Modern Land (China) Co., Limited — Proxy Solicitation & Information Statement 2016

Sep 15, 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 a licensed securities dealer or other registered institution in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in HNA Holding Group Co. Limited, you should at once hand this Circular and the accompanying form of proxy to the purchaser(s) or transferee(s) or to the licensed securities dealer or registered institution in securities or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or transferee(s).

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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海航實業集團股份有限公司 HNA HOLDING GROUP CO. LIMITED

(Incorporated in Hong Kong with limited liability)

(Stock Code: 521)

(1) DISCLOSEABLE AND CONNECTED TRANSACTION DISPOSAL OF SOUTH CHINA DIGITAL TV HOLDINGS LIMITED AND (2) NOTICE OF GENERAL MEETING

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders

A notice convening the General Meeting (as defined herein) of HNA Holding Group Co. Limited to be held at Bowen Room, 7/F., Conrad Hong Kong, Pacific Place, 88 Queensway, Admiralty, Hong Kong on Monday, 3 October 2016 at 11:30 a.m. is set out on pages 35 to 36 of this Circular. Whether or not you are able to attend the meeting, please complete and return the accompanying form of proxy in accordance with the instructions printed thereon and return it to the share registrars of HNA Holding Group Co. Limited, Tricor Tengis Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, as soon as possible and in any event not less than 48 hours before the time fixed for the holding of the meeting or any adjournment thereof (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting in person at the meeting or any adjournment thereof (as the case may be) should you so wish.

15 September 2016

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Letter from the Independent Board Committee. . . . . . . . . . . . . . . . . . . . . . . . . . .	13
Letter from the Independent Financial Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
Appendix – General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	32
Notice of General Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	35

– i –

DEFINITIONS

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

• “2011 Disposal Agreement”

the disposal agreement dated 23 December 2011 entered into between the Company and the 2011 Purchaser in relation to the 2011 Proposed Disposal, as supplemented and amended by a supplemental agreement dated 29 February 2012 entered into between the aforesaid parties

• “2011 Proposed Disposal”

• the proposed disposal by the Company of the Sale Share, representing the entire issued and paid-up capital of the Target Company, to the 2011 Purchaser in accordance with the terms of the 2011 Disposal Agreement

• “2011 Purchaser”

• Hong Kong Guang Hua Resources Investments Company Limited, a company incorporated in the British Virgin Islands with limited liability, being the independent third party purchaser under the 2011 Disposal Agreement

• “Agreement”

• the agreement entered into between the Company and the Purchaser on 17 August 2016 in respect of the Disposal

• “Board”

• the board of directors of the Company

• “Business Day”

a day other than a Saturday or Sunday or a statutory holiday in the PRC and Hong Kong on which commercial banks are open for business in Hong Kong and the PRC

• “Company”

• HNA Holding Group Co. Limited, a company incorporated in Hong Kong with limited liability, the shares of which are listed on the main board of the Stock Exchange

• “Completion” completion of the Disposal

• “Completion Date”

• the 15th Business Day after the date on which the condition precedent set out in the Agreement has been satisfied or such other date as the Company and the Purchaser may agree in writing, which will not be later than a date that is more than 30 Business Days after the Long Stop Date

• “connected person”

has the meaning ascribed to it under the Listing Rules

– 1 –

DEFINITIONS

• “Disposal” disposal of the Sale Share by the Company to the Purchaser

• “DTV Business” the digital television technical solution and related business

• “General Meeting” the general meeting of the Company to be convened for, considering and if appropriate, approving the Agreement and the transactions contemplated thereunder

• “Group” the Company and its subsidiaries

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

• “Independent Board Committee” the independent board committee comprising all the independent non-executive Directors

• “Independent Financial Adviser”

• Fortune Financial Capital Limited, a corporation licensed to carry on Type 6 (advising on corporate finance) regulated activities under the SFO and appointed as the independent financial adviser to the Independent Board Committee and the Independent Shareholders in relation to the Agreement and the transactions contemplated thereunder

• “Independent Shareholders”

• Shareholders other than (a) the Purchaser and its associates; and (b) those who are involved in or interested in the Disposal

• “Latest Practicable Date”

• 12 September 2016, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained herein

• “Listing Rules”

• the Rules Governing the Listing of Securities on the Stock Exchange

• “Long Stop Date”

• 30 June 2017, or such other date as the Company and the Purchaser may agree in writing

• “PRC”

• the People’s Republic of China, which for the purposes of this circular, excludes Hong Kong, the Macau Special Administrative Region and Taiwan

– 2 –

DEFINITIONS

• “Purchaser” Leader Concept Investments Limited (領意投資有限公 司), a company incorporated under the laws of the British Virgin Islands with limited liability

• “Sale Share” the entire issued capital of the Target Company

• “SFO” Securities and Futures Ordinance, Chapter 571 of the Laws of Hong Kong

• “Shareholder(s)” shareholder(s) of the Company

• “Shareholder Loan” an amount of HK$950,000,000 as at 31 December 2015, representing all the loans due from and owing by members of the Target Group to members of the Group (other than the Target Group)

• “Southern Yingshi” 廣東南方銀視網絡傳媒有限公司 (Guangdong Southern Yinshi Network Media Company Limited*), a company incorporated under the laws of the PRC

• “Stock Exchange” The Stock Exchange of Hong Kong Limited

• “Target Company” South China Digital TV Holdings Limited (華南數字電視 集團有限公司), a company incorporated under the laws of Hong Kong with limited liability

• “Target Group” the Target Company and its subsidiaries as at Completion

• “%”

• per cent or percentage

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LETTER FROM THE BOARD

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海航實業集團股份有限公司 HNA HOLDING GROUP CO. LIMITED

(Incorporated in Hong Kong with limited liability)

(Stock Code: 521)

Executive Directors: Zhao Quan (Chairman) Li Tongshuang (Vice-chairman) Xu Haohao (Executive President) Zhang Ke

Registered Office: Suites 5811-5814, 58/F. Two International Finance Centre No. 8 Finance Street, Central Hong Kong

Non-executive Directors: Leung Shun Sang, Tony Wang Hao

Independent Non-executive Directors: Leung Kai Cheung Liem Chi Kit, Kevin Lam Kin Fung, Jeffrey

15 September 2016

To the Shareholders

Dear Sir/Madam,

DISCLOSEABLE AND CONNECTED TRANSACTION DISPOSAL OF SOUTH CHINA DIGITAL TV HOLDINGS LIMITED

INTRODUCTION

The Board announced that on 17 August 2016 (after trading hours), the Company and the Purchaser entered into the Agreement.

The purpose of this circular is to provide you with, among other things, (i) further details about the Agreement and the transactions contemplated thereunder; (ii) the recommendation of the Independent Board Committee in relation to the Agreement and the transactions contemplated thereunder; (iii) a letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in relation to the Agreement and the transactions contemplated thereunder; (iv) the notice convening the General Meeting; and (v) other information as required under the Listing Rules.

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LETTER FROM THE BOARD

THE DISPOSAL

On 17 August 2016 (after trading hours), the Company and the Purchaser entered into the Agreement. The principal terms of the Agreement are set out below:

Date: 17 August 2016 (after trading hours) Parties: Seller: the Company Purchaser: Leader Concept Investments Limited (領意投資有限公司)

The Purchaser is a company incorporated in the British Virgin Islands with limited liability. It is principally engaged in investment holding and is ultimately controlled by HNA Group Co., Ltd.* (海航集團有限公司), a substantial shareholder of the Company, through nominees.

Subject matter:

The Sale Share represents the entire issued share capital of the Target Company.

Consideration and repayment of the Shareholder Loan:

On the 5th Business Day upon signing of the Agreement, the Purchaser agreed to pay HK$50 million to the Company as earnest money (the “ Earnest Money ”). If the Purchaser fails to pay the Earnest Money for more than 30 Business Days from the due date, the Company may terminate the Agreement. As at the Latest Practicable Date, the Purchaser had already paid the Earnest Money to the Company.

The consideration for the Sale Share is HK$1.0 and will be settled in cash upon Completion.

