MS Group Holdings Limited — Capital/Financing Update 2018

Mar 14, 2018

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, 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 announcement.

FULLSUN INTERNATIONAL HOLDINGS GROUP CO., LIMITED 福 晟 國 際 控 股 集 團 有 限 公 司

(Incorporated in Bermuda with limited liability)

(Stock Code: 00627)

DISCLOSEABLE TRANSACTION FURTHER ACQUISITION OF 11% EQUITY INTEREST IN THE TARGET COMPANY

Reference is made to the announcement of the Company dated 12 February 2018 in relation to the Previous Acquisition.

As at the date of this announcement, the Previous Acquisition has been completed. The Purchaser is interested in 40% equity interest in the Target Company as at the date of this announcement.

On 14 March 2018 (after the trading hours of the Stock Exchange), the Purchaser, an indirect wholly-owned subsidiary of the Company entered into the Equity Transfer Agreement with the Vendor, pursuant to which the Vendor agreed to sell and the Purchaser agreed to acquire 11% equity interest held by the Vendor in the Target Company at the consideration of RMB50,000,000 (equivalent to approximately HK$61,881,000).

Upon completion of the Further Acquisition, the Purchaser will be interested in a total of 51% equity interest in the Target Company and the Target Company will become an indirect non-wholly owned subsidiary of the Company.

As the highest applicable percentage ratio in respect of the Previous Acquisition and the Further Acquisition, in aggregate, still exceeds 5% but is less than 25%, the Previous Acquisition and the Further Acquisition together constitute a discloseable transaction for the Company under the Listing Rules and are only subject to the reporting and announcement requirements, but are exempt from the shareholders’ approval requirement under Chapter 14 of the Listing Rules.

THE FURTHER ACQUISITION

Reference is made to the announcement of the Company dated 12 February 2018 and in relation to the Previous Acquisition.

As at the date of this announcement, the Previous Acquisition has been completed. The Purchaser is interested in 40% equity interest in the Target Company as at the date of this announcement.

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On 14 March 2018 (after the trading hours of the Stock Exchange), the Purchaser, an indirect wholly-owned subsidiary of the Company entered into the Equity Transfer Agreement with the Vendor, pursuant to which the Vendor agreed to sell and the Purchaser agreed to acquire 11% equity interest held by the Vendor in the Target Company at the consideration of RMB50,000,000 (equivalent to approximately HK$61,881,000).

The principal terms of the Equity Transfer Agreement are set out below.

Date

14 March 2018

Parties

1. Changsha Qiantai Property Development Co., Ltd.* (長沙千泰房地產開發有限公司), as the Vendor;

2. Hunan Fullsun Group Co., Ltd.* (湖南福晟集團有限公司), as the Purchaser.

The Vendor is a company established in the PRC with limited liability and principally engaged in property development in Hunan Province, the PRC. To the best of the knowledge, information and belief of the Directors after having made all reasonable enquiries, the Vendor and its beneficial owner(s) are independent of the Company and its connected persons.

Subject Matters

Pursuant to the Equity Transfer Agreement, the Vendor agreed to sell and the Purchaser agreed to acquire the Target Equity Interest held by the Vendor at the consideration of RMB50,000,000 (equivalent to approximately HK$61,881,000). Further particulars of the Target Company are set out in the section headed ‘‘Information relating to the Target Company and the Project’’ below.

Consideration and Payment Terms

The Consideration is RMB50,000,000 (equivalent to approximately HK$61,881,000) which shall be paid in cash by the Purchaser within 15 days from the date of the Equity Transfer Agreement.

The Consideration will be financed by the Group’s internal resources and the proceeds as raised in the placing of shares and convertible bonds as disclosed in the circular of the Company dated 27 October 2017 and announcement of the Company on 1 December 2017.

The Consideration was determined upon arm’s length negotiation between the parties and the Group has taken into account the following factors: (i) the location, the current development status (as disclosed in item (iii) of the section headed ‘‘Conditions precedent’’ in the announcement of the Company dated 12 February 2018 in relation to the Previous Acquisition) and the prospect of the Project; (ii) the preliminary valuation of the Project as indicated by an independent valuer as at 9 February 2018 of approximately RMB1,146,000,000; and (iii) the synergetic effect that can be created among the Group and the Target Company.

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Completion

The date of Completion shall fall on the date on which the registration in respect of the transfer of the Target Equity Interest with the relevant Administration of Industry and Commerce Bureau has been completed.

The director(s), general manager and chief financial controller of the Target Company nominated by the Vendor shall resign and such positions shall be replaced by the persons nominated by the Purchaser upon Completion.

