Guangzhou R&F Properties Co., Ltd. - Proxy Solicitation & Information Statement 2016

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in GUANGZHOU R&F PROPERTIES CO., LTD. (廣州富力地產股份有限公司), you should at once hand this circular to the purchaser or the transferee or to the bank, stockbroker 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 takes no responsibility for the contents of this circular, 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 circular.

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(a joint stock company incorporated in the People’s Republic of China with limited liability) (Stock Code: 2777)

PROPOSED ADOPTION OF THE: (I) CAUTION OF RISKS RELATING TO POTENTIAL DILUTION OF RETURN FOR THE CURRENT PERIOD RESULTING FROM THE INITIAL PUBLIC OFFERING OF A SHARES BY THE COMPANY;

(II) UNDERTAKING BY THE COMPANY’S DIRECTORS IN CONNECTION WITH THE ADOPTION OF MEASURES TO MITIGATE THE POTENTIAL DILUTION OF RETURN FOR THE CURRENT PERIOD RESULTING FROM THE INITIAL PUBLIC OFFERING OF A SHARES BY THE COMPANY; (III) UNDERTAKING BY THE COMPANY’S SENIOR MANAGEMENT IN CONNECTION WITH THE ADOPTION OF MEASURES TO MITIGATE THE POTENTIAL DILUTION OF RETURN FOR THE CURRENT PERIOD RESULTING FROM THE INITIAL PUBLIC OFFERING OF A SHARES BY THE COMPANY AND

NOTICE OF THE 2016 FIRST EXTRAORDINARY GENERAL MEETING

A notice of the 2016 first extraordinary general meeting of the Company, to be held on Tuesday, 15 March 2016 at the Conference Room, 54/F, R&F Center, No.10 Huaxia Road, Pearl River New Town, Guangzhou, the PRC, is set out on pages 23 to 41 of this circular. Whether or not you are able to attend the said meeting, please complete the enclosed proxy form in accordance with the instructions printed thereon and deliver the form to the Company’s H Share registrar, Computershare Hong Kong Investors Services Limited, at 17M/F, Hopewell Centre, 183 Queen’s Road East, Hong Kong or, in the case of holders of Domestic Shares, to the Company’s registered address, at 45/F, R&F Center, No. 10 Huaxia Road, Pearl River New Town, Guangzhou, the PRC (Postal Code 510623), not less than 24 hours before the time designated for the convening of the 2016 first extraordinary general meeting (i.e. Monday, 14 March 2016). Completion and return of the proxy form will not preclude Shareholders from attending and voting at the 2016 first extraordinary general meeting or any adjourned meeting should they so wish.

27 January 2016

CONTENTS

		Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1
LETTER FROM THE BOARD
1.	Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
2.	Proposed adoption of the caution of risks relating to potential dilution
	of return for the current period resulting from the initial public
	offering of A Shares by the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
3.	Proposed adoption of the undertaking by the Company’s Directors
	in connection with the adoption of measures to mitigate the potential
	dilution of return for the current period resulting
	from the initial public offering of A Shares by the Company . . . . . . . . . . . . . . . .	19
4.	Proposed adoption of the undertaking by the Company’s senior
	management in connection with the adoption of measures to
	mitigate the potential dilution of return for the current period
	resulting from the initial public offering of A Shares by the Company . . . . . .	20
5.	2016 First Extraordinary General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	21
6.	Book Close Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	21
7.	Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	21
8.	Action to be Taken . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	21
9.	Responsibility Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	22
10.	General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	22
APPENDIX — NOTICE OF THE 2016 FIRST EXTRAORDINARY
	GENERAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	23

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DEFINITIONS

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

‘‘2016 First EGM’’ the 2016 first extraordinary general meeting of the Company to be held at 11 a.m. on Tuesday, 15 March 2016 at the Conference Room, 54/F, R&F Center, No. 10 Huaxia Road, Pearl River New Town, Guangzhou, the PRC ‘‘A Shares’’ RMB ordinary shares issued to domestic investors ‘‘A-share Shareholders’’ Holders of A Shares ‘‘Articles of the articles of association of the Company Association’’ ‘‘Board’’ the board of directors of the Company ‘‘CAS’’ China Accounting Standards for Business Enterprises ‘‘Company’’ Guangzhou R&F Properties Co., Ltd. (廣州富力地產股份有限公司), a joint stock company incorporated in the People’s Republic of China with limited liability and listed on the Stock Exchange ‘‘CSRC’’ China Securities Regulatory Commission ‘‘Director(s)’’ director(s) of the Company ‘‘Domestic Share(s)’’ ordinary shares in the capital of the Company, with a nominal value of RMB0.25 each, which are subscribed for and credited as fully paid up in Renminbi ‘‘H Share(s)’’ ordinary shares in the capital of the Company listed on the Stock Exchange, with a nominal value of RMB0.25 each, which are subscribed for and traded in Hong Kong dollars ‘‘Hong Kong’’ the Hong Kong Special Administrative Region of the PRC ‘‘Independent independent non-executive director(s) of the Company Director(s)’’ ‘‘Listing Rules’’ Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited ‘‘net profit margin on net profit generated as a proportion of sales resulting from the sales’’ project ‘‘net investment profit net profit generated as a proportion of the amount invested in ratio’’ the project

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DEFINITIONS

‘‘PRC’’ the People’s Republic of China ‘‘RMB’’ Renminbi, the lawful currency of the PRC ‘‘Shareholders’’ Holders of Domestic Shares and H Shares ‘‘Shares’’ Domestic Shares and H Shares ‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited ‘‘Supervisor(s)’’ Supervisor(s) of the supervisory committee of the Company ‘‘Supervisory the supervisory committee of the Company Committee’’
‘‘Total GFA’’ Total Gross Floor Area

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LETTER FROM THE BOARD

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(a joint stock company incorporated in the People’s Republic of China with limited liability) (Stock Code: 2777)

Executive Directors: Li Sze Lim Zhang Li Zhou Yaonan Lu Jing

Non-executive Directors: Zhang Lin Li Helen

Registered office, head office and principal place of business: R&F Center No. 10 Huaxia Road Pearl River New Town Guangzhou PRC

Independent Non-executive Directors: Lai Ming Joseph Zheng Ercheng Ng Yau Wah Daniel

Dear Sir/Madam,

PROPOSED ADOPTION OF THE: (I) CAUTION OF RISKS RELATING TO POTENTIAL DILUTION OF RETURN FOR THE CURRENT PERIOD RESULTING FROM THE INITIAL PUBLIC OFFERING OF A SHARES BY THE COMPANY;

(III) UNDERTAKING BY THE COMPANY’S SENIOR MANAGEMENT IN CONNECTION WITH THE ADOPTION OF MEASURES TO MITIGATE THE POTENTIAL DILUTION OF RETURN FOR THE CURRENT PERIOD RESULTING FROM THE INITIAL PUBLIC OFFERING OF A SHARES BY THE COMPANY

AND

NOTICE OF THE 2016 FIRST EXTRAORDINARY GENERAL MEETING

1. INTRODUCTION

The purpose of this circular is to provide you with information relating to the proposed adoption of the (i) caution of risks relating to potential dilution of return for the current period resulting from the initial public offering of A Shares by the

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LETTER FROM THE BOARD

Company; (ii) undertaking by the Company’s Directors in connection with the adoption of measures to mitigate the potential dilution of return for the current period resulting from the initial public offering of A Shares by the Company; (iii) undertaking by the Company’s senior management in connection with the adoption of measures to mitigate the potential dilution of return for the current period resulting from the initial public offering of A Shares by the Company and the notice of the 2016 First EGM, at which the three ordinary resolutions set out above will be proposed to shareholders for their consideration and, if thought fit, passing.

