THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

Transcription

1 THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your stockbroker or other licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser. If you have sold or transferred all your shares in GR Properties Limited (the Company ), you should at once hand this circular and the accompanying form of proxy to the purchaser or the transferee or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for the transmission to the purchaser or the transferee. Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular. This circular is for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for the securities of the Company. (Incorporated in Hong Kong with limited liability) (Stock Code: 108) CONTINUING CONNECTED TRANSACTIONS (I) THE NEW HEAT SUPPLY SERVICES AGREEMENTS; (II) THE NEW PROPERTY MANAGEMENT AGREEMENTS; AND (III) THE KINGDOM GUORUI SALES OFFICE MANAGEMENT AGREEMENT Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders CAPITAL A letter from the Board is set out from pages 6 to 23 of this circular. A letter from the Independent Board Committee is set out on pages 24 to 25 of this circular. A letter from the Independent Financial Adviser, containing its advice to the Independent Board Committee and the Independent Shareholders, is set out from pages 26 to 45 of this circular. A notice convening a general meeting of the Company to be held at Capital Conference Services Limited at Suite 2418, 24/F, Jardine House, 1 Connaught Place, Central, Hong Kong on Monday, 11 January 2016 at 11:30 a.m. is set out on pages GM-1 to GM-3 of this circular. A form of proxy for use at the general meeting is enclosed with this circular. Whether or not you are able to attend the general meeting, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return the same to the Company s share registrar in Hong Kong, Tricor Standard 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 appointed for holding the general meeting or any adjournment thereof (excluding public holidays in Hong Kong). Completion and return of the form of proxy will not preclude you from attending and voting in person at the general meeting or any adjournment thereof should you so wish and in such event, the form of proxy will be deemed to have been revoked. 23 December 2015

2 CONTENTS Page Definitions Letter from the Board Letter from the Independent Board Committee Letter from the Independent Financial Adviser Appendix General information I-1 Notice of General Meeting GM-1

3 DEFINITIONS In this circular, unless the context otherwise requires, the following expressions shall have the following meanings: Acquisition Announcement the conditional acquisition of the entire equity interest of AOCEAN Business Management by Rui Cheng Investment Company Limited ( 銳 誠 投 資 有 限 公 司 ), a company incorporated in Hong Kong with limited liability and a wholly-owned subsidiary of the Company from AOCEAN Holdings, which was completed on 28 May 2015 the announcement of the Company dated 27 November 2015 in relation to the Continuing Connected Transactions AOCEAN Business Management 北 京 澳 西 商 業 管 理 有 限 公 司 (Beijing AOCEAN Business Management Company Limited*), a company established under the laws of the PRC with limited liability and a wholly-owned subsidiary of the Company, which was a wholly-owned subsidiary of AOCEAN Holdings prior to the Completion AOCEAN Holdings 北 京 澳 西 控 股 有 限 公 司 (Beijing AOCEAN Holdings Company Limited*), a company established under the laws of the PRC with limited liability AOCEAN Property Management 北 京 澳 西 物 業 管 理 有 限 公 司 (Beijing AOCEAN Property Management Company Limited*), a company established under the laws of the PRC with limited liability and a wholly-owned subsidiary of AOCEAN Business Management associate Beijing Guolong Beijing Guolong Heat Supply Services Agreement Beijing Guolong Property Management Agreement has the meaning ascribed thereto under the Listing Rules 北 京 國 隆 置 業 有 限 公 司 (Beijing Guolong Property Company Limited*), a company established under the laws of the PRC with limited liability and a wholly-owned subsidiary of Beijing Guorui Property the agreement dated 27 November 2015 entered into between AOCEAN Property Management and Beijing Guolong under which AOCEAN Property Management shall provide heat supply and maintenance services of heat exchange stations and facilities and pipeline networks to the vacant units of the residential property project of Beijing Guolong the agreement dated 27 November 2015 entered into between AOCEAN Property Management and Beijing Guolong under which AOCEAN Property Management shall provide property management services to the vacant units of the residential property project of Beijing Guolong 1

4 DEFINITIONS Beijing Guorui Group Beijing Guorui Property and its wholly-owned subsidiaries, including, inter alia, Beijing Guolong Beijing Guorui Property 北 京 國 銳 房 地 產 開 發 有 限 公 司 (Beijing Guorui Property Development Company Limited*), a company established under the laws of the PRC with limited liability, of which Mr. Wei is a director and the controlling shareholder holding approximately 89.6% equity interest (the remaining equity interest of approximately 10.4% being held by Mr. Sun) and of which each of Mr. Sun and Ms. Liu is a director Beijing Guorui Property Heat Supply Services Agreement Beijing Guorui Property Management Agreement Board Car Park Management Agreements Company Completion connected person(s) the agreement dated 27 November 2015 entered into between AOCEAN Property Management and Beijing Guorui Property under which AOCEAN Property Management shall provide heat supply and maintenance services of heat exchange stations and facilities and pipeline networks to the vacant units of certain residential and commercial property projects of Beijing Guorui Property the agreement dated 27 November 2015 entered into between AOCEAN Property Management and Beijing Guorui Property under which AOCEAN Property Management shall provide property management services to the vacant units of certain residential and commercial property projects of Beijing Guorui Property the board of Directors agreements entered into between AOCEAN Property Management and members of the Beijing Guorui Group under which AOCEAN Property Management shall provide management services for car parks of certain residential and commercial property projects of the members of Beijing Guorui Group GR Properties Limited, a company incorporated in Hong Kong with limited liability, the issued Shares of which are listed on the Main Board of the Stock Exchange (stock code: 108) the completion of the Acquisition has the meaning ascribed thereto under the Listing Rules Continuing Connected Transactions the continuing connected transactions contemplated under the New Heat Supply Services Agreements, the New Property Management Agreements and the Kingdom Guorui Sales Office Management Agreement 2

