . . . . . . . . . . . . . . . . . .	58
APPENDIX VI	—	GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	69
NOTICE OF SPECIAL GENERAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			SGM-1

— i —

DEFINITIONS

In this circular, the following expressions have the following meanings unless the context requires otherwise:

“Aviation Industry”

Aviation Industry Corporation of China, Ltd (中國航空工業集團有限公司), a state-owned company (國有獨資公司) established in the PRC which holds 62.52% of the equity interest in AVIC International Holding Corporation (中國航空技術國際控股有限公司) as at the Latest Practicable Date, a controlling shareholder of the Company;

“Board”

the board of Directors;

“Business Day”
“CBEE”
a day (other than a Saturday or Sunday or public holiday) on which banks are open in PRC for general commercial business; China Beijing Equity Exchange* (北京產權交易所), an equity trading institution approved by the People’s Government of Beijing Municipality;
“Chongqing Hanglong”
Chongqing Hanglong Real Estate Company Limited* (重慶航龍置業有限公司), a limited liability company established in PRC, and as at the Latest Practicable Date, its equity interest is owned as to 99% and 1% by Ease Triumph and Chongqing Hang Yue, respectively;
“Chongqing Hang Yue” Chongqing Hang Yue Company Limited (重慶航悅置業有限公司), a limited liability company incorporated in PRC and is wholly owned by Chongqing Jianghang Investment Company Limited (重慶江航投資有限公司), a limited liability company established in PRC which is indirectly wholly owned by Hangfa Investment;
“Company”
AVIC International Holding (HK) Limited, a company incorporated in Bermuda with limited liability and whose shares are listed on the Main Board of the Stock Exchange (stock code: 232);
“Completion” completion of the Proposed Disposal;
“Dalian Hanghua”
Dalian Hanghua Real Estate Company Limited* (大連航華置業有限公司), a limited liability company established in PRC, and as at the Latest Practicable Date, its equity interest is owned as to 52.08%, 30% and 17.92% by Ease Triumph, Dalian Huabang and Hangfa Investment, respectively;

— 1 —

DEFINITIONS

“Dalian Huabang”

Dalian Huabang Investment Development Company Limited* (大連華邦投資發展有限公司), a company incorporated in the PRC with limited liability and an independent third party;

“Directors” the directors of the Company;

“Disposal Group or Ease Triumph Ease Triumph and its subsidiaries; Group”
“Ease Triumph” Ease Triumph International Limited (拓業國際有限公司), a company incorporated in Hong Kong with limited liability and is a direct wholly-owned subsidiary of the Company;
“Enlarged Group” the enlarged Group immediately after the acquisition of Motto Investment Limited
“Group” the Company and its subsidiaries; “Hangfa Investment” Hangfa Investment Limited* (航發投資管理有限公司), a company incorporated in the PRC with limited liability and an independent third party;
“HK$” Hong Kong dollars, the lawful currency of Hong Kong; “Hong Kong” Hong Kong Special Administrative Region of the PRC; “Latest Practicable Date” 28 May 2018, being the latest practicable date prior to the printing of this circular for ascertaining certain information referred to in this circular;
“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange;
“Model Code” the required standards of dealings regarding securities transactions by Directors or the Model Code for Securities Transactions by Directors of Listed Issuers as set out in the Listing Rules;
“Motto Investment Limited” a company incorporated in BVI with limited liability and is a direct wholly-owned subsidiary of the Company;
“Motto Group” Motto Investment Limited and its subsidiaries; “Net Assets” net assets attributable to owners of the company; “PRC” the People’s Republic of China; “Proposed Disposal” the proposed public listing for disposal of the entire issued capital of Ease Triumph and the Shareholder’s Loan through CBEE;

— 2 —

	DEFINITIONS
“Proposed Mandate”	the general mandate to be granted in advance to the Directors
	to enter into and complete the Proposed Disposal by the
	Shareholders at the SGM;
“Remaining Business”	the Group’s remaining business immediately after completion
	of the Proposed Disposal;
“Remaining Group”	the Group immediately after completion of the Proposed
	Disposal;
“RMB”	Renminbi, the lawful currency of the PRC;
“SFO”	the Securities and Futures Ordinance (Chapter 571 of the
	Laws of Hong Kong);
“SGM”	the special general meeting of the Company to be convened
	and held for the purpose of considering and, if thought fit,
	granting the Proposed Mandate to the Directors;
“Shareholder(s)”	registered holder(s) of the Share(s);
“Shareholder’s Loan”	the outstanding shareholder’s loans owed by Ease Triumph to
	the Company;
“Sq.m”	square metres;
“Stock Exchange”	The Stock Exchange of Hong Kong Limited;
“USD”	United States dollar, the lawful currency of the United States
	of America;
“US”	the United States of America; and
“%”	per cent.

— 3 —

LETTER FROM THE BOARD

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(Incorporated in Bermuda with limited liability)

(Stock code: 232)

Executive Directors: Mr. Liu Hongde (Chairman) Mr. Pan Linwu (Deputy Chairman) Mr. Lai Weixuan Ms. Zhou Chunhua Mr. Xu Hongge (Chief Executive Officer)

Non-executive Director: Mr. Chow Wai Kam

Independent Non-executive Directors:

Mr. Chu Yu Lin, David Mr. Li Ka Fai, David Mr. Zhang Ping

Registered office: Canon’s Court 22 Victoria Street Hamilton HM 12 Bermuda

Head office and principal place of business in Hong Kong: Unit B, 15th Floor United Centre 95 Queensway Hong Kong

31 May 2018

To the Shareholders

Dear Sir or Madam,

PROPOSED MANDATE IN RELATION TO THE PROPOSED VERY SUBSTANTIAL DISPOSAL AND

NOTICE OF SPECIAL GENERAL MEETING

INTRODUCTION

Reference is made to the announcements of the Company dated 7 September 2016, 19 September 2017, 27 October 2017 and 17 April 2018 and the circular of the Company dated 29 December 2017. The Board resolved to dispose of the entire issued share capital of Ease Triumph and the Shareholder’s Loan by way of a public tender through CBEE on 17 April 2018 and would like to seek the Proposed Mandate from the Shareholders to enter into and complete the Proposed Disposal.

— 4 —

LETTER FROM THE BOARD

As the highest applicable percentage ratio calculated pursuant to Chapter 14 of the Listing Rules in respect of the Proposal Disposal exceeds 75%, the Proposed Disposal, if materialised, will constitute a very substantial disposal of the Company under Chapter 14 of the Listing Rules.

The purpose of this circular is to provide you with, among other things, (i) further details of the Proposed Disposal and the Proposed Mandate; (ii) financial information of Ease Triumph Group; (iii) pro forma financial information of the Remaining Group; and (iv) a notice convening the SGM together with the form of proxy and other information as required under the Listing Rules.

THE PROPOSED DISPOSAL

Ease Triumph holds equity interest in two project companies, namely Dalian Hanghua and Chongqing Hanglong, which were set up for the development and sale of properties in Dalian and Chongqing respectively. The following diagram illustrates the shareholding structure of the Ease Triumph Group as at the Latest Practicable Date:

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----- Start of picture text -----

The Company
100%
Ease Triumph
Chongqing Hang Dalian Huabang
Yue
Hangfa Investment
1.00% 99.00% 52.08% 30.00% 17.92%
Chongqing Dalian Hanghua
Hanglong
----- End of picture text -----

I. Dalian Hanghua

Dalian Hanghua is principally engaged in the development and sale of properties in Dalian. As at the Latest Practicable Date, it is held as to 52.08%, 30.00% and 17.92% by Ease Triumph, Dalian Huabang and Hangfa Investment, respectively.

The major assets of Dalian Hanghua include four parcels of land having a total site area of approximately 46,938 Sq.m (excluding communal site area). A large-scale development project, the International Square, is currently under construction. It comprises offices, retail shops and residential buildings and is located at the Southeastern side of Zhongshan Road of the Shahekou District of the Dalian City (“Dalian Project”). The total saleable area of Dalian Project upon completion is approximately 350,488 Sq.m.

— 5 —

LETTER FROM THE BOARD

II. Chongqing Hanglong

Chongqing Hanglong is principally engaged in the development and sale of properties in Chongqing. As at the Latest Practicable Date, it is held as to 99.00% and 1.00% by Ease Triumph and Chongqing Hang Yue.

The major assets of Chongqing Hanglong include twelve parcels of land located at the Liangjiangxin District of Chongqing with a total site area of approximately 375,252 Sq.m and is currently in an early development phase.

III. Shareholder’s Loan

As at the date of this circular, the Shareholder’s Loan comprises:

i) a principal amount of approximately USD98 million at the interest rate of 6% per annum, for which the interest start date is 1 July 2017;
ii) a principal amount of RMB38 million at the interest rate of 6% per annum, for which the interest start date is 1 July 2017; and
iii) a principal amount of approximately RMB433 million at the interest rate of 6% per annum, for which the interest start date is 27 March 2018.

IV. Financial information of the Ease Triumph Group

Set out below is the unaudited consolidated financial information of the Ease Triumph Group for the two years ended 31 December 2017 and 2016 prepared according to the Hong Kong Financial Reporting Standards.

	For the year ended	For the year ended
	31 December	31 December
	2017	2016
	HK$’000	HK$’000
Profit/(Loss) before tax	51,698	(44,346)
Loss after tax	(39,615)	(40,255)
Loss for the year attributable to owners of the company	(74,657)	(22,921)

The unaudited consolidated total assets and Net Assets of the Ease Triumph Group as at 31 December 2017 were approximately HK$3,297.3 million and HK$56.4 million, respectively.

— 6 —

LETTER FROM THE BOARD

The appraised value of the properties of Dalian Hanghua and Chongqing Hanglong as at 31 December 2017 was approximately HK$2,328.9 million and HK$976.9 million, respectively, based on a valuation performed by an independent professionally qualified valuer, Jones Lang LaSalle Corporate Appraisal and Advisory Limited. Based on the above valuation of the property assets of the Ease Triumph Group, the adjusted Net Assets of the Ease Triumph Group as at 31 December 2017 would be approximately HK$166.1 million.

V. Major Terms of the Proposed Disposal

Qualifications of potential bidders

The potential bidders shall satisfy, among others, the following qualifications:

the potential transferee shall be financially sound and solvent;
the potential transferee shall have good business credibility;
the potential transferee shall be an independent third party;
if the potential transferee is a natural person, he/she shall have full civil capacity; and
other qualifications stipulated under the laws and regulations of the PRC.

Consideration for the Proposed Disposal

The total consideration for the Proposed Disposal includes two components:

The minimum bidding price for the entire issued share capital of Ease Triumph is RMB680 million, which was decided by the Board after taking into consideration of: (i) the aggregate appraised value of the properties of the Ease Triumph Group as at 31 December 2017 of approximately HK$3,305.8 million based on the appraisal report prepared by an independent appraisal firm; (ii) the adjusted unaudited consolidated Net Assets of the Ease Triumph Group as at 31 December 2017 of approximately HKD 166.1 million, being the Net Assets of the Ease Triumph Group as at 31 December 2017 of approximately HK$56.4 million plus the valuation adjustments on the properties of approximately HK$305.0 million (derived from the difference between the fair value and the carrying amount of properties under development as at the date of acquisition in accordance with HKFRS 3 Business Combinations, less the relevant portion of adjustment attributable to the properties sold during the years ended 31 December 2015, 2016 and 2017 which were included in “cost of sales” of each relevant years), and net of corresponding tax impact of approximately HK$94.3 million and the part attributable to the non-controlling interests of the Ease Triumph Group of approximately HK$101.0 million; and (iii) the operation performance of the project companies of the Ease Triumph Group. In particular, the Board had considered the initial feedback from the potential bidders whom the Company had contacted with, which indicated that a reasonable floor price for the entire issued share capital of Ease Triumph would be RMB680 million.

— 7 —

LETTER FROM THE BOARD

The final consideration of the entire issued share capital of Ease Triumph will depend on the final bid price offered by the successful bidder, but will in any event be no less than the minimum bidding price of RMB680 million.

The consideration of the Shareholder’s Loan is the total outstanding principal amount of approximately USD98 million and RMB471 million (equivalent to approximately a total of HK$1,317 million)[(Note)] . In addition, the successful bidder should pay the interest in relation to the Shareholder’s Loan up to the actual repayment date before Completion.

The minimum bidding price for the entire issued share capital of Ease Triumph of RMB680 million is largely based on the initial feedback from the potential bidders independent of the Company. As it is far above the adjusted unaudited consolidated Net Assets of the Ease Triumph Group of HKD166.1 million as at 31 December 2017, it is expected that there will be a gain resulting from the Proposed Disposal. In addition, the consideration of the Shareholder’s Loan is based on the book value. Therefore the Directors consider the minimum bidding price is fair and reasonable and is in the interests of the Company and the Shareholders as a whole. Since the consideration for the Proposed Disposal is subject to the final bid price which will be equal to or above the minimum bidding price, the Board considers that the basis of the consideration is fair and reasonable.

The consideration shall be satisfied by the purchaser in the following manner:

(i) 30% of the consideration shall be paid by the purchaser to the Company within five (5) Business Days after signing of the relevant sale and purchase agreement. The remittance information shall be provided in the payment notice to be issued by the Company; and
(ii) 70% of the consideration and the interest in relation to the Shareholder’s Loan (up to the actual repayment date before Completion) shall be paid by the purchaser to the Company within thirty (30) days after signing of the relevant sale and purchase agreement. The remittance information shall be provided in the payment notice to be issued by the Company.

Public tender process of the Proposed Disposal

The Company has performed the preliminary disclosure of information (the “Pre-Listing Disclosure”) procedures through CBEE, with a publicity period of 20 Business Days commencing immediately after it published the announcement regarding the Proposed Disposal on 17 April 2018. The Pre-Listing Disclosure contained the basic information of the Ease Triumph Group and the qualifications requirements for the bidders, etc. The Company made the Pre-Listing Disclosure after obtaining the approval of the Board.

Upon completion of the Pre-Listing Disclosure procedures through CBEE, in order to commence the formal process of public tender of the entire issued share capital of Ease Triumph and the Shareholder’s Loan, the Company will have to submit the tender notice setting out, inter alia, (i) the minimum consideration of the entire issued share capital of Ease Triumph and the Shareholder’s Loan; (ii) the principal terms of the bidding; and (iii) qualifications of potential bidders, to CBEE for the Proposed Disposal after obtaining the Shareholders’ approval at the SGM.

Note: The figures are converted into HK$ at the rate of HK$1.00 : USD0.129 and HK$1.00 : RMB0.845 for indicative purpose only.

— 8 —

LETTER FROM THE BOARD

Once the tender notice is published, the publication period will commence and open for 20 Business Days. During the publication period, qualified bidders may indicate their interest in purchasing the entire issued share capital of Ease Triumph and the Shareholder’s Loan and register themselves as interested bidders.

Upon expiry of the publication period, CBEE will notify the Company the identity of the successful bidder of the public tender. The Company will then enter into a sale and purchase agreement in relation to the entire issued share capital of Ease Triumph and the Shareholder’s Loan with the successful bidder and to complete the Proposed Disposal accordingly.

Condition precedent to the entering into and completion of the Proposed Disposal

The entering into the Proposed Disposal shall be conditional upon the Company having completed all filing procedures and obtained all necessary consents and approvals regarding the Proposed Disposal including the approval by the Shareholders in respect of the Proposed Mandate at the SGM. The Proposed Mandate will remain valid for 12 months since the date of approval by the Shareholders at the SGM.

Once a successful bidder for the entire issued share capital of Ease Triumph and the Shareholder’s Loan has been identified, the Company will have an unconditional obligation under the rules of CBEE to enter into the sale and purchase agreement with such a successful bidder and shall, subject to the payment of the consideration and the interest in relation to the Shareholder’s Loan (up to the actual repayment date before Completion) by the successful bidder, complete the transaction contemplated thereunder. The Company will not be able to include the approval of the Shareholders which is required under Chapter 14 of the Listing Rules as a condition precedent to the completion of the Proposed Disposal under the rules of CBEE. Accordingly, the Board will seek the Shareholders’ advance approval for the grant of the Proposed Mandate at the SGM.

REASONS AND BENEFITS FOR THE PROPOSED DISPOSAL AND THE PROPOSED MANDATE

As set out in the Company’s announcement dated 7 September 2016, the Company has been considering a series of business and asset reorganisation proposals which include the acquisition of certain assets and the disposal of the Group’s real estate development business in the PRC. The proposed reorganisation is part of a wider restructuring campaign being implemented by the State-owned Assets Supervision and Administration Commission of the State Council, according to which Aviation Industry was requested to dispose of all its real estate business.

After the completion of acquisition of Motto Investment Limited, details of which can be found in the circular of the Company dated 29 December 2017 and the announcement of the Company dated 7 February 2018, the Company has changed its business focus to the worldwide general aviation aircraft piston engines market. The Directors are confident that such a change is beneficial to the Group’s business performance and is in line with its development strategy in the long run. Given the incompatibility of the business natures of the PRC real estate market and the general aviation aircraft

— 9 —

LETTER FROM THE BOARD

piston engines market, the Directors believe the Proposed Disposal would streamline the Group’s operations and enhance its focus on the new core business. Further, the Proposed Disposal would bring a considerable sum of proceeds for the Group to settle part of the outstanding consideration for the abovementioned acquisition and to enhance the working capital position.

The Board has considered engaging real estate agencies for the disposal of the property assets of the Group. However, the Board is of the view that conducting the Proposed Disposal through CBEE could attract more potential bidders and maximise the consideration of the Proposed Disposal, which would be in the interest of the Company and the Shareholders as a whole. Also, the transaction costs and expenses through CBEE would be much lower than the cost of engagement of a real estate agency. As at the date of this announcement, the Company has contacted several potential bidders who are interested in the Proposed Disposal.

The Company has consulted CBEE regarding the requirements and tendering procedures applicable to the Proposed Disposal and CBEE indicated that a tender conditional on shareholders’ approval will not be acceptable under the rules of CBEE. Under such a restriction, the Company would not be able to conduct the Proposed Disposal under the public tender process unless a prior mandate is sought.