PROPOSED ADOPTION OF THE CAUTION OF RISKS RELATING TO POTENTIAL DILUTION OF RETURN FOR THE CURRENT PERIOD RESULTING FROM THE INITIAL PUBLIC OFFERING OF A SHARES BY THE COMPANY

To further implement the ‘‘Opinion of the General Office of the State Council on Further Strengthening Work for the Protection of Lawful Interests of Small Investors 一 in the Capital Market’’ (Guo Ban Fa [2013] No. 110) (《國務院辦公廳關於進步加強資本市場中小投資者合法權益保護工作的意見》(國辦發[2013]110號) (the ‘‘Opinion’’) and the ‘‘Guidance Opinion on Matters Pertaining to dilution of return for the Current Period Resulting from Initial Offering and Refinancing or Material Asset Restructuring’’ (Zheng Jian Hui Gong Gao [2015] No. 31) 《( 關於首發及再、融資重大資產重組攤薄即期回報有關事項的指導意見》) (證監會公告[2015]31號) (the ‘‘Guidance Opinion’’) and to ensure the right of information and protect the interests of small investors, the Company has proposed to adopt the following measures to address the impact of dilution of return for the current period resulting from the initial public offering of A Shares on the key financial indicators of the Company:

I. Impact of dilution of return for the current period resulting from the initial public offering of A Shares by the Company on the key financial indicators of the Company

Assumptions:

(I) The initial public offering of A Shares will be completed on 30 September 2016, which represents an estimate only subject to the actual time of completion.
(II) The Company’s net profit attributable to shareholders of the parent company for 2016 (in accordance with CAS) will be the same as the net profit attributable to shareholders of the parent company for 2014, namely, RMB6,553,611,900; the Company’s net profit after extraordinary items attributable to shareholders of the parent company for 2016 (in accordance with CAS) will be the same as the net profit after extraordinary items attributable to shareholders of the parent company for 2014, namely, RMB5,272,167,100. The hypothetical analysis of net profit for 2016 is provided to facilitate investors’ understanding of the dilution of return for the current period resulting from the issue, and does not constitute a profit forecast by the Company. Accordingly, investors should not rely on such

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LETTER FROM THE BOARD

analysis in making their investment decisions. The Company shall not assume any responsibility to compensate for losses incurred by investors as a result of investment decisions made in reliance on such analysis.

(III) Owners’ equity attributable to the shareholders of the listed company as at the beginning of 2016 will be the same as equity attributable to the shareholders of the listed company as at 30 June 2015 (in accordance with CAS), namely, RMB46,998,443,700.
(IV) The final size of issue of the initial public offering of A Shares will be 1,070 million A Shares, which is the cap for the initial public offering as considered and approved at the extraordinary general meeting, class meeting of holders of Domestic Shares and class meeting of holders of H Shares held by the Company on 12 August 2015.
(V) The total proceeds raised from the initial public offering of A Shares will amount to RMB35 billion (before issue expenses), as considered and approved at the extraordinary general meeting, class meeting of holders of H Shares and class meeting of holders of Domestic Shares held by the Company on 12 August 2015.
(VI) The effect of the proceeds from the initial public offering of A Shares on the Company’s production operations and financial conditions (such as finance costs and investment gains) has not been taken into consideration.

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LETTER FROM THE BOARD

Based on the aforesaid assumptions, the impact of potential dilution of return for the current period resulting from the initial public offering of A Shares on the key financial indicators of the Company is set out as follows with comparative figures:

	Before the	After the
	issue	issue
Item	(2014)	(2016)
Total share capital (in ten thousand shares)	322,236.73	429,236.73
Estimated net profit attributable to owners of the
parent company (in accordance with CAS)
(RMB in ten thousands)	655,361.19	655,361.19
Net profit attributable to owners of the parent
company after extraordinary items (in accordance
with CAS) (RMB in ten thousands)	527,216.71	527,216.71
Total proceeds from the issue
(RMB in ten thousands)	—	3,500,000.00
Basic earnings per share (in accordance with CAS)
(RMB)	1.63	1.50
Diluted earnings per share (in accordance with
CAS) (RMB)	1.63	1.50
Basic earnings per share after extraordinary items
(in accordance with CAS) (RMB)	1.23	1.13
Diluted earnings per share after extraordinary items
(in accordance with CAS) (RMB)	1.23	1.13

Note: Basic and diluted earnings per share are calculated in accordance with ‘‘Rules for the Preparation and Presentation of Corporate Information Disclosure in connection with Public Issue of Securities No. 9 — Calculation and Disclosure of Return on Net Assets and Earnings Per Share’’ (Revised 2010).

II. Caution of risks relating to potential dilution of return for the current period resulting from the initial public offering of A Shares

Following the initial public offering of A Shares, the share capital and net assets of the Company will increase upon receipt of the proceeds. As it is not likely that the benefit of the application of proceeds will be fully realised in the near term, indicators such as the earnings per share and return on net assets of the Company are subject to the risk of dilution in the short term. Investors are reminded to beware the risk of possible dilution of return for the current period resulting from the initial public offering of A Shares.

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LETTER FROM THE BOARD

III. Necessity and justification of the financing exercise opted by the Board
(I) To boost the Company’s financial strength and safeguard requirements of project development

Property development business is a capital-intensive business. It is essential for a property development company to be supported by sufficient cashflow. As a leading property development company in China, the Company owns development projects across the country with a rich variety of product types, as well as a sizeable land bank of premium sites. Proceeds from the initial public offering of A Shares will substantially enhance the financial strength of the Company and provide a strong financial assurance for the development and construction of its property projects.

(II) To improve the Company’s financial conditions and optimise its capital structure

In recent years, the Company has been undergoing rapid business development, and its funding requirements have been derived mainly from its business operations and debt financing. As at 30 June 2015, the gearing ratio of the Company on a consolidated basis (in accordance with CAS) was 73.26%, which was relatively high. The Company intends to optimise its capital structure, lower its gearing ratio and reduce its financial risks through the initial public offering of A Shares, so as to enhance its profitability and ability to counter risks, further bolster its overall competitive strengths and improve its ability to address industry regulation and market changes in future, with a view to maximising shareholders’ benefits.

IV. Intended application of proceeds to certain projects and their relation to the existing business of the Company

The principal operations of the Company include real estate development and sales and the lease of commercial properties and hotel services. Its products include residential properties, offices, hotels and commercial complexes, which fulfill the wide-ranging requirements of customers in daily living, work, travel, leisure and shopping.

Upon thorough and prudent research, it has been determined that the issue proceeds will be applied in nine projects, including Beijing R&F Tongzhou Yunhe No. 10, Shanghai Hongqiao Project, Tianjin R&F New Town, and Beijing R&F New Town. Products will include residential properties, commercial offices and high-end hotels. Such projects fall within the scope of the Company’s principal operations.

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LETTER FROM THE BOARD

Details of the projects are set out as follows:

Beijing R&F Tongzhou Yunhe No. 10 is located in Tongzhou New Town of Tongzhou District, Beijing with a planned site area of 69,796 square metres and Total GFA of 465,800 square metres. It will provide residential units, apartments, commercial properties and offices in one development. The residential units will mainly be flats with fine decoration complemented by high-end properties. The estimated net profit margin on sales and net investment profit ratio of the project is 23.71% and 40.05%, respectively.

Shanghai Hongqiao Project is located within the core area of Hongqiao Business Zone in Minxing District with a planned site area of 152,455 square metres and Total GFA of 534,058 square metres. The project will provide a variety of properties, such as high-end residential units, office towers of international standards, customised offices, flagship commercial properties and high-end hotels. The estimated net profit margin on sales and net investment profit ratio of the project is 15.56% and 22.43%, respectively, for the portion of properties for sale under the project.

Tianjin R&F New Town is located at the junction of Ren Ai Avenue and Zeshui North Road in Tuanpo New Town Eastern District in Tianjin with a planned site area of 1,440,497 square metres and Total GFA of 2,160,999 square metres. The project is planned to be built into an integrated complex featuring mainly lowdensity residences and high-rise residential buildings, complemented by boutique commercial properties. The estimated net profit margin on sales and net investment profit ratio of the project is 15.65% and 22.77%, respectively.

Beijing R&F New Town is located in Xianghe New Town District adjacent to the Xianghe Exit of Jingha Expressway in Xianghe County. Xianghe is located along the core corridor zone of the Beijing-Tianjin-Hebei region and connects with the business circle in eastern Beijing. The project has a Total GFA of 1,937,660 square metres and is planned for the construction of high-end residential properties. The estimated net profit margin on sales and net investment profit ratio of the project is 15.65% and 22.77%, respectively.

Meizhou R&F City is located in the core zone of Meixian New Town in Meizhou with a planned site area of 662,942.35 square metres and Total GFA of 2,351,581 square metres. The project is planned for the construction of mid- to high-end residential properties. The estimated net profit margin on sales and net investment profit ratio of the project is 16.35% and 24.29%, respectively.