5 DEFINITIONS Controlling Shareholder(s) Director(s) General Meeting Group Heat Supply Season Heat Supply Services Agreements Hong Kong Independent Board Committee Independent Financial Adviser or Quam Capital Independent Shareholders has the meaning ascribed thereto under the Listing Rules director(s) of the Company the general meeting to be convened by the Company for the Independent Shareholders to consider and approve, if thought fit, the New Heat Supply Services Agreements, the New Property Management Agreements, the Kingdom Guorui Sales Office Management Agreement, the transactions contemplated thereunder and the annual caps thereof the Company and its subsidiaries the period from 15 November of a calendar year to 15 March of the immediate subsequent calendar year (both days inclusive) agreements entered into between AOCEAN Property Management and Beijing Guorui Property and Beijing Guolong, respectively, under which AOCEAN Property Management shall provide heat supply and maintenance services of heat exchange stations and facilities and pipeline networks to certain residential and commercial property projects of Beijing Guorui Property and Beijing Guolong The Hong Kong Special Administrative Region of the PRC an independent committee of the Board comprising all the independent non-executive Directors, established for the purpose of advising the Independent Shareholders in connection with the transactions contemplated under the New Heat Supply Services Agreements, the New Property Management Agreements, the Kingdom Guorui Sales Office Management Agreement, and the annual caps thereof Quam Capital Limited, a licensed corporation under the SFO to carry out type 6 (advising on corporate finance) regulated activity, being the independent financial adviser to the Independent Board Committee and the Independent Shareholders in relation to the transactions contemplated under the New Heat Supply Services Agreements, the New Property Management Agreements, the Kingdom Guorui Sales Office Management Agreement, and the annual caps thereof Shareholders other than Wintime, Mr. Sun and their respective associates 3

6 DEFINITIONS independent third party(ies) Kingdom Guorui Sales Office Management Agreement Latest Practicable Date Listing Rules Mr. Sun Mr. Wei Ms. Liu New Heat Supply Services Agreements New Property Management Agreements PRC person(s) or company(ies) and their respective ultimate beneficial owner(s), which, to the best of the Directors knowledge, information and belief, having made reasonable enquiries, are independent of the Company or are not its connected persons the agreement dated 27 November 2015 entered into between Beijing Guorui Property and AOCEAN Property Management under which AOCEAN Property Management shall provide property management services, sales related services and ancillary services to the sales office and ancillary areas of the property project, Kingdom Guorui* ( 國 銳 金 嵿 ) developed by Beijing Guorui Property 21 December 2015, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained in this circular the Rules Governing the Listing of Securities on the Stock Exchange Mr. Sun Zhongmin, an executive Director and a Shareholder beneficially interested as to 6% of the equity interest of the Company, who is also a director and a shareholder (holding approximately 10.4% equity interest) of Beijing Guorui Property Mr. Wei Chunxian, the Chairman, executive Director and a Controlling Shareholder beneficially interested as to 62.24% of the equity interest of the Company, who is also a director and the Controlling Shareholder (holding approximately 89.6% equity interest) of Beijing Guorui Property Ms. Liu Shuhua, an executive Director and the Chief Executive Officer of the Company, who is also a director of Beijing Guorui Property The Beijing Guorui Property Heat Supply Services Agreement and the Beijing Guolong Heat Supply Services Agreement The Beijing Guorui Property Management Agreement and the Beijing Guolong Property Management Agreement The People s Republic of China 4

7 DEFINITIONS Property Management Agreements RMB SFO Share(s) Shareholder(s) Stock Exchange Substantial Shareholder(s) Wintime agreements entered into between AOCEAN Property Management and members of Beijing Guorui Group under which AOCEAN Property Management provides property management services to certain residential and commercial property projects of the members of Beijing Guorui Group Renminbi, the lawful currency of the PRC the Securities and Futures Ordinance, Chapter 571 of the Laws of Hong Kong ordinary share(s) in the share capital of the Company the holder(s) of the issued Shares The Stock Exchange of Hong Kong Limited has the meaning ascribed thereto under the Listing Rules Wintime Company Limited, a Controlling Shareholder and a connected person of the Company % per cent * for identification purpose only 5

8 LETTER FROM THE BOARD (Incorporated in Hong Kong with limited liability) (Stock Code: 108) Executive Directors: Mr. Wei Chunxian (Chairman) Ms. Liu Shuhua (Chief Executive Officer) Mr. Sun Zhongmin Independent non-executive Directors: Mr. Tung Woon Cheung Eric Mr. Chui Tsan Kit Mr. Mak Kwong Yiu Registered office and principal place of business in Hong Kong: Suite 1603, 16th Floor Wheelock House 20 Pedder Street Central, Hong Kong 23 December 2015 To the Shareholders Dear Sir or Madam, CONTINUING CONNECTED TRANSACTIONS (I) THE NEW HEAT SUPPLY SERVICES AGREEMENTS; (II) THE NEW PROPERTY MANAGEMENT AGREEMENTS; AND (III) THE KINGDOM GUORUI SALES OFFICE MANAGEMENT AGREEMENT INTRODUCTION Reference is made to the Announcement. Prior to the completion of the Acquisition, AOCEAN Property Management and the members of the Beijing Guorui Group (each being a connected person of the Company by virtue of Mr. Wei being a director and the controlling shareholder of Beijing Guorui Property holding approximately 89.6% equity interest (the remaining equity interest of approximately 10.4% being held by Mr. Sun) and each of Mr. Sun and Ms. Liu being a director of Beijing Guorui Property) had entered into the Car Park Management Agreements, the Heat Supply Services Agreements and the Property Management Agreements. Upon Completion, AOCEAN Business Management (which is the immediate holding company of AOCEAN Property Management) has become a wholly-owned subsidiary of the Company and the transactions under the Car Park Management Agreements, the Heat Supply Services Agreements and the Property Management Agreements having been entered into between AOCEAN Property Management and the members of the Beijing Guorui Group prior to the Completion have become continuing connected transactions of the Company as defined under Chapter 14A of the Listing Rules. 6