The Company is of the view that the following appropriate measures are in place to safeguard the interests of the Company and its Shareholders as a whole for the Proposed Disposal:

a. the major terms and conditions in relation to the Proposed Disposal, except the final consideration, would be fixed and publicly disclosed in this circular and in the public tender;
b. a minimum bidding price would be set for the Proposed Disposal, meaning that the Company would be protected against any unfavourable bidding results which might not be in the interest of the Company and its Shareholders as a whole; and
c. the Proposed Mandate would be subject to Shareholders’ approval.

USE OF PROCEEDS AND FINANCIAL IMPACT OF THE PROPOSED DISPOSAL

Based on the minimum bidding price, the gross proceeds from the Proposed Disposal are expected to be the aggregate of approximately RMB1,160 million and USD104 million and net proceeds (after deducting related tax expenses, transaction cost and professional expenses) are expected to be the aggregate of approximately RMB1,110 million and USD104 million. The Group intends to use: (i) approximately HK$800 million to settle part of the consideration of the acquisition of Motto Investment Limited; (ii) approximately RMB433 million for the repayment of interest-bearing liabilities of the Group; and (iii) the remaining of the proceeds for general working capital purpose.

— 10 —

LETTER FROM THE BOARD

The Proposed Disposal would give rise to a gain of approximately HK$516.6 million (net of income tax and estimated transaction costs) had it been completed on 31 December 2017, details of which are set out in Note 4 of Appendix IV to this circular. The actual gain or loss as a result of the Proposed Disposal to be recorded by the Company is subject to any changes to the carrying amount of the Ease Triumph Group at Completion and the final consideration.

Possible effect on earnings

For the year ended 31 December 2017, the Group’s loss for the year attributable to owners of the parent was approximately HK$288.5 million. As presented in the unaudited pro forma consolidated statement of profit or loss of the Remaining Group as set out in Appendix IV to this circular, had the Proposed Disposal been completed on 1 January 2017, the Remaining Group’s profit for the year attributable to owners of the parent would have been approximately HK$228.1 million due to pro-forma adjustments of approximately HK$516.6 million, details of which are set out in Appendix IV to this circular.

Possible effect on net assets value

As of 31 December 2017, the Group’s total assets and net assets value were approximately HK$4,384.1 million and HK$2,271.9 million respectively. As illustrated in the unaudited pro forma consolidated statement of financial position of the Remaining Group set out in Appendix IV to this circular, had the Proposed Disposal been completed on 31 December 2017, total assets of the Remaining Group would have been approximately HK$2,386.0 million and net assets value of the Remaining Group would have been approximately HK$2,342.5 million.

The unaudied financial information regarding the Ease Triumph Group for the years ended 31 December 2015, 2016 and 2017 is set out in Appendix II to this circular. For further information regarding the financial implications of the Proposed Disposal on the Group, please refer to the unaudited pro forma financial information of the Remaining Group prepared pursuant to Rule 4.29 of the Listing Rules, as set out in Appendix IV to this circular.

INFORMATION ABOUT THE GROUP

The Company is a company incorporated in Bermuda with limited liability, the shares of which are listed on the main board of the Stock Exchange (stock code: 232). The Group’s current principal business activities include: (a) property development and investment business; and (b) general aviation aircraft piston engine business.

For the year ended 31 December 2017, the Group’s property development and investment business recorded a revenue of HK$1,520,710,000 and a gross loss of HK$185,812,000. The main reason for the loss was due to the loss of HK$296,848,000 arisen from the write-down of properties under development and completed properties held for sale to net realisable value, which was included in the cost of sales. As at 31 December 2017, the Group’s properties under development and completed properties held for sale amounted to HK$2,937,160,000 and investment properties amounted to HK$368,639,000. Please refer to the annual report of the Company for the year ended 31 December 2017 published on 6 April 2018 for details of the latest development of the Group’s existing business.

— 11 —

LETTER FROM THE BOARD

On 7 February 2018, the Company completed the acquisition of Motto Investment Limited’s entire issue share capital and the shareholder’s loan notes owed to AVIC International (HK) Group Limited (“Acquisition”). After the completion of the Acquisition and up to the date of this circular, the Group has been endeavouring to integrate the newly acquired business into the Group on the aspects of culture, management, internal control and financial reporting systems. Also, the Group is in the process of compiling and reviewing the latest operation and financial status of the newly acquired business and is in the process of upgrading its existing engine products line, the Group is committed to maintain the leading position of in the market of the general aviation aircraft piston engines. The Directors are not aware of any material change in the operation of Motto Investment Limited and its subsidiaries as disclosed in the circular of the Company dated 29 December 2017.

As disclosed in the section headed “Reasons and Benefits for the Proposed Disposal and the Proposed Mandate”, the Company has been considering a series of business and asset reorganisation proposals which include the acquisition of certain assets and the disposal of the Group’s real estate development business in the PRC as part of a wider restructuring campaign being implemented by State-owned Assets Supervision and Administration Commission of the State Council. The acquisition of Motto Investment Limited was completed on 7 February 2018 and the Proposed Disposal is being carried out by the Company as the final step of the reorganisation.

FINANCIAL AND TRADING PROSPECTS OF THE REMAINING GROUP

After Completion, Ease Triumph will cease to be a subsidiary of the Company and its financial results will no longer be consolidated into the financial statements of the Group. The Remaining Business of the Remaining Group will be mainly the general aviation aircraft piston engine business.

The prospects of the Remaining Group is encouraged by the following factors: (i) its longstanding manufacturing heritage in the piston aircraft engine manufacturing industry; (ii) its diversified product portfolio of engines for a broad range of aircrafts; (iii) its strong research and development capacity; (iv) its presence in key markets; and (v) support from its controlling shareholder, Aviation Industry, which is a PRC state-owned aerospace and defence company.

The Company intends to maintain the Remaining Group as a leading international aviation piston engine supplier by (i) retaining its current management team; (ii) consolidating its market position in the US market; (iii) establishing its presence in the PRC and creating a strong brand name among Chinese OEMs and end users; (iv) focusing on technology development and introducing new products regularly; and (v) optimising its efficiency on sales, product and sourcing. The management of the Company expects the Remaining Group’s businesses will continue to flourish in the foreseeable future.

LISTING RULES IMPLICATIONS

As the highest applicable percentage ratio calculated pursuant to Chapter 14 of the Listing Rules in respect of the Proposed Disposal exceeds 75%, the Proposed Disposal, if materialised, will constitute a very substantial disposal for the Company and is subject to announcement, circular and shareholders’ approval requirements under Chapter 14 of the Listing Rules.

— 12 —

LETTER FROM THE BOARD

The Company will report on the progress of the Proposed Disposal in its relevant interim report and annual report and make further announcements when any significant disposal under the Proposed Mandate has been made.

THE SGM

Set out on pages SGM-1 to SGM-2 of this circular is a notice convening the SGM to be held at Forum Room 1, Basement 2, Regal Hongkong Hotel, 88 Yee Wo Street, Causeway Bay, Hong Kong on Friday, 15 June 2018 at 11:00 a.m..

At the SGM, ordinary resolution(s) for approving the Proposed Disposal and the Proposed Mandate will be proposed for the Shareholder’s approval.

The resolution(s) will be voted by way of poll at the SGM. As at the Latest Practicable Date, no Shareholder has material interest in the Proposed Disposal and the Proposed Mandate (other than being a Shareholder) and therefore no Shareholder is required to abstain from voting on the relevant resolution(s) at the SGM.

A form of proxy for use at the SGM is enclosed with this circular. Whether or not you are able to attend the SGM, please complete the form of proxy in accordance with the instructions printed thereon and return the same to the branch share registrar and transfer office of the Company in Hong Kong, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong as soon as possible and in any event by not less than 48 hours before the time appointed for the holding of the SGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting at the SGM should you so wish and in such event, the instrument appointing a proxy shall be deemed to be revoked.

CLOSURE OF REGISTER OF MEMBERS

The register of members of the Company will be closed from 12 June 2018 to 15 June 2018, both day inclusive, during which period no transfer of Shares will be registered, in order to determine the entitlement to attend and vote at the SGM. In order to be entitled to attend and vote at the SGM, unregistered holders of Shares should ensure that all transfers of Shares accompanied by the relevant share certificates and properly completed transfer forms must be lodged for registration with the Hong Kong branch share registrar and transfer office, Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong no later than 4:30 p.m., 11 June 2018.

RECOMMENDATION

The Directors are of the view that the Proposed Disposal and the Proposed Mandate are fair and reasonable and in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend the Shareholders to vote in favour of the ordinary resolution(s) as set out in the notice of the SGM.

— 13 —

LETTER FROM THE BOARD

ADDITIONAL INFORMATION

Your attention is also drawn to the information set out in the appendices to this circular.

Yours faithfully, For and on behalf of the Board AVIC International Holding (HK) Limited Liu Hongde

Chairman

— 14 —

FIANANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. FINANCIAL INFORMATION OF THE GROUP

Details of the published financial information of the Group for each of the three years ended 31 December 2015, 2016 and 2017 were disclosed in the following documents which have been published on the websites of the Stock Exchange (www.hkexnews.hk) and the Company (www.avic.com.hk).

Annual report of the Company for the year ended 31 December 2017 (pages 74 to 232);
http://www.hkexnews.hk/listedco/listconews/SEHK/2018/0406/LTN20180406681.pdf
Annual report of the Company for the year ended 31 December 2016 (pages 64 to 224); and

http://www.hkexnews.hk/listedco/listconews/SEHK/2017/0407/LTN201704071006.pdf

Annual report of the Company for the year ended 31 December 2015 (pages 48 to 200).

http://www.hkexnews.hk/listedco/listconews/SEHK/2016/0408/LTN20160408654.pdf

2. INDEBTEDNESS STATEMENT OF THE GROUP

Borrowings

As at the close of business on 31 March 2018, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular, the Group had (i) unguaranteed bank borrowings of approximately HK$46,568,000; (ii) an unsecured loan from an intermediate holding company of the Group of approximately HK$541,036,000; and (iii) unsecured loans from a non-controlling shareholder of a subsidiary of the Group of approximately HK$974,766,000.

As at the close of business on 31 March 2018, the Group had total available and unutilised banking facilities of approximately HK$94,182,000.

Contingent liabilities

As at the close of business on 31 March 2018, the Group had guarantee given to banks for housing loans extended by the banks to the purchasers of the Group’s properties for a period from the date of loans being granted to the purchasers up to the date of issuance of property title certificates to the purchasers of approximately HK$132,014,000.

Save as disclosed above, the Group did not have any other outstanding mortgages, charges, debentures or other loan capital, bank overdrafts or loan, other similar indebtedness, liabilities under acceptance or acceptance credits, guarantees or other material contingent liabilities as at the close of business on 31 March 2018.

— 15 —

FIANANCIAL INFORMATION OF THE GROUP

APPENDIX I

3. WORKING CAPITAL

The Directors, after due and careful consideration, are of the opinion that, after taking into account the financial resources available, including internally generated funds, the available credit loan facilities and the available shareholder’s loans, the Group has sufficient working capital for its requirements for at least twelve months from the date of this circular.

4. MATERIAL ADVERSE CHANGE

The Directors confirmed that there was no material adverse change in the financial or trading position of the Group since 31 December 2017 (being the date to which the latest published audited consolidated financial statements of the Group have been made up) to the Latest Practicable Date.

— 16 —

APPENDIX II

UNAUDITED FINANCIAL INFORMATION OF THE DISPOSAL GROUP

Set out below are the unaudited consolidated financial information of Ease Triumph International Limited (the “Ease Triumph”) and its subsidiaries (collectively the “Ease Triumph Group”) which comprises the unaudited consolidated statements of financial position of the Ease Triumph Group as at 31 December 2015, 31 December 2016 and 31 December 2017 and the unaudited consolidated statements of profit or loss and other comprehensive income, unaudited consolidated statements of changes in equity and unaudited consolidated statements of cash flows of the Ease Triumph Group for the years then ended, and certain explanatory notes (altogether the “Unaudited Financial Information”).

The Unaudited Financial Information has been prepared in accordance with paragraph 68(2)(a)(i) of Chapter 14 of the Rules Governing the Listing of Securities on the Stock Exchange and the bases of preparation and presentation as set out in Note 2 to the Unaudited Financial Information. The Unaudited Financial Information is prepared by the Directors solely for the purpose of inclusion in this circular in connection with the Proposed Disposal. The Ease Triumph’s auditor, Ernst & Young, was engaged to review the Unaudited Financial Information of the Ease Triumph Group as set out on pages 18 to 25 of this circular in accordance with Hong Kong Standard on Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” and with reference to Practice Note 750 “Review of Financial Information under the Hong Kong Listing Rules for a Very Substantial Disposal” issued by the Hong Kong Institute of Certified Public Accountants.

A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable the auditor to obtain assurance that the auditor would become aware of all significant matters that might be identified in an audit. Accordingly, the auditor does not express an audit opinion. Based on their review on the Unaudited Financial Information, nothing has come to their attention that causes them to believe that the Unaudited Financial Information of the Ease Triumph Group is not prepared, in all material respects, in accordance with the basis of preparation and presentation as set out in Note 2.

— 17 —

UNAUDITED FINANCIAL INFORMATION OF THE DISPOSAL GROUP

APPENDIX II

UNAUDITED CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the years ended 31 December 2015, 2016 and 2017

REVENUE
Cost of sales
Gross profit
Other income and gains
Selling and distribution expenses
Administrative and other operating expenses
Fair value gains/(losses) on investment properties
Finance costs
PROFIT/(LOSS) BEFORE TAX
Income tax credit/(expense)
PROFIT/(LOSS) FOR THE YEAR
Attributable to:
Owners of the parent
Non-controlling interests
OTHER COMPREHENSIVE INCOME
Other comprehensive income to be reclassified to profit
and loss in subsequent periods:
Exchange differences on translation of foreign
operations
OTHER COMPREHENSIVE INCOME FOR THE
YEAR, NET OF TAX
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
Attributable to:
Owners of the parent
Non-controlling interests

Year ended 31 December
2015
2016
2017
HK$’000
HK$’000
HK$’000
(Unaudited)
(Unaudited)
(Unaudited)
2,147,344
102,786
1,520,710
(1,754,499)
(64,490)
(1,402,911)
392,845
38,296
117,799
17,899
6,779
2,350
(22,998)
(31,694)
(26,130)
(14,460)
(23,603)
(36,663)
45,487
(34,047)
33,103
(47,638)
(77)
(38,761)
371,135
(44,346)
51,698
(157,097)
4,091
(91,313)
214,038
(40,255)
(39,615)
79,747
(22,921)
(74,657)
134,291
(17,334)
35,042
214,038
(40,255)
(39,615)
(55,544)
(85,803)
69,215
(55,544)
(85,803)
69,215
158,494
(126,058)
29,600
41,949
(81,019)
(28,951)
116,545
(45,039)
58,551
158,494
(126,058)
29,600

— 18 —

UNAUDITED FINANCIAL INFORMATION OF THE DISPOSAL GROUP

APPENDIX II

UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

As at 31 December 2015, 2016 and 2017

NON-CURRENT ASSETS Property, plant and equipment Investment properties Trade receivable Due from a fellow subsidiary Deferred tax assets Total non-current assets CURRENT ASSETS Properties under development and completed properties held for sale Trade receivables Due from fellow subsidiaries Due from an intermediate holding company Prepayments, deposits and other receivables Prepaid taxes Cash and cash equivalents Total current assets CURRENT LIABILITIES Due to non-controlling shareholders Due to intermediate holding companies Due to fellow subsidiaries Due to the immediate holding company Loans from fellow subsidiaries Trade payables Other payables and accruals Customer deposits Tax payable Total current liabilities NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES	As 2015 HK$’000 (Unaudited) — 373,425 21,628 3,178 31,316 429,547 3,437,110 135,498 46,016 — 17,436 12,156 107,644 3,755,860 64,301 774,445 5,693 — 205,988 78,018 20,494 248,310 28,624 1,425,873 2,329,987 2,759,534	at 31 December 2016 2017 HK$’000 HK$’000 (Unaudited) (Unaudited) — — 315,866 368,639 20,178 — — — 40,918 22,862 376,962 391,501 3,522,557 2,632,144 69,442 76,977 10,960 1,664 5,282 — 32,397 3,938 16,186 4,176 239,634 186,862 3,896,458 2,905,761 88,444 138,852 — 16,681 44,101 5,492 760,281 805,272 586,592 366,864 40,088 121,319 14,866 27,717 920,238 217,981 — 42,509 2,454,610 1,742,687 1,441,848 1,163,074 1,818,810 1,554,575

— 19 —

UNAUDITED FINANCIAL INFORMATION OF THE DISPOSAL GROUP

APPENDIX II

NON-CURRENT LIABILITIES Loans from an intermediate holding company Loans from a fellow subsidiary Interest-bearing bank borrowing Total non-current liabilities Net assets EQUITY Equity attributable to the owner of the parent Share capital Reserves Non-controlling interests Total equity	As 2015 HK$’000 (Unaudited) 509,581 1,658,683 — 2,168,264 591,270 250,000 (83,651) 166,349 424,921 591,270	at 31 December 2016 2017 HK$’000 HK$’000 (Unaudited) (Unaudited) 475,419 503,550 648,045 556,213 230,134 — 1,353,598 1,059,763 465,212 494,812 250,000 250,000 (164,670) (193,621) 85,330 56,379 379,882 438,433 465,212 494,812