After Completion, the Purchaser will procure the Target Group to repay the Shareholder Loan (the “ Repayment Obligations ”) in the following manner:

Repayment Repayment date amount (HK$) at Completion 50 million within three months from the date after the Completion Date 500 million within the first anniversary of the date after the Completion Date 400 million Total: 950 million

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LETTER FROM THE BOARD

The Earnest Money will be treated as repayment of HK$50 million of the Shareholder Loan. The Purchaser and the Target Group will be jointly and severally liable for the Repayment Obligations of the Target Group after Completion. As at 30 June 2016, the shareholder loan amounted to approximately HK$1,072 million. Upon fulfilment of the Repayment Obligations, the Company will irrevocably waive all rights in relation to, and any claims against, the Target Group arising from the Shareholder Loan.

The consideration for the Sale Share was arrived at after arm’s length negotiations and has been determined with reference to (i) the financial information of the Target Group as set out under the section headed “INFORMATION ON THE TARGET GROUP” below; and (ii) the Repayment Obligations on the part of the Purchaser.

The Directors (including the independent non-executive Directors whose views are set out in the letter from the Independent Board Committee contained in this circular) consider that the consideration for the Sale Share, while nominal, is fair and reasonable as (i) the DTV Business of the Target Group has been discontinued since 2011, and (ii) the unaudited consolidated accounts of the Target Group had a combined unaudited net liabilities of HK$127,617,000 and HK$190,009,000 as at 31 December 2015 and 30 June 2016, respectively. Further, as the Purchaser has undertaken to procure the Target Group to repay the Shareholder Loan in accordance with the abovementioned schedule after Completion, the Company would have redress to ensure payment of the Shareholder Loan under the Agreement. In view of the aforesaid, the Directors are thus of the view that no valuation over the assets of the Target Company is required.

Condition precedent

Completion is conditional upon the passing of an ordinary resolution for the approval of the Agreement and the transactions contemplated therein by the Independent Shareholders at the General Meeting. As at the Latest Practicable Date, the aforesaid condition has not been satisfied.

If the condition is not fulfilled on or before the Long Stop Date, the Agreement will terminate automatically and the Company will refund the Earnest Money (without any interest) within 10 Business Days after termination of the Agreement. If the condition is fulfilled but Completion does not take place on the Completion Date due to the fault of the Purchaser, then the Earnest Money will not be refunded.

Completion will take place on the Completion Date.

INFORMATION ON THE TARGET GROUP

Overview

As at the Latest Practicable Date, the Target Company is a wholly-owned subsidiary of the Company. The Target Group is principally engaged in the DTV Business and the affiliated sales of light emitted diode products business in the PRC (the “ LED Business ”).

– 6 –

LETTER FROM THE BOARD

Financial Information

The combined unaudited net assets of the Target Group as at 31 December 2014 were HK$17,083,000 and the combined unaudited net liabilities of the Target Group as at 31 December 2015 and 30 June 2016 were HK$127,617,000 and HK$190,009,000 respectively.

The combined unaudited net loss before and after tax of the Target Group for the two financial years ended 31 December 2014, 31 December 2015 and period ended 30 June 2016 were as follows:

			Year Ended	Year Ended	Period Ended
			31 December	31 December	30 June
			2014	2015	2016
			(HK$’000)	(HK$’000)	(HK$’000)
Net	loss	before tax	155,188	148,324	66,306
Net	loss	after tax	155,219	148,340	66,306

FINANCIAL EFFECTS OF THE DISPOSAL

Upon Completion, the Target Company will cease to be a subsidiary of the Company and the financial results of the Target Group will no longer be consolidated into the Group’s financial statements. As a result of the Disposal, the Group expects to record an unaudited gain on the Disposal of approximately HK$68 million. Such a gain is estimated by reference to the nominal consideration receivable from the Disposal (HK$1.0), plus the amount received pursuant to the Repayment Obligations (HK$950 million), less the net asset value of the Target Group (excluding any outstanding shareholder loan) (HK$882 million) as at 30 June 2016, being the latest available information for the relevant financial information of the Target Group. As a result, the net asset value of the Group is also expected to increase by approximately HK$68 million, being the net amount between the nominal consideration and the repayment amount of the Shareholder Loan and the attributable net asset value of the Target Group as at 30 June 2016, upon Completion. The estimate of gain and increase in net asset value are for illustration purpose only and subject to adjustments (such as fair value of the share of net assets of the Target Group as at the date of Completion) that may be made during audit in the future.

Shareholders should note that the financial impact set out above is for illustrative purpose only, which will have to be ascertained with reference to the carrying value of the Sale Share and the intercompany balance between the Group (other than the Target Group) and the Target Group upon Completion and the actual costs and expenses associated with the Disposal.

REASONS FOR AND BENEFITS OF THE DISPOSAL

As at the Latest Practicable Date, the Group is principally engaged in the core business of recreational and tourism services, and property investment, management and development business, and the affiliated business of intelligent information business (the development and provision of system integration solutions, system design and sale of system hardware).

– 7 –

LETTER FROM THE BOARD

On 23 December 2011, the Company (then known as Shougang Concord Technology Holdings Limited) entered into the 2011 Disposal Agreement (as amended and supplemented by the supplemental agreement dated 29 February 2012) with the 2011 Purchaser, pursuant to which the Company conditionally agreed to sell and the purchaser conditionally agreed to purchase the Sale Share, representing the entire issued share capital of the Target Company, at a consideration of HK$1,420 million. Pursuant to the terms of the 2011 Disposal Agreement, the Company would be responsible for the settlement of the agreed outstanding indebtedness of the Target Company and its then subsidiaries as at 31 December 2011 in the amount of approximately HK$1,299 million.

On 2 January 2013, as the only outstanding condition under the 2011 Disposal Agreement for the completion of the 2011 Proposed Disposal was the obtaining of the approval of Southern Yinshi, a party which the Company was collaborating with in the development of the Digital TV Business in the PRC at the time, the parties to the 2011 Disposal Agreement agreed to enter into a further supplemental agreement to extend the time for the fulfilling the aforesaid outstanding condition from 5:00 p.m. on 30 June 2012 to 5:00 p.m. on 31 December 2012.

On 2 January 2013, the time for the fulfilling the abovementioned outstanding condition was further extended to 5:00 pm on 30 June 2013, as the approval of Southern Yinshi for the 2011 Proposed Disposal was still not obtained by then. Despite such further extension, the approval of Southern Yinshi for the 2011 Proposed Disposal was still not obtained by 5:00 p.m. on 30 June 2013. As the parties under the 2011 Disposal Agreement could not agree on further extension of time to fulfil the conditions, the 2011 Disposal Agreement had since lapsed and ceased to be any effect.

Further details of the 2011 Disposal Agreement are disclosed in the announcements of the Company dated 30 December 2011, 29 February 2012, 2 January 2013 and 2 July 2013, and the circular of the Company dated 27 April 2012.

As disclosed in the annual report of the Group for the year ended 31 December 2015, the Group’s DTV Business had been discontinued and no longer generates any operating income. The Group’s DTV Business was classified as “held-for-sale” as at 31 December 2015. Moreover, disposal of the intelligent information business was approved by the shareholder in March 2016, pending completion. It has always been the intention of the Group to dispose of the intelligent information business and the discontinued DTV business.

On 7 March 2016, the Company entered into a memorandum of understanding (the “ MOU ”) with an independent third party in relation to the proposed disposal of the DTV Business, details of which are disclosed in the announcement of the Company dated 7 March 2016. As the parties to the MOU did not enter into a definitive agreement by 31 May 2016, being the long stop date of the MOU, the parties to the MOU have terminated all negotiations on the proposed disposal of the DTV Business.

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LETTER FROM THE BOARD

Upon Completion, both the DTV Business and the LED Business of the Group will be disposed of, the Directors consider that the Disposal presents a valuable opportunity for the Company to dispose of the discontinued DTV Business. The Directors (including the independent non-executive Directors whose views are set out in the letter from the Independent Board Committee contained in this circular) consider that the Agreement and the transactions contemplated thereunder are fair and reasonable, and executed in normal commercial terms and in the interests of the Company and the Shareholders as a whole. In relation to the disposal of the LED Business, the LED Business has historically been a segment that supports the DTV Business only. Upon disposal of the DTV Business, the LED Business will no longer be related to the other business segments or required for the operations of the Group. The Directors (including the independent non-executive Directors whose views are set out in the letter from the Independent Board Committee contained in this circular) consider the incidental disposal of the LED Business is fair, reasonable and in the interests of the Company and the Shareholders as a whole.