9 LETTER FROM THE BOARD Pursuant to Rule 14A.60(1) of the Listing Rules, the Company is required to comply with the applicable reporting and disclosure requirements under Chapter 14A of the Listing Rules regarding the aforesaid continuing connected transactions and shall comply in full with all applicable reporting, disclosure and, if applicable, Independent Shareholders approval requirements under Chapter 14A of the Listing Rules upon any variation or renewal of the aforesaid agreements to the extent applicable. Since the terms of the Heat Supply Services Agreements have ended on 15 September 2015, the Company has entered into the New Heat Supply Services Agreements with each of Beijing Guorui Property and Beijing Guolong on 27 November 2015, respectively. On the same day, the Company has renewed the Property Management Agreements by entering into the New Property Management Agreements with each of Beijing Guorui Property and Beijing Guolong, respectively, and has also entered into the Kingdom Guorui Sales Office Management Agreement with Beijing Guorui Property. The purpose of this circular is to provide you with, among other things, (i) details of the New Heat Supply Services Agreements, the New Property Management Agreements, the Kingdom Guorui Sales Office Management Agreement, and the transactions contemplated thereunder; (ii) the letter from the Independent Board Committee to the Independent Shareholders giving its recommendations in relation to the New Heat Supply Services Agreements, the New Property Management Agreements, the Kingdom Guorui Sales Office Management Agreement, and the annual caps thereof; (iii) the letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders containing its advice and recommendations on the New Heat Supply Services Agreements, the New Property Management Agreements, the Kingdom Guorui Sales Office Management Agreement, and the annual caps there of; and (iv) the notice of the General Meeting. TERMS OF THE NEW HEAT SUPPLY SERVICES AGREEMENTS As at the Latest Practicable Date, AOCEAN Property Management provided heat supply and maintenance services to a total of approximately 8,700 property units of Beijing Guorui Property and Beijing Guolong with a total floor area of approximately 789,000 square metres. The heat supply provided under the Heat Supply Services Agreements is sourced from independent third parties by AOCEAN Property Management and will continue to be sourced from independent third parties by AOCEAN Property Management under the New Heat Supply Services Agreements. The salient terms of the New Heat Supply Services Agreements are summarised as follows: (1) Beijing Guorui Property Heat Supply Services Agreement Date : 27 November 2015 Term : From 16 September 2015 to 15 September 2018 (both days inclusive) Parties : (1) AOCEAN Property Management (2) Beijing Guorui Property 7

10 LETTER FROM THE BOARD Nature of Transactions : AOCEAN Property Management s responsibilities include (i) overlooking the daily operation and provision of repair and maintenance services of the heat exchange station and facilities and the pipeline network located in the property projects developed by Beijing Guorui Property, namely Fortune Street Phase One* ( 財 滿 街 一 期 ), Fortune Street Phase Two* ( 財 滿 街 二 期 ), and Rui City International Building* ( 銳 城 國 際 大 廈 ) in Chaoyang District, Beijing, and Kingdom Guorui* ( 國 銳 金 嵿 ) in Daxing District, Beijing; and (ii) ensuring that the heat supplied complies with governmental guidelines and standards, etc. AOCEAN Property Management charges the individual owners/ tenants of the property units directly for those units which are occupied. Beijing Guorui Property will be responsible for the fees of the vacant units within the aforesaid property projects. Fees : Residential properties: RMB30 per square metre per Heat Supply Season, payable on annual basis Annual Caps Commercial properties: RMB42 per square metre per Heat Supply Season for Fortune Street Phase One* ( 財 滿 街 一 期 ), Fortune Street Phase Two* ( 財 滿 街 二 期 ) and Rui City International Building* ( 銳 城 國 際 大 廈 ), and RMB40 per square metre per Heat Supply Season for Kingdom Guorui* ( 國 銳 金 嵿 ), payable on annual basis The table below summarises the actual transaction amounts, being the fees paid/payable by Beijing Guorui Property to AOCEAN Property Management in respect of the heat supply services provided by AOCEAN Property Management for vacant property units for the three years ended 15 September 2015 and the period from 16 September 2015 to 31 October The period from The period from The period from The period from 16 September 16 September 16 September 16 September 2012 to 2013 to 2014 to 2015 to 15 September 15 September 15 September 31 October (RMB) (RMB) (RMB) (RMB) Actual transaction amounts 276, , ,000 Nil (Note) Note: The fees under the Beijing Guorui Property Heat Supply Services Agreement are charged on annual basis. 8

11 LETTER FROM THE BOARD The Company estimates that the transaction amounts for the continuing connected transactions contemplated under the Beijing Guorui Property Heat Supply Services Agreement for the three years ending 15 September 2018 will not exceed RMB1,466,000, RMB2,291,000 and RMB4,258,000, respectively, and such amounts have accordingly been set as the proposed annual caps for the Beijing Guorui Property Heat Supply Services Agreement for the three years ending 15 September 2018, respectively. The proposed annual caps have been determined by the Company after taking into account of (i) the historical actual transaction amounts, being the fees paid/payable by Beijing Guorui Property to AOCEAN Property Management in respect of the heat supply services provided by AOCEAN Property Management for vacant property units for the three years ended 15 September 2015; (ii) the estimated number of vacant units of the relevant property projects during the three years ending 15 September 2018 having taken into account the estimated completion of the construction of new property units of Kingdom Guorui* ( 國 銳 金 嵿 ) with a total floor area of approximately 286,000 square metres during the corresponding periods based on the current construction plan and information available as at the Latest Practicable Date; and (iii) the fees chargeable per square metre per Heat Supply Season during such period as stipulated under the Beijing Guorui Property Heat Supply Services Agreement. As at the Latest Practicable Date, AOCEAN Property Management provided heat supply and maintenance services to a total of approximately 2,420 property units developed by Beijing Guorui Property. Amongst these property units, approximately 2,350 property units were occupied by individual owners/tenants with a total floor area of approximately 332,530 square metres whereas approximately 65 property units were vacant property units with a total floor area of approximately 7,400 square metres. (2) Beijing Guolong Heat Supply Services Agreement Date : 27 November 2015 Term : From 16 September 2015 to 15 September 2018 (both days inclusive) Parties : (1) AOCEAN Property Management (2) Beijing Guolong Nature of Transactions : AOCEAN Property Management s responsibilities include (i) overlooking the daily operation and provision of repair and maintenance services of the heat exchange station and facilities and the pipeline network located in the property project developed by Beijing Guolong, namely North Garden* ( 北 花 園 ) at Gaobeidian, Chaoyang District, Beijing; and (ii) ensuring that the heat supplied complies with governmental guidelines and standards, etc. AOCEAN Property Management charges the individual owners/ tenants of the property units directly for those units which are occupied. Beijing Guolong will be responsible for the fees of the vacant units within the aforesaid property project. Fees : Residential properties: RMB30 per square metre per Heat Supply Season, payable on annual basis 9