— 20 —

APPENDIX II

UNAUDITED FINANCIAL INFORMATION OF THE DISPOSAL GROUP

Exchange Non-	fluctuation Accumulated Controlling	Share capital Reserve Fund reserve losses Total interests* Total equity	HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000	(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)	At 1 January 2015 250,000 — 1,668 (127,268) 124,400 308,376 432,776	Profit for the year — — — 79,747 79,747 134,291 214,038	Other comprehensive income for the year:	Exchange differences on translation of foreign operations — — (37,798) — (37,798) (17,746) (55,544)	Total comprehensive income for the year — — (37,798) 79,747 41,949 116,545 158,494	Transfer to reserve fund — 10,595 — (10,595) — — —	At 31 December 2015 and 1 January 2016 250,000 10,595 (36,130) (58,116) 166,349 424,921 591,270	Loss for the year — — — (22,921) (22,921) (17,334) (40,255)	Other comprehensive income for the year:	Exchange differences on translation of foreign operations — — (58,098) — (58,098) (27,705) (85,803)	Total comprehensive income for the year — — (58,098) (22,921) (81,019) (45,039) (126,058)	Transfer to reserve fund — 121 — (121) — — —	At 31 December 2016 and 1 January 2017 250,000 10,716 (94,228) (81,158) 85,330 379,882 465,212	Loss for the year — — — (74,657) (74,657) 35,042 (39,615)	Other comprehensive income for the year:	Exchange differences on translation of foreign operations — — 45,706 — 45,706 23,509 69,215	Total comprehensive income for the year — — 45,706 (74,657) (28,951) 58,551 29,600	Transfer to reserve fund — 5,150 — (5,150) — — —	At 31 December 2017 250,000 15,866 (48,522) (160,965) 56,379 438,433 494,812	* These reserve accounts comprise the consolidated negative reserves of HK$83,651,000, HK$164,670,000 and HK$193,621,000 in the unaudited consolidated statements of

— 21 —

UNAUDITED FINANCIAL INFORMATION OF THE DISPOSAL GROUP

APPENDIX II

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years ended 31 December 2015, 2016 and 2017

CASH FLOWS FROM OPERATING ACTIVITIES
Profit/(loss) before tax
Adjustments for:
Finance costs
Bank interest income
Fair value losses/(gains) on investment properties
Write-down of properties under development and
properties held for sale to net realisable value
Decrease/(increase) in properties under development and
completed properties held for sale
Decrease/(increase) in trade receivables
Decrease/(increase) in prepayments, deposits and other
receivables
Decrease/(increase) in amounts due from fellow
subsidiaries
Increase/(decrease) in trade payables
Increase/(decrease) in other payables and accruals
Increase/(decrease) in customer deposits
Cash generated from operations
Overseas taxes paid
Net cash flows from operating activities
CASH FLOW FROM AN INVESTING ACTIVITY
Bank interest received and cash flow from an investing
activity

Year ended 31 December
2015
2016
2017
HK$’000
HK$’000
HK$’000
(Unaudited)
(Unaudited)
(Unaudited)
371,135
(44,346)
51,698
47,638
77
38,761
(769)
(1,789)
(2,341)
(45,487)
34,047
(33,103)
—
—
39,183
372,517
(12,011)
94,198
1,452,440
(166,687)
1,092,306
(157,126)
56,626
17,165
(43,897)
(16,156)
30,036
(49,194)
35,052
9,950
78,018
(32,528)
79,219
(14,398)
(4,209)
12,127
(1,454,289)
689,909
(748,686)
184,071
549,996
586,315
(15,616)
(39,671)
(16,156)
168,455
510,325
570,159
769
1,789
2,341

— 22 —

UNAUDITED FINANCIAL INFORMATION OF THE DISPOSAL GROUP

APPENDIX II

CASH FLOWS FROM FINANCING ACTIVITIES
New bank loans
Repayment of bank loans
New loans from an intermediate holding company
Repayment of loans from fellow subsidiaries
Increase in amounts due to non-controlling shareholders
of a subsidiary
Movement in balances with intermediate holding
companies
Increase in an amount due to the immediate holding
company
Increase/(decrease) in amounts due to fellow
subsidiaries
Interest paid
Net cash flows used in financing activities
NET INCREASE/(DECREASE) IN CASH AND CASH
EQUIVALENTS
Cash and cash equivalents at beginning of year
Effect of foreign exchange rate changes, net
CASH AND CASH EQUIVALENTS AT END OF YEAR
ANALYSIS OF BALANCE OF CASH AND CASH
EQUIVALENTS
Cash and cash equivalents

Year ended 31 December
2015
2016
2017
HK$’000
HK$’000
HK$’000
(Unaudited)
(Unaudited)
(Unaudited)
37,964
230,134
—
(675,148)
—
(230,134)
509,581
—
—
(443,090)
(495,008)
(373,852)
16,111
28,817
45,946
774,445
(13,198)
—
—
—
44,991
6,049
37,482
(37,732)
(389,719)
(161,172)
(88,593)
(163,807)
(372,945)
(639,374)
5,417
139,169
(66,874)
106,595
107,644
239,634
(4,368)
(7,179)
14,102
107,644
239,634
186,862
107,644
239,634
186,862

— 23 —

UNAUDITED FINANCIAL INFORMATION OF THE DISPOSAL GROUP

APPENDIX II

NOTES TO THE UNAUDITED FINANCIAL INFORMAITON

1. General information

Ease Triumph International Limited (the “Ease Triumph”) was incorporated in Hong Kong and principally engaged in investment holding. Particulars of the Ease Triumph’s principal subsidiaries are as follows:

			Percentage	Percentage
			of equity
	Place of	Issued		directly
	incorporation/	ordinary/	attributable
	registration and	registered	to	the Ease	Principal
Name	business	share capital		Triumph	activities
重慶航龍置業有限公司	PRC/	US$62,530,000	— 99		Property
(“重慶航龍”)	Mainland China				developer of
					residential and
					commercial
					projects
大連航華置業有限公司	PRC/	US$96,000,000	—	52.08	Property
(“大連航華”)	Mainland China				developer of
					residential and
					commercial
					projects

On 17 April, 2018, the board of directors of AVIC International Holding (HK) Limited (the “Issuer”) resolved to dispose of the entire issued share capital of the Ease Triumph and the outstanding shareholder’s loans owed by the Ease Triumph to the Issuer by way of a public tender. Upon completion of the Proposed Disposal, the Ease Triumph and its subsidiaries (the “Ease Triumph Group”) will cease to be subsidiaries of the Issuer.

2. Basis of preparation and presentation of the financial information

The unaudited financial information of the Ease Triumph Group (the “Unaudited Financial Information”) has been prepared in accordance with paragraph 68(2)(a)(i) of Chapter 14 of the Rules Governing the Listing of Securities on the Stock Exchange, and solely for the purposes of inclusion in this circular to be issued by the Issuer in connection with the Proposed Disposal.

The Unaudited Financial Information of the Ease Triumph Group has been prepared on the historical cost basis, except for investment properties which are measured at fair value. The Unaudited Financial Information of the Ease Triumph Group has been prepared using the same accounting policies adopted by the Issuer in the preparation of the consolidated financial statements of the Issuer

— 24 —

UNAUDITED FINANCIAL INFORMATION OF THE DISPOSAL GROUP

APPENDIX II

for years ended 31 December 2015, 2016 and 2017, which conform with the Hong Kong Financial Reporting Standards issued by the Hong Kong Institutes of Certified Public Accountants (the “HKICPA”). The Unaudited Financial Information is presented in Hong Kong dollar (HK$) and all values are rounded to the nearest thousand (HK$’000) except when otherwise indicated.

The Unaudited Financial Information of the Ease Triumph Group does not contain sufficient information to constitute a complete set of financial statements as defined in Hong Kong Accounting Standard 1 (Revised) “Presentation of Financial Statements” issued by the HKICPA nor an interim report as defined in Hong Kong Accounting Standard 34”Interim Financial Reporting” issued by the HKICPA.

— 25 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF THE REMAINING GROUP

The management discussion and analysis of the Remaining Group for years ended 31 December 2015, 2016 and 2017 is set out below. Upon completion of the Proposed Disposal, the Ease Triumph Group will cease to be a subsidiary of the Company, and the Company will no longer have any ownership interest in the Ease Triumph Group. The financial data in respect of the Remaining Group, for the purpose of this circular, is derived from the audited consolidated financial statements of the Company for each of the financial years ended 31 December 2017 (“ FY2017 ”), 31 December 2016 (“ FY2016 ”) and 31 December 2015 (“ FY2015 ”).

(i) FY 2017

During FY2017, the Remaining Group’s revenue amounted to nil (FY2016: Nil).

The Remaining Group’s result attributable to owners of the parent for FY2017 was a loss of approximately HK$68.7 million (FY2016: HK$659.4 million). The improvement in loss position was mainly attributable to: (1) the decrease in the share of losses of the joint venture and associates by approximately HK$199.6 million from approximately HK$218.4 million in FY2016 to approximately HK$18.8 million in FY2017, (2) the decrease in the fair value loss on an equity investment at fair value through profit or loss by approximately HK$191.2 million from approximately HK$198.1 million in FY2016 to approximately HK$6.9 million in FY2017, (3) the decrease in the fair value loss on derivative financial instruments by approximately HK$97.3 million from approximately HK$108.6 million in FY2016 to approximately HK$11.3 million in FY2017, (4) a one-off gain on disposal of convertible loans of approximately HK$87.2 million recorded, and (5) the decrease in the impairment of available-for-sale investments by approximately HK$66.8 million from approximately HK$134.1 million in FY2016 to approximately HK$67.3 million in FY2017.

Funding and treasury policy

The Remaining Group’s funding and treasury policy intended to sustain a diversified and balanced debt and financing structure. The Remaining Group endeavoured to monitor its cash flow position and debt, and to improve the cost-efficiency of funding initiatives by its centralised treasury function. In order to maintain financial flexibility and adequate liquidity for the Remaining Group’s operations and growth plans, the Remaining Group had built a solid base of funding resources and would keep exploring cost-efficient ways of financing.

Operating Segment Information

During FY2017, the Remaining Group did not generate any revenue.

Liquidity and financial resources

As at 31 December 2017, the Remaining Group had total assets of approximately HK$1,609.9 million and liabilities of approximately HK$43.6 million.

— 26 —

MANAGEMENT DISCUSSION AND ANALYSIS OF THE REMAINING GROUP

APPENDIX III

Cash position

As at 31 December 2017, the Remaining Group’s bank and cash balances were approximately HK$440.3 million.

Borrowings and Gearing ratio

As at 31 December 2017, the Remaining Group’s equity attributable to owners of the parent amounted to approximately HK$1,566.4 million. The Remaining Group did not have any interest-bearing debt. The Remaining Group’s gearing ratio, calculated on the basis of the interest-bearing debts as a percentage of equity attributable to owners of the parent plus the interest-bearing debts, was 0%.

Charge on assets

As at 31 December 2017, the Remaining Group did not have any charge on assets.

Capital commitments

As at 31 December 2017, the Remaining Group did not have any capital commitments.

Contingent liabilities

As at 31 December 2017, the Remaining Group did not have any contingent liabilities.

Exchange risk exposure and hedging

The Remaining Group’s foreign currency exposures primarily arose from the transactions made by operating units in Renminbi. In view of the fact that the Remaining Group tried to match its assets and liabilities with the same currency, the Remaining Group’s exposure to foreign currency risk was minimal and no hedge activity was considered necessary.

Significant investments and material acquisitions and/or disposals

On 19 September 2017, the Company (as purchaser) entered into an acquisition agreement with AVIC International (HK) Group Limited (as seller) and AVIC International Holding Corporation (as seller guarantor) as regards the acquisition of 100% equity interest of Motto Investment Limited and the Shareholder’s loan owed by it to AVIC International (HK) Group Limited. Details of the said acquisition can be found in the circular of the Company dated 29 December 2017.

Save for the above disclosed, the Remaining Group did not have any significant investments and/or material acquisitions or disposals of subsidiaries and associated companies during FY2017.

— 27 —

MANAGEMENT DISCUSSION AND ANALYSIS OF THE REMAINING GROUP

APPENDIX III

Future Plans for Material Investments and Acquisition of Capital Assets

Save for the acquisition of Motto Investment Limited, the Remaining Group did not have any future plan for material investments nor addition of capital assets during FY2017.

Staff and remuneration policy

As at 31 December 2017, the Remaining Group had approximately 10 employees. The staff cost (excluding directors’ remunerations) of the Remaining Group was approximately HK$6.1 million. The Remaining Group’s remuneration policies are formulated based on the performance of individual employees and are reviewed regularly.

(ii) FY 2016

During FY2016, the Remaining Group’s revenue from continuing operations amounted to nil (FY2015: HK$7.6 million). The decrease in revenue was mainly because the trading business segment recorded no revenue in FY2016. During FY2016, the Remaining Group disposed of 浙江東陽金牛針織製衣有限公司 (“Zhejiang Dongyang Jinniu”), a 51%-owned subsidiary, to an independent third party at a cash consideration of approximately HK$5.7 million. Zhejiang Dongyang Jinniu engaged in the production and distribution of knitting and textile products, knitted fabrics and clothing. The Remaining Group decided to dispose of this subsidiary and cease its knitting and textile business because it had been loss-making in recent years. In FY2016, the revenue of this discontinued operation amounted to approximately HK$18.6 million (FY2015: HK$43.6 million).

The Remaining Group’s result attributable to owners of the parent for FY2016 was a loss of approximately HK$659.4 million (FY2015: profit of approximately HK$55.3 million), which arose mainly from the fair value losses on an equity investment at fair value through profit or loss and derivative financial instruments in an aggregate of approximately HK$306.7 million (FY2015: gain of approximately HK$26.9 million), as well as the share of losses of the joint venture and associates in an aggregate of approximately HK$218.4 million (FY2015: HK$68.6 million) and the impairment of an available-for-sale investment of approximately HK$134.1 million (FY2015: HK$311.1 million).

Funding and treasury policy

Operating Segment Information

During FY2016, the Remaining Group disposed of the knitting and textile business and the Remaining Group had no other segment in operation that had revenue.

— 28 —

MANAGEMENT DISCUSSION AND ANALYSIS OF THE REMAINING GROUP

APPENDIX III

Liquidity and financial resources

As at 31 December 2016, the Remaining Group had total assets of approximately HK$1,680.5 million and liabilities of approximately HK$40.9 million.

Cash position

As at 31 December 2016, the Remaining Group’s bank and cash balances were approximately HK$366.3 million.

Borrowings and gearing ratio

As at 31 December 2016, the Remaining Group’s equity attributable to owners of the parent amounted to approximately HK$1,639.6 million. The Remaining Group did not have any interest-bearing debt. The Remaining Group’s gearing ratio, calculated on the basis of the interest-bearing debts as a percentage of equity attributable to owners of the parent plus the interest-bearing debts, was 0%.

Charge on assets

As at 31 December 2016, the Remaining Group did not have any charge on assets.

Capital commitments

As at 31 December 2016, the Remaining did not have any capital commitments.

Contingent liabilities

As at 31 December 2016, the Remaining Group did not have any contingent liabilities.

Exchange risk exposure and hedging

The Remaining Group’s foreign currency exposures primarily arise from the transactions made by operating units in Renminbi. In view of the fact that the Remaining Group tries to match its assets and liabilities with the same currency, the Remaining Group’s exposure to foreign currency risk is minimal and no hedge activity were considered necessary.

Significant investments and material acquisitions and/or disposals

The Remaining Group did not have any significant investments and material acquisitions and/or disposals of subsidiaries and associated companies during FY2016.

— 29 —

MANAGEMENT DISCUSSION AND ANALYSIS OF THE REMAINING GROUP

APPENDIX III

Staff and remuneration policy

As at 31 December 2016, the Remaining Group had approximately 8 employees. The staff cost (excluding directors’ remunerations) of the Remaining Group was approximately HK$4.0 million. The Remaining Group’s remuneration policies are based on the performance of individual employees and are reviewed regularly.

(iii) FY 2015

During FY2015, the Remaining Group’s revenue from continuing operations amounted to approximately HK$7.6 million (FY2014: HK$17.4 million). The decrease in revenue was mainly attributable to the decrease in the revenue from the trading business segment. The revenue from the discontinued operation (i.e. from Zhejiang Dongyang Jinniu) amounted to approximately HK$43.6 million (FY2014: HK$53.4 million). It was mainly attributable to the weak condition of the knitting and textile industry as a result of the influence of macro economy in FY2015.

The Remaining Group’s result attributable to owners of the parent for FY2015 was a profit of approximately HK$55.3 million (FY2014 : loss of approximately HK$142.0 million). The improved result was mainly because the Remaining Group recorded a one-off net gain on deemed disposal of associates of approximately HK$433.4 million (FY2014: HK$0.7 million). Nevertheless, a provision for impairment of an available-for-sale investment of approximately HK$311.1 million (FY2014: nil) was made due to the significant fall in stock market.

Funding and treasury policy

Operating Segment Information

During FY2015, as the knitting and textile business had been reclassified to a discontinued operation, the Remaining Group had only one operating segment, the trading business segment, which engaged in the trading of raw materials and auxiliary materials. For FY2015, the trading business segment recorded a profit of approximately HK$0.2 million.

Liquidity and financial resources

As at 31 December 2015, the Remaining Group had total assets of approximately HK$2,380.5 million and liabilities of approximately HK$99.0 million.

— 30 —

MANAGEMENT DISCUSSION AND ANALYSIS OF THE REMAINING GROUP

APPENDIX III

Cash position

As at 31 December 2015, the Remaining Group’s bank and cash balances and time deposits were approximately HK$366.0 million.

Borrowings and gearing ratio

As at 31 December 2015, the Remaining Group’s equity attributable to owners of the parent amounted to approximately HK$2,303.6 million. The Remaining Group’s interest-bearing debts, including interest-bearing bank borrowings of approximately HK$38.0 million, are mainly denominated in Renminbi and arranged on a fixed rate basis. The Remaining Group’s gearing ratio, calculated on the basis of the interest-bearing debts as a percentage of equity attributable to owners of the parent plus the interest-bearing debts, was 2%.

Charge on assets

As at 31 December 2015, the following assets were pledged to secure the Remaining Group’s banking facilities:

(i) the Remaining Group’s building in Mainland China with net book value of approximately HK$3.1 million;
(ii) the Remaining Group’s leasehold land in Mainland China with net book value of approximately HK$2.9 million; and
(iii) certain of the Remaining Group’s short term time deposits amounting to approximately HK$0.4 million.

