Guangzhou R&F Properties Co., Ltd. - Proxy Solicitation & Information Statement 2021

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 transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or 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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(a joint stock limited company incorporated in the People’s Republic of China with limited liability)

(Stock Code: 2777)

(1) JOINT VENTURE ARRANGEMENT CONNECTED AND MAJOR TRANSACTION (2) PROPOSED APPOINTMENT OF SUPERVISOR AND

(3) NOTICE OF EXTRAORDINARY GENERAL MEETING

Financial adviser to the Company

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Independent Financial Adviser to the Independent Board Committee and Independent Shareholders

Unless the context requires otherwise, capitalised terms used herein shall have the same meanings as defined under the section of “Definitions” of this circular.

A letter from the Board is set out on pages 4 to 12 of this circular. A letter from the Independent Board Committee containing its recommendation is set out on pages 13 to 14 of this circular. A letter from the Independent Financial Adviser containing its recommendation to the Independent Board Committee and the Independent Shareholders is set out on pages 15 to 25 of this circular. A notice convening the EGM to be held at the Conference Room, 54/F., R&F Center, No. 10 Huaxia Road, Pearl River New Town, Guangzhou, the PRC on Friday, 3 December 2021 at 11:00 a.m. is set out on pages 35 to 36 of this circular.

A form of proxy for use at the EGM is enclosed with this circular. Whether or not you are able to attend the EGM, you are requested to complete the proxy form in accordance with the instructions printed thereon and return the same to the H share registrar of the Company in Hong Kong, Computershare Hong Kong Investor Services Limited of 17M/F., Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong as soon as possible, and in any event not less than 24 hours before the time appointed for holding the EGM or any adjournment thereof.

11 November 2021

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
Letter from the Independent Financial Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
Appendix I – Financial Information of the Group. . . . . . . . . . . . . . . . . . . . . .	26
Appendix II – Biography of the proposed Supervisor. . . . . . . . . . . . . . . . . . . .	28
Appendix III – General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	29
Notice of EGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	35

– i –

DEFINITIONS

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

“Agreement”

the agreement dated 29 September 2021 entered into between the Company and the Major Shareholders in relation to the Joint Venture Arrangement

“Board”

the board of the directors of the Company

“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 the H Shares of which are listed on the main board of the Stock Exchange (stock code: 2777)

“Director(s)” the director(s) of the Company
“Dr. Li”
Dr. Li Sze Lim, an executive Director and a substantial shareholder of the Company
“EGM”
the extraordinary general meeting of the Company to be convened for the purpose of considering and, if thought fit, approving the transactions contemplated under the Agreement and the proposed appointment of a Supervisor
“Financial Support”

the financial support provided by the Major Shareholders in the amount of RMB5.38 billion as at the date of the Agreement, which has been booked under “accruals and other payables”

“Group” the Company and its subsidiaries
“Hong Kong”

the Hong Kong Special Administrative Region of the People’s Republic of China

“HK$” the lawful currency of Hong Kong
“H Share(s)” or “Share(s)”

ordinary share(s) in the share capital of the Company, with a nominal value of RMB1 each, which are listed on the main board of the Stock Exchange

“Independent Board Committee”

an independent committee of the Board, comprising all the independent non-executive Directors, established for the purpose of advising the Independent Shareholders in respect of the transactions contemplated under the Agreement

– 1 –

DEFINITIONS

“Independent Financial Adviser” or “Maxa Capital”

Maxa Capital Limited, a licensed corporation permitted to carry out type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities under the SFO, which was appointed by the Company as the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the terms of Agreement and the transactions contemplated thereunder

“Independent Shareholders” the Shareholders other than Dr. Li, Mr. Zhang and their respective associates (as defined in the Listing Rules)
“Joint Venture Arrangement” the formation of the JV Companies between the Company and the Major Shareholders
“JV Company(ies)” one or more investment vehicles to be formed between the Major Shareholders (or their wholly-owned companies) and the Company (or its wholly-owned subsidiaries)
“Latest Practicable Date” 5 November 2021, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein
“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange
“Major Shareholders” Dr. Li and Mr. Zhang
“Mr. Zhang” Mr. Zhang Li, an executive Director and a substantial shareholder of the Company
“PRC” the People’s Republic of China
“RMB” the lawful currency of the PRC
“SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), as amended, supplemented or otherwise modified from time to time
“Shareholders” the shareholders of the Company “Stock Exchange” The Stock Exchange of Hong Kong Limited “Supervisor” the supervisor of the Supervisory Committee of the Company
“Supervisory Committee” the supervisory committee of the Company

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	DEFINITIONS
“US$”	United States dollar(s), the lawful currency of the
	United States of America
“%”	per cent.

* For identification purposes only

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LETTER FROM THE BOARD

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

Executive Directors: Dr. Li Sze Lim Mr. Zhang Li Mr. Zhang Hui Mr. Xiang Lijun

Registered Office in the PRC: 45-54/F., R&F Center, No. 10 Huaxia Road, Pearl River New Town, Guangzhou 510623 PRC

Non-executive Directors: Ms. Zhang Lin Ms. Li Helen

Independent Non-executive Directors: Mr. Zheng Ercheng Mr. Ng Yau Wah, Daniel Mr. Wong Chun Bong

Principal Place of Business in Hong Kong: Room 6303, The Center, No. 99 Queen’s Road Central, Hong Kong

11 November 2021

To the Shareholders

Dear Sir or Madam,

(1) JOINT VENTURE ARRANGEMENT CONNECTED AND MAJOR TRANSACTION (2) PROPOSED APPOINTMENT OF SUPERVISOR

INTRODUCTION

Reference is made to (1) the announcement of the Company dated 29 September 2021 in relation to, among other things, the Agreement and the transactions contemplated thereunder; and (2) the announcement of the Company dated 5 November 2021 in relation to the proposed appointment of Mr. Zhang Yucong (“ Mr. Zhang ”) as a Supervisor representing Shareholders.

The purpose of this circular is to provide you with, among other things, (i) further details about the Joint Venture Arrangement and the proposed appointment of Mr. Zhang as Supervisor representing Shareholders; (ii) the recommendations of the Independent Board

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LETTER FROM THE BOARD

Committee on the terms of the Agreement; (iii) a letter of advice from the independent financial adviser to the Independent Board Committee and the Independent Shareholders in relation to the terms of the Agreement; and (iv) the notice convening the EGM.

THE JOINT VENTURE ARRANGEMENT

On 29 September 2021 (after trading hours), the Company entered into the Agreement with the Major Shareholders in relation to the Joint Venture Arrangement for the purposes of identifying and jointly investing into project development and property-related investments. The principal terms of the Agreement are set out below.

Subject matter

The Major Shareholders and the Company agreed to the formation of the JV Companies.

Each of the JV Companies will be held as to 51% by the Company or its wholly-owned subsidiary and as to 49% by the Major Shareholders or companies wholly-owned by them.

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the Company or its wholly-owned the Major Shareholders or companies
subsidiary wholly-owned by them
51% 49%
the JV Companies
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Each of the JV Companies will be a subsidiary of the Company and their financial results will be consolidated by the Company.

Capital Contribution

The Major Shareholders or companies wholly-owned by them will subscribe for a 49% interest in each of the JV Companies. The Company or its wholly-owned subsidiary will subscribe for a 51% interest in each of the JV Companies.

Each of the Company and the Major Shareholders will make capital contribution to the JV Companies in the amount pro rata to their equity holding in the JV Companies.

The proportion of total commitment attributable to the Company to the JV Companies will be up to RMB10.8 billion.

The total commitment of the Major Shareholders to the JV Companies will be up to RMB10.4 billion, which will be settled (i) first, by offsetting against the Financial Support; and (ii) secondly, in cash.

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LETTER FROM THE BOARD

The amount of capital contribution was determined based on the amount of the financial assistance already provided to the Company by the Major Shareholders as at the date of the Agreement (i.e. the Financial Support) and the amount of long-term commitment to the principal business activities of the Group which they had previously communicated to the Company and as disclosed in the announcement of the Company dated 20 September 2021.

As at the Latest Practicable Date, the parties to the Agreement have not identified any potential acquisitions or investment opportunities. Hence, the number of JV Companies and the individual capital commitment of each JV Company has not been decided.

The Agreement does not have restrictions on the timeline for the potential acquisitions or investment opportunities to be identified. The parties to the Agreement will make their respective capital contribution after such acquisition or investment opportunities have been identified. It is expected that the Company will fund its commitment by internal resources. Subject to market conditions, government policies and the fulfilment of selection criteria set out in the section headed “Management” below, the Company intends to identify investment targets within 12 to 18 months from the date of passing of the resolutions approving the Agreement.