12 LETTER FROM THE BOARD Annual Caps The table below summarises the actual transaction amounts, being the fees paid/payable by Beijing Guolong to AOCEAN Property Management in respect of the heat supply services provided by AOCEAN Property Management for vacant property units for the three years ended 15 September 2015 and the period from 16 September 2015 to 31 October The period from The period from The period from The period from 16 September 16 September 16 September 16 September 2012 to 2013 to 2014 to 2015 to 15 September 15 September 15 September 31 October (RMB) (RMB) (RMB) (RMB) Actual transaction amounts 774,000 1,780,000 2,790,000 Nil (Note) Note: The fees under the Beijing Guolong Heat Supply Services Agreement are charged on annual basis. The Company estimates that the transaction amounts for the continuing connected transactions contemplated under the Beijing Guolong Heat Supply Services Agreement for the three years ending 15 September 2018 will not exceed RMB3,351,000, RMB3,159,000 and RMB3,217,000, respectively, and such amounts have accordingly been set as the proposed annual caps for the Beijing Guolong Heat Supply Services Agreement for the three years ending 15 September 2018, respectively. The proposed annual caps have been determined by the Company after taking into account of (i) the historical actual transaction amounts, being the fees paid/payable by Beijing Guolong to AOCEAN Property Management in respect of the heat supply services provided by AOCEAN Property Management for vacant property units for the three years ended 15 September 2015; (ii) the estimated number of vacant units of the relevant property project during the three years ending 15 September 2018 having taken into account the estimated completion of the construction of new property units of North Garden* ( 北 花 園 ) with a total floor area of approximately 190,000 square metres during the corresponding periods based on the current construction plan and information available as at the Latest Practicable Date; and (iii) the fees chargeable per square metre per Heat Supply Season during such period as stipulated under the Beijing Guolong Heat Supply Services Agreement. As at the Latest Practicable Date, AOCEAN Property Management provided heat supply and maintenance services to a total of approximately 6,280 property units developed by Beijing Guolong. Amongst these property units, approximately 4,700 property units were occupied by individual owners/ tenants with a total floor area of approximately 334,500 square metres whereas approximately 1,580 property units were vacant property units with a total floor area of approximately 115,000 square metres. Pricing and Payment Terms AOCEAN Property Management charges heat supply services fees in accordance with the prevailing heat supply prices as stipulated by the relevant regulatory authorities of the Beijing municipal government. 10

13 LETTER FROM THE BOARD On 24 November 2015, the Beijing Municipal Commission of Development and Reform released the Notice Regarding the Adjustment of the Heat Supply Price for Non-Residential Purpose in the City (Jing Fa Gai [2015] No. 2619) ( 關 於 調 整 本 市 非 居 民 供 熱 價 格 的 通 知 ( 京 發 改 號 ) ), pursuant to which the heat supply price for non-residential purpose in Beijing was adjusted to RMB42 per square metre per Heat Supply Season for Chaoyang District, Haidian District, Dongcheng District, Xicheng District, Fengtai District and Shijingshan District, and RMB40 per square metre per Heat Supply Season for the other districts of Beijing. The fees in respect of commercial property are implemented in accordance with the aforesaid standard non-residential heat supply price. On 17 October 2001, the Beijing Municipal Price Bureau issued the Notice Regarding the Adjustment of Residential-use Heat Supply Price and Ex-Factory Price of Heat from Thermal Power Plants for the City (Jing Jia (Shang) Zi [2001] No. 372) ( 關 於 調 整 我 市 民 用 供 熱 價 格 和 熱 電 廠 熱 力 出 廠 價 格 的 通 知 ( 京 價 ( 商 ) 字 號 ) ), in which it was stipulated that the heat supply price for residential purpose in Beijing shall be adjusted to RMB30 per square metre for every Heat Supply Season. Such heat supply government regulated prices have remained unchanged since its implementation. AOCEAN Property Management strictly complies with the heat supply government regulated prices of the regulatory authorities for the purpose of charging heat supply fees under the New Heat Supply Services Agreements. The Company has taken the following measures for monitoring the pricing and terms of the transactions contemplated under the New Heat Supply Services Agreements and for ensuring that the transactions conducted under such agreements are entered into based on normal commercial terms: (1) prior to entering into the New Heat Supply Services Agreements, the legal department, the financial department and the operation department of AOCEAN Property Management are responsible for the negotiation of the terms of the New Heat Supply Services Agreements with reference to the fees of heat supply services of comparable properties provided by at least two independent-third-party market players and the contract terms thereof to ensure that the fees charged by AOCEAN Property Management and the terms of the agreements are in conformity with normal commercial terms that are no less favourable to the Company than those available to or from independent third parties; (2) upon execution of the New Heat Supply Services Agreement, the legal department of AOCEAN Property Management is responsible for continuously monitoring and checking the government regulated heat supply prices announced on the websites of the relevant regulatory authorities and formal notices issued by the said authorities on quarterly basis, in order to ensure that the price paid by property owners remains consistent with the government regulated prices; and (3) throughout the term of the New Heat Supply Services Agreements, the operation department and the financial department are responsible for monitoring the implementation of the New Heat Supply Services Agreements to ensure that the terms, including the fees charged under the New Heat Supply Services Agreements are strictly adhered to by the parties to the agreements. Any deviation from the contract terms thereof should be reported to the management of the Company for further actions. In addition, the management of the Company will perform spot checks on the implementation of the New Heat Supply Services Agreements to ensure compliance of the contract terms as and when necessary. 11