Upon Completion, the Purchaser will hold a total of 51% equity interest in the Target Company and the Target Company will become a subsidiary of the Group, and hence the repayment obligations of the Target Company and the securities granted by the Target Company to Daye Trust in respect of the financial assistance (being a loan amount of approximately RMB682,000,000) provided to the Target Company by Daye Trust will constitute continuing connected transactions for the Company. It is also expected that, upon Completion, a pledge of the 51% equity interest in the Target Company will be provided by the Purchaser to Daye Trust as security for the repayment obligations of the Target Company in respect of such loan owed by the Target Company to Daye Trust, therefore, such security to be granted by the Purchaser to Daye Trust will also constitute a continuing connected transaction for the Company. In this regard, the Company will make further announcement(s) and comply with the applicable disclosure requirements under Listing Rules as and when appropriate.

Although 49% equity interest in the Target Company is held by Daye Trust, under the accounting policy of the Company, the Group will treat the Target Company as its subsidiary with 100% effective equity interest. It follows that the equity interest in the Target Company had been held by Daye Trust solely by way of security as collateral for the loan mentioned above.

Information relating to the Target Company and the Project

The Target Company was established in the PRC in 1999 and is principally engaged in property development in Hunan Province, the PRC. As at the date of this announcement, it is owned as to 49% by Daye Trust, 40% by the Purchaser and 11% by the Vendor. The registered capital of the Target Company is RMB50,000,000.

As at the date of this announcement, the Target Company owns the Project and the book value of the Project together with its prepaid construction costs as at 28 February 2018 was approximately RMB582,409,000 according to its management accounts.

As at the date of this announcement, the land use right of the Project and the properties (accounted as inventories) erected thereon have been mortgaged in favour of Daye Trust as security for a loan amount of approximately RMB682,000,000 owed by the Target Company to Daye Trust. Pursuant to the financing arrangement entered into between the Target Company and Daye Trust, the 49% equity interest of the Target Company currently held by Daye Trust is held as collateral to secure the repayment obligation of Target Company. Daye Trust is obliged under the terms of the financing arrangement to release and transfer back to the Vendor such equity interest in Target Company upon its repayment of the agreed amounts, comprising the principal of the loan and the fixed income return.

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The financial information of Target Company for the two financial years ended 31 December 2017 according to its management accounts is set out below:

		For the year	ended
		31 December
		2016	2017
		(RMB’000)	(RMB’000)
Profit/(loss)	before tax	(123,527)	(26,375)
Profit/(loss)	after tax	(123,527)	(26,375)

As at 28 February 2018, the net liabilities value of Target Company was approximately RMB70,126,000.

Reasons for the Further Acquisition

The Company is an investment holding company and the Group is principally engaged in the development and sale of residential and commercial properties in the PRC. The Purchaser was established in the PRC and is principally engaged in equity investment.

The Board believes that the Previous Acquisition and the Further Acquisition will provide a good opportunity to enlarge the property development portfolio in Changsha City. The principal asset of the Target Company is the Project located at Tian Xin District, Changsha City and adjacent to Guihuaping Station* (桂花坪站) of Line 1 of the Changsha Metro. The development site of phase II and phase III of the Project contains planned gross floor area of approximately 83,620 square metres and 159,645 square metres, respectively. The Project contains residential, commercial apartments, retail shops and other facilities. The management expects the pre-sale of Phase II may be commenced within 3 months depending on the market conditions.

The management is optimistic about the prospects of the Project as it is situated at a prime location and that is close to the transportation network. Upon the Completion, the Group will become the sole developer of the Project and will take up the functions for building quality control, selling and strategic market and property management. The management expects that higher potentials of the Project can be released with the management experience and the reputation of the Group.

The Board considers that the acquisition and development of the Project will enable the Group to generate income and provide capital appreciation potential to the Group.

The Directors (including the independent non-executive Directors) are of the view that the terms of the Equity Transfer Agreement and the Further Acquisition are normal commercial terms, and fair and reasonable, and are in the best interest of the Company and the Shareholders as a whole.

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AGREEMENT WITH RESPECT TO ARRANGEMENT OF THE RELEASE OF 49% EQUITY INTEREST IN THE TARGET COMPANY BY DAYE TRUST

On 26 November 2016, a financing arrangement was entered into between Daye Trust and the Target Company, pursuant to which a maximum amount of available financing of approximately RMB690,000,000 (the ‘‘Loan’’) was provided by Daye Trust to the Target Company to fund the development of the Project. The term of the loan is two years and renewable with the consent of Daye Trust. As part of the securities for the repayment obligations of the Target Company under the financing arrangement, the Vendor had transferred 49% equity interest in the Target Company to Daye Trust. Accordingly, the 49% equity interest in the Target Company transferred to Daye Trust is held by Daye Trust as collateral to secure the repayment obligations of Target Company.

On 14 March 2018, the Purchaser, the Vendor, Daye Trust and the Target Company entered into an agreement, pursuant to which, the parties agree that after all repayment obligations of the Target Company under the financing arrangement in relation to the Loan are settled in full, Daye Trust shall release and transfer the 49% equity interest in the Target Company to the Purchaser or a third party as designated by the Purchaser in replacement of the Vendor upon receiving the written request from the Purchaser. The Company will make further announcement(s) and comply with the applicable disclosure requirements under Listing Rules as and when appropriate.

