MS Group Holdings Limited — Capital/Financing Update 2019

Mar 8, 2019

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.

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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

CAPITAL INCREASE AGREEMENT

On 8 March 2019 (after the trading hours of the Stock Exchange), AVIC Trust, Hunan Fullsun Group and the Project Company entered into the Capital Increase Agreement, pursuant to the terms and conditions of which AVIC Trust has agreed to invest in the Project Company in the aggregate amount of up to RMB500,000,000 by way of the Capital Injection. As at the date of this announcement, Hunan Fullsun Group is the sole shareholder of the Project Company. Both Hunan Fullsun Group and the Project Company are indirect wholly-owned subsidiaries of the Company.

The Capital Injection comprises increasing the registered capital of the Project Company from RMB50,000,000 to RMB1,020,000,000, with (i) Hunan Fullsun Group contributing an amount of RMB470,000,000 in cash and (ii) AVIC Trust contributing an aggregate amount of up to RMB500,000,000 in cash. Upon completion of the Capital Injection, the equity interest in the Project Company will be registered as to 51% and 49% in the name of Hunan Fullsun Group and AVIC Trust respectively.

LISTING RULES IMPLICATIONS

Upon completion of the Capital Injection, Hunan Fullsun Group’s equity interest in the Project Company will be reduced from 100% to 51%. The Capital Injection therefore constitutes a deemed disposal of the Company under Rule 14.29 of the Listing Rules.

As one of the applicable percentage ratios in respect of the Capital Injection exceeds 5% but all of such percentage ratios are less than 25%, the Capital Injection constitutes a discloseable transaction for the Company under Chapter 14 of the Listing Rules and is subject to the reporting and announcement requirements under the Listing Rules.

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CAPITAL INCREASE AGREEMENT

On 8 March 2019 (after the trading hours of the Stock Exchange), AVIC Trust, Hunan Fullsun Group and the Project Company entered into the Capital Increase Agreement, the major terms of which are set out below:

Date

8 March 2019

Parties

1. AVIC Trust;

2. Hunan Fullsun Group, an indirect wholly-owned subsidiary of the Company; and

3. the Project Company, an indirect wholly-owned subsidiary of the Company.

As at the date of this announcement, Hunan Fullsun Group is the sole shareholder of the Project Company.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, as at the date of this announcement, each of AVIC Trust and its ultimate beneficial owners is a third party independent of the Company and its connected persons.

Capital Injection

Pursuant to the terms and conditions of the Capital Increase Agreement, AVIC Trust has agreed to invest in the Project Company in the aggregate amount of up to RMB500,000,000 by way of the Capital Injection.

The Capital Injection comprises increasing the registered capital of the Project Company from RMB50,000,000 to RMB1,020,000,000, with (i) Hunan Fullsun Group contributing an amount of RMB470,000,000 in cash and (ii) AVIC Trust contributing an aggregate amount of up to RMB500,000,000 in cash. Upon completion of the Capital Injection, the equity interest in the Project Company will be registered as to 51% and 49% in the name of Hunan Fullsun Group and AVIC Trust respectively.

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The shareholding in the Project Company as at the date of this announcement and immediately after the completion of the Capital Injection are set out below:

Shareholders Hunan Fullsun Group AVIC Trust Total	As at the date of this announcement Registered capital contributed (RMB) % 50,000,000 100 — — 50,000,000 100	Immediately after completion of the Capital Injection Registered capital contributed (RMB) % 520,000,000 51 500,000,000 49 1,020,000,000 100	Immediately after completion of the Capital Injection Registered capital contributed (RMB) % 520,000,000 51 500,000,000 49 1,020,000,000 100
			100

After completion of the Capital Injection, the Project Company will remain as a subsidiary of the Company and its financial results will continue to be consolidated with the financial statements of the Group. It is expected that the Group will not record any gain or loss in the statement of profit or loss from the deemed disposal arising from the Capital Injection.

Use of funds injected by AVIC Trust under the Capital Injection

Save with the consent of AVIC Trust, the Project Company shall use the funds from the Capital Injection solely for the subsequent development and construction of Phase III of the Project and related purposes.