Capital commitments

On 4 January 2006, Sino-Aviation Investments Limited (“Sino-Aviation Investments”), a wholly-owned subsidiary of the Company, entered into a joint venture agreement (the “JV Agreement”) with AVIC International Holding Corporation (“AVIC International”) and Chengdu Aircraft Industry (Group) Corporation Ltd. (“Chengdu Aircraft”) for the establishment of a joint venture to engage in the research and development, design and manufacture of parts and components for commercial aircraft, and provision of related technical services. According to the JV Agreement, the total registered capital of the joint venture is RMB100 million (equivalent to approximately HK$120 million), of which 40%, 15% and 45% respectively, will be contributed by Sino-Aviation Investments, AVIC International and Chengdu Aircraft. The JV Agreement is conditional upon (i) the internal approval obtained by each of the three parties; and (ii) the approval from the relevant PRC authorities. As at 31 December 2015, the JV Agreement has not become effective as the conditions stated above have not been fulfilled.

— 31 —

MANAGEMENT DISCUSSION AND ANALYSIS OF THE REMAINING GROUP

APPENDIX III

Contingent liabilities

As at 31 December 2015, the Remaining Group did not have any contingent liabilities.

Exchange risk exposure and hedging

Significant investments and material acquisitions and/or disposals

The Remaining Group did not have any significant investments and material acquisitions and/or disposals of subsidiaries and associated companies during FY2015.

Staff and remuneration policy

As at 31 December 2015, the Remaining Group had approximately 77 employees. The staff cost (excluding directors’ remunerations) of the Remaining Group was approximately HK$16.2 million. The Remaining Group’s remuneration policies are based on the performance of individual employees and are reviewed regularly.

— 32 —

APPENDIX IV UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

Introduction

The accompanying unaudited pro forma consolidated statement of financial position, unaudited pro forma consolidated statement of profit or loss, the unaudited pro forma consolidated statement of comprehensive income and unaudited pro forma consolidated statement of cash flows (collectively referred to as the “Unaudited Pro Forma Financial Information”) have been prepared by the directors of the Company in accordance with paragraph 29 of Chapter 4 of the Listing Rules for the purpose of illustrating the effects upon completion of the Proposed Disposal.

The unaudited pro forma consolidated statement of financial position of the Remaining Group has been prepared based on the audited consolidated statement of financial position of the Group as at 31 December 2017 which has been extracted from the Group’s audited financial statements for the year ended 31 December 2017, after taking into account the pro forma adjustments relating to the Proposed Disposal that are (i) clearly shown and explained; (ii) directly attributable to the Proposed Disposal and not relating to future events or decisions; and (iii) factually supportable, as explained in the accompanying notes, as if the Proposed Disposal had been completed on 31 December 2017.

The unaudited pro forma consolidated statement of profit or loss, the unaudited pro forma consolidated statement of comprehensive income and the unaudited pro forma consolidated statement of cash flows of the Remaining Group are prepared based on the audited consolidated statement of profit or loss, audited consolidated statement of comprehensive income and audited consolidated statement of cash flows of the Group for the year ended 31 December 2017 as extracted from the Group’s published annual report for the year ended 31 December 2017 dated 14 March 2018 after taking into account the pro forma adjustments relating to the Proposed Disposal that are (i) clearly shown and explained; (ii) directly attributable to the Proposed Disposal and not relating to future events or decisions; and (iii) factually supportable, as explained in the accompanying notes, as if the Proposed Disposal had been completed on 1 January 2017.

The accompanying Unaudited Pro Forma Financial Information of the Remaining Group is prepared by the Directors based on a number of assumptions, estimates, uncertainties and currently available information to provide information of the Remaining Group upon Completion of the Proposed Disposal. As the Unaudited Pro Forma Financial Information is prepared for illustrative purposes only, and because of its hypothetical nature, it may not give a true picture of the financial position and results of the Remaining Group following the completion of the Proposed Disposal and does not purport to describe the actual results of operations, financial position and cash flows of the Remaining Group that would have been attained had the Proposed Disposal been completed on the dates indicated herein. Further, the accompanying Unaudited Pro Forma Financial Information of the Remaining Group does not purport to predict the future financial position, results of operations or cash flows of the Remaining Group after completion of the Proposed Disposal.

The Unaudited Pro Forma Financial Information of the Remaining Group has been prepared in accordance with paragraph 29 of Chapter 4 and paragraph 68(2)(a)(ii) of Chapter 14 of the Listing Rules. The Unaudited Pro Forma Financial Information of the Remaining Group should be read in conjunction with the financial information of the Group as set out in Appendix I to the Circular, the unaudited financial information of the Ease Triumph Group as set out in Appendix II to the Circular and other information included elsewhere in the Circular.

— 33 —

APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

Unaudited Pro Forma Consolidated Statement of Financial Position of the Remaining Group As at 31 December 2017

The Group HK$’000 (Note 1) NON-CURRENT ASSETS Property, plant and equipment 22,444 Investment properties 368,639 Investment in a joint venture 42,464 Investments in associates 14,385 Financial asset under Project EC120 — Available-for-sale investments 110,380 Deferred tax assets — Total non-current assets 558,312 CURRENT ASSETS Properties under development and completed properties held for sale 2,937,160 Trade receivables 76,977 Due from fellow subsidiaries 1,664 Due from an associate 10,441 Prepayments, deposits and other receivables 5,095 Available-for-sale investments 82,348 Equity investment at fair value through profit or loss 80,761 Derivative financial instruments 1 Prepaid taxes 4,176 Cash and cash equivalents 627,140 Total current assets 3,825,763	Pro Forma adjustments HK$’000 HK$’000 HK$’000 (Note 2) (Note 3) (Note 4) — — — (368,639) — — — — — — — — — — — — — — (22,862) 22,862 — (391,501) 22,862 — (2,632,144) (305,016) — (76,977) — — (1,664) — — — — — (3,938) — 805,272 — — — — — — — — — (4,176) — — (186,862) — 751,956 (2,905,761) (305,016) 1,557,228	Pro Forma The Remaining Group (unaudited) HK$’000 HK$’000 (Note 5) — 22,444 — — — 42,464 — 14,385 — — — 110,380 — — — 189,673 — — — — — — — 10,441 (804,477) 1,952 — 82,348 — 80,761 — 1 — — 828,611 2,020,845 24,134 2,196,348	Pro Forma The Remaining Group (unaudited) HK$’000 HK$’000 (Note 5) — 22,444 — — — 42,464 — 14,385 — — — 110,380 — — — 189,673 — — — — — — — 10,441 (804,477) 1,952 — 82,348 — 80,761 — 1 — — 828,611 2,020,845 24,134 2,196,348
			189,673
			— — — 10,441 1,952 82,348 80,761 1 — 2,020,845
			2,196,348

— 34 —

APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

The Group HK$’000 (Note 1) CURRENT LIABILITIES Due to non-controlling shareholders of subsidiaries 138,852 Due to an intermediate holding company 16,681 Due to the Remaining Group — Due to fellow subsidiaries 5,492 Loans from a fellow subsidiary 366,864 Trade payables 122,511 Other payables and accruals 34,198 Customer deposits 217,981 Tax payable 78,403 Total current liabilities 980,982 NET CURRENT ASSETS 2,844,781 TOTAL ASSETS LESS CURRENT LIABILITIES 3,403,093 NON-CURRENT LIABILITIES Loans from an intermediate holding company 503,550 Loans from a fellow subsidiary 556,213 Deferred tax liabilities 71,398 Total non-current liabilities 1,131,161 Net assets 2,271,932 EQUITY Equity attributable to owners of the parent Issued capital 551,959 Reserves 1,180,546 1,732,505 Non-controlling interests 539,427 Total equity 2,271,932	Pro Forma adjustments HK$’000 HK$’000 HK$’000 (Note 2) (Note 3) (Note 4) (138,852) — — (16,681) — — (805,272) — 805,272 (5,492) — — (366,864) — — (121,319) — — (27,717) — — (217,981) — — (42,509) — — (1,742,687) — 805,272 (1,163,074) (305,016) 751,956 (1,554,575) (282,154) 751,956 (503,550) — — (556,213) — — — (71,398) — (1,059,763) (71,398) — (494,812) (210,756) 751,956 (250,000) — 250,000 193,621 (109,762) 501,956 (56,379) (109,762) 751,956 (438,433) (100,994) — (494,812) (210,756) 751,956	Pro Forma The Remaining Group (unaudited) HK$’000 HK$’000 (Note 5) — — — — — — — — — — — 1,192 — 6,481 — — — 35,894 — 43,567 24,134 2,152,781 24,134 2,342,454 — — — — — — — — 24,134 2,342,454 — 551,959 24,134 1,790,495 24,134 2,342,454 — — 24,134 2,342,454	Pro Forma The Remaining Group (unaudited) HK$’000 HK$’000 (Note 5) — — — — — — — — — — — 1,192 — 6,481 — — — 35,894 — 43,567 24,134 2,152,781 24,134 2,342,454 — — — — — — — — 24,134 2,342,454 — 551,959 24,134 1,790,495 24,134 2,342,454 — — 24,134 2,342,454
			43,567
			2,152,781
			2,342,454
			— — —
			—
			2,342,454
			551,959 1,790,495
			2,342,454 —
			2,342,454

— 35 —

APPENDIX IV UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

Unaudited Pro Forma Consolidated Statement of Profit or Loss of the Remaining Group

For the year ended 31 December 2017

REVENUE Cost of sales Gross loss Other income and gains Selling and distribution expenses Administrative expenses Other operating expenses Finance costs Gain on disposal of subsidiaries Gain on disposal of convertible loans Share of profits and losses of: Joint venture Associates Impairment of available-for-sale investments (transfer from available-for-sale investment revaluation reserve) Fair value loss on derivative financial instruments Fair value loss on an equity investment at fair value through profit or loss PROFIT/(LOSS) BEFORE TAX Income tax expense PROFIT/(LOSS) FOR THE YEAR Attributable to: Owners of the parent Non-controlling interests	The Group HK$’000 (Note 6) 1,520,710 (1,706,522) (185,812) 41,681 (26,130) (73,718) (21,463) (38,761) — 87,151 (19,043) 222 (67,280) (11,337) (6,857) (321,347) (15,196) (336,543) (288,481) (48,062) (336,543)	Pro Forma adjustments HK$’000 HK$’000 HK$’000 (Note 7) (Note 8) (Note 9) (1,520,710) — — 1,402,911 303,611 — (117,799) 303,611 — (2,350) — — 26,130 — — 36,663 — (4,000) (33,103) — — 38,761 — — — — 349,557 — — — — — — — — — — — — — — — — — — (51,698) 303,611 345,557 91,313 (75,394) (48,778) 39,615 228,217 296,779 74,657 145,113 296,779 (35,042) 83,104 — 39,615 228,217 296,779	Pro Forma The Remaining Group (unaudited) HK$’000 — — — 39,331 — (41,055) (54,566) — 349,557 87,151 (19,043) 222 (67,280) (11,337) (6,857) 276,123 (48,055) 228,068 228,068 — 228,068

— 36 —

APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

Unaudited Pro Forma Consolidated Statement of Comprehensive Income of the Remaining Group

For the year ended 31 December 2017

PROFIT/(LOSS) FOR THE YEAR OTHER COMPREHENSIVE INCOME Other comprehensive income to be reclassified to profit or loss in subsequent periods: Available-for-sale investments: Changes in fair value Reclassification adjustments for losses included in the consolidated statement of profit or loss — Impairment loss Exchange differences: Exchange differences on translation of foreign operations Reclassification adjustment for a foreign operation disposed of during the year Share of other comprehensive income of a joint venture NET OTHER COMPREHENSIVE INCOME TO BE RECLASSIFIED TO PROFIT OR LOSS IN SUBSEQUENT PERIODS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR, NET OF TAX TOTAL COMPREHENSIVE INCOME FOR THE YEAR Attributable to: Owners of the parent Non-controlling interests	The Group HK$’000 (Note 6) (336,543) (86,017) 67,280 (18,737) 97,554 — 97,554 2,905 81,722 (254,821) (240,767) (14,054) (254,821)	Pro Forma adjustments HK$’000 HK$’000 HK$’000 (Note 7) (Note 8) (Note 9) 39,615 228,217 296,779 — — — — — — — — — (69,215) (17,027) — — — 121,499 (69,215) (17,027) 121,499 — — — (69,215) (17,027) 121,499 (29,600) 211,190 418,278 28,951 138,585 418,278 (58,551) 72,605 — (29,600) 211,190 418,278	Pro Forma The Remaining Group (unaudited) HK$’000 228,068 (86,017) 67,280 (18,737) 11,312 121,499 132,811 2,905 116,979 345,047 345,047 — 345,047

— 37 —

APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

Unaudited Pro Forma Consolidated Statement of Cash flows of the Remaining Group For the year ended 31 December 2017

								Pro Forma
								The
								Remaining
								Group
	The Group		Pro Forma adjustments				(unaudited)
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000		HK$’000	HK$’000
	(Note 10)	_(Note 11) _	(Note 12)	(Note 9)	_(Note _	_5) _	(Note 13)
CASH FLOWS FROM OPERATING
ACTIVITIES
Profit/(loss) before tax	(321,347)	(51,698)	303,611	345,557		—	—	276,123
Adjustments for:
Finance costs	38,761	(38,761)	—	—		—	—	—
Share of profits and losses of a joint
venture and associates	18,821	—	—	—		—	—	18,821
Bank interest income	(6,239)	2,341	—	—		—	—	(3,898)
Interest income on a convertible bond	(1,036)	—	—	—		—	—	(1,036)
Interest income on loans to associates	(586)	—	—	—		—	—	(586)
Interest income on a loan to a related
company	(536)	—	—	—		—	—	(536)
Gain on disposal of convertible loans	(87,151)	—	—	—		—	—	(87,151)
Depreciation	1,098	—	—	—		—	—	1,098
Provision for impairment of other
receivables	20,699	—	—	—		—	—	20,699
Loss on disposal of items of property,
plant and equipment	764	—	—	—		—	—	764
Fair value gains on investment properties	(33,103)	33,103	—	—		—	—	—
Write-down of properties under
development and properties held for
sale to net realisable value	296,848	(39,183)	(257,665)	—		—	—	—
Fair value loss on equity investment at
fair value through profit or loss	6,857	—	—	—		—	—	6,857
Impairment of available-for-sale
investments	67,280	—	—	—		—	—	67,280
Fair value loss on derivative financial
instruments, net	11,337	—	—	—		—	—	11,337
Gain on disposal of subsidiaries	—	—	—	(349,557)		—	—	(349,557)
	12,467	(94,198)	45,946	(4,000)		—	—	(39,785)

— 38 —

APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

								Pro Forma	Pro Forma
									The
								Remaining
									Group
	The Group		Pro Forma adjustments				(unaudited)
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000		HK$’000		HK$’000
	(Note 10)	_(Note 11) _	(Note 12)	(Note 9)	_(Note _	_5) _	(Note 13)
Decrease in properties under development
and completed properties held for sale	1,149,205	(1,092,306)	(56,899)	—		—	—		—
Decrease in trade receivables	17,165	(17,165)	—	—		—	—		—
Decrease/(increase) in prepayments, deposits
and other receivables	32,441	(30,036)	—	—		—	(2,533)		(128)
Decrease in amounts due from fellow
subsidiaries	9,950	(9,950)	—	—		—	—		—
Increase in trade payables	79,219	(79,219)	—	—		—	—		—
Increase in other payables and accruals	16,225	(12,127)	—	—		—	—		4,098
Decrease in customer deposits	(748,686)	748,686	—	—		—	—		—
Cash generated from/(used in) operations	567,986	(586,315)	(10,953)	(4,000)		—	(2,533)		(35,815)
Overseas tax paid	(16,986)	16,156	—	(48,778)		—	—		(49,608)
Net cash flows from/(used in) operating
activities	551,000	(570,159)	(10,953)	(52,778)		—	(2,533)		(85,423)
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of items of property, plant and
equipment	(28)	—	—	—		—	—		(28)
Proceeds from disposal of items of property,
plant and equipment	793	—	—	—		—	—		793
Proceeds from disposal of convertible loans	87,151	—	—	—		—	—		87,151
Disposal of subsidiaries	—	—	—	565,100		—	—		565,100
Proceeds from disposal of shareholder’s
loans	—	—	—	—	1,316,823		—		1,316,823
Repayment of loans from an intermediate
holding company	—	—	—	—	(512,346)		—		(512,346)
Bank interest received	6,214	(2,341)	—	—		—	—		3,873
Interest received on a convertible bond	1,036	—	—	—		—	—		1,036
Interest received on loans to associates	774	—	—	—		—	—		774
Interest received on a loan to a related
company	1,079	—	—	—		—	—		1,079
Net cash flows from investing activities	97,019	(2,341)	—	565,100	804,477		—		1,464,255

— 39 —

APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

The Group HK$’000 (Note 10) CASH FLOWS FROM FINANCING ACTIVITIES Repayment of bank loans (230,134) Repayment of loans from a fellow subsidiary (373,852) Increase in amounts due to non-controlling shareholders of subsidiaries 45,946 Increase in an amount due to the immediate holding company — Increase in amounts due to fellow subsidiaries 4,726 Interest paid (88,593) Net cash flows used in financing activities (641,907) NET INCREASE IN CASH AND CASH EQUIVALENTS 6,112 Cash and cash equivalents at beginning of year 605,925 Effect of foreign exchange rate changes, net 15,103 CASH AND CASH EQUIVALENTS AT END OF YEAR 627,140 ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Cash and bank balances 301,921 Non-pledged time deposits with original maturity of less than three months when acquired 325,219 627,140	Pro Forma adjustments Pro Forma The Remaining Group (unaudited) HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Note 11) (Note 12) (Note 9) (Note 5) (Note 13) 230,134 — — — — — 373,852 — — — — — (45,946) — — — — — (44,991) — — — 44,991 — 37,732 — — — (42,458) — 88,593 — — — — — 639,374 — — — 2,533 — 66,874 (10,953) 512,322 804,477 — 1,378,832 (239,634) — 239,634 — — 605,925 (14,102) 10,953 — — — 11,954 (186,862) — 751,956 804,477 — 1,996,711 (186,862) — 751,956 804,477 — 1,671,492 — — — — — 325,219 (186,862) — 751,956 804,477 — 1,996,711	Pro Forma adjustments Pro Forma The Remaining Group (unaudited) HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Note 11) (Note 12) (Note 9) (Note 5) (Note 13) 230,134 — — — — — 373,852 — — — — — (45,946) — — — — — (44,991) — — — 44,991 — 37,732 — — — (42,458) — 88,593 — — — — — 639,374 — — — 2,533 — 66,874 (10,953) 512,322 804,477 — 1,378,832 (239,634) — 239,634 — — 605,925 (14,102) 10,953 — — — 11,954 (186,862) — 751,956 804,477 — 1,996,711 (186,862) — 751,956 804,477 — 1,671,492 — — — — — 325,219 (186,862) — 751,956 804,477 — 1,996,711
		—
		1,378,832 605,925 11,954
		1,996,711
		1,671,492 325,219
		1,996,711

— 40 —

APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

Notes:

The audited consolidated statement of financial position of the Group as at 31 December 2017 were extracted from the Group’s audited financial statements for the year ended 31 December 2017.
The adjustment reflects the exclusion of the assets and liabilities of the Ease Triumph Group as if the Proposed Disposal had completed on 31 December 2017. The assets and liabilities for the Ease Triumph Group as at 31 December 2017 have been extracted from the unaudited consolidated statement of financial position of the Ease Triumph Group as at 31 December 2017 as set out in Appendix II to the Circular; except for the following items with the reconciliation as shown below:

HK$’000

Increase in amounts due to the Remaining Group as set out in Appendix IV 805,272
Decrease in amounts due to the immediate holding company as set out in Appendix II (805,272)

The adjustment is not expected to have a continuing effect on the Remaining Group.