Consistent with the Group’s prudent and steady investment principle, the Company mainly focuses on merger and acquisition opportunities in developed economies and will seek new investment opportunities in sectors such as property investment, real estate development and public infrastructure. The Company will also actively explore overseas investment opportunities about golf courses in order to enhance the existing principal business of the Company. Meanwhile, the Group will actively explore relevant businesses that can create synergy with HNA Group Co., Ltd.* (海航集團有限公司). Abiding by the above strategies, the Group will strive to build a business conglomerate which delivers stable cash flow and great growth prospects and to achieve a good balance between risks and benefits.

As disclosed in the announcement of the Company dated 22 June 2016, the Company, as the intended purchaser, has entered into a letter of intent (the “ LOI ”) with certain independent third parties, as intended sellers, in relation to the potential acquisition of certain golf properties together with all appurtenant land, facilities, amenities and improvements located in the western part of the United States of America (the “ Potential Acquisition ”). The consideration for the Potential Acquisition, if it materializes, shall be in an amount equivalent to approximately HK$1 billion to HK$1.1 billion. Since the date of the LOI, the Company has been conducting due diligence on the target assets and in ongoing negotiation with the potential sellers on the terms and conditions of the definitive agreement for the Potential Acquisition. As at the Latest Practicable Date, no definitive agreement for the Potential Acquisition has been entered into. It is expected that should the Potential Acquisition materialize, it will constitute a notifiable transaction of the Company that requires shareholders’ approval under Chapter 14 of the Listing Rules. The Company will publish further announcement(s) as and when appropriate. Should the Potential Acquisition fail to materialize, it is the intention of the Company to continue to explore other investment and business opportunities. The Potential Acquisition is subject to further negotiation among the relevant parties. The Potential Acquisition may or may not materialize and the final structure and terms of the Potential Acquisition have yet to be finalized. Shareholders and potential investor should exercise caution when dealing in the securities of the Company.

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LETTER FROM THE BOARD

The Company intends to apply the repayment from the Shareholder Loan (i) as general working capital of the Group (which will mainly be used for the daily operations of the Group); and (ii) for potential acquisitions. As at the Latest Practicable Date, except for the Potential Acquisition explained in the above paragraph, the Company has not identified any other acquisition targets.

LISTING RULES IMPLICATIONS

As the applicable percentage ratios in respect of the Disposal (including the Repayment Obligations) are more than 5% but less than 25%, the transactions contemplated under the Agreement constitutes a discloseable transaction of the Company.

The Purchaser is ultimately controlled by HNA Group Co., Ltd. (海航集團有限公司) through nominees. HNA Group Co., Ltd. (海航集團有限公司) is interested in approximately 66.84% of the issued share capital of the Company as at the Latest Practicable Date and a substantial shareholder of the Company. The Purchaser is its associate and hence a connected person of the Company under the Listing Rules.

The Disposal (together with the Repayment Obligations) constitutes a non-exempt connected transaction for the Company under the Listing Rules which requires the approval of the Independent Shareholders by poll.

GENERAL

In the Board resolutions to approve the Disposal, none of the Directors were considered to be interested in the transactions contemplated thereunder and have abstained from voting in respect of the resolutions proposed to approve such transactions. Accordingly, no Director has abstained from voting in the relevant Board resolutions.

The Independent Board Committee comprising all the independent non-executive Directors has been formed to advise the Independent Shareholders on the terms of the Agreement and the transactions contemplated thereunder.

Fortune Financial Capital Limited has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders regarding, among other things, the terms of the Agreement and the transactions contemplated thereunder.

– 10 –

LETTER FROM THE BOARD

GENERAL MEETING AND PROXY ARRANGEMENT

The notice of the General Meeting is set out on pages 35 to 36 of this circular. A form of proxy for use at the General Meeting is enclosed with this circular and such form of proxy is also published on the website of the Stock Exchange (www.hkexnews.hk). Whether or not you are able to attend the General Meeting, please complete and sign the enclosed form of proxy in accordance with the instructions printed thereon and deposited, together with the power of attorney or other authority (if any) under which it is signed or a notarially certified copy of that power of attorney or authority with the share registrars of the Company, Tricor Tengis Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, not less than 48 hours before the time appointed for holding the meeting or any adjourned meeting thereof (as the case may be). Completion and return of the form of proxy will not preclude members from attending and voting in person at the meeting or at any adjourned meeting thereof (as the case may be) should they so wish, and in such event, the form of proxy shall be deemed to be revoked.

The voting at the General Meeting will be conducted by way of poll. Shareholders with a material interest in the Disposal and his associates will abstain from voting on the resolution approving the Disposal.

HNA Group Co., Ltd. (海航集團有限公司), was interested in 7,619,374,189 Shares, representing 66.84% of the total number of Shares in issue as at the Latest Practicable Date. HNA Group Co., Ltd. (海航集團有限公司) and its associates are deemed to be interested in the Acquisition and accordingly, will abstain from voting for the resolution proposed at the General Meeting to approve the Agreement and transactions contemplated thereunder.

Except as disclosed above, to the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, no Shareholder is required to abstain from voting on the resolution to be proposed at the General Meeting.

CLOSURE OF THE SHAREHOLDERS’ REGISTER

For the purpose of determining the list of Shareholders who are entitled to attend and vote at the General Meeting, the shareholders’ register of the Company will be closed from Thursday, 29 September 2016 to Monday, 3 October 2016, both days inclusive. No transfer of Shares will be registered during this period. In order to qualify to attend and vote at the General Meeting, all instruments of transfer together with the relevant share certificate(s) must be lodged with the share registrars of the Company, Tricor Tengis Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong for registration no later than 4:30 p.m. on Wednesday, 28 September 2016.

– 11 –

LETTER FROM THE BOARD

RECOMMENDATION

The Directors (including the independent non-executive Directors whose views are set out in the letter from the Independent Board Committee contained in this circular) consider that the Agreement and the transactions contemplated thereunder are fair and reasonable, and executed in normal commercial terms and in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors (including the independent non-executive Directors) recommend the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the General Meeting to approve the Agreement and the transactions contemplated thereunder.

ADDITIONAL INFORMATION

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

Yours faithfully, For and on behalf of the Board

HNA Holding Group Co. Limited Xu Haohao

Executive Director

– 12 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

The following is the text of a letter of advice from the Independent Board Committee setting out its recommendation to the Independent Shareholders for the purpose of inclusion in this circular.

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海航實業集團股份有限公司 HNA HOLDING GROUP CO. LIMITED

(Incorporated in Hong Kong with limited liability)

(Stock Code: 521)

15 September 2016

To the Independent Shareholders

Dear Sir or Madam,

We refer to the circular of the Company to the Shareholders dated 15 September 2016 (the “ Circular ”), in which this letter forms part. Unless the context requires otherwise, capitalized terms used in this letter will have the same meanings as defined in the Circular unless the context otherwise requires.

We have been appointed by the Board as the Independent Board Committee to advise the Independent Shareholders on whether the terms of the Agreement and the transactions contemplated thereunder are fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Group and the Shareholders as a whole.

We wish to draw your attention to the letter of advice from the Independent Financial Adviser as set out on pages 14 to 31 of the Circular and the letter from the Board as set out on pages 4 to 12 of the Circular.

Having considered the terms of the Agreement, the factors and reasons considered by the Independent Financial Adviser and its opinion as stated in its letter of advice, we consider that the Agreement was entered into in the ordinary and usual course of business of the Group and that the terms of the Agreement and the transactions contemplated thereunder are on normal commercial terms, the Disposal is fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Group and the Shareholders as a whole, and accordingly recommend the Independent Shareholders to vote in favour of the ordinary resolution proposed to approve the Agreement and the transactions contemplated thereunder.

Yours faithfully Independent Board Committee

Leung Kai Cheung

Liem Chi Kit, Kevin Independent non-executive Directors

Lam Kin Fung, Jeffrey

– 13 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the full text of the letter from the Independent Financial Adviser which sets out its advice to the Independent Board Committee and the Independent Shareholders for inclusion in this circular.