Harbin R&F City is located at Youyi West Road in Daoli District, Harbin adjacent to the core zone of the Songbei Financial CBD. The project has a planned site area of 399,197.5 square metres and Total GFA of 832,500 square metres. The project is planned to be built into an integrated complex featuring mainly low-density residences and decorated high-rise residential buildings,

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LETTER FROM THE BOARD

complemented and enhanced by boutique commercial properties. The estimated net profit margin on sales and net investment profit ratio of the project is 17.68% and 27.41%, respectively.

Nanjing R&F Shangyue Court is located at Xinhu Avenue in Banqiao New Town of Yuhuatai District, Nanjing with a planned site area of 105,021 square metres and Total GFA of 343,472 square metres. Property types will include mid- to high-end residential units and commercial properties. The estimated net profit margin on sales and net investment profit ratio of the project is 11.45% and 14.73%, respectively.

Wuxi R&F No. 10 is located in the core area of Taihu New Town in Binhu District, Wuxi with an overall planned site area of 111,261 square metres and Total GFA of 233,648 square metres. The project is planned for the construction of decorated high-end residential buildings. The estimated net profit margin on sales and net investment profit ratio of the project is 12.15% and 15.43%, respectively.

Foshan R&F Plaza is located within Chancheng District in Foshan with a planned site area of 51,304 square metres and Total GFA of 227,524 square metres. The project is planned to be developed into an integrated complex featuring mainly high-rise residential buildings complemented by boutique commercial properties. The estimated net profit margin on sales and net investment profit ratio of the project is 13.91% and 20.02%, respectively.

V. Resources in staff, technology and market knowledge for projects to be invested along side projects whereby the proceeds will be applied

With over 20 years of continuous involvement in property development since 1994, the Company has grown into an enterprise consistently ranking among the forerunners in the real estate development industry of China in terms of overall strengths, integrating real estate planning and design, development, engineering work supervision, construction, sales, decoration, property management, aftersales services and property agency under one roof. The Company has completed a nationwide business network with a business scope covering more than 20 medium to large cities and regions in China; meanwhile, the Company has also expanded its business outside China to Malaysia and Australia. As such, the Company’s staff resources, technology and market knowledge are expected to drive positive earnings from the projects using the proceeds.

Staff resources

Our efficient administration, team coordination and outstanding ability in market-oriented operations of our management team underscore one of the core competitive strengths of the Company. Over the years, the Company has trained up a large number of professional staff and gained strong experience in market research, project analysis, project planning and positioning, survey planning and design, engineering work, marketing strategies and property

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LETTER FROM THE BOARD

management. Our relevant management personnel and other staff are capable of advancing the efficient implementation of projects using issue proceeds.

The Company has developed a comprehensive staff training regime. The Company has always placed a strong emphasis on staff training and provided a diverse range of training for staff at various levels, such as training in specialised and technical skills, management and professional enhancement. The succession planning roadmap of the Company has provided a larger pool of talents that will effectively drive its stable development.

2. Technical resources

The Company has formulated a comprehensive real estate business model and developed efficient operating and management mechanisms for various segments of the business. The Company conducts its real estate business under the model of ‘‘integrated operations’’, forming an integrated development chain as it expands its business and incorporates design, engineering, construction, sales and property management into its business scope. A feasible development chain business model has been formed, resulting in effective cost control and shortened turnover periods for property development.

The Company’s persistence in innovative property development is reflected in many ways, such as its architectural planning, deployment of commercial properties, layout design for residential units, design for hotel plans and office layout planning. Commercial and residential properties developed by the Company are underpinned by traditional architectural styles and internationally advanced design concepts while showcasing local cultural characteristics, with the aim of building properties with local architectural styles, eco-friendly features and intensive use of resources. Meanwhile, to better meet the requirements of customers, enhance corporate competitiveness and increase social benefits, the Company adopts in its development and construction work new processes and technologies that feature innovations in planning and architectural designs, architectural structures, energy conservation and eco-friendliness.

3. Market resources

As at 30 June 2015, the Company had commenced property development projects with a primary focus on residential properties in more than 20 medium to large cities and regions, including Guangzhou, Beijing, Tianjin and Shanghai, as well as outside China in Malaysia and Australia, with Total GFA of 12,898,000 square metres. The Company has already developed its network in tier-one and tier-two key cities, accelerated its project completion progress, whilst adopting proactive and effective sales strategies to increase sales year-on-year.

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LETTER FROM THE BOARD

In terms of its land bank, each year the Company maintains land reserves sufficient for development for the next 3 to 5 years, taking into account of its funding conditions and future development planning. As at 30 June 2015, the Company has attributable land reserves with a total area of approximately 40,319,000 square metres. Such land reserves enjoy a considerable cost advantage and are mainly located in the urban areas of tier-one and tier-two cities in China. The reasonable regional deployment and product mix provide effective assurance for the future growth of the Company’s results.

VI. Measures in relation to dilution of return for the current period

Following the issue and listing of the A Shares, the total share capital and net assets of the Company will increase substantially. As the construction period of the projects to be invested with the proceeds will be relatively long, a considerable period will lapse before the projects become profitable after implementation. During such period, indicators such as the earnings per share and return on net assets of the Company will be subject to a certain measure of dilution in the near term.

The major risks currently faced by the Company are discussed as follows:

(I) Policy Risk

The property industry is an important pillar of overall national economic development and the industry as a whole is more susceptible to the impact of macro-economic and industrial policies. Since the first mentioning of the ‘‘property industry’’ in the government’s work report in 2001, the direction of property regulation has been closely linked with the development cycles of the industry. The property industry has generally managed to achieve a healthy and stable development over the years under the guidance of regulatory policies in connection with land, credit and taxation, variously reflected in the employment of terms such as ‘‘grooming’’, ‘‘encouraging’’ and ‘‘reform’’ in the early years, ‘‘high vigilance’’ and ‘‘stringent regulation’’ in later periods, ‘‘classified regulation’’ in 2014, and ‘‘support’’ and ‘‘facilitation’’ in 2015.

In recent years, in view of overheated property investments and excessive rises in property prices, the central government has noticeably increased the magnitude of its austerity measures targeted at the property market, with a view to steering the property industry towards ongoing stable growth. Since May 2005, the General Office of the State Council has successively issued documents such as the ‘‘Opinion on the Proper Implementation of Measures to Stabilise Property Prices’’ 《( 關於做好穩定住房價格工作的意見》), ‘‘Notice on Facilitating the Stable and Healthy Development of the Property Market’’ 《( 關於促進房地產市場平穩健康發展的通知》) and ‘‘Notice on the Ongoing Proper Implementation of Measures for Regulating the Property Market’’ 《( 關於繼續做好房地產市場調控工作的通知》). Through measures such as land supply policy adjustments, stringent implementation of policies for

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LETTER FROM THE BOARD

the administration of residential land use, differentiated credit and taxation policies and purchase restrictions in key cities, rigorous policy control over the property market was exercised. With the slowdown in growth of the property industry since 2014, there have also been signs of these austerity measure easing, as implementations of policies such as classified regulation and by varying measures for different regions have been seen. Subsequently, purchase restrictions in certain regions have been canceled and conditions for loans for the first property purchase have also been adjusted. In late March 2015, a number of ministries and ministerial commissions announced policies to lower the ratio for housing provident fund loans for the first property purchase and the down-payment ratio for the second property purchase, and to shorten the duration for the charge or exemption of business tax on the amount of difference in property transactions in the secondary market from 5 years to 2 years.

At the Third Plenum of the Central Committee of the 18th Party Congress of the Chinese Communist Party, it was emphasised that ‘‘the market should be the decisive factor in the allocation of resources.’’ Currently, the priority of the government is to maintain the stable and healthy development of the property market. Guided by the general principle of stable housing consumption, the policy of differentiated guidance is firmly adhered to in support of the voluntary and upgrade demand of residents. Driven by government policies, the property industry has generally enjoyed a stable development. Nevertheless, the property industry is always subject to cyclical fluctuations, while uncertainties will remain in the direction of future policies. If the Company is unable to proactively adapt itself to changes in regulatory policies, and improve its risk control, business management standards on an ongoing basis and formulate reasonable business strategies, the operations and results of the Company might be adversely affected.