Management

With respect to the management of the JV Companies, the board of directors of each of the JV Companies will consist of three directors, two of whom will be appointed by the Company, and the remaining one director will be appointed by the Major Shareholders. For JV Companies established in the PRC, the Company will also have the right to appoint a supervisor. The board of directors of the JV Company shall be responsible for the business operations of the JV Company.

The Company will take lead in selecting and identifying the investments. The investment team of the Group will be responsible in identifying the investment opportunities which are in line with the Group’s principal activities and prepare proposal and budget for the opportunities they deem fit and in the interests of the Group and Shareholders. Then, the proposal and budget will be passed to the finance team of the Company for review and approval. If the finance team of the Company is of the view that the Group has sufficient resources to meet the investment requirement, they will pass the proposal to the Board. Upon approval by the Board, the Company will make recommendation to the board of JV Company. All matters to be determined by the board of directors of the JV Company shall be by majority decision. In making investment decisions, the Major Shareholders, Ms. Li Helen (who is the sister of Dr. Li) and Ms. Zhang Lin (who is the sister of Mr. Zhang), will abstain from voting in the relevant board resolutions.

In line with the Group’s development strategy, the Company will focus on quality investment targets.

The selection criteria for any investment targets of the JV Companies will be no different from the same approach adopted by the Group from time to time in making its investment decisions. Investments may be made by way of acquisition, auction or project redevelopment. In deciding suitable projects for investment, the Group consistently adopts a

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LETTER FROM THE BOARD

stringent selection criteria based on geography, demographics, commercial return and investment cycle. The geography and demographics will determine the cities which the Group will consider to invest in such that there are operational synergies with other existing or neighboring projects, and attractive demographics that ensures the success of the project. From a suitability perspective, the Group will assess the potential financial return generated from the project with a view to obtain attractive returns in its investments in terms of gross profit margin and cash flow cycle over the life of a project. The Group has in recent years a strategical geo-graphical focus in the Greater Bay Area (“ GBA ”). As at the Latest Practicable Date, the Group had projects/ investments in the GBA including Guangzhou, Foshan and Zhuhai.

The Group will continue to focus on investments in the GBA, initially with a principal focus on urban renewal projects. In line with the track record of the Group, the Group considered that a gross profit margin of 20% to 30%, or a short project cash cycle whereby the invested capital can be recouped and reinvested into further projects, was attractive investments; while projects with a longer project cycle, such as urban renewal projects in the GBA were also considered attractive in terms of higher gross profit margins or larger site areas located in prime locations.

The general manager of each JV Company will be a person appointed by the Company. He/ she will be responsible for overseeing the day to day management and operations of the JV Company and reporting to the board of directors of the JV Company.

The chief financial officer of each of the JV Companies will also be a person appointed by the Company.

Distribution

Any profit sharing or distribution shall be determined by the board of directors of the JV Company from time to time. Any distribution shall be made in proportion to the Company’s and the Major Shareholders’ respective 51% and 49% equity interests in the JV Company.

Future funding

The JV Companies will seek to meet any additional working capital requirements which exceed the current capital commitment by way of (i) external loans from banks, financial institutions or other third parties; or (ii) financing by the Company and the Major Shareholders (whether by way of subscription of new shares or provision of shareholder’s loan(s)) in proportion to the Company’s and Major Shareholders’ respective 51% and 49% equity interests in the JV Companies.

Condition

The Joint Venture Arrangement will be subject to the Company having obtained the approval from the Independent Shareholders at a general meeting to approve the Agreement and the transactions contemplated thereunder.

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LETTER FROM THE BOARD

REASONS FOR AND BENEFITS TO THE JOINT VENTURE ARRANGEMENT

The Group is principally engaged in the development and sale of properties, property investment, hotel operation and other property development related services in the PRC.

Each of the Major Shareholders is an executive Director and a substantial shareholder of the Company. Each of them is also the founder of the Group. Dr. Li is the founder of the Group, the Chairman and an executive Director. He is responsible for the strategic direction of the Group and also specially responsible for the sales and financial management function. Mr. Zhang is the founder of the Group, the Co-chairman, an executive Director and chief executive officer of the Company. He is mainly responsible for land acquisition, construction development, cost control and managing daily operations.

The Company considers that the Joint Venture Arrangement demonstrates the commitment and confidence of the Major Shareholders to the development and prospects of the Group. The investment by the Major Shareholders will be settled by offsetting against the Financial Support and in cash as set out in the section headed “Capital Contribution” above.

Upon completion of the Joint Venture Arrangement, the direct equity participation by the Major Shareholders will be considered as long-term investment capital contribution. Following the announcement of the Company dated 20 September 2021 in relation to, among others, the possible financial support of up to HK$8.0 billion by the Major Shareholders, the current contemplated total commitment by the Major Shareholders is RMB10.4 billion and there will be an overall improvement to the Group’s liquidity and financial structure upon completion of the Joint Venture Arrangement. Based on internal financial information as at 31 August 2021, the balance of borrowings and cash amounted to approximately RMB140.0 billion and RMB27.3 billion respectively. Upon contribution by the Major Shareholders, the total equity is expected to increase by RMB10.4 billion to approximately RMB103.2 billion while the total borrowings will be reduced by RMB6.1 billion to approximately RMB133.9 billion as a result of repayment. Assume there are no change in the cash balance, the Group’s pro forma net gearing ratio will decrease to 103%. Up to the date of the Agreement, approximately RMB5.38 billion of financial assistance has already been provided by the Major Shareholders, which will be used to settle part of the commitment of the Major Shareholders under the Joint Venture Arrangement.

Based on the Company’s financial planning for the remainder of the year, management expects the pace of further reduction of the net gearing ratio will occur ahead of internal targets.

The Joint Venture Arrangement will make the Group’s financial structure more optimal and healthier which will be beneficial to its long-term development.

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LETTER FROM THE BOARD

The Major Shareholders are committed to supporting the Group and, subject to compliance with all applicable rules and regulations (including the Listing Rules), will continue to do so.

The Directors (excluding (i) the Major Shareholders, Ms. Li Helen (who is the sister of Dr. Li) and Ms. Zhang Lin (who is the sister of Mr. Zhang); but including (ii) the independent non-executive Directors, who after having received the advice from the Independent Financial Adviser) are of the view that the Agreement was entered into on normal commercial terms and are fair and reasonable and in the interests of the Company and the Shareholders as a whole. Each of the Major Shareholders, Ms. Li Helen (who is the sister of Dr. Li) and Ms. Zhang Lin (who is the sister of Mr. Zhang) has abstained from voting on the relevant Board resolutions in relation to the Agreement.

LISTING RULES IMPLICATIONS

(i) Chapter 14

As one or more of the percentage ratios (as defined in the Listing Rules) applicable to the Company’s commitment exceeds 25% but are all less than 75%, the Joint Venture Arrangement constitutes a major transaction for the Company and is subject to the reporting, announcement and Shareholders’ approval requirements under Chapter 14 of the Listing Rules.

(ii) Chapter 14A

Each of the Major Shareholders is an executive Director and a substantial shareholder of the Company. The transactions contemplated under the Agreement constitute connected transactions of the Company under Chapter 14A of the Listing Rules.

As the highest applicable percentage ratio in respect of the Company’s commitment exceeds 5%, the Joint Venture Arrangement is subject to the reporting, announcement and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

The Company has appointed Maxa Capital as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in relation to the Agreement and the transactions contemplated thereunder.

The Independent Board Committee comprising all the independent non-executive Directors has been established to consider the terms of the Agreement to advise the Independent Shareholders whether the terms of the Agreement are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

The letter of the Independent Board Committee and the letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders are set out in this circular.

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LETTER FROM THE BOARD

FINANCIAL EFFECT OF THE JOINT VENTURE ARRANGEMENT ON THE GROUP

Assets and liabilities

Upon completion of the Joint Venture Arrangement, the direct equity participation by the Major Shareholders will be considered as long-term investment capital contribution. The total assets of the Group as at 30 June 2021 would increase from approximately RMB424.6 billion to approximately RMB429.6 billion, its total liabilities as at 30 June 2021 would decrease from RMB331.8 billion to RMB326.4 billion and its net assets would increase from RMB92.8 billion to RMB103.2 billion.