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Fortune Financial Capital Limited 35th Floor Office Tower Convention Plaza 1 Harbour Road, Wanchai Hong Kong

15 September 2016

• To: The Independent Board Committee and the Independent Shareholders of HNA Holding Group Co. Limited

Dear Sirs,

DISCLOSEABLE AND CONNECTED TRANSACTION DISPOSAL OF SOUTH CHINA DIGITAL TV HOLDINGS LIMITED

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 Agreement and the transactions contemplated thereunder, 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 15 September 2016 (the “ Circular ”), of which this letter forms part. Capitalised terms used in this letter shall have the same meanings as defined in the Circular unless the context otherwise requires.

On 17 August 2016, the Company announced that the Company and the Purchaser entered into the Agreement, pursuant to which the Company conditionally agreed to sell, and the Purchaser conditionally agreed to purchase, the Sale Share, being the entire issued share capital of the Target Company. Furthermore, pursuant to the Agreement, the Purchaser will procure the Target Group to repay the Shareholder Loan in accordance with the repayment schedule stipulated under the Agreement and the Purchaser and the Target Group will be jointly and severally liable for the Repayment Obligations.

– 14 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As at the date of the Agreement, the applicable percentage ratios (as defined under Rule 14.07 of the Listing Rules) in respect of the Disposal (including the Repayment Obligations) exceeded 5% but were less than 25%, accordingly, the Agreement and the transactions contemplated thereunder constitute a discloseable transaction of the Company for the purpose of Chapter 14 of the Listing Rules. Furthermore, as at the Latest Practicable Date, the Purchaser was ultimately controlled by HNA Group Co., Ltd.* (海航集團有限公司) through nominees and HNA Group Co., Ltd. being the controlling Shareholder (as defined under the Listing Rules), was interested in approximately 66.84% of the entire issued share capital of the Company and therefore the Purchaser and HNA Group Co. Ltd. are connected persons of the Company under Chapter 14A of the Listing Rules. Accordingly, the Agreement and the transactions contemplated thereunder also constitute connected transactions of the Company under Chapter 14A of the Listing Rules, which are subject to the annual reporting, annual review, announcement, circular and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

Pursuant to Rule 13.39(4) of the Listing Rules, any vote of shareholders at a general meeting must be taken by poll and Rule 14A.36 of the Listing Rules requires any shareholder who has a material interest in the underlying transactions to abstain from voting on related resolution. As the HNA Group Co., Ltd and its close associates have material interests in the transactions contemplated under the Agreement, they are required to abstain from voting on the proposed resolution relating to the Agreement and the transactions contemplated thereunder at the General Meeting.

The Independent Board Committee, comprising Mr. Leung Kai Cheung, Mr. Liem Chi Kit, Kevin, and Mr. Lam Kin Fung, Jeffrey (all being the independent non-executive Directors), was established to (a) advise the Independent Shareholders on whether the terms of the Agreement and the transactions contemplated thereunder are i) fair and reasonable; ii) on normal commercial terms or better; and iii) in the interests of the Company and its Shareholders as a whole; and (b) make recommendation to the Independent Shareholders on how to vote on the resolution to be proposed at the General Meeting to approve the Agreement and the transactions contemplated thereunder. We, Fortune Financial Capital Limited, was appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

BASIS OF OUR OPINION

In formulating our recommendation to the Independent Board Committee and the Independent Shareholders, we have relied on the statements, 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 senior management of the Company (collectively, the “ Management ”). We have assumed that all information and representations provided by the Management, for which they are solely and wholly responsible, are true, accurate and complete in all material respects and not misleading or deceptive at the time when they were provided or made and will continue to be so up to the date of the Circular. We have also assumed that all statements of belief, opinion, expectation and intention made by the

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Management in the Circular were reasonably made after due enquiries and careful considerations by the Management and there are no other facts not contained in the Circular the omission of which would make any such statement contained in the Circular misleading. We have no reason to suspect that any relevant information has been withheld, nor are we aware of any fact or circumstance which would render the information provided and representations and opinions made to us untrue, inaccurate or misleading. We have not, however, carried out any independent verification of the information provided by the Management nor have we conducted any independent investigation into the business, financial conditions and affairs or the prospect of the Group or any of their associates.

The Directors have collectively and individually accepted full responsibility, including particulars given in compliance with the Listing Rules, for the purpose of giving information with regard to the Company. The Directors have confirmed, after having made all reasonable enquiries, which to the best of their knowledge and belief, the information contained in the 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 the Circular misleading.

This letter is issued to the Independent Board Committee and the Independent Shareholders solely in connection with their consideration regarding the Agreement and the transactions contemplated thereunder.

PRINCIPAL FACTORS AND REASONS CONSIDERED

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

(a) Background of the Parties to the Agreement

(i) Information about the Group

Background of the Group

The principal activity of the Company is investment holding. The Group is principally engaged in the core business of recreational and tourism services, and property investment, management and development business, and the affiliated business of intelligent information business (the development and provision of system integration solutions, system design and sale of system hardware).

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Financial highlights of the Group

We set out below the Group’s key financial information for the six months ended 30 June 2016 as extracted from the interim results announcement of the Company for the six months ended 30 June 2016 (the “ IR2016 ”) and for the two years ended 31 December 2015 as extracted from the annual report of the Company for the year ended 31 December 2015 (the “ AR2015 ”):

	For the
	six months	For the year ended
	ended 30 June	31 December
	2016	2015	2014
	(HK$)	(HK$)	(HK$)
Revenue	65,624,000	336,869,000	339,993,000
Cost of sales	(63,550,000)	(282,990,000)	(288,035,000)
Gross profit	2,074,000	53,879,000	51,958,000
Loss before tax	(17,706,000)	(84,313,000)	(201,602,000)
Loss for the period/year from
continuing operations	(15,450,000)	(83,008,000)	(201,267,000)
Loss for the period/year from
discontinued operations	(79,299,000)	(152,593,000)	(149,991,000)
Loss for the period/year	(94,749,000)	(235,601,000)	(351,258,000)
	As at 30 June	**As at 31 **	December
	2016	2015	2014
	(HK$)	(HK$)	(HK$)
Non-current assets	1,586,625,000	1,939,216,000	2,203,168,000
Current assets	2,476,398,000	3,444,217,000	771,153,000
Disposal group classified as
held-for-sale	1,385,466,000	1,045,743,000	1,223,172,000
Total assets	5,448,489,000	6,429,176,000	4,197,493,000
Current liabilities	209,195,000	717,272,000	771,784,000
Non-current liabilities	959,505,000	1,551,567,000	1,624,172,000
Liabilities associated with disposal
group classified as held-for-sale	498,388,000	204,024,000	331,226,000
Total liabilities	1,667,088,000	2,472,863,000	2,727,182,000
Net assets	3,781,401,000	3,956,313,000	1,470,311,000

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As set out in the AR2015, the Group’s reportable and operating segments from continuing operations include intelligent information business, golf club and hotel business and sales of light emitted diode products. Among these three segments, the golf club and hotel business segment, which was acquired in 2014, recorded segment profit in each of the years ended 31 December 2014 and 2015. Meanwhile, the Company recorded loss of approximately HK$79.30 million, HK$152.59 million and HK$149.99 million from discontinued operations for the six months ended 30 June 2016 and for the year ended 31 December 2015 and 2014, respectively.

(ii) Information about the Purchaser and the HNA Group

The Purchaser, Leader Concept Investments Limited (領意投資有限公司), is a company incorporated in the British Virgin Islands with limited liability. It is principally engaged in investment holding and is ultimately controlled by HNA Group Co., Ltd. through nominees.

The HNA Group Co., Ltd. is a limited liability company established in the PRC. HNA Group Co., Ltd. was the controlling Shareholder (as defined under the Listing Rules), holding approximately 66.84% of the entire issued share capital in the Company as at the Latest Practicable Date. The HNA Group Co., Ltd. is principally engaged in the provision of service in the area of aviation, real estate, financial services, tourism, logistics, and other industries.

(iii) Information about the Target Group

As at the Latest Practicable Date, the Target Company was a wholly-owned subsidiary of the Company. The Target Group is principally engaged in the DTV Business and the affiliated sales of light emitted diode products business in the PRC. The historical development and current status of the Group’s DTV Business and the light emitted diode products business and financial highlights of the Target Group is presented below:

Historical development of the Group’s DTV Business

The Company first commenced its DTV Business in March 2008. As set out in the announcement of the Company dated 10 March 2008, the Company entered into a cooperation agreement with Southern Yinshi pursuant to which the Group would establish an operation platform in the Guangdong Province, the PRC, for the provision of multi-media information services based on a cabled digital television network. Please refer to the announcement of the Company dated 10 March 2008 for full details.