(II) Business Risk

Risks relating to project development

Property project development comprises multiple phases which include site selection, land acquisition, planning, design, construction, sales and after-sales service. Project development typically requires long turnover periods, significant financial investments and interaction with numerous parties. It is subject to approval and supervision by a number of government authorities, such as authorities for the administration of land and resources, housing and urban-rural development, fire prevention and environmental protection, and will also be affected by factors such as market conditions. While the Company has extensive experience in property project development and strong abilities in project development underpinned by the model of integrated operations which is conducive to the timely access to latest information at various stages of project development and the acceleration of project

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LETTER FROM THE BOARD

development, any changes in market conditions will affect the turnover period and estimated earnings of a project. In recent years, the government has announced policies containing more stringent approval requirements for land transactions, housing layout planning, and application for construction permits and sales permits, etc. This may result in longer turnover periods for the Company’s property development and sales. Our development costs and development risks will be increased as a consequence and our operating results will be adversely affected.

2. Risks relating to land reserve

The development of construction land sites is fundamental to the survival and development of a property business. Land is a resource that cannot be regenerated, and the scarcity of land is particularly more apparent than in core cities. As a property development company, if we are unable to obtain land required by our project development in a timely manner, our production operations will be forced into suspension. Meanwhile, fluctuations in land prices will also have a direct impact on the development costs of a property development company. At present, the transfer of land sites for development and construction in China is conducted through the ‘‘tender, auction and listing’’ system of transfer in the public market. Property development companies face intense competition in land acquisition. If the Company is unable to acquire land sites required for project development in a timely manner and maintain a dynamic land bank required for ongoing development, the Company’s development will be restrained and the continuous growth in the Company’s revenue and operating results will be affected as a result.

(III) Market Risk

1. Risks relating to the decline in potential long-term demand for properties

The property sector of China has experienced rapid development for nearly 20 years. While commodity houses remain undersupplied in certain regions, there has been an increasing trend of disparity among cities of different tiers in recent years in terms of the demand for properties. Given the relative stable ratio of home ownership, decline in birth rate, a rapidly aging population and slowdown in macro-economic growth, there will be a general transition from booming growth to stability in the development of the property industry in the long term. As the growth rate of the industry becomes stabilised, the industry will face the risk of declining long-term potential demands. If the Company is unable to maintain or further enhance its market competitiveness

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under this context and distinguish itself from its competition to secure larger market shares, the ongoing development of its property development and sales business will face challenges.

2. Risks relating to operations outside China

From 2013 to 2015, the Company had been expanding its property development business in Malaysia and Australia, and its overseas projects had yet to generate significant revenue.

While the Company has enjoyed a strong reputation with solid riskaversion abilities in China following consistent development in the past 20 years or more, the political and legal settings of the domestic market remain significantly different from their counterparts in the overseas market. The Company needs to gain deeper understanding of aspects such as land transfers, labour employment, safe production and taxation in Malaysia and Australia to avoid policy risks; it also needs to take accurate actions in product design, financing and marketing to avoid market risks. If the Company is unable to optimise and adjust its business strategies in line with the political, legal and market developments in Malaysia, Australia and other overseas regions for its intended future expansion, the Company’s operating results and market reputation in the overseas market will be directly affected. In addition, the overseas business of the Company is primarily settled in foreign currencies, and changes in RMB exchange rates will be subject to a number of factors, such as changes in the political and economic conditions in China and elsewhere. This might result in exchange losses for the Company and affect the assets and business revenue of the Company denominated in RMB.

(IV) Financial Risk

1. Risks relating to financing

The real estate industry is a typical capital-intensive industry. Industry players have consistently strong demand for capital. With the support of ample funds, a property development company will be able to expand its business and develop a nationwide business network through ongoing investment, development and sales, while substantially lowering its operating risks. The Company raises funds mainly through internal resources, bank borrowings and debt issues in the capital markets. Restrictions in access to bank borrowings, funds derived from internal resources and revenue from presales/sales of commodity housing falling short of project construction requirements, or inability to issue debt in the capital markets will affect the property project development plans of

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LETTER FROM THE BOARD

the Company and hence the business development of the Company, while also adversely affecting the stability of the Company’s financial conditions.

As at the end of June 2015, the Company held land reserves with a total area of 40,319,000 square metres. While the quality land bank of the Company has provided a strong foundation for its ongoing development in future, subsequent project development will require ongoing funding in future. Hence, the Company will generally face a certain degree of pressure in capital expenditure in future. If the financing capacity of the Company is affected by future macro-economic policies, credit policies and industrial policies, the realisation of future business goals will be affected to a certain extent.

2. Risks relating to a high gearing ratio

As at 30 June 2015, the consolidated gearing ratio of the Company (in accordance with CAS) was 73.26%, and the gearing ratio of the parent company (in accordance with CAS) was 79.37%. The consolidated gearing ratio excluding advanced receipts (in accordance with CAS) was 68.65%. The relatively high overall gearing ratio of the Company was mainly attributable to increased bank borrowings by the Company in recent years and its active issuance of corporate debentures and overseas bonds to enhance its financial strength, resulting in an increase in liabilities.

As at 30 June 2015, the balance of the Company’s long-term borrowings, non-current liabilities due within one year, bond payable and short-term borrowings amounted to RMB37.132 billion, RMB23.580 billion, RMB9.661 billion and RMB4.358 billion, respectively, reflecting the pressure of long-term as well as short-term debt repayments. If significant volatility occurs in the sales market or financial market and the funding sources of the Company are not sufficiently covered, the Company’s ability to repay debts when due will be directly affected. In tandem with its business development, the size of the Company’s financing requirements will continue to grow. If the Company is unable to maintain its gearing ratio within a reasonable level, the pressure of debt repayment will increase and its ability to seek further financing will be restricted as a result.

3. Risks relating to substantial trade receivables

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LETTER FROM THE BOARD

end of 2012, 2013, 2014 and the end of June 2015, trade receivables due within one year accounted for 83.38%, 83.57%, 86.02% and 71.04%, respectively, while trade receivables due within two year accounted for 96.22%, 94.25%, 93.04% and 91.97%, respectively, of total trade receivables.

The Company is principally engaged in property development and sales, lease of commercial properties and hotel services, and its trade receivables are primarily amounts payable by property purchasers for the purchase of properties. As the amount of an individual property transaction is usually substantial and only a small percentage of property purchasers would make one-off full payments, the Company’s sales of properties are commonly conducted by way of instalment payment by the purchaser or bank mortgage payment. In case of bank mortgage payment, the purchaser would settle the downpayment and his/her eligibility to borrow loans would be confirmed by the bank before the execution of the property sales contract with the Company; in case of payment by instalments, the amount of downpayment will be agreed between the Company and the purchaser and will typically account for 20%–30% of the contract amount, and the instalment period will normally be no longer than 2 years.

The Company has established a stringent payment collection system to address trade receivables. While the Company will conduct comprehensive evaluation of the ability of a purchase to honour payments prior to signing the contract with him/her and formulated corresponding measures to manage trade receivables, and the Company has not experienced any non-recoverable trade receivables during the reporting period, the risk of the Company’s trade receivables turning into bad debts will nevertheless increase if the customer is unable to continue to honour the agreement owing to a significant decline of the property market or sudden worsening of the financial conditions of the customer owing substantial macro-economic volatility and other unforeseeable reasons, and the Company’s profitability will be adversely affected as a result.

(V) Risk relating to the Use of Proceeds

Proceeds from the issue will be committed to 9 projects of the Company, including Beijing R&F New Town, Beijing R&F Tongzhou Yunhe No. 10, Tianjin R&F New Town and Shanghai Hongqiao Project. Property development projects typically command massive investments and a long turnover period. Although the management of the Company has conducted thorough feasibility studies regarding the projects to be invested with the proceeds and such projects will become important profit growth drivers of the Company in future, material changes in the property market in future,

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LETTER FROM THE BOARD

such as adjustments in macro-economic policies and decline in property prices, will nevertheless affect the profitability of some of the projects to be invested with the proceeds.

(VI) Risk relating to Earnings Per Share and Return on Net Assets

Following the completion of the initial public offering of A Shares, the Company’s share capital and net assets will increase substantially. As property development projects typically command a considerable turnover period and it will take some time before the projects to be invested with the issue proceeds will generate profit, the Company is expected to face the risk of dilution of return per share and return on net assets resulting from the swift growth in share capital and net assets for a certain period after the completion of the issue.