Earnings

Upon completion of the Joint Venture Arrangement, the JV Companies will become subsidiaries of the Company and the consolidated financial results of the JV Companies will be consolidated into the financial results of the Company. It is expected that the Group will record additional revenue and earnings from the JV Companies in the future.

PROPOSED APPOINTMENT OF SUPERVISOR

The Supervisory Committee has proposed to appoint Mr. Zhang as a Supervisor representing Shareholders. The appointment of Mr. Zhang is subject to approval by the Shareholders at the EGM.

The biography of Mr. Zhang is set out in Appendix II of this circular.

EGM

The Company will convene the EGM at the Conference Room, 54/F., R&F Center, No. 10 Huaxia Road, Pearl River New Town, Guangzhou, the PRC on Friday, 3 December 2021 at 11:00 a.m. for the Independent Shareholders to consider and approve, the Agreement and the transactions contemplated thereunder, and the appointment of Mr. Zhang as Supervisor representing Shareholders.

The notice of the EGM is set out on pages 35 and 36 of this circular. The voting on resolutions to be proposed at the EGM will be conducted by way of poll in accordance with Rule 13.39(4) of the Listing Rules.

The Company will publish an announcement on the poll results of the EGM with respect to whether or not the proposed resolutions has been passed by the Independent Shareholders or the Shareholders, as the case may be.

Shareholder with a material interest in the Agreement and the transactions contemplated thereunder and his/her/its close associates shall abstain from voting on the resolution No. 1 to be proposed at the EGM in relation to the Agreement. As at the Latest Practicable Date, except for the following Shareholders which together hold 2,125,981,344 Shares,

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LETTER FROM THE BOARD

representing 56.66% of the total share capital of the Company, to the best of the Directors’ knowledge, information and belief, save as disclosed above, no other Shareholder is required to abstain from voting on resolution No. 1 to be proposed at the EGM.

(i) Dr. Li holds 1,066,092,672 Shares, representing 28.41% of the total share capital of the Company;
(ii) Mr. Zhang holds 1,017,885,072 Shares, representing 27.13% of the total share capital of the Company;
(iii) Ms. Cheung Yee Man, Elisa (“ Ms. Cheung ”), who is the spouse of Dr. Li holds 5,000,000 Shares, representing 0.13% of the total share capital of the Company;
(iv) Ms. Liao Dong Fen, who is the spouse of Mr. Zhang, holds 20,000,000 Shares, representing 0.53% of the total share capital of the Company;
(v) Fusion Capital Limited, a company owned as to 50% by Dr. Li and 50% by Ms. Cheung, holds 16,000,000 Shares, representing 0.43% of the total share capital of the Company; and
(vi) Ms. Li Helen, who is the sister of Dr. Li, holds 1,003,600 Shares, representing 0.03% of the total share capital of the Company.

With respect to resolution No. 2 in relation to the proposed appointment of Mr. Zhang as a Supervisor, to the best of the Directors’ knowledge, information and belief, no Shareholder will be required to abstain from voting on the resolution.

A form of proxy for use at the EGM is enclosed with this circular. Whether or not you are able to attend the meeting, you are requested to complete the proxy form in accordance with the instructions printed thereon and return the same to the H share registrar of the Company in Hong Kong, Computershare Hong Kong Investor Services Limited, 17M/F., Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong as soon as possible, and in any event not less than 24 hours before the time appointed for holding the EGM or any adjournment thereof. Completion and return of the proxy form will not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish. In such event, the instrument appointing the proxy will be deemed to be revoked.

RECOMMENDATION

(i) The Agreement

Your attention is drawn to the letter of the Independent Board Committee of this circular, and the letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders of this circular.

The Independent Board Committee, having taken into account the advice of the Independent Financial Adviser, is of the view that the Agreement and the transactions contemplated thereunder, which have been reached after arm’s length negotiations

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LETTER FROM THE BOARD

among the parties thereto, are on normal commercial terms, fair and reasonable, and the transactions contemplated above are in the interests of the Company and the Shareholders as a whole. Accordingly, the Independent Board Committee recommends the Independent Shareholders to vote in favour of the resolution to be proposed for approving the Agreement and the transactions contemplated thereunder at the EGM.

The Board (including independent non-executive Directors but excluding (i) the Major Shareholders, Ms. Li Helen (who is the sister of Dr. Li) and Ms. Zhang Lin (who is the sister of Mr. Zhang)) considers that the Agreement and the transactions contemplated thereunder, which have been reached after arm’s length negotiations among the parties thereto, are on normal commercial terms, fair and reasonable, and the transactions contemplated above are in the interests of the Company and the Shareholders as a whole. Accordingly, the Board (including independent non-executive Directors but excluding (i) the Major Shareholders, Ms. Li Helen (who is the sister of Dr. Li) and Ms. Zhang Lin (who is the sister of Mr. Zhang)) recommends the Independent Shareholders to vote in favour of the resolution approving the Agreement and the transactions contemplated thereunder at the EGM.

(ii) The proposed appointment of Mr. Zhang as a Supervisor

The Directors consider that Mr. Zhang is a suitable candidate to be appointed as a Supervisor and accordingly recommend the Shareholders to vote in favour of the resolution approving the appointment of Mr. Zhang as a Supervisor representing Shareholders.

FURTHER INFORMATION

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

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

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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

11 November 2021

To the Independent Shareholders

Dear Sir or Madam

JOINT VENTURE ARRANGEMENT CONNECTED AND MAJOR TRANSACTION

We refer to the circular of the Company dated 11 November 2021 (the “ Circular ”) of which this letter forms part. Unless the context otherwise requires, terms and expressions defined in the Circular shall have the same meanings herein.

We have been appointed by the Board as members of the Independent Board Committee to advise the Independent Shareholders as to whether the terms of the Agreement and the transactions contemplated thereunder are fair and reasonable, whether the transactions contemplated above are on normal commercial terms and in the ordinary and usual course of business of the Group and in the interests of the Company and the Independent Shareholders as a whole, and to advise the Independent Shareholders on how to vote, taking into account the recommendations of the Independent Financial Adviser.

We wish to draw your attention to (i) the letter from the Board of the Circular; (ii) the letter from the Independent Financial Adviser of the Circular which contains its recommendation to the Independent Board Committee and the Independent Shareholders in relation to the terms of the Agreement and the transactions contemplated thereunder as well as the principal factors and reasons considered by the Independent Financial Adviser in arriving at its recommendation; and (iii) the additional information as set out in the appendices to the Circular.

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

After taking into account the factors and reasons considered by the Independent Financial Adviser and its conclusion and advice, we concur with its views and consider that the terms of the Agreement and the transactions contemplated thereunder are fair and reasonable as far as the Independent Shareholders are concerned, and the Agreement and transactions contemplated thereunder are on normal commercial terms, in the ordinary and usual course of business of the Group and in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the resolution to be proposed at the EGM to approve the Agreement and the transactions contemplated thereunder.

Yours faithfully For and on behalf of the Independent Board Committee Mr. Zheng Ercheng Mr. Ng Yau Wah, Daniel Mr. Wong Chun Bong Independent non-executive Directors

For identification purpose only

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the full text of the letter from Maxa Capital Limited, the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders setting out its advice in respect of the terms of the Joint Venture Arrangement and the transactions contemplated thereunder, which has been prepared for the purpose of inclusion in this circular.

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Unit 1908, Harbour Center 25 Harbour Road Wan Chai Hong Kong

11 November 2021

To the Independent Board Committee and the Independent Shareholders

Dear Sir or Madam,

JOINT VENTURE ARRANGEMENT– CONNECTED AND MAJOR TRANSACTION

INTRODUCTION

We refer to our appointment as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Joint Venture Arrangement, details of which are set out in the letter from the Board (the “ Letter from the Board ”) contained in the circular of the Company dated 11 November 2021 (the “ Circular ”), of which this letter forms parts. Capitalised terms used in this letter shall have the same meanings as those defined in the Circular unless the context otherwise requires.