LISTING RULES IMPLICATIONS

As the highest applicable percentage ratio in respect of the Previous Acquisition and the Further Acquisition, in aggregate, still exceeds 5% but is less than 25%, the Previous Acquisition and the Further Acquisition together constitute a discloseable transaction for the Company under the Listing Rules and are only subject to the reporting and announcement requirements, but are exempt from the shareholders’ approval requirement under Chapter 14 of the Listing Rules.

DEFINITIONS

In this announcement, the following expressions have the meanings set out below unless the context requires otherwise.

‘‘Board’’	the board of Directors
‘‘business day(s)’’	a day (other than a Saturday or a	Sunday or a public
	holiday) on which licensed banks in	the PRC are open	for
	general banking business throughout	their normal business
	hours
‘‘Company’’	Fullsun International Holdings Group	Co., Limited (福晟國
	際控股集團有限公司), a company	incorporated in	the
	Bermuda with limited liability, the	shares of which	are
	listed on the main board of the Stock	Exchange
‘‘Completion’’	completion of the Further Acquisition

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‘‘connected person’’	has the meaning ascribed to it under the Listing Rules
‘‘Consideration’’	the consideration for the Further Acquisition, being
	RMB50,000,000 (equivalent to approximately
	HK$61,881,000)
‘‘Daye Trust’’	Daye Trust Co., Ltd.* (大業信託有限責任公司), a state
	controlled company established in the PRC with limited
	liability, a connected person of the Company at the
	subsidiary level
‘‘Directors’’	the directors of the Company
‘‘Equity Transfer Agreement’’	the conditional equity transfer agreement dated 14 March
	2018 entered into between the Vendor and the Purchaser in
	relation to the Further Acquisition
‘‘Further Acquisition’’	the proposed acquisition of the Target Equity Interest by the
	Purchaser
‘‘Group’’	the Company and its subsidiaries
‘‘HK$’’	Hong Kong Dollar, the lawful currency of Hong Kong
‘‘Hong Kong’’	the Hong Kong Special Administrative Region of the PRC
‘‘Listing Rules’’	the Rules Governing the Listing of Securities on the Stock
	Exchange
‘‘PRC’’	the People’s Republic of China, excluding Hong Kong,
	Macau Special Administrative Region and Taiwan for the
	purpose of this announcement
‘‘Previous Acquisition’’	the acquisition of 40% equity interest in the Target
	Company by the Purchaser from the Vendor pursuant to an
	equity transfer agreement dated 12 February 2018 entered
	into between the Purchaser and the Vendor, which was
	completed on 26 February 2018
‘‘Project’’	a commercial and residential property project with land and
	the buildings erected thereon located at Furong South Road,
	Tianxin Qu* (芙蓉南路天心區), Changsha City, Hunan
	Province, the PRC named Xing Ru Jin Cheng Commercial
	and Residential Area* (興汝金城商住小區項目), which is
	owned by the Target Company
‘‘Purchaser’’	Hunan Fullsun Group Co., Ltd.* (湖南福晟集團有限公司),
	a company established in the PRC with limited liability and
	an indirect wholly-owned subsidiary of the Company

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‘‘RMB’’	Renminbi, the lawful currency of the PRC
‘‘Stock Exchange’’	The Stock Exchange of Hong Kong Limited
‘‘Target Company’’	Hunan Xing Ru Cheng Property Development Co., Ltd.* (湖
	南興汝城房地產開發有限公司), a company established in
	the PRC with limited liability
‘‘Target Equity Interest’’	the 11% equity interest in the Target Company owned by
	the Vendor
‘‘Vendor’’	Changsha Qiantai Property Development Co., Ltd.* (長沙千
	泰房地產開發有限公司), a company established in the PRC
	with limited liability
‘‘%’’	per cent.

• for identification purpose only

For illustration purpose only and unless otherwise stated, conversion of RMB into HK$ in this announcement is based on the exchange rate of HK$1 = RMB0.808. Such conversion should not be construed as a representation that any amount have been, could have been, or may be, exchanged at this or any other rate.

By Order of the Board Fullsun International Holdings Group Co., Limited Pan Weiming Chairman

Hong Kong, 14 March 2018

As at the date of this announcement, the Board comprises eight executive Directors, namely Mr. PAN Weiming, Mr. PAN Jungang, Ms. CHEN Weihong, Mr. LI Jinrong, Mr. PAN Haoran, Mr. TANG Kwok Hung, Ms. WU Jihong and Mr. WU Yang and four independent non-executive Directors, namely Mr. MAK Ka Wing, Patrick, Mr. YUEN Chee Lap, Carl, Mr. YANG Xiaoping and Dr. CHEUNG Wai Bun, Charles J.P.

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