In September 2010, the Group proposed to reorganise the current business model of its DTV Business (the “ Reorganisation ”), which was subsequently approved by the then independent Shareholders and completed on 8 November 2010. Under the arrangement with Southern Yinshi, the Group was responsible to provide its equipment to local digital television project companies and technical services to Southern Yinshi, which owned the operation rights in providing multi-media

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

information services based on cabled digital television network in the Guangdong Province, the PRC. Please refer to the announcement of the Company dated 5 September 2010 and circular of the Company dated 14 October 2010 for full details of the Reorganisation.

Change in relevant regulatory regime for the DTV Business

On 14 December 2011, the Company announced that the Company had been advised by Southern Media Corporation, a state-owned enterprise in the PRC, about the reorganisation of the cable digital broadcasting networks of Guangdong Province, the PRC, into one centralised network under one provincial broadcasting network company (the “ Reform ”) which is led by the Steering Group on the Reform of Guangdong Cultural Structure* (廣東省文化體制改革工作領導小組). As set out in relevant announcement of the Company, the Group would no longer be able to operate its DTV Business under the then existing structure and the Group decided to exit its DTV Business as a result of the Reform. Please refer to the announcement of the Company dated 14 December 2011 for full details.

Current status of the Group’s DTV Business

With reference to the IR2016 and AR2015, the Group’s DTV Business had been discontinued and no longer generates any operating income. The Group’s DTV Business was classified as held for sale since 2011. It has always been the intention of the Group to dispose its DTV Business.

The Group’s DTV Business generated no operating income during the six months ended 30 June 2016 and during the years ended 31 December 2015 and 31 December 2014, respectively, and incurred an after tax loss of approximately HK$64.62 million, HK$152.59 million and HK$149.99 million for the six months ended 30 June 2016 and for the years ended 31 December 2015 and 2014, respectively.

Current status of the light emitted diode products business

According to the AR2015, the light emitted diode products business was categorised under the “Sale of light emitted diode products” segment of the Group, which include the provision of management services, sales of light emitted diode products and other products by the Group. The revenue generated from this segment accounted for only approximately 0.74% and 0.66% of the total revenue of the Group for the years ended 31 December 2015 and 2014, respectively and represented the total revenue of the Target Group for each of the years ended 31 December 2015 and 2014. As stated in the Letter from the Board, in relation to the disposal of the LED Business, the LED Business has historically been a segment that supports the DTV Business only. Upon disposal of the DTV Business, the LED Business will no longer be related to the other business segments or required for the operations of the Group.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Financial highlights of the Target Group

We set out below the Target Group’s key financial information for the six months ended 30 June 2016 and for the two years ended 31 December 2015 extracted from the combined unaudited management account of the Target Group as provided and confirmed by the Management:

	For the
	six months	For the year ended
	ended 30 June	31 December
	2016	2015	2014
	(HK$)	(HK$)	(HK$)
Revenue	438,120	2,479,520	2,525,670
Cost of sales	(57,740,790)	(119,739,660)	(123,012,730)
Gross loss	(57,302,670)	(117,260,140)	(120,487,060)
Loss before tax	(66,305,620)	(148,323,550)	(155,188,350)
Loss for the period/year	(66,305,620)	(148,340,350)	(155,219,340)
	As at 30 June	**As at 31 **	December
	2016	2015	2014
	(HK$)	(HK$)	(HK$)
Non-current assets
Investment properties	39,024,480	38,317,770	48,802,960
Property, plant and equipment	477,265,290	537,003,990	621,728,650
Intangible asset	289,042,560	305,969,180	342,082,080
Other non-current assets	12,932,120	13,227,990	53,140,380
Sub total	818,264,450	894,518,930	1,065,754,070
Current assets
Trade receivables	164,059,870	167,813,430	175,770,400
Other current assets	28,096,950	28,696,850	22,133,430
Sub total	192,156,820	196,510,280	197,903,830
Current liabilities
Shareholder Loan	1,072,032,960	950,000,000	907,172,640
Other current liabilities	128,397,740	268,646,310	309,770,620
Sub total	1,200,430,700	1,218,646,310	1,216,943,260
Non-current liabilities	–	–	29,632,110
Net assets/(liabilities)	(190,009,430)	(127,617,100)	17,082,530

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(b) Reasons for entering into the Agreement and benefits of the Disposal

• (i) Imposition of the one province one network* ( 一省一網 ) policy and capital requirement to the digital television business by the PRC government

As stipulated by the Guangdong cultural reform [2011] No. 7* (粵文改[2011]7 號) issued by the Steering Group on the Reform of Guangdong Cultural Structure on 31 August 2011, one province one network policy was implemented in Guangdong Province, the PRC. It brought along substantial changes to the capital requirement to the digital television business. As confirmed by the PRC legal adviser of the Company, the Company is restricted to directly engage in the digital television broadcasting business in Guangdong province, the PRC and to hold any interest in Southern Yinshi as a result of the Reform. Nonetheless, the equipment and technical know-how under the Group’s DTV Business is allowed to be transferred to and/or utilised by a licensed entity in the digital television industry. Hence, we concur with the Directors’ view that the Reform does not necessarily reduce the value of the underlying assets of the Target Group as the relevant assets and/or equipment is ready to be utilised by any operators in digital television business but not exclusively for the use of the Group’s DTV Business. As informed by the Management, the value of the Target Group’s underlying assets was taken into account in determining the terms of the Disposal.

(ii) Unsuccessful past negotiations with potential independent buyers

The Company first announced its intention to dispose its DTV Business on 30 December 2011 and entered into the 2011 Disposal Agreement with the Hong Kong Guang Hua Resources Investments Company Limited, a strategic partner of the Company in its DTV Business and an independent third party. However, the said disposal agreement lapsed and ceased to be of any effect by 5:00 pm on 30 June 2013 as one of the conditions to relevant disposal agreement had not been fulfilled and parties under the 2011 Disposal Agreement could not agree on further extension of time to fulfill the condition. Successively, the Company identified several potential buyers for the sale of the Group’s DTV Business in March 2014 but no formal agreement had been concluded as stated in the announcement of the Company dated 28 March 2014. The Company entered into a non-legally binding memorandum of understanding with China TriComm Ltd. on 7 March 2016 to negotiate in good faith with a view of entering into a definitive agreement by no later than 31 May 2016 for disposal of its DTV Business. Nonetheless, as advised by the Management, negotiation contemplated under the memorandum of understanding between the Company and China Tricomm Ltd. had been terminated on 31 May 2016. Please refer to the announcements of the Company dated 30 December 2011, 29 February 2012, 25 May 2012, 29 June 2012, 2 January 2013, 2 July 2013, 28 March 2014 and 7 March 2016 and circular of the Company dated 27 April 2012 for full details.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In view of the Company’s endeavours for more than four years in attempt to dispose the Target Group and the change in business strategy of the Group as discussed below, we concur with the view of the Directors (including the independent non-executive Directors whose view are set out in the Letter from the Independent Board Committee contained in the Circular) that the Disposal presents a valuable opportunity for the Company to dispose of its discontinued DTV Business.

(iii) Unfavourable financial fundamentals of the Target Group

As provided by the Company, the Target Group recorded net liabilities position of approximately HK$127.62 million as at 31 December 2015 which was further worsened to approximately HK$190.01 million as at 30 June 2016. As advised by the Management, the increase in the net liabilities of the Target Group was due to the depreciation charges during the period. Furthermore, the loss making position due to depreciation of property, plant and equipment recorded by the Target Group for each of the three years ended 31 December 2015 and the outstanding other current liabilities of the Target Group due to third parties of approximately HK$128.40 million as at 30 June 2016 created unnecessary financial burden to the Group. The Group will no longer be required to provide funding to the Target Group for its operation or repayment of its liabilities after Completion and the Group can commit its resources to its new core businesses.