14 LETTER FROM THE BOARD TERMS OF THE NEW PROPERTY MANAGEMENT AGREEMENTS Each of Beijing Guorui Property and Beijing Guolong has renewed its property management agreement with AOCEAN Property Management for management of the vacant units within its residential and commercial property projects by entering into the relevant property management agreements. (1) Beijing Guorui Property Management Agreement Date : 27 November 2015 Original Term : 1 January 2015 to 31 December 2015 New Term : 1 January 2016 to 31 December 2018 (both days inclusive) Parties : AOCEAN Property Management : Beijing Guorui Property Premises : Fortune Street Phase One* ( 財 滿 街 一 期 ), Fortune Street Phase Two* ( 財 滿 街 二 期 ), Rui City International Building* ( 銳 城 國 際 大 廈 ), and GOLDEN TOWER* ( 金 長 安 大 廈 ) in Chaoyang District, Beijing, and Kingdom Guorui* ( 國 銳 金 嵿 ) in Daxing District, Beijing Nature of Transactions : AOCEAN Property Management is responsible for (i) safekeeping of the keys of the vacant units; (ii) carrying out monthly inspections of the vacant units and keeping records accordingly; (iii) carrying out monthly cleaning of the vacant units; and (iv) inspecting the vacant units during bad weather conditions, etc. Fees : The management fee ranges from RMB2.25 to RMB9.4 per square metre per month for different types of commercial and residential property units, payable on quarterly basis. The management fees are determined by AOCEAN Property Management and Beijing Guorui Property having regard to, inter alia., the historical management fees, the costs of the management services, the area of the properties, the service standard as required, the type and use of the properties (e.g. residential or commercial properties), the age of the properties and the prevailing market prices for the provision of comparable property management services. 12

15 LETTER FROM THE BOARD Annual Caps The table below summarises the actual transaction amounts, being the fees paid/payable by Beijing Guorui Property to AOCEAN Property Management in respect of the property management services for vacant property units provided by AOCEAN Property Management for the two years ended 31 December 2014 and the ten months ended 31 October Ten Year ended Year ended months ended 31 December 31 December 31 October (RMB) (RMB) (RMB) Actual transaction amounts 934, ,000 1,241,000 The Company estimates that the transaction amounts for the continuing connected transactions contemplated under the Beijing Guorui Property Management Agreement for the three years ending 31 December 2018 will not exceed RMB4,481,000, RMB6,858,000 and RMB7,497,000, respectively, and such amounts have accordingly been set as the proposed annual caps for the Beijing Guorui Property Management Agreement for the three years ending 31 December 2018, respectively. The proposed annual caps have been determined by the Company after taking into account of (i) the historical actual transaction amounts, being the fees paid/payable by Beijing Guorui Property to AOCEAN Property Management in respect of the property management services for vacant property units provided by AOCEAN Property Management for the two years ended 31 December 2014 and the ten months ended 31 October 2015; (ii) the estimated number of vacant units of the relevant property projects during the three years ending 31 December 2018 having taken into account the estimated completion of the construction of new property units of Kingdom Guorui* ( 國 銳 金 嵿 ) with a total floor area of approximately 286,000 square metres during the corresponding periods based on the current construction plan and information available as at the Latest Practicable Date; and (iii) the fees chargeable per square metre per month during such period as stipulated under the Beijing Guorui Property Management Agreement. As at the Latest Practicable Date, AOCEAN Property Management provided property management services to a total of approximately 2,420 property units developed by Beijing Guorui Property. Amongst these property units, approximately 2,350 property units were occupied by individual owners/tenants with a total floor area of approximately 332,530 square metres whereas approximately 65 property units were vacant property units with a total floor area of approximately 7,400 square metres. 13

16 LETTER FROM THE BOARD (2) Beijing Guolong Property Management Agreement Date : 27 November 2015 Original Term : 1 January 2015 to 31 December 2015 New Term : 1 January 2016 to 31 December 2018 (both days inclusive) Parties : AOCEAN Property Management : Beijing Guolong Premises : North Garden* ( 北 花 園 ) at Gaobeidian, Chaoyang District, Beijing Nature of Transactions : AOCEAN Property Management is responsible for (i) safekeeping of the keys of the vacant units; (ii) carrying out monthly inspections of the vacant units and keeping records accordingly; (iii) carrying out monthly cleaning of the vacant units; and (iv) inspecting the vacant units during bad weather conditions, etc. Fees : RMB2.25 per square metre per month, payable on quarterly basis. The management fee is determined by AOCEAN Property Management and Beijing Guolong having regard to, inter alia., the historical management fee, the nature of the properties, the costs of the management services, the area of the properties, the service standard as required, the age of the properties and the prevailing market prices for the provision of comparable property management services. Annual Caps The table below summarises the actual transaction amounts, being the fees paid/payable by Beijing Guolong to AOCEAN Property Management in respect of the property management services for vacant property units provided by AOCEAN Property Management for the two years ended 31 December 2014 and the ten months ended 31 October Ten Year ended Year ended months ended 31 December 31 December 31 October (RMB) (RMB) (RMB) Actual transaction amounts 2,169,000 4,645,000 1,863,000 14