The adjustment reflects the exclusion of (i) the fair value adjustments of HK$305 million as at 31 December 2017 arising from the acquisition of entire equity interests in Ease Triumph by the Group in 2014; (ii) the corresponding tax impact of HK$94 million as at 31 December 2017. The adjustment is derived from the difference between the fair value and the carrying amount of properties under development as at the date of acquisition in accordance with HKFRS 3 Business Combinations, less the relevant portion of adjustment attributable to the properties sold during the years ended 31 December 2015, 2016 and 2017 which were included in “cost of sales” of each relevant years. The Remaining Group did not have other investment properties, properties under development and completed properties held for sale as at 31 December 2017.

The adjustment is not expected to have a continuing effect on the Remaining Group.

The adjustment represents (i) the estimated gross proceeds from the disposal of entire issued share capital of Ease Triumph of HK$805 million; (ii) the estimated transaction costs directly attributable to the Proposed Disposal of HK$4 million; (iii) the estimated income tax directly attributable to the Proposed Disposal of HK$49 million; (iv) the reclassification of intercompany balances to reflect the financial position of the Proposed Disposal; and (v) the estimated gain on the Proposed Disposal of HK$569 million as if the Proposed Disposal had completed on 31 December 2017.

— 41 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX IV

The calculation of the estimated gain on the Disposal to be recognised in profit or loss, as if the Proposed Disposal had completed on 31 December 2017, is as follows:

Notes
Cash consideration
(i)
De-recognition of the net assets of the Ease Triumph Group as at
31 December 2017
(ii)
De-recognition of the Group’s non-controlling interest of the
Ease Triumph Group as at 31 December 2017
(iii)
Release of exchange reserve of the Ease Triumph Group
(iv)
Gain on the Proposed Disposal as if the Proposed Disposal had been
completed on 31 December 2017
Income tax effect
(v)
Estimated transaction costs
(vi)
Gain on the Proposed Disposal as if the Proposed Disposal had been
completed on 31 December 2017, net of income tax and estimated
transaction costs

HK$’000
804,734
(705,568)
539,427
(69,265)
569,328
(48,778)
(4,000)
516,550

Notes:

(i) The minimum bidding price for the entire issued share capital of Ease Triumph is RMB680 million (equivalent to HK$805 million). Therefore, the gross proceeds from the disposal of entire issued share capital of Ease Triumph are estimated to be HK$805 million. The exchange rate of HK$1.00 to RMB0.845 was used for translating the cash consideration.
(ii) The amount of net assets of the Ease Triumph Group represents the amount of HK$495 million extracted from the unaudited consolidated statement of financial position of the Ease Triumph Group as at 31 December 2017, set out in Appendix II and the adjustment reflects the exclusion of (i) the fair value adjustments of HK$305 million as at 31 December 2017 arising from the acquisition of entire equity interests in Ease Triumph by the Group in 2014; and (ii) the corresponding tax impact of HK$94 million as at 31 December 2017, as set out in note 3 above.
(iii) The amount of the Group’s non-controlling interest in the Ease Triumph Group was extracted from the audited consolidated statement of financial position as at 31 December 2017 as stated in the Group’s audited financial statements for the year ended 31 December 2017, representing the entire balance of the Group’s non-controlling interests as at 31 December 2017 as the Remaining Group did not have other non-wholly-owned subsidiaries as at 31 December 2017.
(iv) The amount represents exchange fluctuation reserve of the Ease Triumph Group to be released to profit or loss as if the Proposed Disposal had been completed on 31 December 2017.
(v) The amount represents tax on capital gain on disposal of the Ease Triumph Group as if the Proposed Disposal had been completed on 31 December 2017.
(vi) The transaction costs represent professional fee directly attributable to the Proposed Disposal which are estimated to be HK$4 million and it is assumed that the fees will be settled by cash.

— 42 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX IV

Actual gain on disposal arising from the Proposed Disposal depends on actual proceeds from the Proposed Disposal, actual amount of net assets of the Ease Triumph Group, actual amount of exchange fluctuation reserve of the Ease Triumph Group to be released to profit or loss and actual amount of tax on capital gain on the completion date. Therefore, the actual gain on disposal shall be different from the amount calculated in the above table.

5 The adjustment represents the proceeds from the disposal of outstanding shareholder’s loans together with interest owed by Ease Triumph to the Company as if the Proposed Disposal had been completed on 31 December 2017. The calculation of net proceeds, as if the Proposed Disposal had been completed on 31 December 2017, is as follows:

Notes Cash consideration for the disposal of outstanding shareholder’s loans (i) Cash consideration for the disposal of accrued interest on the outstanding shareholder’s loans (ii) Repayment to an intermediate holding company on behalf of the Ease Triumph Group (iii)	HK$’000 1,316,823 24,134 (512,346) 828,611

Notes:

(i) The shareholder’s loans comprises (a) a principal amount of approximately USD98 million at the interest rate of 6% per annum for which the interest start date is 1 July 2017; (b) a principal amount of RMB38 million at the interest rate of 6% per annum for which the interest start date is 1 July 2017; and (c) a principal amount of approximately RMB433 million at the interest rate of 6% per annum for which the interest start date is 27 March 2018. Therefore, the gross proceeds from the disposal of the shareholder’s loans are estimated to be HK$1,317 million. The exchange rates of HK$1.00 to RMB0.845 and HK$1.00 to USD0.129 were used for translating the cash consideration.
(ii) Accrued interest on the outstanding shareholder’s loans represents the interest income receivable recognised from the interest start date at 1 July 2017 to 31 December 2017. The exchange rates of HK$1.00 to RMB0.845 and HK$1.00 to USD0.129 were used for translating the cash consideration.
(iii) On 27 March 2018, the Company acquired a loan with principal amount of approximately RMB433 million owed by the Ease Triumph Group to an intermediate holding company at consideration of RMB433 million. This shareholder’s loan was included in the shareholder’s loans as set out in note 5(i) above. The exchange rate of HK$1.00 to RMB0.845 was used for translating the repayment.
6 The audited consolidated statement of profit or loss and the audited consolidated statement of comprehensive income of the Group for the year ended 31 December 2017 were extracted from the Group’s audited financial statements for the year ended 31 December 2017.
7 The adjustment reflects the exclusion of the result of the Ease Triumph Group for the year ended 31 December 2017, which was extracted from the unaudited consolidated statement of profit or loss and other comprehensive income of the Ease Triumph Group for the year ended 31 December 2017 as set out in Appendix II to the Circular.

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APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

8 The adjustment reflects the exclusion of the impact on consolidated statement of profit or loss and consolidated statement of comprehensive income for the year ended 31 December 2017 arising from (i) the fair value adjustments of HK$304 million arising from the acquisition of entire equity interests in Ease Triumph by the Group in 2014; (ii) the corresponding tax impact HK$75 million; and (iii) the corresponding exchange differences on translation of foreign operations of HK$17 million.
9 The adjustment represents (i) the estimated transaction costs directly attributable to the Proposed Disposal of HK$4 million; (ii) the estimated tax directly attributable to the Proposed Disposal of HK$49 million; and (iii) the estimated gain on the Proposed Disposal of HK$350 million as if the Proposed Disposal had been completed on 1 January 2017.

The calculation of the estimated gain on the Proposed Disposal to be recognised in profit or loss, as if the Proposed Disposal had been completed on 1 January 2017, is as follows:

Notes
Cash consideration
(i)
De-recognition of the net assets of the Ease Triumph Group as at
1 January 2017
(ii)
De-recognition of the Group’s non-controlling interest of the
Ease Triumph Group as at 1 January 2017
(iii)
Release of exchange reserve of the Ease Triumph Group
(iv)
Gain on disposal as at 1 January 2017
Income tax effect
(v)
Estimated transaction costs
(vi)
Gain on the Proposed Disposal as if the Proposed Disposal had been
completed on 1 January 2017, net of income tax and estimated
transaction costs

HK$’000
804,734
(887,159)
553,481
(121,499)
349,557
(48,778)
(4,000)
296,779

An analysis of the net inflow of cash and cash equivalents in respect of the Proposed Disposal is as follows:

Cash consideration Cash and cash equivalents disposed of	HK$’000 804,734 (239,634) 565,100

Notes:

(i) The minimum bidding price for the entire issued share capital of Ease Triumph is RMB680 million (equivalent to HK$805 million). Therefore, the gross proceeds from the disposal of entire issued share capital of Ease Triumph are estimated to be HK$805 million. The exchange rate of HK$1.00 to RMB0.845 was used for translating the cash consideration.

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APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

(ii) The amount of net assets of the Ease Triumph Group represents the amount of HK$465 million extracted from the unaudited consolidated statement of financial position of the Ease Triumph Group as at 31 December 2016, set out in Appendix II, the fair value adjustments of HK$583 million as at 31 December 2016 arising from the acquisition of entire equity interests in Ease Triumph by the Group in 2014 and the corresponding tax impact of HK$161 million as at 31 December 2016.
(iii) The amount of the Group’s non-controlling interest in the Ease Triumph Group was extracted from the unaudited consolidated statement of financial position as at 31 December 2016 as stated in the Group’s audited financial statements for the year ended 31 December 2016, representing the entire balance of the Group’s non-controlling interests as at 31 December 2016 as the Remaining Group did not have other non-wholly-owned subsidiaries as at 31 December 2016.
(iv) The amount represents exchange fluctuation reserve of the Ease Triumph Group to be released to profit or loss as if the Proposed Disposal had been completed on 1 January 2017.
(v) The amount represents tax on capital gain on disposal of the Ease Triumph Group as if the Proposed Disposal had been completed on 1 January 2017.
(vi) The transaction costs represent professional fee directly attributable to the Proposed Disposal which are estimated to be HK$4 million and it is assumed that the fees will be settled by cash.

10 The audited consolidated statement of cash flows of the Group for the year ended 31 December 2017 was extracted from the Group’s financial statements for the year ended 31 December 2017.
11 The adjustments reflects the exclusion of the cash flows of the Ease Triumph Group for the year ended 31 December 2016, which is extracted from the unaudited consolidated statement of cash flows for the Ease Triumph Group for the year ended 31 December 2017 as set out in Appendix II to the Circular.
12 The adjustment reflects the exclusion of the impact on consolidated statement of cash flows for the year ended 31 December 2017 arising from the fair value adjustments arising from the acquisition of entire equity interests in Ease Triumph by the Group in 2014.
13 The adjustment includes reclassification of nature of intercompany balances to reflect the result of the Proposed Disposal.

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APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

14 As detailed in the Company’s circular dated 29 December 2017, the Group proposed to acquire the entire issued share capital of Motto Investment Limited and the shareholder’s loan notes owing by the Motto Investment Limited to AVIC International (HK) Group Limited (“AVIC HK”) (the “Acquisition”). As the Acquisition was completed on 7 February 2018 which was subsequent to the reporting date on 31 December 2017, the financial information of Motto Group has not been included in the above Unaudited Pro Forma Financial Information. In order to provide additional useful information for the shareholders of the Company, the Directors have prepared the following unaudited pro forma consolidated statement of financial position of the Remaining Group as if the Acquisition had been completed on 31 December 2017 and unaudited pro forma consolidated statement of profit or loss and the unaudited pro forma consolidated statement of cash flows of the Remaining Group as if the Acquisition had been completed on 1 January 2017. The financial information of Motto Group as presented in note ii below is based on previously published unaudited pro forma financial information in the Company’s circular dated 29 December 2017. The following unaudited pro forma financial information is prepared by the Directors based on a number of assumptions, estimates, uncertainties and currently available information to provide information of the Enlarged Group upon completion of the Acquisition. As the following unaudited pro forma financial information is prepared for illustrative purposes only, and because of its hypothetical nature, it may not give a true picture of the financial position and results of the Enlarged Group following the completion of the Acquisition and does not purport to describe the actual results of operations, financial position and cash flows of the Enlarged Group that would have been attained had the Acquisition been completed on the dates indicated herein. Further, the following unaudited pro forma financial information does not purport to predict the future financial position, results of operations or cash flows of the Enlarged Group after completion of the Acquisition.

Unaudited Pro Forma Consolidated Statement of Financial Position of the Enlarged Group

Pro NON-CURRENT ASSETS Property, plant and equipment Goodwill Other intangible assets Investment in joint ventures Investments in associates Available-for-sale investments Prepayment Total non-current assets CURRENT ASSETS Inventories Trade receivables Due from fellow subsidiaries Due from an associate	Forma The Remaining Group Motto Group as at 30 June 2017 (unaudited) (audited) HK$’000 HK$’000 (Note i) (Note ii) 22,444 246,365 — 848,261 — 922,529 42,464 659 14,385 — 110,380 — — 968 189,673 2,018,782 — 462,195 — 116,157 — 18,166 10,441 —	Subtotal Pro forma adjustments HK$’000 HK$’000 Notes 268,809 90,008 v(a) 848,261 922,529 727,345 v(a) 43,123 14,385 110,380 968 2,208,455 462,195 77,616 v(a) 116,157 18,166 10,441	Enlarged Group (unaudited) HK$’000 358,817 848,261 1,649,874 43,123 14,385 110,380 968
			3,025,808
			539,811 116,157 18,166 10,441

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APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

Pro Prepayments, deposits and other receivables Available-for-sale investments Equity investment at fair value through profit or loss Derivative financial instruments Cash and cash equivalents Total current assets CURRENT LIABILITIES Due to intermediate holding companies Due to fellow subsidiaries Due to the immediate holding company Loans from fellow subsidiaries Interest-bearing bank borrowings Trade payables Other payables, accruals, provisions and other liabilities Tax payables Total current liabilities NET CURRENT ASSETS/ (LIABILTIES) TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Due to an intermediate holding company Due to the immediate holding company Interest-bearing bank borrowings Other payables, provisions and other liabilities Defined benefit obligations Deferred tax liabilities Total non-current liabilities Net assets EQUITY Equity attributable to owners of the Company Share capital Reserves Total equity	Forma The Remaining Group Motto Group as at 30 June 2017 (unaudited) (audited) HK$’000 HK$’000 (Note i) (Note ii) 1,952 35,867 82,348 — 80,761 — 1 — 2,020,845 65,565 2,196,348 697,950 — — — 8,510 — 9,424 — 373,550 — 167,400 1,192 69,657 6,481 116,707 35,894 605 43,567 745,853 2,152,781 (47,903) 2,342,454 1,970,879 — — — 17,004 — 1,674,992 — 135,105 — 4,325 — 38,184 — 1,869,610 2,342,454 101,269 551,959 155,000 1,790,495 (53,731) 2,342,454 101,269	Subtotal Pro forma adjustments HK$’000 HK$’000 Notes 37,819 82,348 80,761 1 2,086,410 (1,025,412) iv, viii 2,894,298 — 9,424 ix 8,510 9,424 (9,424) ix 373,550 (373,550) iii(b) 167,400 (155,000) iii(a) 70,849 123,188 36,499 789,420 2,104,878 4,313,333 — 17,004 ix 17,004 (17,004) ix 1,674,992 (1,655,363) iii(a) 135,105 4,325 38,184 313,990 v 1,869,610 2,443,723 706,959 223,378 iii(b), iv(c), v 1,736,764 1,516,102 iv(c), v, viii 2,443,723	Enlarged Group (unaudited) HK$’000 37,819 82,348 80,761 1 1,060,998
			1,946,502
			9,424 8,510 — — 12,400 70,849 123,188 36,499
			260,870
			1,685,632
			4,711,440
			17,004 — 19,629 135,105 4,325 352,174
			528,237
			4,183,203
			930,337 3,252,866
			4,183,203

— 47 —

APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

Unaudited Pro Forma Consolidated Statement of Profit or Loss of the Enlarged Group

Pro Revenue Cost of sales Gross profit Other income and gains Selling and distribution expenses Administrative expenses Other operating expenses Finance costs Gain on disposal of subsidiaries Gain on disposal of convertible loans Share of profits and losses of: Joint ventures Associates Impairment of an available-for- sale investment (transfer from available-for-sale investment revaluation reserve) Fair value loss on derivative financial instruments Fair value loss on equity investment at fair value through profit or loss Gain on bargain purchase PROFIT BEFORE TAX Income tax expense PROFIT FOR THE YEAR Attributable to: Owners of the Company	Forma The Remaining Group Motto Group year ended 31 December 2016 (unaudited) (audited) HK$’000 HK$’000 (Note i) (Note ii) — 1,583,441 — (1,076,343) — 507,098 39,331 — — (85,583) (41,055) (263,160) (54,566) (922) — (83,646) 349,557 — 87,151 — (19,043) 109 222 — (67,280) — (11,337) — (6,857) — — — 276,123 73,896 (48,055) (32,263) 228,068 41,633 228,068 41,633	Subtotal Pro forma adjustments HK$’000 HK$’000 Notes 1,583,441 (1,076,343) (89,954) vi 507,098 39,331 (85,583) (304,215) (79,290) vi, viii (55,488) (83,646) 80,011 vii 349,557 87,151 (18,934) 222 (67,280) (11,337) (6,857) — 390,485 v(b) 350,019 (80,318) 24,622 vi, vii 269,701 269,701 325,874 v(b), vi, vii, viii	Enlarged Group (unaudited) HK$’000 1,583,441 (1,166,297)
			417,144 39,331 (85,583) (383,505) (55,488) (3,635) 349,557 87,151 (18,934) 222 (67,280) (11,337) (6,857) 390,485
			651,271 (55,696)
			595,575
			595,575