(iv) Management discussion with the controlling Shareholder

With the expertise of the Management in the areas of corporate management, investment, hotel operation and property development and financial management, the Management believes it is favourable to dispose its DTV Business as early as possible so as to allow the Company to concentrate on its new core business strategy of proactively exploring new investment projects in order to capture more profitable opportunities and to provide more stable and better return for the Shareholders. As a result of the discussion between the Management and HNA Group Co., Ltd., the controlling Shareholder (as defined under the Listing Rules), given HNA Group Co., Ltd.’s confidence in and its support to the Company’s execution of its new core business strategy, HNA Group Co., Ltd. has agreed to acquire the Group’s DTV Business, subject to Independent Shareholders’ approval. Upon our enquiry to the Management, the Company and HNA Group Co., Ltd. have taken into consideration, inter alia i) the terms and consideration offered by potential independent buyers; ii) the value of the underlying assets of the Target Group; and iii) the total capital investment made by the Group, when arriving at the terms of the Agreement, which was carried out under arm’s length negotiation on normal commercial terms.

(v) Implementation of new business strategy

As stated in the IR2016 and AR2015, the Company will continue to implement the strategy of business transformation by disposing the “intelligent information business” and “digital television business”, which are not in line with the development strategy of

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

the Group. Moreover, the Group will focus on merger and acquisition opportunities in developed economies and seek new investment opportunities in sectors such as property investment, real estate development and public infrastructure. The Company will also actively explore overseas investment opportunities in order to enhance the existing principal business of the Company and to further diversify its business at the same time. Such intention is evidenced by i) the acquisition of commercial building in London, the United Kingdom, in April 2016; ii) the entering of a letter of intent between the Company and certain independent third parties in relation to the potential acquisition of certain golf course properties in the United States of America with a maximum potential consideration equivalent to approximately HK$1.1 billion in June 2016 (please refer to the Letter from the Board for latest development); and iii) the establishment of strategic cooperation in the fields of investment consultancy, corporate finance, infrastructure development and investment, commercial real estate development and investment, as well as investment funds etc., between the Company and China Securities (International) Finance Holding Company Limited in June 2016. We are of the view that the Disposal is consistent with the business strategy of the Company and favourable to the future development of the Company.

(vi) Improvements to the level of working capital and the financial position of the Company

As stated in the Letter from the Board, the proceeds to be received by the Company under the Repayment Obligations contemplated under the Disposal will be used i) as general working capital of the Group (which will mainly be used for the daily operations of the Group); and ii) for potential acquisitions. As at the Latest Practicable Date, except for the Potential Acquisition explained in the Letter from the Board, the Company has not identified any other acquisition targets. Upon our further enquiry, the Management confirmed that the Disposal was implemented with a view to dispose its non-performing assets on commercial basis rather than being a fund raising exercise.

Taking into account that the Group will receive cash proceeds from the repayment of the Shareholder Loan within one year upon Completion and the Target Group’s worsening net liabilities position, the level of working capital and the financial position of the Group is expected to be improved upon Completion. It is believed that the Disposal represents a good opportunity for the Group to provide greater value to the Shareholders by strengthening its cash position and focusing its resources on principal activities of the Group that are in line with its core business strategies.

Having considered the circumstances and various factors stated above, we concur with the view of the Directors (including the independent non-executive Directors whose view are set out in the Letter from the Independent Board Committee contained in the Circular) that it would be beneficial to the Company and the Shareholders as a whole to enter into the Agreement and transactions contemplated thereunder.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(c) Principal terms of the Agreement

We set out below a summary of major terms of the Agreement:

Date : 17 August 2016 Parties : the Company, as the seller

Leader Concept Investments Limited (領意投資有限公司), as the purchaser

• Nature of the : The Company conditionally agreed to sell, and the Purchaser transactions conditionally agreed to purchase, the Sale Share, being the entire issued share capital of the Target Company.

• Earnest Money, : Within 5 business days upon the signing of the Agreement, Consideration the Purchaser agreed to pay the Earnest Money. and Payment term The consideration for the Sale Share the

• The consideration for the Sale Share payable by the Purchaser to the Company is HK$1.00 which shall be settled in cash upon Completion.

If the Purchaser fails to pay the Earnest Money within 30 Business Days from its due date, the Company has the right to terminate the Agreement with immediate effect.

• Repayment : Immediately after Completion, the Purchaser will procure the obligations of Target Group to repay the Shareholder Loan to the Company the Shareholder in the following manner: Loan

Repayment date	Amount
	(HK$ in million)
At Completion	50
Within 3 months after the Completion
Date	500
Within 1 year after the
Completion Date	400
Total	950

The Earnest Money will be treated as the repayment of the first installment of the Shareholder Loan of HK$50 million payable by the Purchaser at Completion.

Upon fulfilment of the Repayment Obligations, the Company will irrevocably waive all rights in relation to and any claims against the Target Group arising from the Shareholder Loan.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Purchaser and the Target Group will be jointly and severally liable for the Repayment Obligations of the Target Group upon the Completion.

• Conditions : Completion is conditional upon the passing of an ordinary precedent resolution for the approval of the Agreement and the transactions contemplated therein by the Independent Shareholders at the General Meeting.

If the condition is not fulfilled on or before the Long Stop Date, the Agreement will terminate automatically and the Company will refund the Earnest Money (without any interest) within 10 Business Days after termination of the Agreement. If the condition is fulfilled but Completion does not take place on the Completion Date due to the fault of the Purchaser, then the Earnest Money will not be refunded.

• Completion : Completion will take place on the Completion Date.

Further details of the principal terms of the Agreement are outlined in the Letter from the Board.

As at the Latest Practicable Date, the Purchaser had already paid the Earnest Money to the Company.

Under the Agreement, apart from the obligation contemplated under the Consideration, the Purchaser will procure the Target Group to repay the Shareholder Loan in accordance with the repayment schedule stipulated under the Agreement. The Purchaser and the Target Group will be jointly and severally liable for the Repayment Obligations. As such, in our analysis of total amount involved in the Disposal, we considered the aggregate of the Consideration and the repayment amount of the Shareholder Loan as a whole (the “ Total Transaction Amount ”). Set out below is our analysis to the terms of the Agreement.

(i) Analysis on the fairness and reasonableness of the Total Transaction Amount

(1) The Consideration

The Sale Share will be transferred to the Purchaser at a nominal consideration of HK$1.00, which was arrived at after arm’s length negotiations and has been determined with reference to i) the financial information of the Target Group; and ii) the Repayment Obligations on the part of the Purchaser. The Consideration shall be satisfied in cash upon Completion.

In view of the loss-making track record of the Target Group’s DTV Business since 2012, the combined unaudited net liabilities of the Target Group as at 30 June 2016 of approximately HK$190.01 million and factors discussed in the section “(b)

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(i) Imposition of the policy of one province one network* (一省一網) and capital requirement to the digital television business by the PRC government” above, we consider the possibility of turnaround in the Target Group’s financial contribution to the Group to be unlikely.

Following the Completion and the fulfilment of the Repayment Obligations, the nominal consideration of HK$1.00 for the Sale Share represents a significant premium on the abovementioned combined unaudited net liabilities of approximately HK$190.01 million as at 30 June 2016, hence, the financial and liquidity position of the Group is expected to improve and provide a solid foundation for the Group to explore investment opportunities and pursue its transforming business strategy.

(2) Repayment amount of the Shareholder Loan

As provided by the Company, the amount repayable by the Target Group to the Company under the Repayment Obligations represents i) the amount of total loans due and owing by the Target Group to the Group of HK$950.00 million as at 31 December 2015; and ii) approximately 88.62% of the total loans due and owing by the Target Group to the Group of approximately HK$1.07 billion as at 30 June 2016.

As advised by the Management, the repayment amount under the Repayment Obligations was concluded with reference to the financial figures of the Target Group as at 31 December 2015, which was the latest financial information of the Target Group available immediately prior to the entering of the Agreement. As such, we consider the basis of determining the repayment amount under the Repayment Obligations is reasonable.

(3) The Total Transaction Amount

Given the Shareholder Loan is an inter-company loan, the entire sum of which will be repaid by the Target Group, for analytical purpose in relation to the Total Transaction Amount hereunder, we disregard the Shareholder Loan from the unaudited net liabilities position of the Target Group with the intention of reflecting the actual value of assets to be disposed by the Group attributed by the Target Group. The aforesaid attributable assets as at 30 June 2016 was amounted to an unaudited net asset value (excluding amounts due to the Group) of approximately HK$882.02 million (the “ 2016 June Attributable NAV of the Target Group ”).