On 29 September 2021, the Company entered into the Agreement with the Major Shareholders in relation to the Joint Venture Arrangement for the purposes of identifying and jointly investing into project development and property-related investments. The Major Shareholders and the Company agreed to the formation of the JV Companies. Each of the JV Companies will be held as to 51% by the Company or its wholly-owned subsidiary and as to 49% by the Major Shareholders or companies wholly-owned by them. The proportion of total commitment attributable to the Company to the JV Companies will be up to RMB10.8 billion. The total commitment of the Major Shareholders to the JV Companies will be up to RMB10.4 billion, which will be settled (i) first, by offsetting against the Financial Support; and (ii) secondly, in cash.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

LISTING RULES IMPLCATION

As at the Latest Practicable Date, each of the Major Shareholders is an executive Director and a substantial shareholder of the Company. The transactions contemplated under the Agreement constitute connected transactions of the Company under Chapter 14A of the Listing Rules. As the highest applicable percentage ratio in respect of the Company’s commitment exceeds 5%, the Joint Venture Arrangement is subject to the reporting, announcement and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

We, Maxa Capital Limited, have been appointed by the Company as the Independent Financial Adviser to advise the independent non-executive Directors, namely, Mr. Zheng Ercheng, Mr. Ng Yau Wah, Daniel and Mr. Wong Chun Bong, in respect of whether the terms of the Agreement and the transactions contemplated thereunder are on normal commercial terms and are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

The EGM will be convened for the purpose of considering and, if thought fit, approving the Agreement and the transactions contemplated thereunder. The Major Shareholders, Ms. Cheung Yee Man, Elisa, Ms. Liao Dong Fen, Ms. Li Helen and Fusion Capital Limited will abstain from voting in respect of the resolution that would be proposed to approve the Agreement and the transactions contemplated thereunder at the EGM.

OUR INDEPENDENCE

In the past two years, we have acted as an independent financial adviser to the Company in its (i) exempt connected transaction on disposal of property management companies; and (ii) exempt continuing connected transactions pursuant to framework agreement, the details of which are set out in the Company’s announcements dated 9 April 2020 and 25 May 2020. As at the Latest Practicable Date, we were independent from and not connected with the Company and any of its associates that could reasonably be regarded as relevant to our independence and accordingly, were qualified to give independent advice to the Independent Board Committee and the Independent Shareholders in respect of the terms of the Agreement and the transactions contemplated thereunder.

BASIS OF OUR OPINION

In formulating our opinion, we have relied on the statements, information, opinions and representations contained in the Circular and the information and representations provided to us by the Directors and the management of the Group (the “ Management ”). We have also reviewed, inter alia, the statements, the information, opinions and representations contained or referred to in the Circular and the information and representations as provided to us by the Directors and the Management. We have assumed that (i) all statements, information and representations provided by the Directors and the Management; and (ii) the information referred to in the Circular, for which they are solely responsible, were true and accurate at the time when they were provided and continued to be so as at the Latest Practicable Date and the Shareholders will be notified of any material changes to such information and representations before the EGM. We have also assumed that all statements of belief, opinion,

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

intention and expectation made by the Directors in the Circular were reasonably made after due enquiry and careful consideration. We have no reason to suspect that any material facts or information have been withheld or to doubt the truth, accuracy and completeness of the information and facts contained in the Circular, or the reasonableness of the representation and opinions expressed by the Company, its advisers and/or the Directors. We consider that we have been provided with sufficient information to reach an informed view and to provide a reasonable basis for our opinion. We have not, however, conducted any independent verification of the information included in the Circular and provided to us by the Directors and the Management nor have we conducted any form of in-depth investigation into the business and affairs or the future prospects of the Group.

The Directors jointly and severally accept full responsibility for the accuracy of the information contained in the Circular and have confirmed, having made all reasonable enquiries, that to the best of their knowledge and belief, there are no other facts the omission of which would make any statement in the Circular misleading.

Our opinion is necessarily based on the financial, economic, market and other conditions in effect and the information made available to us as at the Latest Practicable Date. Nothing contained in this letter should be construed as a recommendation to hold, sell or buy any Shares or any other securities of the Company. Where information in this letter has been extracted from published or otherwise publicly available sources, the sole responsibility of us is to ensure that such information has been correctly and fairly extracted, reproduced or presented from the relevant stated sources and not be used out of context.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion in respect of the Agreement and the transactions contemplated thereunder, we have taken into consideration the following principal factors and reasons:

1. Background information of the Group

The Group is principally engaged in the development and sale of properties, property investment, hotel operations and other property development related services in the PRC. Set out below is the summarised financial information of the Group for the two years ended 31 December 2019 and 2020 (“ FY2019 ” and “ FY2020 ”, respectively) and for the six months ended 30 June 2020 and 2021 (“ 1H2020 ” and “ 1H2021 ”, respectively), as extracted from the annual report of the Company for the year ended 31 December 2020 (the “ 2020 AR ”) and the interim report of the Company for the six months ended 30 June 2021 (the “ 2021 IR ”):

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

	For the year ended	For the year ended	For the six months	For the six months
	31 December		ended	30 June
	2019	2020	2020	2021
	RMB’000	RMB’000	RMB’000	RMB’000
	(audited)	(audited)	(unaudited)	(unaudited)
Total revenue	90,813,970	85,891,778	33,591,036	39,493,138
Property development	79,689,217	78,568,290	30,831,124	35,946,375
Property investment	1,213,119	1,157,922	465,911	533,251
Hotel operations	7,022,452	4,462,735	1,396,106	2,499,645
Others	2,889,182	1,702,831	897,895	513,867
Profit before tax	18,226,264	15,911,683	6,628,510	5,555,516
Profit for the year/period	10,093,210	9,146,315	3,916,988	3,181,021

As disclosed in the 2020 AR, the total revenue of the Group was approximately RMB85,891.8 million for FY2020, representing a decrease of approximately RMB4,922.2 million or 5.4% as compared to approximately RMB90,814.0 million for FY2019, whereas the profit for the year was approximately RMB9,146.3 million for FY2020, representing a decrease of approximately RMB946.9 million or 9.4% as compared to approximately RMB10,093.2 million for FY2019. Such decrease in the revenue and the profit for the year was primarily attributable to (i) the decrease in the revenue derived from the property development segment from approximately RMB79,689.2 million for FY2019 to approximately RMB78,568.3 million for FY2020, resulting from the decrease in the overall average selling price of 10% to RMB8,600 per sq.m.; and (ii) the decrease in the revenue derived from the hotel operations segment from approximately RMB7,022.5 million for FY2019 to approximately RMB4,462.7 million for FY2020, resulting from the irrevocable negative impact brought by the COVID-19 during the first half of 2020.

As disclosed in the 2021 IR, the total revenue of the Group was approximately RMB39,493.1 million for 1H2021, representing an increase of approximately RMB5,902.1 million or 17.6% as compared to approximately RMB33,591.0 million for 1H2020, whereas the profit for the period was approximately RMB3,181.0 million for 1H2021, representing a decrease of approximately RMB736.0 million or 18.8% as compared to approximately RMB3,917.0 million for 1H2020. The increase in the revenue was primarily attributable to the increase in the revenue derived from the property development segment from approximately RMB30,831.1 million for 1H2020 to approximately RMB35,946.4 million for 1H2021 resulting from the increase in the amount of saleable areas sold from approximately 3,350,000 sq.m. during 1H2020 to approximately 4,098,000 sq.m. or 22.3% during 1H2021. The decrease in the profit for the period was primarily attributable to (i) the adjustments made on the average selling price to accelerate the pace of sales; and (ii) the increase in the land and construction costs per sq.m. from approximately RMB5,560 during 1H2020 to approximately RMB6,190 during 1H2021.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

			As at 30
	As at 31	December	June
	2019	2020	2021
	RMB’000	RMB’000	RMB’000
	(audited)	(audited)	(unaudited)
Non-current assets	103,608,668	114,409,335	121,821,745
Current assets	323,717,650	327,775,880	302,730,726
Total assets	427,326,318	442,185,215	424,552,471
Non-current liabilities	143,224,090	107,952,433	102,498,837
Current liabilities	204,303,103	242,227,439	229,279,392
Total liabilities	347,527,193	350,179,872	331,778,229
Net current assets	119,414,547	85,548,441	73,451,334
Net assets	79,799,125	92,005,343	92,774,242

As disclosed in the 2020 AR, the Group had net assets of approximately RMB92,005.3 million as at 31 December 2020 as compared to net assets of approximately RMB79,799.1 million as at 31 December 2019, such increase was mainly attributable to (i) the decrease in long-term borrowings from approximately RMB134,870.7 million as at 31 December 2019 to approximately RMB95,848.6 million as at 31 December 2020; and (ii) the increase in assets classified as held for sale from nil as at 31 December 2019 to approximately RMB6,330.7 million as at 31 December 2020; and was partially offset by (i) the increase in accruals and other payables from approximately RMB83,905.9 million as at 31 December 2019 to RMB106,533.1 million as at 31 December 2020; and (ii) the decrease in trade and other receivables and prepayments from approximately RMB57,730.0 million as at 31 December 2019 to RMB46,315.5 million as at 31 December 2020.