Conditions precedent

1. The Capital Injection by AVIC Trust is conditional upon and subject to the following conditions:

2. (a) the Trust having been established and in effect and the funds to be used for payment of the first tranche of the Capital Injection by AVIC Trust having been successfully raised;

3. (b) Hunan Fullsun Group having passed a shareholder’s resolution of the Project Company approving (i) the Capital Injection in accordance with the terms of the Capital Increase Agreement; and (ii) the alteration to the articles of association of the Project Company; and the relevant procedures having been completed with the relevant local bureau of the Administration for Industry and Commerce of the PRC;

4. (c) Hunan Fullsun Group and the Project Company not having breached any of the representations, warranties, commitments or obligations under the Capital Increase Agreement during the period between the date of the Capital Increase Agreement and the payment of the funds for the first tranche of the Capital Injection by AVIC Trust;

5. (d) there being no material adverse change in the business of the Project Company during the period between the date of the Capital Increase Agreement and the payment of the funds for the first tranche of the Capital Injection by AVIC Trust;

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• (e) the monitoring measures to the Project Company as agreed between the Project Company and AVIC Trust having taken effect;

• (f) the asset valuation and financial audit of the Project Company having been completed and acknowledged by AVIC Trust; all corresponding approvals and filing procedures having been completed in accordance with relevant laws; and AVIC Trust having received the relevant documents;

• (g) save for reaching the national statutory retirement age, serious violation of company policy, dereliction of duty and dismissal or termination of labour relations by the Project Company not having taken place and the core management personnel and core technical personnel of the Project Company not having resigned or their service being terminated during the period between the date of the Capital Increase Agreement and the payment of the funds for the first tranche of the Capital Injection by AVIC Trust;

• (h) the Project Company having made sufficient prior disclosure to AVIC Trust regarding its current assets and liabilities, guarantees, litigation and arbitration and/or contingent liabilities during the period between the signing of the Capital Increase Agreement and the establishment of the Trust, with Hunan Fullsun Group guaranteeing the truth, accuracy and completeness of the information so disclosed by the Project Company;

• (i) there being no administrative actions, administrative decisions, third party agreements, litigation or any other administrative or judicial proceedings or threats which prohibit or restrict the Capital Increase Agreement, or may result in substantial damages for the Capital Increase Agreement or materially increase the cost of AVIC Trust’s performance of the Capital Increase Agreement;

• (j) certain commitments, representations and warranties in the Capital Increase Agreement being true, accurate and valid; and

• (k) (if applicable) the transaction contemplated under the Capital Increase Agreement having been approved by the shareholders of the Company as required under the Listing Rules.

• The subsequent tranches of the Capital Injection by AVIC Trust are conditional upon and subject to the following conditions:

• (a) the conditions for the first tranche of the Capital Injection by AVIC Trust having been satisfied and the time limit for the periods set out in paragraphs 1(c), 1(d), 1(e), 1(g) and 1(h) above being extended to ‘‘prior to the payment of the funds for the relevant subsequent tranche of the Capital Injection by AVIC Trust’’;

• (b) the Trust having raised sufficient funds for making the relevant subsequent tranche of the Capital Injection by AVIC Trust; and

• (c) other conditions in respect of the subsequent tranches of the Capital Injection by AVIC Trust as AVIC Trust considers necessary having been satisfied.

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AVIC Trust may waive any or all of the above conditions (other than that under paragraph 1(k) above). None of Hunan Fullsun Group and the Project Company may waive any of the above conditions.

Other terms

Under the terms of the Capital Increase Agreement, among others:

• (i) the board of directors of the Project Company shall have three directors. AVIC Trust shall have the right to nominate one such director who will also act as the legal representative of the Project Company, and Hunan Fullsun Group shall have the right to nominate two such directors and the chairman of the board of directors;

• (ii) save for the Capital Injection, in the event of any intended increase in the registered capital of the Project Company, AVIC Trust shall be entitled, but not obliged, to contribute to such increase in registered capital at the same price, terms and conditions as other potential investors in order to maintain its shareholding level in the Project Company; and

• (iii) in the event of any intended transfer of equity interest in the Project Company by either AVIC Trust or Hunan Fullsun Group to any third party, the other shareholder of the Project Company shall have a right of first refusal over such equity interest under the same terms offered to such third party.

Information relating to the Project Company and the Project

The Project 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, its sole shareholder is Hunan Fullsun Group, it is an indirect wholly-owned subsidiary of the Company and its registered capital is RMB50,000,000.

The principal asset of the Project Company is the Project located at Tian Xin District, Changsha City and adjacent to Guihuaping Station* (桂花平站) of Line 1 of the Changsha Metro. The Project contains products of residential, commercial apartments, retail shops and other facilities. The development site of Phase III of the Project contains planned gross floor area of approximately 159,645 square metres. Certain property units of Phase II of the Project have been delivered to customers in 2018. The Project Company is initiating the development of Phase III of the Project.