17 LETTER FROM THE BOARD The Company estimates that the transaction amounts for the continuing connected transactions contemplated under the Beijing Guolong Property Management Agreement for the three years ending 31 December 2018 will not exceed RMB3,003,000, RMB2,642,000 and RMB2,907,000, respectively, and such amounts have accordingly been set as the proposed annual caps for the Beijing Guolong Property Management Agreement for the three years ending 31 December 2018, respectively. The proposed annual caps have been determined by the Company after taking into account of (i) the historical actual transaction amounts, being the fees paid/payable by Beijing Guolong to AOCEAN Property Management in respect of the property management services for vacant property units provided by AOCEAN Property Management for the two years ended 31 December 2014 and the ten months ended 31 October 2015; (ii) the estimated number of vacant units of the relevant property projects during the three years ending 31 December 2018 having taken into account the estimated completion of the construction of new property units of North Garden* ( 北 花 園 ) with total floor area of approximately 190,000 square metres during the corresponding periods based on the current construction plan and information available as at the Latest Practicable Date; and (iii) the fees chargeable per square metre per month during such period as stipulated under the Beijing Guolong Property Management Agreement. As at the Latest Practicable Date, AOCEAN Property Management provided property management services to a total of approximately 6,280 property units developed by Beijing Guolong. Amongst these property units, approximately 4,700 property units were occupied by individual owners/tenants with a total floor area of approximately 334,500 square metres whereas approximately 1,580 property units were vacant property units with a total floor area of approximately 115,000 square metres. Pricing and Payment Terms AOCEAN Property Management charges property management fees in accordance with the applicable laws and regulations of the relevant government authorities, the details of which are set out below. As stipulated in Article 5 of the Measures on the Administration of Property Service Charges in Beijing ( 北 京 市 物 業 服 務 收 費 管 理 辦 法 ) (the Measures ) issued by Beijing Municipal Commission of Development and Reform in 2005, either the market-adjusted price or government regulated price shall apply to property service charges in Beijing. In respect of those property service charges to which the market-adjusted price applies, the charge rates shall be stipulated in a property service contract to be entered into by the landlord and the property management enterprise. In respect of those property service charges to which the government regulated prices apply, the basic charge rates and range of adjustments shall be formulated by the competent municipal price authorities together with the competent property administrative authorities. 15

18 LETTER FROM THE BOARD Pursuant to Article 6 of the Measures, the types of property adopting the government regulated price shall include economically affordable housing communities, and communities in which unsafe buildings are rebuilt into replacement housing. The property units under the management of AOCEAN Property Management fall into the category of either general residential property or commercial property, for which the market-adjusted price shall be implemented instead of the government regulated price. In other words, AOCEAN Property Management is entitled to independently negotiate and fix the charge rates with the landlord in accordance with the prevailing market price levels and charging practices in the industry. AOCEAN Property Management strictly complies with the Measures in respect of the charges and fees under the New Property Management Agreements. In accordance with the Measures, AOCEAN Property Management collects property management fees based on the market-adjusted price approach under the New Property Management Agreements. The charge rates and fee calculation methods have been specifically stipulated in the said agreements. The management fees under the New Property Management Agreements are determined by AOCEAN Property Management and members of the Beijing Guorui Group based on arm s length negotiations having regard to, inter alia., the historical management fees under the Property Management Agreements which are of high reference value, the costs of management services as required under the individual property management agreement, the area of the properties served, the service standard as required, the type and use of the properties involved (e.g. residential or commercial properties), the age of the properties involved and the prevailing market prices for the provision of comparable property management services. When determining the fees under the New Property Management Agreements, the management of the Company are required to comply with the Company s internal control measures in relation to connected transactions to ensure that the fees charged by AOCEAN Property Management and the terms of the New Property Management Agreements are fair and reasonable and in the interest of the Company. The Company has taken the following measures for monitoring the pricing and terms of the transactions contemplated under the New Property Management Agreements and for ensuring that the transactions conducted under such agreements are entered into based on normal commercial terms: (1) prior to entering into the New Property Management Agreements, the legal department, the financial department and the operation department of AOCEAN Property Management are responsible for the negotiation of the terms of the New Property Management Agreements with reference to property management fees of comparable properties managed by at least two independent-third-party market players and the contract terms thereof to ensure that the management fees charged by AOCEAN Property Management and the terms of the agreements are in conformity with normal commercial terms that are no less favourable to the Company than those available to or from independent third parties; (2) upon execution of the New Property Management Agreements, the legal department of AOCEAN Property Management is responsible for continuously monitoring and checking on a monthly basis as to whether the relevant laws and regulations on property management prices have been amended, in order to ensure that the price paid by property owners remains consistent with the requirements pursuant to the relevant laws and regulations; and 16

19 LETTER FROM THE BOARD (3) throughout the term of the New Property Management Agreements, the operation department and the financial department are responsible for monitoring the implementation of the New Property Management Agreements to ensure that the terms, including the fees charged under the New Property Management Agreements are strictly adhered to by the parties to the agreements. Any deviation from the contract terms thereof should be reported to the management of the Company for further actions. In addition, the management of the Company will perform spot checks on the implementation of the New Property Management Agreements to ensure compliance of the contract terms as and when necessary. TERMS OF THE KINGDOM GUORUI SALES OFFICE MANAGEMENT AGREEMENT Date : 27 November 2015 Term : 8 October 2015 to 7 October 2018 Parties : AOCEAN Property Management : Beijing Guorui Property Premises : Kingdom Guorui* ( 國 銳 金 嵿 ) sales office and ancillary areas at Beijing Economic and Technological Development Area, Daxing District, Beijing Nature of Transactions : AOCEAN Property Management is responsible for (i) welcoming and arranging customers to visit the show flats; (ii) coordinating services related to sales activities; (iii) the security, hygiene and concierge services of the property; (iv) the daily operation, management and maintenance of the common parts including the restaurants, bars and other amenities facilities and common facilities; (v) maintenance of the hygiene and security of the common parts of the property; (vi) refuse collection and disposal; (vii) maintenance and management of the greenery of the property, and so on. Fees : Beijing Guorui Property shall bear the following expenses, disbursements, costs and fees, which are paid by AOCEAN Property Management in advance and settled between the parties quarterly: the expenses incurred in the course of providing services to the property, including all supplies, materials and labour costs; disbursements including the costs incurred for external wall cleaning, floor brightening, maintenance of the exterior greenery as well as power charges and replacement costs of facilities; 17