As disclosed in the 2021 IR, the Group had net assets of approximately RMB92,774.2 million as at 30 June 2021 as compared to net assets of approximately RMB92,005.3 million as at 31 December 2020, such slight increase was mainly attributable to the combined effect of (i) the decrease in long-term borrowings from approximately RMB95,848.6 million as at 31 December 2020 to approximately RMB91,444.7 million as at 30 June 2021; (ii) the decrease in accruals and other payables from approximately RMB106,533.1 million as at 31 December 2020 to approximately RMB99,199.9 million as at 30 June 2021; (iii) the decrease in current portion of long-term borrowings from approximately RMB52,961.9 million as at 31 December 2020 to approximately RMB38,275.9 million as at 30 June 2021; and (iv) the decrease in cash and cash equivalents from approximately RMB25,672.8 million as at 31 December 2020 to approximately RMB12,763.9 million as at 30 June 2021.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

2. Reasons for and benefits of the Joint Venture Arrangement

2.1 Background and reasons for the Joint Venture Arrangement

References are made to the 2020 AR and the 2021 IR, the Group’s profit for the year decreased to approximately RMB9,146.3 million for FY2020 and the Group’s profit for the period decreased to approximately RMB3,181.0 million for 1H2021, such was primarily attributable to (i) the adjustments made on average selling price to mitigate the irrevocable financial impact brought by the COVID-19 to the Group; and (ii) the fact that China continues to undergo adjustments in policies that affect the property sector, of which the policy fluctuation will affect the overall liquidity management to a certain extent. In addition, we also noticed that (i) the Group’s cash and cash equivalents drastically decreased from approximately RMB25,672.9 million as at 31 December 2020 to approximately RMB12,763.9 million as at 30 June 2021; and (ii) the Group’s total interest-bearing borrowings amounted to approximately RMB143,348.6 million with gearing ratio of approximately 123.4% as at 30 June 2021.

It is expected that the JV Companies will invest in projects that are in line with the principal business of the Group (including property development projects, investment properties and urban renewal projects). We concur with the view of the Company that the Joint Venture Arrangement demonstrates the commitment and confidence of the Major Shareholders to the development and prospects of the Group.

Upon completion of the Joint Venture Arrangement, the direct equity participation by the Major Shareholders will be considered as long-term investment capital contribution. The current contemplated total commitment by the Major Shareholders under the Joint Venture Arrangement is RMB10.4 billion. Following the announcement of the Company dated 20 September 2021 in relation to, among others, the possible financial support of up to HK$8.0 billion by the Major Shareholders, approximately RMB5.4 billion of financial assistance has already been provided by the Major Shareholders as of the Latest Practicable Date and we have obtained and reviewed relevant bank statements from the Company regarding the receipt of such advances from the Major Shareholders. Having considered (i) the Financial Support provided by the Major Shareholders is interest free; (ii) certain credit agencies have recently degraded the rating of many mainland property developers, including the Company, under the current market sentiment; and (iii) the Agreement does not have any restriction in identifying potential investment opportunities, we are of the view that the Joint Venture Arrangement demonstrates the commitment and confidence of the Major Shareholders to the development and prospects of the Group. These amounts will be used to settle part of the commitment of the Major Shareholders under the Joint Venture Arrangement. Based on the Group’s internal financial information as at 31 August 2021, the Group’s pro forma net gearing ratio will further decrease to approximately 103%.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Based on the Company’s financial planning for the remainder of the year, the Management expects the pace of further reduction of the net gearing ratio will occur ahead of internal targets. The total equity of the Group is expected to increase by approximately RMB10.4 billion should the full amount of the Financial Support were capitalised pursuant to the Agreement. We are also of the view that the Joint Venture Arrangement will make the Group’s financial structure more optimal and healthier which will be beneficial to its long-term development.

Taking into consideration that (i) the JV Companies will invest in projects that are in line with the principal business of the Group; and (ii) there will be an overall improvement to the Group’s liquidity and financial structure upon completion of the Joint Venture Arrangement, we concur with the view of the Company that the Joint Venture Arrangement is in the interest of the Group as a whole.

2.2 Principal terms of the Agreement

Date

29 September 2021 (After trading hours)

Parties

(1) the Company; and
(2) the Major Shareholders

Subject matter

The Major Shareholders and the Company agreed to the formation of the JV Companies.

Each of the JV Companies will be held as to 51% by the Company or its wholly-owned subsidiary and as to 49% by the Major Shareholders or companies wholly-owned by them.

==> picture [401 x 114] intentionally omitted <==

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

the Company or its wholly-owned the Major Shareholders or companies
subsidiary wholly-owned by them
51% 49%
the JV Companies
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Each of the JV Companies will be a subsidiary of the Company and their financial results will be consolidated by the Company.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Capital Contribution

Each of the Company and the Major Shareholders will make capital contribution to the JV Companies in the amount pro rata to their equity holding in the JV Companies.

The proportion of total commitment attributable to the Company to the JV Companies will be up to RMB10.8 billion. The total commitment of the Major Shareholders to the JV Companies will be up to RMB10.4 billion, which will be settled (i) first, by offsetting against the Financial Support; and (ii) secondly, in cash.

The Agreement does not have restrictions on the timeline for the potential acquisitions or investment opportunities to be identified. The parties to the Agreement will make their respective capital contribution after such acquisition or investment opportunities have been identified. It is expected that the Company will fund its commitment by internal resources. Subject to market conditions, government policies and the fulfilment of selection criteria set out in the section headed “Management” in the Letter from the Board, the Company intends to identify investment targets within 12 to 18 months from the date of passing of the resolutions approving the Agreement.

On the basis that the amount of capital contribution and commitment under the Joint Venture Arrangement will comprise of cash pro rata to the equity interest in each of the JV Companies, we are of the view that the terms in relation to the capital contribution are fair and reasonable and on normal commercial terms after arm’s length negotiations between the parties.

Management

With respect to the management of the JV Companies, the board of directors of each of the JV Companies will consist of three directors, two of whom will be appointed by the Company and the remaining one will be appointed by the Major Shareholders. The Company will hold the right in appointing the senior management of each of the JV Companies such as general manager and chief financial officer, for JV Companies established in the PRC, the Company will also hold the rights in appointing supervisor. The board of directors of the JV Company shall be responsible for the business operations of the JV Company.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

will make recommendation to the board of JV Company. All matters to be determined by the board of directors of the JV Company shall be by majority decision. In making investment decisions, the Major Shareholders, Ms. Li Helen (who is the sister of Dr. Li) and Ms. Zhang Lin (who is the sister of Mr. Zhang), will abstain from voting in the relevant board resolutions. We are of the view such arrangement under the Agreement will enable the Company to maintain its control over the investment decision of the JV Companies.

Distribution

Any profit sharing or distribution shall be determined by the board of directors of each of the JV Companies from time to time and shall be made in proportion to the Company’s and the Major Shareholders’ respective 51% and 49% equity interests in each of the JV Companies, we are of the view that such arrangement under the Agreement is fair and reasonable and on normal commercial terms after arm’s length negotiations between the parties.

Condition

Based on our discussion with the Management, we understood that (i) the amount of capital contribution was determined based on the amount of long-term commitment that the Major Shareholders are willing to invest in the projects to be identified by the JV Companies; and (ii) the Company will have the right to appoint the majority of the directors of the JV Companies. We have also reviewed the 2020 AR and we noted that approximately 1.3 million sq.m. of gross floor area was converted from urban renewal projects in tier-1 and tier-2 cities and the GBA during FY2020. Having considered that the investment strategies of the JV Companies are expected to be in line with the Group, in particular, the Group will continue to focus on investments in the GBA with a principal focus on urban renewal projects, we are of the view that the terms in relation to the capital contribution and the management composition of the Agreement are fair and reasonable and on normal commercial terms after arm’s length negotiations between the parties.

3. Possible financial effects of the Joint Venture Arrangement

Net assets and earnings

Upon completion of the Joint Venture Arrangement by way of the aforesaid capital injection, the registered capital of the JV Company will be owned as to 51% by the Company or its wholly-owned subsidiaries and 49% by the Major Shareholders or companies wholly-owned by them, and accordingly, the JV Companies will be accounted for as subsidiaries of the Company and their financial results will be consolidated into the Group’s consolidated financial statements. We have discussed

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

with the Management and understood that the JV Companies have not identified any specific project to invest and therefore there is no significant contributions from the JV Companies until it has commenced its operation.