— 48 —

APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

Unaudited Pro Forma Consolidated Statement of Cash Flows of the Enlarged Group

Pro Forma The Remaining Group Motto Group year ended 31 December 2016 (unaudited) (audited) HK$’000 HK$’000 (Note i) (Note ii) Cash flows from operating activities Profit before tax 276,123 73,896 Adjustments for: Finance costs — 83,646 Share of profits and losses of joint ventures and associates 18,821 (109) Bank interest income (3,898) — Interest income on a convertible bond (1,036) — Interest income on loans to associates (586) — Interest income on a loan to a related company (536) — Gain on disposal of convertible loans (87,151) — Depreciation 1,098 46,508 Amortisation of intangible assets — 35,898 Provision for impairment of other receivables 20,699 — Loss on disposal of items of property, plant and equipment 764 581 Fair value loss on equity investment at fair value through profit or loss 6,857 — Impairment of available-for-sale investments 67,280 — Fair value loss on derivative financial instruments, net 11,337 — Gain on disposal of subsidiaries (349,557) — Reversal of provision of trade receivables — (1,682) Impairment of items of property, plant and equipment — 2,372 Impairment of goodwill — 667 Loss on disposal of items of other intangible assets — 705 Reversal of provision for deposits — (1,054) Pension scheme expense under defined benefit schemes — 3,712 Gain on bargain purchase — — (39,785) 245,140	Subtotal Pro forma adjustments Enlarged Group (unaudited) HK$’000 HK$’000 Notes HK$’000 350,019 301,252 v(b), vi, vii, viii 651,271 83,646 (80,011) vii 3,635 18,712 18,712 (3,898) (3,898) (1,036) (1,036) (586) (586) (536) (536) (87,151) (87,151) 47,606 21,863 vi 69,469 35,898 44,353 vi 80,251 20,699 20,699 1,345 1,345 6,857 6,857 67,280 67,280 11,337 11,337 (349,557) (349,557) (1,682) (1,682) 2,372 2,372 667 667 705 705 (1,054) (1,054) 3,712 3,712 — (390,485) v(b) (390,485) 205,355 102,327	Subtotal Pro forma adjustments Enlarged Group (unaudited) HK$’000 HK$’000 Notes HK$’000 350,019 301,252 v(b), vi, vii, viii 651,271 83,646 (80,011) vii 3,635 18,712 18,712 (3,898) (3,898) (1,036) (1,036) (586) (586) (536) (536) (87,151) (87,151) 47,606 21,863 vi 69,469 35,898 44,353 vi 80,251 20,699 20,699 1,345 1,345 6,857 6,857 67,280 67,280 11,337 11,337 (349,557) (349,557) (1,682) (1,682) 2,372 2,372 667 667 705 705 (1,054) (1,054) 3,712 3,712 — (390,485) v(b) (390,485) 205,355 102,327
		102,327

— 49 —

APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

Pro Forma The Remaining Group Motto Group year ended 31 December 2016 (unaudited) (audited) HK$’000 HK$’000 (Note i) (Note ii) Decrease/(increase) in inventories — (43,346) Decrease in trade and bills receivables — 66,797 Decrease/(increase) in prepayments, deposits and other receivables (128) 7,339 Decrease in trade and bills payables — (29,442) Increase/(decrease) in other payables, accruals, provisions and other liabilities 4,098 (24,932) Increase in amounts due from fellow subsidiaries — (3,720) Increase in amounts due to fellow subsidiaries — 7,556 Increase in amounts due to an intermediate holding company — — Increase in an amount due to the immediate holding company — 3,619 Benefits paid from defined benefit schemes — (457) Contribution to defined benefit schemes — (2,612) (35,815) 225,942 Overseas tax paid (49,608) (2,604) Net cash flows from/(used in) operating activities (85,423) 223,338 Cash flows from investing activities Purchases of items of property, plant and equipment (28) (31,287) Additions to other intangible assets — (68,223) Proceeds from disposal of items of property, plant and equipment 793 14,609 Proceeds from disposal of convertible loans 87,151 — Disposal of subsidiaries 565,100 — Proceeds from disposal of shareholder’s loans 1,316,823 — Repayment of loans from an intermediate holding company (512,346) — Bank interest received 3,873 — Interest received on a convertible bond 1,036 — Interest received on loans to associates 774 — Interest received on a loan to a related company 1,079 —	Subtotal Pro forma adjustments Enlarged Group (unaudited) HK$’000 HK$’000 Notes HK$’000 (43,346) 77,616 vi 34,270 66,797 66,797 7,211 7,211 (29,442) (29,442) (20,834) (20,834) (3,720) (3,720) 7,556 7,556 — 3,619 ix 3,619 3,619 (3,619) ix — (457) (457) (2,612) (2,612) 190,127 164,715 (52,212) (52,212) 137,915 112,503 (31,315) (31,315) (68,223) (68,223) 15,402 15,402 87,151 87,151 565,100 565,100 1,316,823 1,316,823 (512,346) (512,346) 3,873 3,873 1,036 1,036 774 774 1,079 1,079	Subtotal Pro forma adjustments Enlarged Group (unaudited) HK$’000 HK$’000 Notes HK$’000 (43,346) 77,616 vi 34,270 66,797 66,797 7,211 7,211 (29,442) (29,442) (20,834) (20,834) (3,720) (3,720) 7,556 7,556 — 3,619 ix 3,619 3,619 (3,619) ix — (457) (457) (2,612) (2,612) 190,127 164,715 (52,212) (52,212) 137,915 112,503 (31,315) (31,315) (68,223) (68,223) 15,402 15,402 87,151 87,151 565,100 565,100 1,316,823 1,316,823 (512,346) (512,346) 3,873 3,873 1,036 1,036 774 774 1,079 1,079
		164,715 (52,212)
		112,503
		(31,315) (68,223) 15,402 87,151 565,100 1,316,823 (512,346) 3,873 1,036 774 1,079

— 50 —

APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

Pro Forma The Remaining Group Motto Group year ended 31 December 2016 (unaudited) (audited) HK$’000 HK$’000 (Note i) (Note ii) Acquisition of subsidiaries — — Net cash flows from/(used in) investing activities 1,464,255 (84,901) Cash flows from financing activities New bank loans — 15,500 Repayment of bank loans — (136,400) Repayment of loans from fellow subsidiaries — — Capital injection received from AVIC International Holding Corporation — — Loan from a fellow subsidiary — 106,950 Capital element of finance lease rental payments — (3,650) Interest paid — (83,646) Net cash flows used in financing activities — (101,246) Net increase in cash and cash equivalents 1,378,832 37,191 Cash and cash equivalents at beginning of year 605,925 72,997 Effect of foreign exchange rate changes, net 11,954 (874) Cash and cash equivalents at end of year 1,996,711 109,314 Analysis of balances of cash and cash equivalents Cash and bank balances 1,671,492 109,314 Non-pledged time deposit with original maturity of less than three months when acquired 325,219 — Cash and cash equivalents at end of year 1,996,711 109,314	Subtotal Pro forma adjustments HK$’000 HK$’000 Notes — (1,000,000) iv 1,379,354 15,500 (136,400) — (373,550) iii(b) — 373,550 iii(b) 106,950 (3,650) (83,646) 80,011 vii (101,246) 1,416,023 678,922 11,080 2,106,025 1,780,806 (945,401) iv, vii, viii 325,219 2,106,025	Enlarged Group (unaudited) HK$’000 (1,000,000)
		379,354
		15,500 (136,400) (373,550) 373,550 106,950 (3,650) (3,635)
		(21,235)
		470,622 678,922 11,080
		1,160,624
		835,405 325,219
		1,160,624

Notes:

i. The Unaudited Pro Forma Financial Information of the Remaining Group was extracted from the above.

ii. The audited consolidated statement of financial position of Motto Group as at 30 June 2017 and the audited consolidated profit or loss and audited consolidated statement of cash flows for the year ended 31 December 2016 of Motto Group were derived from the accountants’ report as set out in Appendix III to the circular dated 29 December 2017 which were converted from US$ to HK$ at the rate of US$1.00 to HK$7.75.

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APPENDIX IV UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

iii. Pursuant to the terms of the acquisition agreement, as conditions precedent to the completion of the Acquisition, certain loans of Motto Group shall be settled under the following arrangement (“Preceding Loans Restructuring”):
(a) Bank loans of US$180,000,000 and EUR46,975,000 (equivalent to HK$1,810,363,000 in aggregate) borrowed by the subsidiaries of Motto Investment Limited shall be purchased by AVIC HK which shall subsequently sell these two loans to Motto Investment Limited in return for the issuance by Motto Investment Limited of interest free, unsecured and repayable on demand loan note(s) in the same aggregate principal amount as the two loans (the “Loan Note(s)”). Such Loan Note(s) together with the entire issued share capital of Motto Investment Limited will be sold to the Company.
(b) Motto Group shall repay the loan due to a fellow subsidiary of the Group amounting to US$48,200,000 (equivalent to HK$373,550,000) using the funds from additional equity investment by AVIC International Holding Corporation (“AVIC International”), the immediate holding company of Motto Group before the completion of the Acquisition.
iv. The total purchase consideration of the Acquisition shall be satisfied by the Company by the issue and allotment of 3,783,783,783 consideration shares and cash consideration of HK$1,000,000,000 payable in two instalments as set out in (a) and (b) below and is calculated as follows:

Cash consideration (a), (b) Consideration shares (c) Total consideration In exchange for: Acquisition of 100% equity interest of Motto Investment Limited Acquisition of the Loan Note(s) owing by Motto Investment Limited to AVIC HK (Note iii(a))	HK$’000 1,000,000 1,475,676
	2,475,676
	HK$’000 665,313 1,810,363
	2,475,676

(a) Initial cash consideration of HK$200,000,000 to be settled upon completion.
(b) Deferred consideration of HK$800,000,000 to be settled upon the earlier occurrence of the following events:
(i) the Company having received the proceeds from the disposal of its real estate business resulting in the Company having net cash balance of more than HK$800,000,000; and
(ii) the Group having net cash balance of more than HK$800,000,000.
(c) The closing price of the share of the Company at HK$0.39 each as at 30 June 2017 was adopted for the calculation of the fair value of the consideration shares, as if the Acquisition had been effected on 30 June 2017. The actual fair value of the consideration shares will be determined upon completion of the actual Acquisition, which consequently may result in a financial effect which is materially different from the above.

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX IV

v. The identifiable assets and liabilities of Motto Group acquired by the Group will be accounted for in the consolidated financial statements of the Enlarged Group at fair value under acquisition accounting in accordance with Hong Kong Financial Reporting Standard 3 Business Combinations (“HKFRS 3”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

The allocation of the purchase price is determined based on an independent professional valuer’s estimates of the fair values of the identified assets and liabilities of Motto Group as at 30 June 2017 as follows.

Consideration so determined per note iv above Less: Net assets acquired: Carrying amount of the net assets of Motto Group as at 30 June 2017 Additional equity investment in Motto Group (Note iii(b)) Fair value adjustments (a) Loan Note(s) owing by Motto Investment Limited to AVIC HK (Note iii(a)) Add: Deferred tax liabilities related to the fair value adjustments Gain on bargain purchase (b)	HK$’000 (101,269) (373,550)	HK$’000 (474,819) (894,969) (1,810,363) 313,990	HK$’000 2,475,676 (2,866,161)
			(390,485)

(a) The estimated fair values of the identifiable assets and liabilities of Motto Group were based on the independent valuation conducted by Duff & Phelps, LLC, an independent professional valuer, as at 30 June 2017. The details of the fair value adjustments are as follows:

Identifiable assets subject to fair value adjustments:

Identifiable assets subject to fair value adjustments:
		Carrying	Fair value
	Fair values	amounts	adjustments
	HK$’000	HK$’000	HK$’000
Property, plant and equipment	336,373	246,365	90,008
Inventories	539,811	462,195	77,616
Other intangible assets including backlog, trademarks,
product technology, licence and completed programs
and customer relationships	1,649,874	922,529	727,345
Total	2,526,058	1,631,089	894,969

(b) Actual goodwill or gain on bargain purchase arising from the Acquisition will be determined based on fair values of the identifiable assets and liabilities of Motto Group and the aggregate fair value of the total consideration at the actual completion date. When the actual transactions take place, different fair values may be determined which consequently may result in a financial effect which is materially different from the above.

— 53 —

APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

Since the fair value of the consideration shares and the fair value of the underlying assets and liabilities of Motto Group as at the completion date may be different from the above, the resulting amount of goodwill or gain on bargain purchase at the date of Acquisition may be different. If the fair value of the underlying assets and liabilities of Motto Group is higher than the fair value of the total consideration transferred as at the completion date, a gain on bargain purchase will be resulted. If the fair value of the underlying assets and liabilities of Motto Group is lower than the fair value of the total consideration transferred as at the completion date, goodwill will be resulted.

vi. The adjustments represent the additional cost of sales, depreciation and amortisation together with the corresponding deferred income tax impact arising from the fair value adjustments per Note v(a) above as if the Acquisition had been effected at the beginning of the reporting period.
vii. The adjustment represents savings in finance costs incurred for the loans in Note iii above and the corresponding income tax impact, as if the Acquisition and the Preceding Loans Restructuring had been effected at the beginning of the reporting period.
viii. The adjustment represents estimated direct expenses of audit, legal, valuation and other professional services of approximately HK$25,412,000 related to the Acquisition and the Preceding Loans Restructuring. These expenses are charged to the Enlarged Group’s consolidated statement of profit or loss. The adjustment is not expected to have a continuing effect on the Enlarged Group.
ix. The adjustments represent the reclassification of balances with AVIC International as balances with the immediate holding company recorded by Motto Group to balances with an intermediate holding company of the Enlarged Group.
x. Foreign currency amounts in US$ and EUR have been translated into HK$ at the exchange rate of US$1.00 to HK$7.75 and EUR1.00 to HK$8.84, respectively.

— 54 —

APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT ON THE COMPILATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following is the text of a report from Ernst and Young, the independent reporting accountants, in respect of the unaudited pro forma financial information of the Remaining Group as set out in this appendix and prepared for the sole purpose of inclusion in this circular.

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31 May 2018

The Board of Directors of AVIC International Holding (HK) Limited

We have completed our assurance engagement to report on the compilation of unaudited pro forma financial information of AVIC International Holding (HK) Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”) by the directors of the Company (the “Directors”) for illustrative purposes only. The unaudited pro forma financial information consists of the unaudited pro forma consolidated statement of financial position as at 31 December 2017, and unaudited pro forma consolidated statement of profit or loss, unaudited pro forma consolidated statement of comprehensive income and unaudited pro forma consolidated statement of cash flows for the year ended 31 December 2017, and related notes as set out on pages 33 to 54 in Appendix IV of the circular dated 31 May 2018 issued by the Company (the “Circular”) (the “Unaudited Pro Forma Financial Information”). The applicable criteria on the basis of which the Directors have compiled the Unaudited Pro Forma Financial Information are described in Appendix IV of the Circular.

The Unaudited Pro Forma Financial Information has been compiled by the Directors to illustrate the impact of the proposed disposal of Ease Triumph International Limited (“Ease Triumph”) and its subsidiary (the “Ease Triumph Group”) (the “Disposal”) on the Group’s financial position as at 31 December 2017 and the Group’s financial performance and cash flows for the year ended 31 December 2017 as if the Disposal had completed at 31 December 2017 and 1 January 2017, respectively. As part of this process, information about the Group’s financial position, financial performance and cash flows has been extracted by the Directors from the Group’s audited financial statements for the year ended 31 December 2017 of the Company. Information about the Ease Triumph Group’s financial position, financial performance and cash flows has been extracted by the Directors from the financial information of the Ease Triumph Group as set out in its financial information included in Appendix II to the Circular.

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX IV

Directors’ responsibility for the Unaudited Pro Forma Financial Information

The Directors are responsible for compiling the Unaudited Pro Forma Financial Information in accordance with paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and with reference to Accounting Guideline (“AG”) 7 Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”).

Our independence and quality control

We have complied with the independence and other ethical requirements of the Code of Ethics for Professional Accountants issued by the HKICPA, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behavior.

Our firm applies Hong Kong Standard on Quality Control 1 Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements , and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

Reporting accountants’ responsibilities

Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the Listing Rules, on the Unaudited Pro Forma Financial Information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the Unaudited Pro Forma Financial Information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

We conducted our engagement in accordance with Hong Kong Standard on Assurance Engagements 3420 Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus issued by the HKICPA. This standard requires that the reporting accountants plan and perform procedures to obtain reasonable assurance about whether the Directors have compiled the Unaudited Pro Forma Financial Information in accordance with paragraph 4.29 of the Listing Rules and with reference to AG 7 issued by the HKICPA.

For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical financial information used in compiling the Unaudited Pro Forma Financial Information, nor have we, in the course of this engagement, performed an audit or review of the financial information used in compiling the Unaudited Pro Forma Financial Information.

The purpose of the Unaudited Pro Forma Financial Information included in the Circular is solely to illustrate the impact of the Disposal on unadjusted financial information of the Group as if the Disposal had been undertaken at an earlier date selected for purpose of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the Disposal would have been as presented.