20 LETTER FROM THE BOARD the costs of acquiring the fixed assets, equipment and facilities necessary for the additional services if Beijing Guorui Property requests AOCEAN Property Management to provide additional services or theme activities related to sales; and the relevant taxation (being business tax of 5.6% of the total annual revenue generated under the agreement payable by AOCEAN Property Management) and profit margin of 10% over the actual costs and expenses incurred in the course of managing the property. Annual Caps Kingdom Guorui* ( 國 銳 金 嵿 ) is a large-scale property development project with leading sales prices oriented towards high-end purchasers located in the Economic and Technological Development Area, Daxing District, Beijing, which is a prime area of Beijing, the PRC. In line with the sales strategies for large-scale and high-end property projects in Beijing, potential purchasers or visitors to Kingdom Guorui* ( 國 銳 金 嵿 ) are expected to experience high-quality and pleasant services provided by AOCEAN Property Management both within the sales office and its ancillary areas, which include showrooms, restaurants and bars and various amenities facilities, etc. To maintain the required level of quality of services, a sufficient array of servicing staff members, including approximately 50 for cleanliness, 30 for security, and 50 for customer services is required. In light of the aforesaid, the annual expenditure in respect of the management of the Kingdom Guorui sales office and its ancillary areas is constituted by two main components, namely staff costs at approximately RMB6,708,000, and expenditure for other service items and actual expenditures at approximately RMB4,244,000 per year. The proposed annual caps are determined by the Company after taking into account of (i) the scale of the Kingdom Guorui sales office and its ancillary areas, (ii) the estimated actual costs and expenses to be incurred by AOCEAN Property Management in managing and operating the Kingdom Guorui sales office and its ancillary areas; and (iii) the relevant taxation (being business tax of 5.6% of the total annual revenue generated under the agreement payable by AOCEAN Property Management) and the 10% profit margin entitled by AOCEAN Property Management as stipulated under the Kingdom Guorui Sales Office Management Agreement. Based on the abovementioned, the Company estimates that the transaction amounts for the continuing connected transactions contemplated under the Kingdom Guorui Sales Office Management Agreement for the three years ending 7 October 2018 will not exceed RMB12,048,000, RMB13,253,000 and RMB14,578,000, respectively, and such amounts have accordingly been set as the proposed annual caps for the Kingdom Guorui Sales Office Management Agreement for the three years ending 7 October 2018, respectively. Pricing and Payment Terms As stated above, AOCEAN Property Management charges property management fees in accordance with the applicable laws and regulations of the relevant government authorities. 18

21 LETTER FROM THE BOARD As stipulated in Article 5 of the Measures, either the market-adjusted price or government regulated price shall apply to the property service charges in Beijing. In respect of those property service charges to which the market-adjusted price applies, the charge rates shall be stipulated in a property service contract to be entered into by the landlord and the property management enterprise. In respect of those property service charges to which the government regulated prices apply, the basic charge rates and range of adjustments shall be formulated by the competent municipal price authorities together with the competent property administrative authorities. Pursuant to Article 6 of the Measures, the sales office and its ancillary areas of Kingdom Guorui ( 國 銳 金 嵿 ) under the management of AOCEAN Property Management fall into the category of commercial property, for which the market-adjusted price shall be implemented instead of the government regulated price. In other words, AOCEAN Property Management is entitled to independently negotiate and fix the charge rates with the landlord in accordance with the prevailing market price levels and charging practices in the industry. AOCEAN Property Management strictly complies with the Measures in respect of the charges and fees under the Kingdom Guorui Sales Office Management Agreement. In accordance with the Measures, AOCEAN Property Management collects property management fees based on the market-adjusted price approach under the Kingdom Guorui Sales Office Management Agreement. The charge rates and fee calculation methods have been specifically stipulated in the said agreement. The management fees under the Kingdom Guorui Sales Office Management Agreement are charged on a cost plus basis with a 10% profit margin entitled by AOCEAN Property Management. The management fees and the profit margin are determined by AOCEAN Property Management and Beijing Guorui Property based on arm s length negotiations having regard to, inter alia., the historical management fees which are of high reference value, the scale of Kingdom Guorui sales office and its ancillary areas, the estimated actual costs and expenses to be incurred in managing and operating the Kingdom Guorui sales office and its ancillary areas as more particularly delineated under the paragraph headed Terms of the Kingdom Guorui Sales Office Management Agreement Annual Caps above, the relevant taxation (being business tax of 5.6% of the total annual revenue generated under the agreement payable by AOCEAN Property Management) and the 10% profit margin entitled by AOCEAN Property Management. When determining the fees under the Kingdom Guorui Sales Office Management Agreement, the management of the Company are required to comply with the Company s internal control measures in relation to connected transactions to ensure that the fees charged by AOCEAN Property Management and the terms of the Kingdom Guorui Sales Office Management Agreement are fair and reasonable and in the interest of the Company. 19