The risks discussed above are inherent in the entire production process of the Company. While it will be difficult to measure the extent of the impact of such risks in quantified terms, the concentration of such risks or the combination of different risks might result in a decline in the Company’s operating results.

In view of the above, the Company intends to mitigate for dilution of return for the current period by enhancing its profitability through more effective application of the issue proceeds, assuring and expediting implementation of the projects using the issue proceeds and improvement of its profit distribution policy. Specifically, the Company will adopt the following measures:

Enhancing management of issue proceeds to ensure legal compliance of the application of proceeds

To regulate the management and application of the issue proceeds and protect investors’ interests, the Company has formulated the ‘‘Measures for the Administration of Issue Proceeds of Guangzhou R&F Properties Co., Ltd.’’ 《( 廣州富力地產股份有限公司募集資金管理辦法》) to regulate the application of issue proceeds. Upon receipt of the issue proceeds, the Board of the Company will place the proceeds in a designated account, ensure application of the proceeds in designated projects, cooperate with supervisory banks and sponsors in their inspection and supervision of the use of proceeds in strict compliance with the requirements set out in ‘‘Measures for the Administration of Issue Proceeds of Guangzhou R&F Properties Co., Ltd.’’ 《( 廣州富力地產股份有限公司募集資金管理辦法》), in order to assure reasonable and compliant application of the issue proceeds and protect the Company against risks relating to the use of proceeds.

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LETTER FROM THE BOARD

Active implementation of projects utilising the issue proceeds

The issue is closely related to the principal business of the Company, in line with the future development strategies of the Company and conducive to the enhancement of the Company’s ongoing profitability. The Company has conducted thorough research on the projects to be invested with the proceeds. Prior to the receipt of the proceeds, the Company will commit its internal and privately-raised funds to the construction of the projects to strive to bring forward the generation of revenue.

Active enhancement of the competitiveness and profitability of the Company

The Company will endeavor to further consolidate and enhance the core competitive strengths of the Company and broaden its market, in a bid to ensure growth in both revenue and profitability.

Improving the profit distribution system and particularly the cash dividend policy

The Company will amend the clauses of its Article of Association in relation to its profit distribution policy in accordance with relevant provisions of the ‘‘Notice on the Further Implementation of Matters 一 pertaining to Cash Dividend by Listed Companies’’ 《( 關於進步落實上市公司現金分紅有關事項的通知》) of CSRC, ‘‘CSRC Opinion on Further Advancing the Reform of the System for the Issue of New Shares’’ 《( 中國證監會關於進一步推進新股發行體制改革的意見》), ‘‘Guideline for the Regulation of Listed Companies No. 3 — Cash Dividend of Listed Companies’’ 《( 上市公司監管指引第3號 — 上市公司現金分紅》) and ‘‘Guideline for Articles of Association of Listed Companies’’ (Revised 2014) 《( 上市公司章程指引》（2014年修訂）), as well as further improve its profit distribution system and strengthen its investor return mechanism to ensure protection for the interests of shareholders of the Company, especially those of the minority shareholders. Meanwhile, to further refine the decision-making procedures for profit distribution and the terms of the distribution policy, enhance the transparency and operability of cash dividend and facilitate investors’ supervision of the Company’s operations and profit distribution, the Company has formulated the ‘‘Planning for Shareholders’ Dividend and Return for the Three Years Following the Listing of A Shares of Guangzhou R&F Properties Co., Ltd.’’ 《( 廣州富力地產股份有限公司A股上市後未來三年股東分紅回報規劃》), which specifically provides for the principles and methods of profit distribution and the conditions and percentages for cash dividend of the Company in full protection of its shareholders’ legal entitlements to asset returns.

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LETTER FROM THE BOARD

The Company undertakes to optimise its measures to mitigate for dilution of return on an ongoing basis in accordance with implementation rules or supplementary provisions that may be announced by the CSRC or the stock exchanges in future.
PROPOSED ADOPTION OF THE UNDERTAKING BY THE COMPANY’S DIRECTORS IN CONNECTION WITH THE ADOPTION OF MEASURES TO MITIGATE THE POTENTIAL DILUTION OF RETURN FOR THE CURRENT PERIOD RESULTING FROM THE INITIAL PUBLIC OFFERING OF A SHARES BY THE COMPANY

To safeguard the lawful rights of investors, particularly those of small investors, the CSRC issued the ‘‘Guidance Opinion on Matters Pertaining to dilution of return for the Current Period Resulting from Initial Offering and Refinancing or Material Asset Reorganisation’’ (Zheng Jian Hui Gong Gao [2015] No. 31) 《( 關於首發及再融資、重大資產重組攤薄即期回報有關事項的指導意見》) (證監會公告[2015]31號)) on 30 December 2015, further stating the requirement for optimising the mechanism for investors’ return.

To thoroughly implement and aforesaid regulation and the principle of the document, the Directors of the Company hereby undertake to the Company and its shareholders that:

(I) they will not direct benefits to other entities or individuals without consideration or on unfair terms, nor will they compromise the interests of the Company in any other manner.
(II) they will act to restrain duty-related spending.
(III) they will not appropriate assets of the Company for investments and spending not related to the performance of their duties.
(IV) the remuneration system formulated by the Board or the Remuneration Committee will be correlated to the implementation of the Company’s measures to make up for returns.
(V) in the event of the implementation of any share option incentive scheme by the Company in future, the conditions for exercising options under such scheme will be correlated to the implementation of the Company’s measures to make up for returns.
(VI) during the period from the date on which such undertaking is given to the completion of the initial public offering of A Shares, supplementary undertakings will be given in accordance with supplementary regulations announced by competent authorities such as the CSRC concerning measures to make up for returns and related undertakings, if such regulations are announced by such competent authorities and the foregoing undertakings fall short of meeting such new regulations.

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LETTER FROM THE BOARD

PROPOSED ADOPTION OF THE UNDERTAKING BY THE COMPANY’S SENIOR MANAGEMENT IN CONNECTION WITH THE ADOPTION OF MEASURES TO MITIGATE THE POTENTIAL DILUTION OF RETURN FOR THE CURRENT PERIOD RESULTING FROM THE INITIAL PUBLIC OFFERING OF A SHARES BY THE COMPANY

To thoroughly implement and aforesaid regulation and the principle of the document, the senior management of the Company hereby undertake to the Company and its Shareholders that:

(I) they will not direct benefits to other entities or individuals without consideration or on unfair terms, nor will they compromise the interests of the Company in any other manner.
(II) they will act to restrain duty-related spending.
(III) they will not appropriate assets of the Company for investments and spending not related to the performance of their duties.
(IV) the remuneration system formulated by the Board or the Remuneration Committee will be correlated to the implementation of the Company’s measures to make up for returns.
(V) in the event of the implementation of any share option incentive scheme by the Company in future, the conditions for exercising options under such scheme will be correlated to the implementation of the Company’s measures to make up for returns.
(VI) during the period from the date on which such undertaking is given to the completion of the initial public offering of A Shares, supplementary undertakings will be given in accordance with supplementary regulations announced by competent authorities such as the CSRC concerning measures to make up for returns and related undertakings, if such regulations are announced by such competent authorities and the foregoing undertakings fall short of meeting such new regulations.

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LETTER FROM THE BOARD

5. 2016 FIRST EXTRAORDINARY GENERAL MEETING

The 2016 First EGM will be convened to approve the abovementioned matters by ordinary resolution as appropriate. The notice for convening the 2016 First EGM to be held at 11 a.m. on Tuesday, 15 March 2016 at the Conference Room, 54/F, R&F Center, No.10 Huaxia Road, Pearl River New Town, Guangzhou, the PRC is set out on pages 23 to 41 of this circular.

In accordance with Rule 13.39(4) of the Listing Rules, the voting on all the resolutions at the 2016 First EGM will be taken by poll.

No Shareholder is interested in the proposed resolutions. Accordingly, no Shareholder is required to abstain from voting for the resolutions proposed at the 2016 First EGM.

Holders of H Shares who wish to appoint a proxy/proxies to attend the 2016 First EGM are requested to complete and sign the proxy form in accordance with the instructions contained therein, and deliver the proxy form to the Company’s H Share registrar, Computershare Hong Kong Investor Services Limited, at 17M/F, Hopewell Centre, 183 Queen’s Road East, Hong Kong, not less than 24 hours before the time designated for the convening of the 2016 First EGM (i.e. Monday, 14 March 2016). For holders of Domestic Shares, the proxy form should be delivered to the Company registered address at 45/F, R&F Center, No. 10 Huaxia Road, Pearl River New Town, Guangzhou, the PRC (Postal Code 510623).