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APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

A reasonable assurance engagement to report on whether the Unaudited Pro Forma Financial Information has been properly compiled on the basis of the applicable criteria involves performing procedures to assess whether the applicable criteria used by the Directors in the compilation of the Unaudited Pro Forma Financial Information provide a reasonable basis for presenting the significant effects directly attributable to the Disposal, and to obtain sufficient appropriate evidence about whether:

the related pro forma adjustments give appropriate effect to those criteria; and
the Unaudited Pro Forma Financial Information reflects the proper application of those adjustments to the unadjusted financial information.

The procedures selected depend on the reporting accountants’ judgment, having regard to the reporting accountants’ understanding of the nature of the Group, the Disposal in respect of which the Unaudited Pro Forma Financial Information has been compiled, and other relevant engagement circumstances.

The engagement also involves evaluating the overall presentation of the Unaudited Pro Forma Financial Information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion

In our opinion:

(a) the Unaudited Pro Forma Financial Information has been properly compiled on the basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purpose of the Unaudited Pro Forma Financial Information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.

Yours faithfully,

Ernst & Young Certified Public Accountants Hong Kong

31 May 2018

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PROPERTY VALUTION REPORT

APPENDIX V

The following is the text of a letter and valuation certificates, prepared for the purpose of incorporation in this circular received from Jones Lang LaSalle Corporate Appraisal and Advisory Limited, an independent valuer and consultant, in connection with its valuation as at 28 February 2018 of the property interests to be disposed by the Group.

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Jones Lang LaSalle Corporate Appraisal and Advisory Limited 6/F Three Pacific Place 1 Queen’s Road East Hong Kong tel +852 2846 5000 fax +852 2169 6001 Company Licence No.: C-030171

31 May 2018

The Board of Directors

AVIC International Holding (HK) Limited

Unit B, 15th, United Centre No. 95 Queensway Hong Kong

Dear Sirs,

Re: Valuation of 2 properties located in Dalian City of Liaoning Province and Chongqing in the People’s Republic of China (the “PRC”).

Jones Lang LaSalle Corporate Appraisal and Advisory Limited (“JLL ” or “ we ”) is instructed by AVIC International Holding (HK) Limited (the “ Company ”) to provide valuation service on two properties in which Dalian Hanghua Real Estate Company Limited (“ Dalian Hanghua ”, a 52.08% interest owned subsidiary of the Company) and Chongqing Hanglong Real Estate Company Limited (“ Chongqing Hanglong ”, a 99% interest owned subsidiary of the Company) (hereinafter together with the Company referred to as the “ Group ”) have interest in the People’s Republic of China (the “ PRC ”). We confirm that we have carried out inspections, made relevant enquiries and searches and obtained such further information as we consider necessary for the purpose of providing you with our opinion on the market values of the property interests as at 28 February 2018 (the “ valuation date ”).

Our valuation is carried out on a market value basis. Market value is defined 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 wherein the parties had each acted knowledgeably, prudently and without compulsion”.

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PROPERTY VALUTION REPORT

APPENDIX V

According to the purpose for the property held, the properties are categorized in three groups in this report: Group I- Property interests held for sale by the Group, Group II- Property interests held for investment by the Group and Group III- Property interests held for future development by the Group.

Considering evidences of relevant transactions in the market place in which the properties located can be observed, we have valued the properties in Group I and in Group III by the comparison approach assuming sale of the property interests in their existing states with the benefit of immediate vacant possession and by making reference to comparable sales transactions as available in the market. This approach rests on the wide acceptance of the market transactions as the best indicator and pre-supposes that evidence of relevant transactions in the market place can be extrapolated to similar properties, subject to allowances for variable factors.

For the purpose of our valuation, completed properties for sale are those the Construction Work Completion and Inspection Certificate/Tables or Building Ownership Certificates/Real Estate Title Certificates thereof are issued by the relevant local authorities or are in the process of application, this also includes those property interests which have been contracted to be sold, but the formal assignment procedures of which have not yet been completed; and properties for future development are those the Construction Work Commencement Permits are not issued while the State-owned Land Use Rights Certificates have been obtained.

We have valued the properties in Group II by the income approach considering most of the property held for investment by the Group has been leased out and most of lease terms is longer than 2 years, and the rental market is active. We take into account the net rental income of the properties derived from the existing leases and/or achievable in the existing market with due allowance for the reversionary income potential of the leases, which have been then capitalized to determine the fair value at an appropriate capitalization rate. Where appropriate, reference has also been made to the comparable sales transactions as available in the relevant market.

Our valuation has been made on the assumption that the seller sells the property interests in the market without the benefit of a deferred term contract, leaseback, joint venture, management agreement or any similar arrangement, which could serve to affect the values of the property interests.

No allowance has been made in our report for any charge, mortgage or amount owing on any of the property interests valued nor for any expense 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 value.

In valuing the property interests, we have complied with all requirements contained in Chapter 5 and Practice Note 12 of the Rules Governing the Listing of Securities issued by the Stock Exchange of Hong Kong Limited; the RICS Valuation — Global Standards published by the Royal Institution of Chartered Surveyors; the HKIS Valuation Standards published by the Hong Kong Institute of Surveyors, and the International Valuation Standards published by the International Valuation Standards Council.

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PROPERTY VALUTION REPORT

APPENDIX V

We have relied to a very considerable extent on the information given by the Group and have accepted advice given to us on such matters as tenure, planning approvals, statutory notices, easements, particulars of occupancy, lettings, and all other relevant matters.

We have been shown copies of title documents including State-owned Land Use Rights Certificates, Real Estate Title Certificates, Construction Work Planning Permits and Construction Work Commencement Permits and other official plans relating to the property interests and have made relevant enquiries. Where possible, we have examined the original documents to verify the existing title to the property interests in the PRC and any material encumbrance that might be attached to the property interests or any tenancy amendment. If necessary, we recommend that a PRC legal opinion is sought to verify the existing title to the property interests in the PRC.

We have not carried out detailed measurements to verify the correctness of the areas in respect of the properties but have assumed that the areas shown on the title documents and official site plans handed to us are correct. All documents and contracts have been used as reference only and all dimensions, measurements and areas are approximations. No on-site measurement has been taken.

We have inspected the exterior and, where possible, the interior of the properties. However, we have not carried out investigation to determine the suitability of the ground conditions and services for any development thereon. Our valuation has been prepared on the assumption that these aspects are satisfactory and that no unexpected cost and delay will be incurred during construction. Moreover, no structural survey has been made, but in the course of our inspection, we did not note any serious defect. We are not, however, able to report whether the property is free of rot, infestation or any other structural defect. No tests were carried out on any of the services.

The site inspection was carried out on 12 February 2018 and 26 April 2018 by Ms. Corrina Li and Mr. Shawn Yang . Ms. Corrina Li has obtained a MA degree in Economics in 2007 and has 11 years’ property valuation experience in the PRC. Mr Shawn Yang has obtained a MA degree in Finance in 2017 and finished some courses referring to property valuation and real estate investment.

We have had no reason to doubt the truth and accuracy of the information provided to us by the Group. We have also sought confirmation from the Group that no material factors have been omitted from the information supplied. We consider that we have been provided with sufficient information to arrive an informed view, and we have no reason to suspect that any material information has been withheld.

All monetary figures stated in this report are in Renminbi (RMB).

Our summary of values and valuation certificates are attached below for your attention.

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PROPERTY VALUTION REPORT

APPENDIX V

As advised by the Company, potential tax liabilities would be incurred on sales of the properties and they are mainly PRC value added tax (“ VAT ”) and associated surcharges, PRC corporate income tax, PRC land appreciation tax and stamp duty. The estimated total potential tax liability would be RMB251.5 million based on the assumption that the properties were to be sold at the amount of valuation in this report.

Yours faithfully,

For and on behalf of

Jones Lang LaSalle Corporate Appraisal and Advisory Limited Gilbert C. H. Chan

MRICS MHKIS RPS (GP) Director

Note: Gilbert C.H. Chan is a Chartered Surveyor who has 25 years’ experience in the valuation of properties in the PRC.

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PROPERTY VALUTION REPORT

APPENDIX V

SUMMARY OF VALUES

Group I: Property interests held for sale by the Group in the PRC Group II: Property interests held for investment by the Group in the PRC Group III: Property interests held for future development by the Group in the PRC

					The total
					market value
					of the
		Market value	Market value	Market value	property in
		in existing	in existing	in existing	existing state
		state as at the	state as at the	state as at the	as at the
No.	Property(1)	valuation date	valuation date	valuation date	valuation date
		RMB	RMB	RMB	RMB
		Group I:	Group II:	Group III:
1.	Portion of the	946,400,000	314,700,000	708,900,000	1,970,000,000
	Project Zhonghang
	International Square
	located at No. 468
	Zhongshan Road
	Shahekou District
	Dalian City
	Liaoning Province
	The PRC
2.	12 parcels of land	—	—	831,800,000	831,800,000
	located at Hualong
	Road Longxing
	Town Liangjiangxin
	District Chongqing
	City The PRC
	Total:	946,400,000	314,700,000	1,540,700,000	2,801,800,000

Notes:

(1) The property does not include the portions which have been sold out before the valuation date and the proceeds from which have already been recognized as revenue.

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PROPERTY VALUTION REPORT

APPENDIX V

VALUATION CERTIFICATE

				Market value in
			Particulars of	existing state as at
No.	Property	Description and tenure	occupancy	the valuation date
				RMB
1.	Portion of the	Project Zhonghang International Square (the	As at the	1,970,000,000
	Project	“Project”) is situated at southeastern of	valuation date,	(100% interest)
	Zhonghang	Zhongshan Road, Shahekou District, Dalian	the unsold
	International	City. It occupies 4 parcels of land with a total	residential,
	Square	site area of approximately 46,937.50 sq.m.	apartment and
	located at No. 468	which will be developed into a development	retail units,
	Zhongshan Road	complex with residential, apartment, retail,	storerooms and
	Shahekou District	office and basement car parking spaces. The	car parking
	Dalian City	Project is well served by commercial and public	spaces of Zones
	Liaoning Province	facilities. The Project also enjoys easy access as	A, C and D of
	The PRC	it is about 1 kilometers off Subway Station.	the property
			were held by
		The Project is developed into 4 zones (“Zone	the Group for
		A”, “Zone B”, “Zone C” and “Zone D”). Upon	sale. Portions of
		completion, the Project will have a total gross	the office
		floor area (“GFA”) of approximately 432,967.85	building of
		sq.m. Zone A and Zone C of the Project were	Zone A, which
		completed in 2015. Zone D of the Project were	was held by the
		completed in 2017. Zone B of the Project is	Group for
		currently a vacant land except a sales center	investment
		erected thereon, which was excluded from the	purpose, with a
		property (see note 16).	total GFA of
			approximately
		The property comprises the unsold residential,	18,221.24 sq.m.
		apartment and retail units, storerooms and	were rented to
		car-parking spaces of Zones A, C and D of the	various tenants,
		Project, a 12-storey office building in Zone A,	whilst the
		and the vacant land of Zone B of the Project.	remaining
		Details of GFA of the completed portion of the	portion of the
		property are set out in note 7.	office building
			was vacant.
		The land use rights of the property have been	Zone B was a
		granted for terms expiring on 13 February 2052	vacant land
		for commercial and financial uses and on 13
		February 2082 for residential use respectively.	except a sales center erected
			thereon.

Notes:

As advised by the Group, Dalian Hanghua Real Estate Company Limited (“ Dalian Hanghua ”) is a 52.08% interest owned subsidiary of the Company.
Pursuant to 4 State-owned Land Use Rights Certificates — Da Guo Yong (2013) Di Nos. 03015 to 03018, the land use rights of 4 parcels of land with a total site area of approximately 46,937.50 sq.m., on which the property is located, have been granted to Dalian Hanghua for terms expiring on 13 February 2052 for commercial and financial uses and on 13 February 2082 for residential use respectively.

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PROPERTY VALUTION REPORT

APPENDIX V

Pursuant to 8 Real Estate Title Certificates — Sha You Xian Nos. 2016600757 to 2016600764, the building ownership of Zones A and C of the Project (including the unsold units and the office building of the property) with a total GFA of approximately 128,541.43 sq.m. was owned by Dalian Hanghua.
Pursuant to a Construction Work Planning Permit — Jian Zi Di No.210204201300009 in favour of Dalian Hanghua, the construction works of Zone D with a total planned GFA of approximately 130,379.00 sq.m. have been approved for construction.
Pursuant to a Construction Work Commencement Permit — No. 210200201404251001 in favour of Dalian Hanghua, permissions by the relevant local authority were given to commence the construction of Zone D with a total GFA of approximately 130,379.00 sq.m. has been approved for construction.
Pursuant to 3 Pre-sale Permits — Da Fang Yu Xu Zi Di Nos. 20150035, 20160105 and 20170009, in favour of Dalian Hanghua, the Group is entitled to sell Zone D of the property (representing a total GFA of approximately 94,135.00 sq.m.) to purchasers.
According to the information provided by the Group, details of GFA of the completed portion of the property are set out below:

Zone		Usage	GFA	No. of Car Parking Space
			(sq.m.)
Zone	A	Office	21,147.87
		Apartment	19,947.34
		Retail	3,958.66
		Car parking	1,091.50	92
		Sub-total:	46,145.37	92
Zone	C	Retail	191.91
		Car Parking	2,745.00	228
		Storeroom	36.34
		Sub-total:	2,973.25	228
Zone	D	Residential	13,921.02
		Retail	5,549.98
		Car Parking	2,616.60	214
		Storeroom	720.97
		Sub-total:	22,808.57	214
		Grand-total:	71,927.19	534

As advised by Dalian Hanghua, 59 residential units with a total GFA of approximately 8,212.83 sq.m., 12 retail units with a total GFA of approximately 2,564.52 sq.m, 11 apartments with a total GFA of approximately 624.88 sq.m and 34 car parking spaces of Zones A, C and D of the property have been pre-sold to various third parties at a total consideration of RMB246,936,365 exclusive of value added tax (“ VAT ”). Such portions of the property have not been legally and virtually transferred and therefore we have included the units, the storerooms and the car parking spaces in our valuation. In arriving at our opinion on the market value of the property, we have taken into account the contracted prices of such portions of the property.
The Group has not obtained Construction Work Planning Permit for Zone B of the property. As advised by the Group, the developing plan for Zone B of the property is still under construction and is not yet finalised. Once it is finalised, the Group will proceed to apply for Construction Work Planning Permit. According to the Directors’ view, this will have no effect on the development of the property.

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APPENDIX V

PROPERTY VALUTION REPORT

The Group has not obtained Construction Work Completion and Inspection Certificate for Zone D of the property. Zone D of the property completed at the end of 2017, and the Group is currently applying for the said certificate.
As advised by Dalian Hanghua, 45 office units of the office building of Zone A of the property with a total lettable area of approximately 18,221.24 sq.m. were rented to various tenants as at the valuation date for various terms with the expiry dates between 30 April 2018 and 14 October 2025 at a total annual rental of RMB21,153,765 exclusive of water, electricity charges and VAT.
Our valuation has been made on the following basis and analysis:
a. For office units, we have considered the actual rents in the existing tenancy agreement and also compared with similar properties located in the same business circle and/or nearby within reasonable walking distance, for the calculation of market rent in considering: (1) the reversionary rental income after the expiry of the existing leases for occupied area; and (2) the rental income of vacant area;
b. Based on our research, office unit rent of the comparable properties is in the range of RMB96 to RMB114 per sq.m. per month, appropriate adjustments and analysis are considered to the differences in location, size and other characters between the comparable properties and the property to arrive at the property market rent and/or market price.
c. Based on our research, the stabilized market yield of similar properties is in the range of 5.5% to 6.0% for office use as at the valuation date. Considering the location and characteristics of the property, we have applied a market yield of 6.0% in the valuation.
d. Based on our research, the stabilized market occupancy rate of similar properties is in the range of 85% to 90% for office use as at the valuation date. Considering the location and characteristics of the property, we have applied a market occupancy rate of 90% in the valuation.
e. For residential, retail, apartment, storeroom and car parking spaces, we have identified and analyzed various relevant sales evidences in the locality which have similar characteristics as the property. The unit prices of these comparable properties range from RMB15,000 to RMB20,000 per sq.m. for residential units, RMB32,000 to RMB40,000 per sq.m. for retail units on the first floor, RMB14,000 to 16,000 per sq.m. for apartment units, RMB10,000 to RMB11,000 per sq.m. for storeroom units and RMB200,000 to RMB270,000 per lot for car parking spaces. Appropriate adjustments and analysis are considered to the differences in location, size and other characters between the comparable properties and the property to arrive at an assumed unit rate for the property.
f. We have also made reference to sales prices of land within the locality which have the similar characteristics comparable to Zone B of the property. The prices of these comparable land sites are about RMB9,000 to RMB10,000 per sq.m. on floor area basis. Appropriate adjustments and analysis are considered to the differences in location, size and other characters between the comparable properties and the property to arrive at our assumed unit rate.
In valuing the property, we have assumed that:
a. All land premium payments and other costs such as resettlement and ancillary utilities services have been paid in full and there is no requirement for payment of further land premium or other onerous payments to the government;
b. The design and construction of the property are in compliance with the local planning regulations and have been approved by the relevant government authorities and all necessary authorizations and permits have been obtained in respect of the construction works;

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APPENDIX V

PROPERTY VALUTION REPORT

c. The Group has not obtained the Construction Work Completion and Inspection Certificate for Zone D of the Project, in the valuation of the property, we have assumed that relevant Construction Work Completion and Inspection Certificate of the property has been obtained and there is no further payments for Zone D may occurred; and
d. The property can be freely transferred, leased or mortgaged by Dalian Hanghua without payment of any further land premium or transfer fees.

A	summary of major certificates/approvals is shown as follows:
a.	State-owned Land Use Rights Certificate	Yes
b.	Construction Work Planning Permit	Yes
c.	Construction Work Commencement Permit	Yes
d.	Pre-sale Permit	Yes
e.	Real Estate Title Certificates	Portion
f.	Construction Work Completion and Inspection Certificate	Portion

For the purpose of this report, the property is classified into the following groups according to the purpose for which it is held, we are of the opinion that the market value of each group as at the valuation date in its existing state is set out as below:

	Market value in existing state
Group	as at the valuation date
	(RMB)
Group I — held for sale	946,400,000
Group II — held for investment	314,700,000
Group III — held for future development	708,900,000
Grand-total:	1,970,000,000

As advised by the Group, the sales center erected on Zone B of the property, which was excluded from the valuation of the property, was a temporary building and will be demolished before the construction work on Zone B has been commenced.