It is noted that the Total Transaction Amount represents a premium of approximately 7.71% over the 2016 June Attributable NAV of the Target Group.

In order to further evaluate the fairness and reasonableness of the Total Transaction Amount, we have performed a comparable companies analysis. Given that the Target Group was loss making for the year ended 31 December 2015 and for

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

the six months ended 30 June 2016 respectively, we consider the analysis of price-to-earnings ratio is not meaningful. As such, we have taken the value of the assets of the Target Group into consideration for comparison purpose and conducted a price-to-book analysis. We were not able to identify any company listed on the Stock Exchange which is engaged in exactly the same business as the Target Group, accordingly we limited the scope of our search for the purpose of this analysis. We have identified, on best effort basis, an exhaustive list of companies listed on the Stock Exchange for comparison (the “ Comparable Companies ”) based on following criteria. In respect of Television Broadcasts Limited (stock code: 0511), I-Cable Communications Limited (stock code: 1097) and Phoenix Satellite Television Holdings Limited (stock code: 2008) (the “ Category A Comparable Companies ”), they are all engaged in digital television business and owned broadcasting and transmitting equipment as disclosed in their latest published financial statement. In respect of Skyworth Digital Holdings Limited (stock code: 0751) (the “ Category B Comparable Company ”), it is principally engaged in providing top set box for the operation of digital television business. We consider the Comparable Companies are able to provide meaningful comparison, and are fair and representative samples, as we are of the view that i) the property, plant and equipment of the Category A Comparable Companies also consist of broadcasting and transmitting equipment for digital television operations; ii) Category B Comparable Company has similar business operation as the Target Group; and iii) despite we noted that the Comparable Companies have other business operations which are not related to digital television business and that their assets are located in different provinces in the PRC when compared to that of the Target Group, the fact that Comparable Companies have a variety of business operations will not significantly affect our analysis as we intend to focus on the value of the assets rather than the nature of operations, and that location has minimal relevancy in terms of value of assets of this type. Details of the result are summarised in the following table:

				Respective latest
				net assets value
				(excluding non-
				controlling interest)
				as disclosed in
				respective latest
			Market	published financial
			capitalisation as	statement before	Implied
		Stock	at the Latest	the Latest	price-to-
	Company	code	Practicable Date	Practicable Date	book ratio
			(HK$’ million)	(HK$’ million)
Category A Comparable Companies
1.	Television Broadcasts Ltd	511	12,264.00	7,680.43	1.60
2.	I-Cable Communications Ltd	1097	1,951.16	683.87	2.85
3.	Phoenix Satellite Television Holdings	2008	8,051.61	4,881.14	1.65
	Ltd

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

				Respective latest
				net assets value
				(excluding non-
				controlling interest)
				as disclosed in
				respective latest
			Market	published financial
			capitalisation as	statement before	Implied
		Stock	at the Latest	the Latest	price-to-
	Company	code	Practicable Date	Practicable Date	book ratio
			(HK$’ million)	(HK$’ million)
Category B Comparable Company
4.	Skyworth Digital Hldgs Ltd	751	16,799.65	15,092.00	1.11
				mean	1.80
				median	1.62
				maximum	2.85
				minimum	1.11
			The Total	2016 June	Implied
			Transaction	Attributable NAV of	price-to-
			Amount	the Target Group	book ratio
			(HK$’ million)	(HK$’ million)
	The Disposal		950.00	882.02	1.08

Source: http://www.hkex.com.hk

As shown in the above table, the implied price-to-book ratios of the Comparable Companies ranged from approximately 1.11 to 2.85 times, with a mean of approximately 1.80 times and a median of 1.62 times. We noted that the implied price-to-book ratio for the Disposal, calculated as the Total Transaction Amount divided by 2016 June Attributable NAV of the Target Group is 1.08 times, which is out of the range of the implied price-to-book ratios of the Comparable Companies. Nonetheless, given that i) none of the Comparable Companies is engaged in exactly the same business as the Target Group and each of Comparable Companies has other business segments which is unrelated to digital television business; ii) each of Television Broadcasts Limited, I-Cable Communications Limited and Phoenix Satellite Television Holdings Limited maintain a free-to-air television licence whilst the Target Group does not; iii) business operation of the Target Group has been suspended since December 2011 whilst the Comparable Companies are in normal business operation; iv) the loss making position of the Target Group in the last three consecutive financial years; v) all members of the Target Group are private companies with no open market for trading of its shares; and vi) reasons and benefits for entering into the Agreement and benefits of the Disposal as discussed in the section “(b) Reasons for entering into the Agreement and benefits of the Disposal” above, we consider that the implied price-to-book ratio for the Disposal, which is out of the range of the implied price-to-book ratios of the Comparables Companies is justifiable.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

With reference to facts presented in this section and having considered i) the terms of the Agreement were agreed based on arm’s length negotiations between the Company and the Purchaser; ii) the prospect of the Target Group; iii) the positive effect to the financial results of the Group; iv) change in PRC government policy to the digital television industry; v) the financial position and results of the Target Group in recent years; vi) our analysis on the Consideration and repayment amount of the Shareholder Loan above; and vii) the comparables companies analysis, we are of the view that the Total Transaction Amount is fair and reasonable and in the interest of the Company and the Shareholders as a whole.

(ii) Analysis on other terms of the Agreement

Upon our review of the Agreement, we noted that i) the Earnest Money to be paid by the Purchaser; and ii) the Purchaser will be jointly and severally liable for the Repayment Obligations provide extra protection to the rights of the Company under the Repayment Obligations and we are not aware of any other terms contained in the Agreement which is unfavourable to the Group.

Having taken into account all the factors presented above, we are of the opinion that the terms of the Agreement are on normal commercial terms or better, fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Company and the Shareholders as a whole.

(d) Possible financial effects of the Disposal on the Company

Upon Completion, the Company will cease to have any interest in the Target Group and hence, all assets and liabilities of the Target Group will no longer be consolidated into the Group’s financial statements.

(i) Earnings

With reference to factors discussed in the above sections, it is unlikely that the Target Group will have any revenue contribution to the Group in the future, whereas the cost of sales, other losses, administrative expenses and finance costs of DTV Business which are of recurring nature will no longer impact the Group’s financials. Therefore, by disposing the Group’s DTV Business, the Group will not be required to bear any future loss of its DTV Business.

As set out in the Letter from the Board, based on the net liabilities position of the Target Group of approximately HK$190.01 million as at 30 June 2016, the Group currently expects to record a gain of approximately HK$67.98 million upon Completion.

As a result of the factors discussed above, the Disposal would likely have a positive impact on the future earnings potential of the Group.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(ii) Net asset value

According to the IR2016, the unaudited net asset value of the Group as at 30 June 2016 was approximately HK$3.78 billion.

As set out in the Letter from the Board, it is estimated that the Group will record a gain of approximately HK$67.98 million from the Disposal. As a result, the net asset value of the Group is also expected to increase by approximately HK$67.98 million, being the net amount between the Total Transaction Amount and the 2016 June Attributable NAV of the Target Group, upon Completion.

(iii) Cash Flow

Pursuant to the IR2016, the unaudited bank balances and cash of the Group amounted to approximately HK$2.35 billion as at 30 June 2016. The proceeds (including the repayment amount of the Shareholders Loan) of approximately HK$948.00 million (after deducting professional fees in relation to the Disposal) from the Disposal will be used as general working capital of the Group, and it is expected that the Disposal will have a positive effect on the cash flow of the Group.

The actual gain or loss arising from the Disposal to be recognised by the Group may be different from the above and shall be subject to the review by auditor of the Company and determined based on the amount of the consolidated net assets/liabilities (as the case may be) of the Target Group and the amount of expenses incidental to the Disposal. It should be noted that the above analyses are for illustrative purposes only and does not purport to represent how the actual financial position of the Group will be on the date of Completion.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

RECOMMENDATION

Having considered the principal factors and reasons discussed above, we are of the view that the Disposal and the terms of the Agreement are on normal commercial terms or better (although it is not in the ordinary and usual course of business of the Group), fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Company and the Shareholders as a whole.