6. BOOK CLOSE PERIOD

The register of members of the H Shares will be closed from 29 January 2016 to 15 March 2016 (both days inclusive) in accordance with the Articles of Association. During such period, no transfer of H Shares will be registered. Shareholders, who intend to attend the 2016 First EGM, must deliver their instruments of transfer together with the relevant share certificates to the Company’s H Share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited, at Rooms 1712– 1716, 17/F, Hopewell Center, 183 Queen’s Road East, Wanchai, Hong Kong not later than 4: 30 p.m. on 28 January 2016.

7. RECOMMENDATION

The Directors are of the view that all resolutions proposed are necessary and in the interests of the Company and the Shareholders. Accordingly, the Directors recommend all Shareholders to vote in favour of the aforementioned resolutions at the 2016 First EGM.

8. ACTION TO BE TAKEN

Whether or not you are able to attend the 2016 First EGM, please complete the proxy form in accordance with the instructions printed thereon and deliver the form to the Company’s H Share registrar, Computershare Hong Kong Investor Services Limited, at 17M/F, Hopewell Centre, 183 Queen’s Road East, Hong Kong or, in the case of

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LETTER FROM THE BOARD

holders of Domestic Shares, to the Company’s registered address, at 45/F, R&F Center, No. 10 Huaxia Road, Pearl River New Town, Guangzhou, the PRC (Postal Code 510623), not less than 24 hours before the time designated for the convening of the 2016 First EGM (i.e. Monday, 14 March 2016). Completion and return of the proxy form will not preclude Shareholders from attending and voting at the meeting or any adjourned meetings should they so wish.

9. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particular 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 fraudulent, and there are no other matters the omission of which would make any statement herein or this circular misleading.

10. GENERAL INFORMATION

This Circular does not constitute an offer or an invitation to induce any person to acquire, subscribe for or purchase any securities of the Company.

By Order of the Board Guangzhou R&F Properties Co., Ltd. Li Sze Lim Chairman

27 January 2016, Hong Kong

For identification purposes only

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NOTICE OF THE 2016 FIRST EXTRAORDINARY GENERAL MEETING

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

(Stock Code: 2777)

NOTICE OF THE 2016 FIRST EXTRAORDINARY GENERAL MEETING

Notice is hereby given that the 2016 first extraordinary general meeting (the ‘‘2016 First EGM’’) of Guangzhou R&F Properties Co., Ltd. (the ‘‘Company’’) will be held at 11 a.m. on Tuesday, 15 March 2016 at the Conference Room, 54/F, R&F Center, No. 10 Huaxia Road, Pearl River New Town, Guangzhou, the PRC, to consider and, if thought fit, pass the following resolutions:

ORDINARY RESOLUTIONS

I. To consider and approve the caution of risks relating to potential dilution of return for the current period resulting from the initial public offering of A Shares by the Company:

To further implement the ‘‘Opinion of the General Office of the State Council on Further Strengthening Work for the Protection of Lawful Interests of Small Investors 一 in the Capital Market’’ (Guo Ban Fa [2013] No. 110) (《國務院辦公廳關於進步加強資本市場中小投資者合法權益保護工作的意見》(國辦發[2013]110號) (the ‘‘Opinion’’) and the ‘‘Guidance Opinion on Matters Pertaining to dilution of return for the Current Period Resulting from Initial Offering and Refinancing or Material Asset Restructuring’’ (Zheng Jian Hui Gong Gao [2015] No. 31) 《( 關於首發及再、融資重大資產重組攤薄即期回報有關事項的指導意見》) (證監會公告[2015]31號) (the ‘‘Guidance Opinion’’) and to ensure the right of information and protect the interests of small investors, the Company has proposed to adopt the following measures to address the potential impact of dilution of return for the current period resulting from the initial public offering of A Shares on the key financial indicators of the Company:

I. Impact of dilution of return for the current period resulting from the initial public offering of A Shares by the Company on the key financial indicators of the Company

Assumptions:

(I) The initial public offering of A Shares will be completed on 30 September 2016, which represents an estimate only subject to the actual time of completion.

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NOTICE OF THE 2016 FIRST EXTRAORDINARY GENERAL MEETING

(II) The Company’s net profit attributable to shareholders of the parent company for 2016 will be the same as the net profit attributable to shareholders of the parent company for 2014 (in accordance with China Accounting Standards for Business Enterprises ‘‘CAS’’), namely, RMB6,553,611,900; the Company’s net profit after extraordinary items attributable to shareholders of the parent company for 2016 will be the same as the net profit after extraordinary items attributable to shareholders of the parent company for 2014 (in accordance with CAS), namely, RMB5,272,167,100. The hypothetical analysis of net profit for 2016 is provided to facilitate investors’ understanding of the dilution of return for the current period resulting from the issue, and does not constitute a profit forecast by the Company. Accordingly, investors should not rely on such analysis in making their investment decisions. The Company shall not assume any responsibility to compensate for losses incurred by investors as a result of investment decisions made in reliance on such analysis.
(III) Owners’ equity attributable to the shareholders of the listed company as at the beginning of 2016 will be the same as equity attributable to the shareholders of the listed company as at 30 June 2015 (in accordance with CAS), namely, RMB46,998,443,700.
(IV) The final size of issue of the initial public offering of A Shares will be 1,070 million A Shares, which is the cap for the initial public offering as considered and approved at the extraordinary general meeting, class meeting of holders of Domestic Shares and class meeting of holders of H Shares held by the Company on 12 August 2015.
(V) The total proceeds raised from the initial public offering of A Shares will amount to RMB35 billion (before issue expenses), as considered and approved at the extraordinary general meeting, class meeting of holders of H Shares and class meeting of holders of Domestic Shares held by the Company on 12 August 2015.
(VI) The effect of the proceeds from the initial public offering of A Shares on the Company’s production operations and financial conditions (such as finance costs and investment gains) has not been taken into consideration.

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NOTICE OF THE 2016 FIRST EXTRAORDINARY GENERAL MEETING

APPENDIX

	Before the	After the
	issue	issue
Item	(2014)	(2016)
Total share capital (in ten thousand shares)	322,236.73	429,236.73
Estimated net profit attributable to owners of the
parent company (in accordance with CAS) (RMB
in ten thousands)	655,361.19	655,361.19
Net profit attributable to owners of the parent
company after extraordinary items (in accordance
with CAS) (RMB in ten thousands)	527,216.71	527,216.71
Total proceeds from the issue
(RMB in ten thousands)	—	3,500,000.00
Basic earnings per share (in accordance with CAS)
(RMB)	1.63	1.50
Diluted earnings per share (in accordance with
CAS) (RMB)	1.63	1.50
Basic earnings per share after extraordinary items
(in accordance with CAS) (RMB)	1.23	1.13
Diluted earnings per share after extraordinary items
(in accordance with CAS) (RMB)	1.23	1.13

II. Caution of risks relating to potential dilution of return for the current period resulting from the initial public offering of A Shares

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NOTICE OF THE 2016 FIRST EXTRAORDINARY GENERAL MEETING

III. Necessity and justification of the financing exercise opted by the Board

(I) To boost the Company’s financial strength and safeguard requirements of project development

(II) To improve the Company’s financial conditions and optimise its capital structure

IV. Intended application of proceeds to certain projects and their relation to the existing business of the Company

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NOTICE OF THE 2016 FIRST EXTRAORDINARY GENERAL MEETING

APPENDIX

Details of the projects are set out as follows:

Beijing R&F Tongzhou Yunhe No. 10 is located in Tongzhou New Town of Tongzhou District, Beijing with a planned site area of 69,796 square metres and total gross floor area (‘‘Total GFA’’) of 465,800 square metres. It will provide residential units, apartments, commercial properties and offices in one development. The residential units will mainly be flats with fine decoration complemented by high-end properties. The estimated net profit margin on sales and net investment profit ratio of the project is 23.71% and 40.05%, respectively.

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NOTICE OF THE 2016 FIRST EXTRAORDINARY GENERAL MEETING

APPENDIX

complemented and enhanced by boutique commercial properties. The estimated net profit margin on sales and net investment profit ratio of the project is 17.68% and 27.41%, respectively.