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PROPERTY VALUTION REPORT

APPENDIX V

VALUATION CERTIFICATE

Market value in Particulars of existing state as at No. Property Description and tenure occupancy the valuation date RMB 2. 12 parcels of land The property occupies 12 parcels of land with a The property is 831,800,000 located at total site area of approximately 375,252.00 currently vacant (100% interest) Hualong Road sq.m. land with some Longxing Town pile Liangjiangxin The land use rights of the property have been foundations. District Chongqing granted for terms expiring on 30 June 2054 for The PRC commercial use and on 30 June 2064 for residential use respectively.

Notes:

As advised by the Group, Chongqing Hanglong Real Estate Company Limited (“ Chongqing Hanglong ”) is a 99% interest owned subsidiary of the Company.
Pursuant to 2 State-owned Land Use Rights Grant Contracts dated on 29 September 2014, the land use rights of 2 parcels of land (on which the property is located) with a total site area of approximately 375,252.00 sq.m. were contracted to be granted to Chongqing Hanglong for terms of 40 years for commercial use and 50 years for residential use respectively. The total land premium was RMB740,590,000.00. As advised by Chongqing Hanglong, the land premium has been fully paid.
Pursuant to 2 Construction Land Planning Permits — Di Zi Di Nos. 500141201500056 and 500141201500058, permission towards the planning of the aforesaid 2 land parcels with a total site area of approximately 375,252.00 sq.m. has been granted to Chongqing Hanglong.
Pursuant to 12 Real Estate Title Certificates — 108 Fang Di Zheng 2014 Zi Di Nos. 14505, 14511, 14514, 14525, 14535, 14539, 14540, 14543, 14555, 14557, 14559 and 14562, the land use rights of 12 parcels of land (the 2 parcels of land mentioned in notes 2 and 3) with a total site area of approximately 375,252.00 sq.m., on which the property is located, have been granted to Chongqing Hanglong for terms expiring on 30 June 2054 for commercial use and on 30 June 2064 for residential use respectively.
The Group has not obtained Construction Work Planning Permit and Construction Work Commencement Permit for the property. Because the Group is revising the developing plan for this property considering changes of market situation. According to the Directors’ view, this will delay the completion date for construction of the property.
As advised by Chongqing Hanglong, some pile foundations were constructed on the property which have been suspended as at the valuation date as the Group is revising the development plan for this property. We have considered the cost incurred in the valuation of the property.
Our valuation has been made on the following basis and analysis:
a. we have made reference to sales prices of land within the locality which have the similar characteristics comparable to the property. The prices of these comparable land sites range from about RMB2,200 to RMB2,400 per sq.m. on floor area basis. Appropriate adjustments and analysis are considered to the differences in location, size and other characters between the comparable properties and the property to arrive at our assumed unit rate.

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PROPERTY VALUTION REPORT

APPENDIX V

In valuing the property, we have assumed that:
a. All land premium payments and other costs such as resettlement and ancillary utilities services have been paid in full and there is no requirement for payment of further land premium or other onerous payments to the government; and
b. The property can be freely transferred, leased or mortgaged by Chongqing Hanglong without payment of any further land premium or transfer fees.
A summary of major certificates/approvals is shown as follows:

a.	State-owned Land Use Rights Grant Contract	Yes
b.	Real Estate Title Certificates	Yes
c.	Construction Work Planning Permit	No
d.	Construction Work Commencement Permit	No
e.	Pre-sale Permit	No
f.	Construction Work Completion and Inspection Certificate/Table	No
g.	Building Ownership Certificates	No

For the purpose of this report, the property is classified into the following groups according to the purpose for which it is held, we are of the opinion that the market value of each group as at the valuation date in its existing state is set out as below.

	Market value in existing state
Group	as at the valuation date
	(RMB)
Group I - held for sale	—
Group II - held for investment	—
Group III — held for future development	831,800,000
Grand-total:	831,800,000

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GENERAL INFORMATION

APPENDIX VI

1. RESPONSIBILITY STATEMENT

The circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief, the information contained in this circular 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.

2. DIRECTORS’ INTERESTS IN SECURITIES

Except for certain Directors who had non-beneficial interests in certain subsidiaries of the Company held for the benefits of the Company, as at the Latest Practicable Date, none of the Directors and chief executive of the Company had an interest or short position in the Shares or underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which (a) were required to be notified to the Company and the Stock Exchange pursuant to Division 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 (b) were recorded in the register required to be kept under section 352 of the SFO, or (c) were otherwise notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers contained in the Listing Rules.

3. DIRECTOR’S INTERESTS IN ASSETS/CONTRACTS

As at the Latest Practicable Date, none of the Directors had any interest, direct or indirect, in any assets which have since 31 December 2017, being the date to which the latest published audited financial statements of the Company were made up, been acquired or disposed of by or leased to any member of the Group or are proposed to be acquired or disposed of by or leased to any member of the Group.

As at the Latest Practicable Date, none of the Directors was materially interested in any contract or arrangement subsisting at the Latest Practicable Date and which is significant in relation to the business of the Group.

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GENERAL INFORMATION

APPENDIX VI

4. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contract with any member of the Group or any associated company of the Group which does not expire or is not terminable by such member or associated company of the Group within one year without payment of compensation (other than statutory compensation).

5. COMPETING INTERESTS

The following Director had interests in the following businesses conducted through the company named below which are considered to compete or be likely to compete, either directly or indirectly, with the business of the Group, as defined in the Listing Rules:

				Nature of competing
Name	of Director	Name of company	Nature of interest	business
Chow	Wai Kam	CK Asset Holdings	Executive director	Property development
		Limited		and investment
				(“Excluded Businesses”)

The Board is of the view that the Group is capable of carrying on its business independently of, and at arms length from the Excluded Businesses. When making decisions on the businesses of the Excluded Businesses of the Group, Mr. Chow, in the performance of his duties as Director, has acted and will continue to act in the best interests of the Group.

So far as the Directors were aware, save as abovementioned, as at the Latest Practicable Date, none of the Directors or their respective associates had any interest in any business which competed or was likely to compete with the business of the Group (as would be required to be disclosed under Rule 8.10 of the Listing Rules if each of them were a controlling shareholder).

— 70 —

GENERAL INFORMATION

APPENDIX VI

6. EXPERTS AND CONSENTS

The following sets out the qualifications of the experts who have been named in this circular:

Name Qualifications

Anglo Chinese Corporate Finance, Limited

A corporation licensed to carry out type 1 (dealing in securities), type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities under the SFO

Ernst & Young Certified public accountants

Jones Lang LaSalle Independent property valuer Corporate Appraisal and Advisory Limited

Each of the above experts have given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of its letter and references to its name, in the form and context in which they respectively appear.

As at the Latest Practicable Date, none of the above experts had any shareholding, directly or indirectly, in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for shares in any member of the Group.

As at the Latest Practicable Date, none of the above experts had any interest, direct or indirect, in any assets which since 31 December 2017, the date to which the latest published audited financial statements of the Company were made up, had been acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group.

7. MATERIAL CONTRACTS

The following contracts (not being contracts entered into in the ordinary course of business of the Group) have been entered into by members of the Group within the 2 years immediately preceding the date of this circular and are or may be material:

(a) the agreement dated 19 September 2017 entered into between AVIC International (HK) Group Limited (中航國際（香港）集團有限公司) (“AVIC HK”), AVIC International Holding Corporation (中國航空技術國際控股有限公司) (“AVIC International”) and the Company relating to the acquisition of the entire issued share capital of Motto Investment Limited and the shareholder’s loan note(s) owing by Motto Investment Limited to AVIC HK as at the completion of such acquisition, as amended by the amendment deed dated 27 October 2017 entered into between AVIC HK, AVIC International and the Company to amend the payment terms regarding the deferred consideration under the acquisition agreement; and

— 71 —

GENERAL INFORMATION

APPENDIX VI

(b) the sales and purchase agreement dated 29 June 2016 entered into between (i) 上海瑞爾通投資顧問有限公司(Shanghai RET Investment Consulting Company Limited) (“RET”), an indirect wholly-owned subsidiary of the Company, (ii) 浙江東陽金牛針織製衣有限公司 (Zhejiang Dongyang Jinniu Knitting and Garment Company Limited) (“Jinniu”), which was then a 51%-owned subsidiary of RET, (iii) Mr. Fu Yuqun, an independent third party, and (iv) Mr. Wu Xiaogang, who owned 49% equity interest in Jinniu, in relation to, among other things, the disposal of the 51% equity interest in Jinniu by RET to Mr. Fu Yuqun at a cash consideration of RMB5,000,000.

8. LITIGATION

As at the Latest Practicable Date, none of the members of the Group was engaged in any litigation or arbitration of material importance and no litigation or claim of material importance was known to the Directors to be pending or threatened by or against any member of the Group.

9. MISCELLANEOUS

(a) The company secretary of the Company is Mr. Lau Ka Ho is a fellow member of both The Hong Kong Institute of Chartered Secretaries and The Institute of Chartered Secretaries and Administrators.
(b) The registered office of the Company is at Canon’s Court, 22 Victoria Street, Hamilton, HM 12, Bermuda. The head office and principal place of business of the Company is at Unit B, 15th Floor, United Centre, 95 Queensway, Hong Kong.
(c) The share registrar and transfer office of the Company in Bermuda is MUFG Fund Services (Bermuda) Limited at The Belvedere Building, 69 Pitts Bay Road, Pembroke HM 08, Bermuda.
(d) The branch share registrar and transfer office of the Company in Hong Kong is Computershare Hong Kong Investor Services Limited at Rooms 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.
(e) The English text of this circular and the enclosed proxy form shall prevail over the Chinese text.

— 72 —

GENERAL INFORMATION

APPENDIX VI

10. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours at (i) the office of the Company at Unit B, 15/F., United Centre, 95 Queensway, Hong Kong; (ii) the website of the Company at www.avic.com.hk from the Latest Practicable Date up to and including the date of the SGM:

(a) The Bye-laws of the Company;
(b) The letter from the Board, the text of which is set out on pages 4 to 14 of this circular;
(c) The annual reports of the Company for each of FY2015, FY2016 and FY2017;
(d) The unaudited consolidated financial information of Ease Triumph Group reviewed by Ernst & Young, the text of which is set out in Appendix II to this circular;
(e) The letter on the unaudited pro forma financial information of the Remaining Group issued by Ernst & Young, the text of which is set out in Appendix IV to this circular;
(f) The valuation report issued by Jones Lang LaSalle Corporate Appraisal and Advisory Limited, the text of which is set out in Appendix V to this circular;
(g) a copy of each of the material contracts as set out in the section headed “Material Contracts” in this Appendix;
(h) The written consents referred to in the section headed “Experts and Consents” in this Appendix; and
(i) This circular.

— 73 —

NOTICE OF SPECIAL GENERAL MEETING

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(Incorporated in Bermuda with limited liability)

(Stock code: 232)

NOTICE OF SPECIAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that a special general meeting of the shareholders of AVIC International Holding (HK) Limited (the “ Company ”) will be held at Forum Room 1, Basement 2, Regal Hongkong Hotel, 88 Yee Wo Street, Causeway Bay, Hong Kong on Friday, 15 June 2018 at 11:00 a.m.. (the “ SGM ”) for the purposes of considering and, if thought fit, passing, with or without amendments, the following resolution as an ordinary resolution of the Company.

ORDINARY RESOLUTION

“ THAT :

the Company be and is hereby authorised to dispose of the entire issued share capital of Ease Triumph International Limited (拓業國際有限公司) (“ Ease Triumph ”) and the outstanding shareholder’s loans owed by East Triumph to the Company through China Beijing Equity Exchange (北京產權交易所) by way of open tender in accordance with the major terms as delineated in the announcement of the Company dated 17 April 2018 and the circular dated 31 May 2018 to be despatched by the Company (the “ Disposal ”) and the transactions contemplated under such Disposal be and are hereby approved, ratified and confirmed; and any one director of the Company or his/her proxy(ies) be and is/are hereby authorised to proceed with the Disposal and, should there be a successful bidder, to complete the Disposal and to exercise all the powers of the Company and to do all things and acts and execute and deliver all agreements and document and take all steps, as may be necessary, desirable or expedient to carry out or to give effect to any matters relating to or in connection with the Disposal and the transactions contemplate thereunder and where necessary, affix the common seal of the Company on such documents.”

By order of the Board AVIC International Holding (HK) Limited Liu Hongde Chairman

Hong Kong, 31 May 2018 Registered office: Head office and principal place of Canon’s Court business in Hong Kong: 22 Victoria Street Unit B, 15th Floor Hamilton, HM 12 United Centre Bermuda 95 Queensway Hong Kong

— SGM-1 —

NOTICE OF SPECIAL GENERAL MEETING

Notes:

A member of the Company entitled to attend and vote at the SGM is entitled to appoint a proxy to attend and vote instead of him/her. A member who is the holder of two or more shares of the Company may appoint more than one proxy to represent him/her to attend and vote on his/her behalf. If more than one proxy is so appointed, the appointment shall specify the number and class of shares in respect of which each such proxy is so appointed.
To be valid, the proxy form, together with any power of attorney or other authority (if any) under which it is signed, or a notarially certified copy thereof, must be lodged with the Company’s Hong Kong branch share registrar and transfer office, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for holding the meeting or any adjournment thererof. Completion and return of the form of proxy will not preclude a member from attending and voting at the meeting if the member so desires.
Where there are joint registered holders of any share(s), any one of such persons may vote at the meeting, either personally or by proxy, in respect of such share(s) as if he/she were solely entitled thereto; but if more than one of such joint holders be present at the meeting personally or by proxy, that one of the said persons so present whose name stands first on the register of members of the Company in respect of such share(s) shall alone be entitled to vote in respect thereof.
The voting on the above resolution at the SGM will be conducted by way of a poll.
The register of members of the Company will be closed from 12 June 2018 to 15 June 2018, both days inclusive, during which period no transfer of Shares will be registered, in order to determine the entitlement to attend and vote at the SGM. In order to be entitled to attend and vote at the SGM, unregistered holders of Shares should ensure that all transfers of Shares accompanied by the relevant share certificates and properly completed transfer forms must be lodged for registration with the Hong Kong branch share registrar and transfer office, Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong no later than 4:30 p.m., 11 June 2018.
As at the date hereof, the Board comprises Mr. Liu Hongde, Mr. Pan Linwu, Mr. Lai Weixuan, Ms. Zhou Chunhua and Mr. Xu Hongge as executive directors; Mr. Chow Wai Kam as non-executive director; Mr. Chu Yu Lin, David, Mr. Li Ka Fai, David and Mr. Zhang Ping as independent non-executive directors.

— SGM-2 —

AI assistant

Continental Aerospace Technologies Holding Limited — Proxy Solicitation & Information Statement 2018

49054_rns_2018-05-30_05da18c4-1f04-4257-b244-7b2758906399.pdf

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

PROPOSED MANDATE IN RELATION TO THE PROPOSED VERY SUBSTANTIAL DISPOSAL

AND

NOTICE OF SPECIAL GENERAL MEETING

CONTENTS

DEFINITIONS

DEFINITIONS

(Stock code: 232)

PROPOSED MANDATE IN RELATION TO THE PROPOSED VERY SUBSTANTIAL DISPOSAL AND

NOTICE OF SPECIAL GENERAL MEETING

INTRODUCTION

LETTER FROM THE BOARD

THE PROPOSED DISPOSAL

I. Dalian Hanghua

LETTER FROM THE BOARD

II. Chongqing Hanglong

III. Shareholder’s Loan

IV. Financial information of the Ease Triumph Group

LETTER FROM THE BOARD

V. Major Terms of the Proposed Disposal

Qualifications of potential bidders

Consideration for the Proposed Disposal

LETTER FROM THE BOARD

Public tender process of the Proposed Disposal

LETTER FROM THE BOARD

Condition precedent to the entering into and completion of the Proposed Disposal

REASONS AND BENEFITS FOR THE PROPOSED DISPOSAL AND THE PROPOSED MANDATE

LETTER FROM THE BOARD

USE OF PROCEEDS AND FINANCIAL IMPACT OF THE PROPOSED DISPOSAL

LETTER FROM THE BOARD

Possible effect on earnings

Possible effect on net assets value

INFORMATION ABOUT THE GROUP

LETTER FROM THE BOARD

FINANCIAL AND TRADING PROSPECTS OF THE REMAINING GROUP

LISTING RULES IMPLICATIONS

LETTER FROM THE BOARD

THE SGM

CLOSURE OF REGISTER OF MEMBERS

RECOMMENDATION

LETTER FROM THE BOARD

ADDITIONAL INFORMATION

1. FINANCIAL INFORMATION OF THE GROUP

2. INDEBTEDNESS STATEMENT OF THE GROUP

Borrowings

Contingent liabilities

3. WORKING CAPITAL

4. MATERIAL ADVERSE CHANGE

APPENDIX II

UNAUDITED FINANCIAL INFORMATION OF THE DISPOSAL GROUP

APPENDIX II

UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

APPENDIX II

APPENDIX II

UNAUDITED FINANCIAL INFORMATION OF THE DISPOSAL GROUP

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

NOTES TO THE UNAUDITED FINANCIAL INFORMAITON

1. General information

2. Basis of preparation and presentation of the financial information

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF THE REMAINING GROUP

(i) FY 2017

Funding and treasury policy

Operating Segment Information

Liquidity and financial resources

Cash position

Borrowings and Gearing ratio

Charge on assets

Capital commitments

Contingent liabilities

Exchange risk exposure and hedging

Significant investments and material acquisitions and/or disposals

Future Plans for Material Investments and Acquisition of Capital Assets

Staff and remuneration policy

(ii) FY 2016

Funding and treasury policy

Operating Segment Information

Continental Aerospace Technologies Holding Limited Proxy Solicitation & Information Statement 2018