It is expected the Group’s liability will be reduced by the amount of Financial Support, which is RMB5.4 billion as of the Latest Practicable Date, to be capitalised by means of offsetting the Major Shareholder’s proportion of commitment under the Agreement; and the Group’s total assets will be increased by the amount of cash, if any, to be contributed by the Major Shareholders under the Agreement. Despite the financial position is expected to improve, the exact changes in the financial position can only be determined by the time the commitment of the Major Shareholder is fulfilled.

Besides, we have also reviewed that the Group’s internal financial information as at 31 August 2021 and understood that the Group’s pro forma net gearing ratio will be further decreased to approximately 103%.

In view of the abovementioned factors, we concur with the view of the Company that the investment by the Company or its wholly-owned subsidiaries in the JV Companies will have positive effect on the net assets of the Group.

Working capital

As stated in the 2021 IR, the cash and cash equivalents and net current assets of the Group amounted to approximately RMB12.8 billion and RMB73.5 billion, respectively, as at 30 June 2021, whereas the proportion of total commitment attributable to the Company to the JV Companies will be up to RMB10.8 billion, which represents approximately 84.4% of the cash and cash equivalents or 14.7% of the net current assets of the Group as at 30 June 2021. Based on our discussion with the Management, there is no specific timeframe for fulfilling the commitment under the Agreement and the Company is able to cover the total commitment attributable to the Company to the JV Companies by its net current assets. We have also reviewed the 2020 AR and we noted that the share of results of joint ventures amounted to approximately RMB292.2 million for FY2020, such was mainly attributable to (i) 33.34% interests in Guangzhou Liedecun project; (ii) 25% interests in Tianjin Jinnan New Town project; (iii) 60% interests in Guiyang R&F Center project; and (iv) 33% interests in Changsha Xirong Plaza project. Besides, we have further discussed with the Management and we are given to understand that joint ventures will be formed for project execution if necessary. Having considered the abovementioned factors, we consider that the formation of joint ventures as ordinary course of business for the Group, and we are of the view that (i) the Agreement to the formation of the JV Companies prior to the identification of investment opportunities is to demonstrate the commitment of the Major Shareholders over the long term business development of the Group; and (ii) the Agreement is fair and reasonable and in normal commercial terms or in line with prevailing market practice.

It should be noted that the above analyses are for illustrative purpose only and do not purport to represent how the financial position of the Group will be upon the formation of JV Companies.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

RECOMMENDATION

Having considered the above principal factors and reasons discussed above, we are of the view that the Agreement and the transaction contemplated thereunder are on normal commercial terms, fair and reasonable, in the ordinary and usual course of business of the Company and in the interests of the Company and the Independent Shareholders as a whole. Accordingly, we advise the Independent Board Committee to recommend, and we ourselves recommend, the Independent Shareholders to vote in favour of the relevant resolutions to be proposed for approving the Agreement and the transactions contemplated thereunder at the EGM.

Yours faithfully, For and on behalf of Maxa Capital Limited Michael Fok Managing Director

Mr. Michael Fok is a licensed person registered with the Securities and Futures Commission of Hong Kong and a responsible officer of Maxa Capital Limited to carry out type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities under the SFO and has over 20 years of experience in the corporate finance industry.

– 25 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. FINANCIAL INFORMATION OF THE GROUP

Details of the audited consolidated financial information of the Company for each of the three years ended 31 December 2018, 2019 and 2020 and the interim report of the Company for the six months ended 30 June 2021 have been published and are available on the website of the Stock Exchange (www.hkex.com.hk) and the website of the Company (http://www.rfchina.com/):

the annual report of the Company for the year ended 31 December 2018 (pages 98 to 224) published on 2 April 2019, available on: https://www1.hkexnews.hk/listedco/listconews/sehk/2019/0402/ltn20190402727.pdf;
the annual report of the Company for the year ended 31 December 2019 (pages 105 to 221) published on 8 April 2020, available on: https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0408/2020040800745.pdf;
the annual report of the Company for the year ended 31 December 2020 (pages 108 to 223) published on 19 April 2021, available on https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0419/2021041900394.pdf; and
the interim report of the Company for the six months ended 30 June 2021 (pages 21 to 60) published on 31 August 2021, available on: https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0831/2021083100575.pdf.

2. STATEMENT OF INDEBTEDNESS OF THE GROUP

As at the close of business on 30 September 2021, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular, the Group had outstanding borrowings of approximately RMB134.6 billion, details of which are set out below:

(i) Borrowings

	RMB’000
Bank and other borrowings
Secured	79,409,505
Unsecured	8,337,975
Domestic Bonds	14,305,405
Senior Notes	32,535,307

The secured bank and other borrowings were secured by the right of use assets, property, plant and equipment, investment properties, properties under development, completed properties held for sale, restricted cash and the Group’s shares of certain subsidiaries.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(ii) Charge of assets

As at 30 September 2021, assets with total carrying values of RMB114.2 billion and the Group’s shares of certain subsidiaries were pledged to secure bank loans and other borrowings amounted to RMB79.4 billion.

(iii) Contingent liabilities

The Group provided guarantees in respect of bank mortgage loans taken out by purchasers of the Group’s sale properties and joint liability counter-guarantees for certain borrowings granted to the Group’s joint ventures and associates for project development purpose. For guarantees provided in respect of residential properties, the guarantees are released upon the issuance of real estate ownership certificate of the properties concerned. As at 30 September 2021, such guarantees totalled RMB107.5 billion.

3. WORKING CAPITAL STATEMENT OF THE GROUP

The Directors are of opinion that, after due and careful enquiry and taking into account the Agreement and the transactions contemplated thereunder, and the financial resources available to the Group including the internally generated funds and the available banking facilities, the Group will have sufficient working capital for at least the next 12 months commencing from the date of this circular.

4. MATERIAL ADVERSE CHANGE

The Directors confirm that, as at the Latest Practicable Date, there has been no material adverse change in the financial or trading position of the Group since 31 December 2020, being the date to which the latest published audited consolidated financial statements of the Company were made up.

5. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

As stated in the Company’s 2021 interim results announcement dated 24 August 2021, the Group will continue to focus on managing liquidity and further improving overall credit profile. The Group will also continue to actively seek alternative funding sources and asset disposal opportunities to manage liquidity as well as mitigate market uncertainties brought on by changes in operating conditions and external factors.

– 27 –

BIOGRAPHY OF THE PROPOSED SUPERVISOR

APPENDIX II

Zhang Yucong（張宇聰）

Mr. Zhang, aged 63, obtained a vocational college’s degree in industrial accounting from Guangzhou Amateur Finance College in October 1984. He was conferred as a senior economist by China Construction Bank in December 1997. Prior to November 2001, Mr. Zhang consecutively worked in China Construction Bank with his last position as the deputy director in China Construction Bank (Guangzhou branch) and China Cinda Asset Management Co., Ltd. （中國信達資產管理股份有限公司） (Guangzhou office) as the deputy officer. From November 2001 to March 2004, he worked as deputy general manager in the Company, a vice chairman in Beijing R&F Properties Development Co., Ltd.（北京富力城房地產開發有限公司）and a vice chairman in R&F (Beijing) Properties Development Co., Ltd. （富力（北京）地產開發有限公司）. From June 2004 to August 2010, he worked as the chairman in Guangzhou Fuxing Investment Co., Ltd.（廣州市富興投資有限公司）and a general manager in Guangzhou Yinxiang Guarantee Co., Ltd.（廣州市銀翔擔保有限公司）. From August 2010 to August 2014, he worked as a deputy general manager in Cinda Real Estate Co., Ltd.（信達地產股份有限公司）, a real estate company whose shares are listed in the Shanghai Stock Exchange (stock code: 600657). From June 2014 to April 2016, he worked as a deputy general manager in Cinda Real Estate Co., Ltd. （信達地產股份有限公司）, an executive director in Guangzhou Cinda Property Investment Co., Ltd.（廣州信達置業投資有限公司）and an executive director in Shenzhen Cinda Real Estate Co., Ltd.（深圳信達置業有限公司）.

The Company will enter into a service contract with Mr. Zhang for a term commencing from his date of appointment to the 2023 annual general meeting of the Company. Mr. Zhang will be paid an annual supervisor’s fee of RMB72,000, which was determined on the basis of his experience, duties and responsibilities with the Company and the Company’s remuneration policy.

Mr. Zhang has not been a director of any other listed company within the last three years or held any other position in the Company or its subsidiaries. Mr. Zhang did not have any relationships with any directors, supervisors, senior management, substantial or controlling shareholders of the Company.