Accordingly, we advise the Independent Shareholders, and recommend the Independent Board Committee to advise the Independent Shareholders to vote in favour of the proposed resolution in respect of the Agreement and the transactions contemplated thereunder to be proposed at the General Meeting.

Yours faithfully, For and on behalf of

FORTUNE FINANCIAL CAPITAL LIMITED Alan Chung Kenneth Wong Managing Director Executive Director

Mr. Chung is a responsible officer under the SFO to engage in type 6 (advising on corporate finance) regulated activities. He has around 15 years of experience in corporate finance.

Mr. Wong is a responsible officer under the SFO to engage in type 6 (advising on corporate finance) regulated activities. He has around 9 years of experience in corporate finance.

• For identification purpose only

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GENERAL INFORMATION

APPENDIX

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 Group. 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.

DISCLOSURE OF INTERESTS

Interest of Directors and Chief Executive in the Company

As at the Latest Practicable Date, the interests and short positions, if any, of each Director and 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) 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 the Directors and chief executive were deemed or taken to have under such provisions of the SFO), or which were required to be and are recorded in the register required to be kept by the Company pursuant to Section 352 of the SFO, or as otherwise required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies adopted by the Company (the “ Model Code ”) were as follows:

Long positions in the Shares and underlying Shares

						Total interests
						as to % of the
			**Number **	of		issued share
			shares/Underlying			capital of the
			Shares Interested			Company as at
		Capacity in which	Interests in	Derivative	Total	the Latest
**Name **	of Director	interests are held	Shares	interests*	Interests	Practicable Date
Leung	Shun Sang, Tony	Beneficial owner	20,000,000	15,793,981	35,793,981	0.31%
Leung	Kai Cheung	Beneficial owner	5,000,000	1,843,200	6,843,200	0.06%

__ The interests are unlisted physically settled options granted pursuant to the Share Option Scheme of the Company adopted on 7 June 2002 (the “ 2002 Scheme* ”). Upon exercise of the share options in accordance with the 2002 Scheme, ordinary shares in the share capital of the Company are issuable. The share options are personal to the respective Directors.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors nor the chief executive of the Company had any interests or short positions in any Shares, underlying Shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which would have to be notified to the Company and the Stock

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GENERAL INFORMATION

APPENDIX

Exchange pursuant to Divisions 7 and 8 Part XV of the SFO (including interests and short positions which the Directors and chief executive were deemed or taken to have under such provisions of the SFO), or which were required to be and are recorded in the register required to be kept by the Company pursuant to Section 352 of the SFO, or which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers.

DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had entered into any service agreement with any member of the Group nor were there any other service agreements proposed which would not expire or be determinable by the member of the Group within one year without payment of compensation (other than statutory compensation).

MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors are not aware of any material adverse change in the financial or trading position of the Group since 31 December 2015, the date to which the latest published audited accounts of the Company have been made up.

DIRECTORS’ INTEREST IN ASSETS, CONTRACTS OR ARRANGEMENTS

Interests in assets

As at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any assets which have been acquired or disposed of by, or leased, or which were proposed to be acquired or disposed of by, or leased to any member of the Group since 31 December 2015 (the date to which the latest published audited consolidated financial statements of the Company was made up).

Interests in contracts

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

DIRECTORS’ INTERESTS IN COMPETING BUSINESS

As at the Latest Practicable Date, none of the Directors nor their respective close associates had any interest in any business which complete or is likely to complete, either directly or indirectly, with the businesses of the Group.

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GENERAL INFORMATION

APPENDIX

EXPERT AND CONSENT

The following is the qualification of the expert who has been named in this Circular or has given their opinions and advice which are included in this Circular:

Name

Qualification

Fortune Financial Capital Limited a corporation licensed to carry out type 6 (advising on corporate finance) regulated activities under the SFO

As at the Latest Practicable Date, the expert named above:

• i. did not have any shareholding in any member of the Group nor did each of them 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;

• ii. has given its written consent and has not withdrawn its written consent to the issue of this Circular with the inclusion of its letter and/or references to its name in the form and context in which they respectively appear; and

• iii. did not have any interest, either direct or indirect, in any assets which since 31 December 2015, being the date to which the latest published audited financial statements of the Group were made up, have been acquired or disposed of by or leased to, or are proposed to be acquired or disposed of by or leased to, any member of the Group.

DOCUMENTS FOR INSPECTION

A copy of the Agreement will be available for inspection at Suites 5811-5814, 58/F, Two International Finance Centre, No. 8 Finance Street, Central, Hong Kong from 9:30 a.m. to 12:45 p.m. and from 2:00 p.m. to 6:00 p.m. from the date of this Circular up to and including the date of the General Meeting.

MISCELLANEOUS

The English names of the Chinese entities marked with “*” are translations of their Chinese names and are included in this Circular for identification purposes only; such translations should not be regarded as their official English names. In the event of any inconsistency, the Chinese names prevail. In any event, the English texts of this Circular shall prevail over the Chinese texts.

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NOTICE OF GENERAL MEETING

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海航實業集團股份有限公司 HNA HOLDING GROUP CO. LIMITED

(Incorporated in Hong Kong with limited liability)

(Stock Code: 521)

NOTICE IS HEREBY GIVEN that the general meeting (the “ Meeting ”) of HNA Holding Group Co. Limited (the “ Company ”) will be held at Bowen Room, 7/F., Conrad Hong Kong, Pacific Place, 88 Queensway, Admiralty, Hong Kong on Monday, 3 October 2016 at 11:30 a.m. for the purpose of consideration and, if thought fit, passing, with or without modifications, the following resolution:

ORDINARY RESOLUTION

“THAT:

• 1(a) the agreement (the “ Agreement ”) dated 17 August 2016 entered into between the Company and Leader Concept Investments Limited (the “ Purchaser ”) in respect of the disposal of the entire issued capital of South China Digital TV Holdings Limited (華南數字電視集團有限公司) by the Company to the Purchaser, a copy of which is tabled at the meeting and marked “A” and initialized by the chairman of the meeting for identification purposes, and the transactions contemplated thereunder be and are hereby approved, ratified and confirmed; and

• (b) any one director of the Company be and is hereby authorised to do all such further acts and things and to sign and execute all such documents and to take all such steps which in his/her opinion may be necessary, appropriate, desirable or expedient to implement and/or give effects to the transactions contemplated thereunder.”

For and on behalf of the Board of HNA Holding Group Co. Limited Xu Haohao

Executive Director

Hong Kong, 15 September 2016

– 35 –

NOTICE OF GENERAL MEETING

Notes:

• (1) Any member entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend and, on a poll, vote instead of him/her. A proxy need not be a member of the Company.

• (2) The instrument appointing a proxy shall be in writing under the hand of the appointor or of is/her attorney duly authorised in writing or, if the appointor is a corporation, either under its seal or under the hand of any officer, attorney or other person duly authorised to sign the same.

• (3) In order to be valid, the form of proxy together with the power of attorney or other authority, if any, under which it is signed or a notarially certified copy of such power or authority, must be deposited with the share registrars of the Company, Tricor Tengis Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, not less than 48 hours before the time appointed for holding the meeting or any adjourned meeting thereof (as the case may be).

• (4) Completion and return of the form of proxy will not preclude members from attending and voting in person at the meeting or at any adjourned meeting thereof (as the case may be) should they so wish, and in such event, the form of proxy shall be deemed to be revoke.

• (5) Where there are joint registered holders of any share, any one of such joint holders may vote, either in person or by proxy, in respect of such share as if he/she was solely entitled thereto, but if more than one of such joint holders are present at the meeting, whether in person or by proxy, the joint registered holder present whose name stands first on the register of members of the Company in respect of the shares shall be accepted to the exclusion of the votes of the other registered holders.

As at the date of this notice, the Board comprises Mr. Zhao Quan (Executive Director and Chairman), Mr. Li Tongshuang (Executive Director and Vice-chairman), Mr. Xu Haohao (Executive Director and Executive President), Mr. Zhang Ke (Executive Director), Mr. Leung Shun Sang, Tony (Non-executive Director), Mr. Wang Hao (Non-executive Director), Mr. Leung Kai Cheung (Independent Non-executive Director), Mr. Liem Chi Kit, Kevin (Independent Non-executive Director) and Mr. Lam Kin Fung, Jeffrey (Independent Non-executive Director).

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