Guangzhou R&F Properties Co., Ltd. — M&A Activity 2007

Jun 5, 2007

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this announcement, makes no representation as to its accuracy or completeness, and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

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(a joint stock limited company incorporated in the People’s Republic of China with limited liability)

(Stock code: 2777)

DISCLOSEABLE TRANSACTION ACQUISITION OF GUANGZHOU TIANLI CONSTRUCTION CO. LTD.

The Board wishes to announce that on 5 June 2007, the Company and R&F Properties entered into a sale and purchase agreement with the vendors pursuant to which the Company and R&F Properties have agreed to acquire the entire equity interest in Guangzhou Tianli Construction Co. Ltd. for a total purchase consideration which shall be equal to four times the audited net profit after tax of Tianli for the year ended 31 December 2007. However, the purchase consideration so determined shall not be less than RMB600 million but not more than RMB1,100 million.

As the percentage ratios, as defined in Rule 14.07 of the Listing Rules, is more than 5% but less than 25%, the acquisition constitutes a discloseable transaction for the Company under the Listing Rules. A circular containing, amongst other things, further details in relation to the acquisition will be dispatched to the shareholders of the Company as soon as practicable.

The Company and R&F Properties have entered into a sale and purchase agreement to acquire a construction company.

The Sale and Purchase Agreement (the “Agreement”)

The principal terms of the Agreement are set forth below:

Date: 5 June 2007

Vendors: (1) Mr Chen Liangnuan ( ), holder of 90% interest in Tianli (2) Mr Li Ming ( ), holder of 10% interest in Tianli

To the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, the vendors are third parties independent of the Company and its connected persons.

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• Purchasers: (1) the Company, of 90% interest in Tianli from Mr Chen Liangnuan

(2) R&F Properties, of 10% interest in Tianli from Mr Li Ming Assets acquired: 100% interest in Tianli. Tianli is a construction company with credentials including Building Construction Main Contractor Class 1 ( ).

The unaudited management accounts of Tianli prepared in accordance with the PRC accounting standards showed that the net assets of Tianli as at 31 December 2006 was RMB95,992,000. Tianli has made profit distribution after 31 December 2006 and net assets at the date of acquisition was approximately RMB62,500,000. For the years ended 31 December 2006 and 31 December 2005, the profit before tax and extraordinary items were RMB101,832,000 and RMB50,077,000 respectively and the net profit after tax were RMB75,260,000 and RMB33,633,000 respectively.

• Purchase price: The consideration is determined at 4 times the audited net profit after tax of Tianli for the year ending 31 December 2007 prepared in accordance with the PRC accounting standards provided that the total consideration shall not be less than RMB600 million but not more than RMB1,100 million. The consideration was reached after arm’s length negotiation with reference to inter alia (i) the unaudited net profit after tax of Tianli for the year ended 31 December 2006, (ii) contracts on hand of Tianli as at 30 May 2007, (iii) the anticipated growth of Tianli as a result of the improved sentiments in the PRC construction market, and (iv) the prevailing market prices for construction companies in the PRC.

  • The consideration will be settled by the internal resources of the Group.

Payment terms:

1. RMB540 million and RMB60 million to be paid by the Company and R&F Properties respectively within three days of the date of the Agreement.

2. The balance of the purchase price to be paid by the Company and R&F Properties in the proportion of their respective interest within 10 days of the final determination of the purchase price based on the audited 2007 accounts of Tianli and after completion of the share transfer registration.

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Reason for the Transactions

The Group is principally engaged in property development whereas Tianli is a reputable contractor having a proven track record for the construction of quality residential and commercial buildings as well as the capacity to undertake construction projects of massive scale. The Board believes that the Acquisition will enable the Group to secure control over the construction phase of its operation, ensuring that products quality are commensurate with the brand image of the Group, achieving better cost efficiency and given the very large area under construction as a result of the rapid expansion of the Group’s business, ensures the availability of essential construction capacity which is crucial to the Group’s strategic plan. The Directors (including the independent non-executive directors) consider that the Acquisition has been made on normal commercial terms and that such terms are fair and reasonable so far as the Company and its shareholders are concerned and that the Acquisition is in the interest of the Company and its shareholders.

Information Relating to the Company

The Group’s principal business activity is property development in the PRC with focus on medium and higher-end residential segment but also include commercial and office developments. The Group currently has operation in five major Chinese cities. The Group also engages in ancillary property-related services including architectural and engineering design, engineering supervision, property management and property agency services.

General

As the percentage ratios, as defined in Rule 14.07 of the Listing Rules, is more than 5% but less than 25%, the Acquisition constitutes a discloseable transaction for the Company under the Listing Rules, a circular containing, amongst other things, further details in relation to the Acquisition will be dispatched to the shareholders of the Company as soon as practicable.

Definitions

In this announcement, the following expression have the following meanings unless otherwise defined:-

Acquisition	the acquisition of the entire equity interest in Tianli
Board	the board of directors of the Company
Company	Guangzhou R&F Properties Co., Ltd., a joint stock limited
	company incorporated in the People’s Republic of China with
	limited liability, the H shares of which are listed on the Stock
	Exchange of Hong Kong Limited
Director(s)	the director(s) of the Company
Group	the Company and its subsidiaries

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Listing Rules

The Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited

PRC the People’s Republic of China RMB Renminbi, the lawful currency of the PRC

R&F Properties

R&F Properties Group Co., Ltd. ( ), a limited liability company incorporated in the PRC and a wholly owned subsidiary of the Company

Tianli Guangzhou Tianli Construction Co. Ltd. ( ), a company established in the PRC having a registered capital of RMB50,000,000

By order of the Board

GUANGZHOU R&F PROPERTIES CO., LTD. Wu Tai Loy Company Secretary

5 June 2007

As at the date of this announcement, Mr. Li Sze Lim, Mr. Zhang Li, Mr. Zhou Yaonan and Mr. Lu Jing are executive Directors, Ms. Zhang Lin and Ms. Li Helen are non-executive Directors, and Mr. Huang Kaiwen, Mr. Dai Feng and Mr. Lai Ming, Joseph are the independent non-executive Directors of the Company.

* for identification purpose only

Please also refer to the published version of this announcement in The Standard.

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