As at the Latest Practicable Date, Mr. Zhang did not have any interests in the shares of the Company within the meaning of Part XV of the Securities and Futures Ordinance.

Save as disclosed above, there are no other matter relating to the appointment of Mr. Zhang as a supervisor that need to be brought to the attention of the Shareholders and there is no information which is required to be disclosed pursuant to any of the requirements set out in Rule 13.51(2)(h) to (v) of the Listing Rules.

– 28 –

GENERAL INFORMATION

APPENDIX III

1. RESPONSIBILITY STATEMENT

This 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. DISCLOSURE OF INTERESTS

(a) Directors’ and chief executives’ interests and short positions in shares, underlying shares and debentures of the Company and its associated corporations

As at the Latest Practicable Date, the interests and short positions of the Directors and the chief executive of the Company in the shares, underlying shares and debentures of the Company and any of its associated corporations (within the meaning of Part XV of the SFO) (a) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were deemed or taken to have under such provisions of the SFO), or (b) which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or (c) which were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers, to be notified to the Company and the Stock Exchange were as follows:

(i) Long positions in the shares, underlying shares and debentures of the Company

			Number of Shares	Number of Shares
					Total	Approximate
					number of	percentage
					Shares held	of interests
			Spouse or		at the end	in the total
	Class of		child under	Corporate	of the	share
Director/ Supervisor	shares	Personal	18	interest	period	capital Note
Li Sze Lim	H Share	1,066,092,672	5,000,000	16,000,000	1,087,092,672	28.97%
Zhang Li	H Share	1,017,885,072	20,000,000		1,037,885,072	27.66%
Zhang Hui	H Share	1,894,800			1,894,800	0.05%
Xiang Lijun	H Share	1,800,000			1,800,000	0.05%
Li Helen	H Share	1,003,600			1,003,600	0.03%
Ng Yau Wah, Daniel	H Share	588,000			588,000	0.02%
Chen Liangnuan	H Share	20,000,000			20,000,000	0.53%

Note: The Company’s total number of issued shares as at the Latest Practicable Date was 3,752,367,344 H Shares.

– 29 –

GENERAL INFORMATION

APPENDIX III

(ii) Long positions in the shares, underlying shares and debentures of the Company’ s associated corporations (within the meaning of Part XV of the SFO):

				Percentage
				of total
	Name of associated		No. of	issued
Director	corporation	Type	Shares	capital
Dr. Li	Guangzhou Tianfu Property	Corporate	N/A	7.50%
	Development Co., Ltd.
	(“Tianfu”) (Note 1)
	Beijing Fushengli	Corporate	N/A	34.64%
	Investment Consulting
	Co., Ltd.
	(“Fushengli”) (Note 2)
	Easy Tactic Limited (“Easy	Corporate	N/A	N/A
	Tactic”) (Note 3)
Mr. Zhang	Tianfu (Note 1)	Corporate	N/A	7.50%
	Fushengli (Note 2)	Corporate	N/A	34.64%
	Easy Tactic (Note 4)	Corporate	N/A	N/A
Li Helen	Easy Tactic (Note 5)	Corporate	N/A	N/A

Notes:

Tianfu is 15% and 85% owned by Century Land Properties Limited and the Company respectively. Century Land Properties Limited is beneficially owned by Dr. Li and Mr. Zhang at 50% each.
Fushengli is 70% and 30% owned by Well Bright International Limited and Guangzhou Tianli Construction Co., Ltd. respectively. Guangzhou Tianli Construction Co., Ltd. is a subsidiary of the Company. Well Bright International Limited is 51% and 49% owned by Guangdong South China Environmental Protection Investment Co., Ltd. and Sparks Real Estate Holdings Limited respectively. Each of Dr. Li and Mr. Zhang owns 49% of Guangdong South China Environmental Protection Investment Co., Ltd.. Sparks Real Estate Holdings Limited is beneficially owned by Dr. Li and Mr. Zhang at 50% each.
Dr. Li (a) through his spouse, has an interest in (i) US$14,000,000 of the US$375 million 8.625% senior notes due 2024 issued by Easy Tactic, a wholly-owned subsidiary of the Company; (ii) US$10,000,000 of the US$875 million 8.125% senior notes due 2023 issued by Easy Tactic; (iii) US$49,500,000 of the US$450 million 8.125% senior notes due 2024 issued by Easy Tactic; (iv) US$50,000,000 of the US$400 million 8.625% senior notes due 2024 issued by Easy Tactic; and (v) US$5,000,000 of the US$360 million 12.375% senior notes due 2022 issued by Easy Tactic; (b) through Fusion Capital Limited which is owned by him and his spouse at 50% each, has an interests in (i) US$1,000,000 of the US$288 million 9.125% senior notes due 2022 issued by Easy Tactic; and (ii) US$1,000,000 of the US$725 million 5.75% senior notes due 2022 issued by Easy Tactic; and (c) through Parkford Assets Management Limited which is 100% owned by him, has an interest in (i) US$1,000,000 of the US$288 million 9.125% senior notes due 2022 issued by Easy Tactic; and (ii) US$2,500,000 of the US$725 million 5.75% senior notes due 2022 issued by Easy Tactic.
Mr. Zhang has an interest in US$1,400,000 of the US$725 million 5.75% senior notes due 2022 issued by Easy Tactic.

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GENERAL INFORMATION

APPENDIX III

Ms. Li Helen, through Pleasant View Limited which is 100% owned by her, has an interest in (i) US$500,000 of the US$375 million 8.625% senior notes due 2024 issued by Easy Tactic; (ii) US$1,000,000 of the US$400 million 8.625% senior notes due 2024 issued by Easy Tactic; (iii) US$500,000 of the US$360 million 12.375% senior notes due 2022 issued by Easy Tactic; (iv) US$1,500,000 of the US$675 million 11.75% senior notes due 2023 issued by Easy Tactic; and (v) US$500,000 of the US$325 million 11.625% senior notes due 2024 issued by Easy Tactic.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or chief executive of the Company had any interests or short positions in the Shares, underlying shares or debentures of the Company and any of its associated corporations (within the meaning of Part XV of the SFO) (a) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were deemed or taken to have under such provisions of the SFO), or (b) which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or (c) which were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers, to be notified to the Company and the Stock Exchange.

(b) Substantial Shareholders’ interests and short positions

As at the Latest Practicable Date, so far as was known to any Director or chief executive of the Company, no other persons or companies (other than the Directors or chief executive of the Company) had any interests or short positions in the Shares or underlying Shares which were recorded in the register kept by the Company pursuant to section 336 of the SFO, or which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO.

3. DIRECTORS’ COMPETING INTERESTS

As at the Latest Practicable Date, except as disclosed below, so far as the Directors are aware of, none of the Directors nor their respective close associates had any interest in any business which competes or is likely to compete, or is in conflict or is likely to be in conflict, either directly or indirectly, with the business of the Group.

			Nature of the
			interest of the
		Description of	director in the
Name of director	Name of entity	Business	entity
Dr. Li	Fushengli	Owns partial	Shareholder
		parking spaces in
		Beijing
Mr. Zhang	Fushengli	Owns partial	Shareholder
		parking spaces in
		Beijing

– 31 –

GENERAL INFORMATION

APPENDIX III

4. DIRECTORS’ AND SUPERVISORS’ INTERESTS IN ASSETS

As at the Latest Practicable Date, so far as the Directors are aware, none of the Directors had any interest, either directly or indirectly, in any assets which has since 31 December 2020 (being the date to which the latest published audited consolidated 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.

5. DIRECTORS’ AND SUPERVISORS’ 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 which does not expire or is not determinable by such member of the Group within one year without payment of compensation (other than statutory compensation).

6. DIRECTORS’ AND SUPERVISORS’ INTERESTS IN CONTRACT OR ARRANGEMENT OF SIGNIFICANCE

As at the Latest Practicable Date, none of the Directors was materially interested, directly or indirectly, in any contract or arrangement entered into by any member of the Group subsisting at the Latest Practicable Date and which is significant in relation to the businesses of any member of the Group.

7. LITIGATION

As at the Latest Practicable Date, no member 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.

8. EXPERT AND CONSENT

The following are the qualifications of the expert who has given opinion contained in this circular:

Name Qualification Maxa Capital a licensed corporation permitted to carry out type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities under the SFO

The above expert has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of its letter, report and references to its name in the form and context in which they respectively appeared.