V. Resources in staff, technology and market knowledge for projects to be invested along side projects whereby the proceeds will be applied

With over 20 years of continuous involvement in property development since in 1994, the Company has grown into an enterprise consistently ranking among the forerunners in the real estate development industry of China in terms of overall strengths, integrating real estate planning and design, development, engineering work supervision, construction, sales, decoration, property management, aftersales services and property agency under one roof. The Company has completed a nationwide business network with a business scope covering more than 20 medium to large cities and regions in China; meanwhile, the Company has also expanded its business outside China to Malaysia and Australia. As such, the Company’s staff resources, technology and market knowledge are expected to drive positive earnings from the projects using the proceeds.

Staff resources

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NOTICE OF THE 2016 FIRST EXTRAORDINARY GENERAL MEETING

APPENDIX

planning and design, engineering work, marketing strategies and property management. Our relevant management personnel and other staff are capable of advancing the efficient implementation of projects using issue proceeds.

2. Technical resources

3. Market resources

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NOTICE OF THE 2016 FIRST EXTRAORDINARY GENERAL MEETING

network in tier-one and tier-two key cities, accelerated its project completion progress, whilst adopting proactive and effective sales strategies to increase sales year-on-year.

VI. Measures in relation to dilution of return for the current period

The major risks currently faced by the Company are discussed as follows:

(I) Policy Risk

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NOTICE OF THE 2016 FIRST EXTRAORDINARY GENERAL MEETING

on Facilitating the Stable and Healthy Development of the Property Market’’ 《( 關於促進房地產市場平穩健康發展的通知》) and ‘‘Notice on the Ongoing Proper Implementation of Measures for Regulating the Property Market’’ 《( 關於繼續做好房地產市場調控工作的通知》). Through measures such as land supply policy adjustments, stringent implementation of policies for the administration of residential land use, differentiated credit and taxation policies and purchase restrictions in key cities, rigorous policy control over the property market was exercised. With the slowdown in growth of the property industry since 2014, there have also been signs of these austerity measure easing, as implementations of policies such as classified regulation and by varying measures for different regions have been seen. Subsequently, purchase restrictions in certain regions have been canceled and conditions for loans for the first property purchase have also been adjusted. In late March 2015, a number of ministries and ministerial commissions announced policies to lower the ratio for housing provident fund loans for the first property purchase and the down-payment ratio for the second property purchase, and to shorten the duration for the charge or exemption of business tax on the amount of difference in property transactions in the secondary market from 5 years to 2 years.

(II) Business Risk

1. Risks relating to project development

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NOTICE OF THE 2016 FIRST EXTRAORDINARY GENERAL MEETING

APPENDIX

prevention and environmental protection, and will also be affected by factors such as market conditions. While the Company has extensive experience in property project development and strong abilities in project development underpinned by the model of integrated operations which is conducive to the timely access to latest information at various stages of project development and the acceleration of project development, any changes in market conditions will affect the turnover period and estimated earnings of a project. In recent years, the government has announced policies containing more stringent approval requirements for land transactions, housing layout planning, and application for construction permits and sales permits, etc. This may result in longer turnover periods for the Company’s property development and sales. Our development costs and development risks will be increased as a consequence and our operating results will be adversely affected.

2. Risks relating to land reserve

(III) Market Risk

1. Risks relating to the decline in potential long-term demand for properties

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APPENDIX

NOTICE OF THE 2016 FIRST EXTRAORDINARY GENERAL MEETING

growth, there will be a general transition from booming growth to stability in the development of the property industry in the long term. As the growth rate of the industry becomes stabilised, the industry will face the risk of declining long-term potential demands. If the Company is unable to maintain or further enhance its market competitiveness under this context and distinguish itself from its competition to secure larger market shares, the ongoing development of its property development and sales business will face challenges.

2. Risks relating to operations outside China

From 2013 to 2015, the Company had been expanding its property development business in Malaysia and Australia, and its overseas projects had yet to generate significant revenue.

(IV) Financial Risk

1. Risks relating to financing

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APPENDIX

NOTICE OF THE 2016 FIRST EXTRAORDINARY GENERAL MEETING

Restrictions in access to bank borrowings, funds derived from internal resources and revenue from presales/sales of commodity housing falling short of project construction requirements, or inability to issue debt in the capital markets will affect the property project development plans of the Company and hence the business development of the Company, while also adversely affecting the stability of the Company’s financial conditions.

2. Risks relating to a high gearing ratio

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NOTICE OF THE 2016 FIRST EXTRAORDINARY GENERAL MEETING

APPENDIX

3. Risks relating to substantial trade receivables

The Company had substantial balances of trade receivables. As at the end of 2012, 2013, 2014 and the end of June 2015, the balance of the Company’s trade receivables amounted to RMB3,011,553,100, RMB4,640,368,600, RMB4,825,535,600 and RMB4,031,891,600, respectively, and the turnover ratio for trade receivables was 12.32, 9.50, 7.36 and 2.89, respectively; in terms of aging structure, as at the end of 2012, 2013, 2014 and the end of June 2015, trade receivables due within one year accounted for 83.38%, 83.57%, 86.02% and 71.04%, respectively, while trade receivables due within two year accounted for 96.22%, 94.25%, 93.04% and 91.97%, respectively, of total trade receivables.

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NOTICE OF THE 2016 FIRST EXTRAORDINARY GENERAL MEETING

(V) Risk relating to the Use of Proceeds

(VI) Risk relating to Earnings Per Share and Return on Net Assets

Enhancing management of issue proceeds to ensure legal compliance of the application of proceeds

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NOTICE OF THE 2016 FIRST EXTRAORDINARY GENERAL MEETING

ensure application of the proceeds in designated projects, cooperate with supervisory banks and sponsors in their inspection and supervision of the use of proceeds in strict compliance with the requirements set out in ‘‘Measures for the Administration of Issue Proceeds of Guangzhou R&F Properties Co., Ltd.’’ 《( 廣州富力地產股份有限公司募集資金管理辦法》), in order to assure reasonable and compliant application of the issue proceeds and protect the Company against risks relating to the use of proceeds.

Active implementation of projects utilising the issue proceeds

Active enhancement of the competitiveness and profitability of the Company

The Company will endeavor to further consolidate and enhance the core competitive strengths of the Company and broaden its market, in a bid to ensure growth in both revenue and profitability.

Improving the profit distribution system and particularly the cash dividend policy

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NOTICE OF THE 2016 FIRST EXTRAORDINARY GENERAL MEETING

policy, enhance the transparency and operability of cash dividend and facilitate investors’ supervision of the Company’s operations and profit distribution, the Company has formulated the ‘‘Planning for Shareholders’ Dividend and Return for the Three Years Following the Listing of A Shares of Guangzhou R&F Properties Co., Ltd.’’ 《( 廣州富力地產股份有限公司A股上市後未來三年股東分紅回報規劃》), which specifically provides for the principles and methods of profit distribution and the conditions and percentages for cash dividend of the Company in full protection of its shareholders’ legal entitlements to asset returns.

The Company undertakes to optimise its measures to mitigate for dilution of return on an ongoing basis in accordance with implementation rules or supplementary provisions that may be announced by the CSRC or the stock exchanges in future.
II. To consider and approve the undertaking by the Company’s Directors in connection with the adoption of measures to mitigate the potential dilution of return for the current period resulting from the initial public offering of A Shares by the Company:

To thoroughly implement and aforesaid regulation and the principle of the document, the Directors of the Company hereby undertake to the Company and its shareholders that:

(I) they will not direct benefits to other entities or individuals without consideration or on unfair terms, nor will they compromise the interests of the Company in any other manner.
(II) they will act to restrain duty-related spending.
(III) they will not appropriate assets of the Company for investments and spending not related to the performance of their duties.
(IV) the remuneration system formulated by the Board or the Remuneration Committee will be correlated to the implementation of the Company’s measures to make up for returns.