As at the date of this announcement, the total assets value of the Project Company as at 30 September 2018 was approximately RMB922,000,000 according to its management accounts.

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The financial information of the Project 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)
Loss	before tax	(123,527)	(26,375)
Loss	after tax	(123,527)	(26,375)

As at 30 September 2018, the net liabilities of the Project Company was approximately RMB92,055,000. It is expected that the net liabilities of the Project Company will turn into net assets upon completion of the Capital Injection.

Information on AVIC Trust

AVIC Trust is a trust company established in the PRC with limited liability and engaged in, among others, investment activities.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, as at the date of this announcement, each of AVIC Trust and its ultimate beneficial owners is a third party independent of the Company and its connected persons.

Reasons for entering into the Capital Increase Agreement

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. Hunan Fullsun Group was established in the PRC and is principally engaged in equity investment.

The Capital Injection by AVIC Trust will have the effect of raising funds for the development of the Project. The terms of the Capital Increase Agreement (including the amount of the Capital Injection) were determined by the Group and AVIC Trust after arm’s length negotiations and the amount of the Capital Injection was determined by reference to, among others, the expected amount required for the subsequent development and construction of Phase III of the Project and the prospect of the Project.

The Directors (including the independent non-executive Directors) are of the view that the Capital Increase Agreement and the transactions contemplated thereunder are on normal commercial terms and fair and reasonable, and are in the interest of the Company and its shareholders as a whole.

LISTING RULES IMPLICATIONS

Upon completion of the Capital Injection, Hunan Fullsun Group’s equity interest in the Project Company will be reduced from 100% to 51%. The Capital Injection therefore constitutes a deemed disposal of the Company under Rule 14.29 of the Listing Rules.

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As one of the applicable percentage ratios in respect of the Capital Injection exceeds 5% but all of such percentage ratios are less than 25%, the Capital Injection constitutes a discloseable transaction for the Company under Chapter 14 of the Listing Rules and is subject to the reporting and announcement requirements under the Listing Rules.

DEFINITIONS

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

• ‘‘AVIC Trust’’ AVIC Trust Co., Ltd.* (中航信託股份有限公司), a company established in the PRC with limited liability

• ‘‘Board’’ the board of Directors ‘‘Capital Increase the agreement dated 8 March 2019 entered into between Agreement’’ AVIC Trust, Hunan Fullsun Group and the Project Company in relation to, among others, the Capital Injection

• ‘‘Capital Injection’’ comprising the increase of the registered capital of the Project Company from RMB50,000,000 to RMB1,020,000,000, with (i) Hunan Fullsun Group contributing an amount of RMB470,000,000 in cash and (ii) AVIC Trust contributing an aggregate amount of up to RMB500,000,000 in cash

• ‘‘Company’’ Fullsun International Holdings Group Co., Limited (福晟國 際控股集團有限公司), a company incorporated in Bermuda with limited liability, the shares of which are listed on the main board of the Stock Exchange

• ‘‘connected person(s)’’ has the meaning ascribed to it under the Listing Rules ‘‘controlling shareholder(s)’’ has the meaning ascribed to it under the Listing Rules ‘‘Directors’’ the directors of the Company ‘‘Group’’ the Company and its subsidiaries ‘‘Hong Kong’’ the Hong Kong Special Administrative Region of the PRC ‘‘Hunan Fullsun Group’’ 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

• ‘‘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

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• ‘‘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 Project Company

• ‘‘Project Company’’

• Hunan Xingru 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

• ‘‘RMB’’ Renminbi, the lawful currency of the PRC

• ‘‘Stock Exchange’’

The Stock Exchange of Hong Kong Limited

• ‘‘Trust’’

• a unit trust to be established by AVIC Trust for the purpose of, among others, implementing the investment in the Project Company through the Capital Injection

• ‘‘%’’

• per cent.

• for identification purpose only

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

Hong Kong, 8 March 2019

As at the date of this announcement, the Board comprises eight executive Directors, namely Mr. Pan Weiming, Mr. Tong Wentao, Mr. Pan Jungang, Ms. Chen Weihong, Ms. Wu Jihong, Mr. Wu Yang, Mr. Li Jinrong and Mr. Tang Kwok Hung and four independent non-executive Directors, namely Dr. Cheung Wai Bun, Charles J.P., Dr. Tse Hiu Tung, Sheldon, Mr. Yang Xiaoping and Mr. Yuen Chee Lap, Carl.

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