– 32 –

GENERAL INFORMATION

APPENDIX III

As at the Latest Practicable Date, the above expert (i) did not have any direct or indirect interest in any assets which had been acquired, or disposed of by, or leased to any member of the Group, or was proposed to be acquired, or disposed of by, or leased to any member of the Group, since 31 December 2020, the date to which the latest published audited consolidated financial statements of the Company was made up; and (ii) was not beneficially interested in the share capital of any member of the Group and did not have any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

9. MATERIAL CONTRACTS

Saved as the Agreement, no material contracts (not being contract entered into in the ordinary course of business carried out by the Group) have been entered into by any member of the Group within the two years immediately preceding the Latest Practicable Date.

10. MISCELLANEOUS

(a) The company secretary of the Company is Mr. Lee Michael. Mr. Lee Michael holds a Double Degree Bachelor of Commerce (Finance & Accounting) and Bachelor of Engineering (Honours) from the University of Sydney.
(b) The registered office of the Company is located at 45-54/F., R&F Center, No. 10 Huaxia Road, Pearl River New Town, Guangzhou 510623 PRC.
(c) The principal place of business of the Company in Hong Kong is Room 6303, The Center, No. 99 Queen’s Road Central, Hong Kong.
(d) The Hong Kong H share registrar of the Company is Computershare Hong Kong, Investor Services Limited, at 17M/F., Hopewell Center, 183 Queen’s Road East, Wanchai, Hong Kong.
(e) The English text of this circular shall prevail over the Chinese text for the purpose of interpretation.

11. DOCUMENTS ON DISPLAY

The following documents are available on the website of the Stock Exchange (www.hkex.com.hk) and the website of the Company (www.rfchina.com) for a period of 14 days from the date of this circular: (i) the material contracts referred to in the section headed “Material Contracts” of this Appendix;

(ii) the letter of advice from the Independent Board Committee to the Independent Shareholders as set out in this circular;

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GENERAL INFORMATION

APPENDIX III

(iii) the letter from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders as set out in this circular; and
(iv) the written consent referred to in the section headed “Expert and Consent” of this Appendix.

– 34 –

NOTICE OF EGM

==> picture [187 x 41] intentionally omitted <==

==> picture [65 x 39] intentionally omitted <==

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

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that the extraordinary general meeting (the “ EGM ”) of Guangzhou R&F Properties Co., Ltd. (the “ Company ”) will be held at the Conference Room, 54/F., R&F Center, No. 10 Huaxia Road, Pearl River New Town, Guangzhou, the PRC on Friday, 3 December 2021 at 11:00 a.m. for the purpose of considering and, if thought fit, passing, with or without modifications, the following ordinary resolutions of the Company:

ORDINARY RESOLUTIONS

“ THAT
(a) the agreement dated 29 September 2021 (as supplemented and amended from time to time) entered into by and among the Company, Dr. Li Sze Lim and Mr. Zhang Li in relation to the Joint Venture Arrangement (as defined in the circular of the Company dated 11 November 2021), a copy of which is tabled at the meeting and marked “ A ” and signed by the chairman of the meeting for identification purpose) and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified; and
(b) any one director of the Company be and is hereby authorised to, on behalf of the Company, do all such acts and sign, seal, execute and deliver all such documents and take all such actions as he/she may consider necessary, appropriate, desirable or expedient for the purpose of or in connection with or to give effect to the Agreement and the transactions contemplated thereunder.”
“ THAT the appointment of Mr. Zhang Yucong as a supervisor of the Company representing shareholders be and is hereby approved and the board of directors of the Company be and is hereby authorised to fix the remuneration of Mr. Zhang Yucong.”

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

Hong Kong, 11 November 2021

– 35 –

NOTICE OF EGM

Notes:

Any shareholder of the Company entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend and vote on behalf of him. A proxy need not be a shareholder of the Company.
A form of proxy for the EGM is enclosed. In order to be valid, a form of proxy, together with the power of attorney or other authority (if any), under which the form is signed must be deposited at the Company’s H share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited of 17M/F., Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not less than 24 hours before the time fixed for holding the meeting.
Completion and return of the form of proxy will not preclude shareholders of the Company from attending and voting in person at the meeting or any adjourned meeting or upon the poll concerned if the shareholders of the Company so wish. In such event, the instrument appointing the proxy shall be deemed to be revoked.
To determine the entitlement of the members of the Company to attend and vote at the EGM, the register of members of the Company will be closed on Monday, 29 November 2021 to Friday, 3 December 2021, both days inclusive. In order to qualify for attending and voting at the EGM, all transfer documents should be lodged for registration with 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 later than 4:30 p.m. on Friday, 26 November 2021.

As at the date of this announcement, the executive directors of the Company are Dr. Li Sze Lim, Mr. Zhang Li, Mr. Zhang Hui and Mr. Xiang Lijun; the non-executive directors are Ms. Zhang Lin and Ms. Li Helen; and the independent non-executive directors are Mr. Zheng Ercheng, Mr. Ng Yau Wah, Daniel and Mr. Wong Chun Bong.

For identification purpose only

– 36 –

AI assistant

Guangzhou R&F Properties Co., Ltd. — Proxy Solicitation & Information Statement 2021

50773_rns_2021-11-10_eba94664-6f2d-4971-b333-66a0398d5907.pdf

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

(Stock Code: 2777)

(1) JOINT VENTURE ARRANGEMENT CONNECTED AND MAJOR TRANSACTION (2) PROPOSED APPOINTMENT OF SUPERVISOR AND

(3) NOTICE OF EXTRAORDINARY GENERAL MEETING

Independent Financial Adviser to the Independent Board Committee and Independent Shareholders

CONTENTS

DEFINITIONS

DEFINITIONS

(1) JOINT VENTURE ARRANGEMENT CONNECTED AND MAJOR TRANSACTION (2) PROPOSED APPOINTMENT OF SUPERVISOR

INTRODUCTION

THE JOINT VENTURE ARRANGEMENT

Subject matter

Capital Contribution

LETTER FROM THE BOARD

Management

LETTER FROM THE BOARD

Distribution

Future funding

Condition

REASONS FOR AND BENEFITS TO THE JOINT VENTURE ARRANGEMENT

LISTING RULES IMPLICATIONS

(i) Chapter 14

(ii) Chapter 14A

FINANCIAL EFFECT OF THE JOINT VENTURE ARRANGEMENT ON THE GROUP

Assets and liabilities

Earnings

PROPOSED APPOINTMENT OF SUPERVISOR

EGM

LETTER FROM THE BOARD

RECOMMENDATION

(i) The Agreement

(ii) The proposed appointment of Mr. Zhang as a Supervisor

FURTHER INFORMATION

JOINT VENTURE ARRANGEMENT CONNECTED AND MAJOR TRANSACTION

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

JOINT VENTURE ARRANGEMENT– CONNECTED AND MAJOR TRANSACTION

INTRODUCTION

LISTING RULES IMPLCATION

OUR INDEPENDENCE

BASIS OF OUR OPINION

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Background information of the Group

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

2. Reasons for and benefits of the Joint Venture Arrangement

2.1 Background and reasons for the Joint Venture Arrangement

2.2 Principal terms of the Agreement

Date

Parties

Subject matter

Capital Contribution

Management

Distribution

Condition

3. Possible financial effects of the Joint Venture Arrangement

Working capital

RECOMMENDATION

1. FINANCIAL INFORMATION OF THE GROUP

2. STATEMENT OF INDEBTEDNESS OF THE GROUP

(i) Borrowings

(ii) Charge of assets

(iii) Contingent liabilities

3. WORKING CAPITAL STATEMENT OF THE GROUP

4. MATERIAL ADVERSE CHANGE

5. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

APPENDIX II

Zhang Yucong（張宇聰）

1. RESPONSIBILITY STATEMENT

2. DISCLOSURE OF INTERESTS

(i) Long positions in the shares, underlying shares and debentures of the Company

APPENDIX III

(b) Substantial Shareholders’ interests and short positions

3. DIRECTORS’ COMPETING INTERESTS

4. DIRECTORS’ AND SUPERVISORS’ INTERESTS IN ASSETS

5. DIRECTORS’ AND SUPERVISORS’ SERVICE CONTRACTS

6. DIRECTORS’ AND SUPERVISORS’ INTERESTS IN CONTRACT OR ARRANGEMENT OF SIGNIFICANCE

7. LITIGATION

8. EXPERT AND CONSENT

Guangzhou R&F Properties Co., Ltd. Proxy Solicitation & Information Statement 2021