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NOTICE OF THE 2016 FIRST EXTRAORDINARY GENERAL MEETING

(V) in the event of the implementation of any share option incentive scheme by the Company in future, the conditions for exercising options under such scheme will be correlated to the implementation of the Company’s measures to make up for returns.
(VI) during the period from the date on which such undertaking is given to the completion of the initial public offering of A Shares, supplementary undertakings will be given in accordance with supplementary regulations announced by competent authorities such as the CSRC concerning measures to make up for returns and related undertakings, if such regulations are announced by such competent authorities and the foregoing undertakings fall short of meeting such new regulations.
III. To consider and approve the undertaking by the Company’s senior management in connection with the adoption of measures to mitigate the potential dilution of return for the current period resulting from the initial public offering of A Shares by the Company:

To thoroughly implement and aforesaid regulation and the principle of the document, the senior management of the Company hereby undertake to the Company and its Shareholders that:

(I) they will not direct benefits to other entities or individuals without consideration or on unfair terms, nor will they compromise the interests of the Company in any other manner.
(II) they will act to restrain duty-related spending.
(III) they will not appropriate assets of the Company for investments and spending not related to the performance of their duties.
(IV) the remuneration system formulated by the Board or the Remuneration Committee will be correlated to the implementation of the Company’s measures to make up for returns.
(V) in the event of the implementation of any share option incentive scheme by the Company in future, the conditions for exercising options under such scheme will be correlated to the implementation of the Company’s measures to make up for returns.

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NOTICE OF THE 2016 FIRST EXTRAORDINARY GENERAL MEETING

APPENDIX

(VI) during the period from the date on which such undertaking is given to the completion of the initial public offering of A Shares, supplementary undertakings will be given in accordance with supplementary regulations announced by competent authorities such as the CSRC concerning measures to make up for returns and related undertakings, if such regulations are announced by such competent authorities and the foregoing undertakings fall short of meeting such new regulations.

Upon approval of the aforesaid authorisation at the general meeting, the chairman of the Board or his authorised delegate(s) is/are given mandate to deal with the matters under authorisation set out above with full discretion; such mandate being valid from the date on which it is considered and approved at the general meeting until the date on which the matters under authorisation set out above are completed.

By Order of the Board Guangzhou R&F Properties Co., Ltd. Michael Lee Joint Company Secretary

27 January 2016, Hong Kong

Notes:

Holders of H Shares are reminded that pursuant to the Articles of Association of the Company and for the purpose of determining the right of shareholders to attend and vote at the 2016 First EGM, the register of the shareholders of the Company shall be closed from 29 January 2016 to 15 March 2016 (both days inclusive), during which period, no transfer of H Shares will be registered. Shareholders, who intend to attend the 2016 First EGM, must deliver their instruments of transfer together with the relevant share certificates to the Company’s H Share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited, at Rooms 1712–1716, 17/F, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong no later than 4: 30 p.m. on 28 January 2016.
Any shareholder of the Company entitled to attend and vote at the 2016 First EGM is entitled to appoint one or more proxies to attend and vote on his/her behalf. A proxy needs not be a shareholder of the Company. Where a shareholder of the Company appoints more than one proxy, his/her proxies can only vote in a poll.
To be valid, the proxy form used by shareholders of the Company (including holders of Domestic Shares and holders of H Shares) or signed by a person authorised under a power of attorney or an instrument otherwise duly signed by a shareholder of the Company, together with a notarised copy of such power of attorney or other instrument, must be delivered to the Company or the Company’s H Share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited, at 17M/F, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not less than 24 hours before the time designated for the convening of the meeting.
Shareholders who wish to attend the 2016 First EGM, are required to return the notice of attendance to the Company no later than 4: 30 p.m. on 23 February 2016 (20 days before the date of meeting).

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APPENDIX

NOTICE OF THE 2016 FIRST EXTRAORDINARY GENERAL MEETING

A shareholder or his/her/its proxy shall produce proof of identity when attending the 2016 First EGM. If a corporate shareholder appoints its legal representative to attend the meeting, such legal representative shall produce proof of his/her personal identity and a copy of the resolution of the board of directors or other governing body of such corporate shareholder.
In accordance with the Company’s Articles of Association, where there are joint shareholders, only the first-named shareholder in the register of shareholders has the right to receive this notice, attend the 2016 First EGM and exercise the voting right.
The 2016 First EGM is expected to last for about half a day. Shareholders of the Company or their proxies attending the 2016 First EGM shall arrange their own transportation, accommodation and meals.

As at the date of this announcement, the executive directors of the Company are Mr. Li Sze Lim, Mr. Zhang Li, Mr. Zhou Yaonan and Mr. Lu¨ Jing; the non-executive directors are Ms. Zhang Lin and Ms. Li Helen; and the independent non-executive directors are Mr. Lai Ming Joseph, Mr. Zheng Ercheng and Mr. Ng Yau Wah Daniel.

For identification purposes only

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AI assistant

Guangzhou R&F Properties Co., Ltd. — Proxy Solicitation & Information Statement 2016

50773_rns_2016-01-27_c908b5f6-ce83-48e8-a87d-7cf578c8e1f5.pdf

NOTICE OF THE 2016 FIRST EXTRAORDINARY GENERAL MEETING

DEFINITIONS

PROPOSED ADOPTION OF THE: (I) CAUTION OF RISKS RELATING TO POTENTIAL DILUTION OF RETURN FOR THE CURRENT PERIOD RESULTING FROM THE INITIAL PUBLIC OFFERING OF A SHARES BY THE COMPANY;

AND

NOTICE OF THE 2016 FIRST EXTRAORDINARY GENERAL MEETING

1. INTRODUCTION

LETTER FROM THE BOARD

LETTER FROM THE BOARD

IV. Intended application of proceeds to certain projects and their relation to the existing business of the Company

2. Technical resources

3. Market resources

LETTER FROM THE BOARD

VI. Measures in relation to dilution of return for the current period

(I) Policy Risk

LETTER FROM THE BOARD

(II) Business Risk

LETTER FROM THE BOARD

2. Risks relating to land reserve

(III) Market Risk

1. Risks relating to the decline in potential long-term demand for properties

2. Risks relating to operations outside China

(IV) Financial Risk

1. Risks relating to financing

2. Risks relating to a high gearing ratio

3. Risks relating to substantial trade receivables

(V) Risk relating to the Use of Proceeds

(VI) Risk relating to Earnings Per Share and Return on Net Assets

5. 2016 FIRST EXTRAORDINARY GENERAL MEETING

6. BOOK CLOSE PERIOD

7. RECOMMENDATION

8. ACTION TO BE TAKEN

9. RESPONSIBILITY STATEMENT

10. GENERAL INFORMATION

NOTICE OF THE 2016 FIRST EXTRAORDINARY GENERAL MEETING

(Stock Code: 2777)

NOTICE OF THE 2016 FIRST EXTRAORDINARY GENERAL MEETING

ORDINARY RESOLUTIONS

APPENDIX

NOTICE OF THE 2016 FIRST EXTRAORDINARY GENERAL MEETING

APPENDIX

II. Caution of risks relating to potential dilution of return for the current period resulting from the initial public offering of A Shares

III. Necessity and justification of the financing exercise opted by the Board

IV. Intended application of proceeds to certain projects and their relation to the existing business of the Company

APPENDIX

APPENDIX

APPENDIX

2. Technical resources

3. Market resources

VI. Measures in relation to dilution of return for the current period

(I) Policy Risk

NOTICE OF THE 2016 FIRST EXTRAORDINARY GENERAL MEETING

(II) Business Risk

1. Risks relating to project development

APPENDIX

2. Risks relating to land reserve

(III) Market Risk

1. Risks relating to the decline in potential long-term demand for properties

2. Risks relating to operations outside China

(IV) Financial Risk

1. Risks relating to financing

2. Risks relating to a high gearing ratio

APPENDIX

3. Risks relating to substantial trade receivables

NOTICE OF THE 2016 FIRST EXTRAORDINARY GENERAL MEETING

(V) Risk relating to the Use of Proceeds

(VI) Risk relating to Earnings Per Share and Return on Net Assets

NOTICE OF THE 2016 FIRST EXTRAORDINARY GENERAL MEETING

NOTICE OF THE 2016 FIRST EXTRAORDINARY GENERAL MEETING

NOTICE OF THE 2016 FIRST EXTRAORDINARY GENERAL MEETING

APPENDIX

27 January 2016, Hong Kong

Notes:

APPENDIX

NOTICE OF THE 2016 FIRST EXTRAORDINARY GENERAL MEETING

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Guangzhou R&F Properties Co., Ltd. Proxy Solicitation & Information Statement 2016