22 LETTER FROM THE BOARD The Company has taken the following measures for monitoring the pricing and terms of the transactions contemplated under the Kingdom Guorui Sales Office Management Agreement and for ensuring that the transactions conducted under such agreement are entered into based on normal commercial terms: (1) prior to entering into the Kingdom Guorui Sales Office Management Agreement, the legal department, the financial department and the operation department of AOCEAN Property Management are responsible for the negotiation of the terms of the Kingdom Guorui Sales Office Management Agreement with reference to property management fees of comparable properties managed by at least two independent-third-party market players and the contract terms thereof to ensure that the management fees charged by AOCEAN Property Management and the terms of the agreements are in conformity with normal commercial terms that are no less favourable to the Company than those available to or from independent third parties; (2) upon execution of the Kingdom Guorui Sales Office Management Agreement, the legal department of AOCEAN Property Management is responsible for continuously monitoring and checking on a monthly basis as to whether the relevant laws and regulations on property management prices have been amended, in order to ensure that the price paid by the property owner remains consistent with the requirements pursuant to the relevant laws and regulations; and (3) throughout the term of the Kingdom Guorui Sales Office Management Agreement, the operation department and the financial department are responsible for monitoring the implementation of the Kingdom Guorui Sales Office Management Agreement to ensure that the terms, including the fees charged under the Kingdom Guorui Sales Office Management Agreement are strictly adhered to by the parties to the agreements. Any deviation from the contract terms thereof should be reported to the management of the Company for further actions. In addition, the management of the Company will perform spot checks on the implementation of the Kingdom Guorui Sales Office Management Agreement to ensure compliance of the contract terms as and when necessary. REASONS FOR ENTERING INTO THE NEW HEAT SUPPLY SERVICES AGREEMENTS, THE NEW PROPERTY MANAGEMENT AGREEMENTS AND THE KINGDOM GUORUI SALES OFFICE MANAGEMENT AGREEMENT Following Completion, the Company has expanded into the property management industry in the PRC leveraging on AOCEAN Business Management s and AOCEAN Property Management s experience and operations in the property management industry. As at the Latest Practicable Date, the Group is principally engaged in property management, hotel management, property investment and property development. The property management, hotel management and property investment segments are located in the PRC, the property development segment is located in the United States of America. Beijing Guorui Group is principally engaged in the development of residential, commercial/ residential and commercial complex property projects in Beijing. 20

23 LETTER FROM THE BOARD AOCEAN Business Management and AOCEAN Property Management have been providing property management services to some of the residential and residential/commercial property projects developed by the Beijing Guorui Group since Throughout the years, AOCEAN Business Management and AOCEAN Property Management have been selected, through tender process, by the Beijing Guorui Group for the management of a number of property projects developed by the Beijing Guorui Group and a strong business relationship has been established between the two. As at the Latest Practicable Date, the Company managed seven major property projects through AOCEAN Property Management, all of which were property projects developed by the Beijing Guorui Group. In light of the well-established business relationship between AOCEAN Business Management and AOCEAN Property Management and the Beijing Guorui Group, the Directors (including the independent non-executive Directors) consider it beneficial to the Group to continue to conduct the continuing connected transactions contemplated under the New Heat Supply Services Agreements for each of the three years ending 15 September 2018, the New Property Management Agreements for each of the three years ending 31 December 2018, as well as the Kingdom Guorui Sales Office Management Agreement for each of the three years ending 7 October 2018 given that they are in line with the Group s strategies to expand into the property management industry in the PRC, and are able to continue to generate stable revenue and income to the Group. LISTING RULES IMPLICATIONS Upon Completion, AOCEAN Business Management (which is the immediate holding company of AOCEAN Property Management) has become a wholly-owned subsidiary of the Company. As at the Latest Practicable Date, Wintime is the Controlling Shareholder of the Company holding 492,814,591 Shares, representing 62.24% of the issued share capital of the Company, and is therefore a connected person of the Company under Chapter 14A of the Listing Rules. Wintime is a wholly-owned subsidiary of Winluck Global Limited, the entire issued share capital of which is beneficially owned by Mr. Wei. Therefore, Mr. Wei is deemed to be interested in the 492,814,591 Shares held by Wintime, representing 62.24% of the issued share capital of the Company as at the Latest Practicable Date. As at the Latest Practicable Date, Mr. Wei is a director and the controlling shareholder of Beijing Guorui Property holding approximately 89.6% equity interest (the remaining equity interest of approximately 10.4% being held by Mr. Sun) and each of Mr. Sun and Ms. Liu is a director of Beijing Guorui Property. As such, each of the members of the Beijing Guorui Group, including Beijing Guorui Property and Beijing Guolong is a connected person of the Company. The transactions contemplated under the New Heat Supply Services Agreements, the New Property Management Agreements and the Kingdom Guorui Sales Office Management Agreement would therefore constitute continuing connected transactions for the Company under Chapter 14A of the Listing Rules. 21

24 LETTER FROM THE BOARD As one or more of the applicable percentage ratios calculated pursuant to Rule of the Listing Rules for the annual caps for each of the New Heat Supply Services Agreements, the New Property Management Agreements and the Kingdom Guorui Sales Office Management Agreement, respectively, exceed 25%, the transactions contemplated thereunder constitute non-exempt continuing connected transactions for the Company under Chapter 14A of the Listing Rules and are subject to the reporting, annual review, announcement and Independent Shareholders approval requirements. The Company will seek the Independent Shareholders approval of the transactions contemplated under the New Heat Supply Services Agreements, the New Property Management Agreements and the Kingdom Guorui Sales Office Management Agreement, and the annual caps thereof at the General Meeting by way of poll whereby Wintime, Mr. Sun and their respective associates shall abstain from voting. As Mr. Wei, Mr. Sun and Ms. Liu are deemed to have material interest in the Continuing Connected Transactions, they have also abstained from voting in the meeting of the Board approving the Continuing Connected Transactions. GENERAL MEETING A notice convening the General Meeting to be held at Capital Conference Services Limited at Suite 2418, 24/F, Jardine House, 1 Connaught Place, Central, Hong Kong on Monday, 11 January 2016 at 11:30 a.m. is set out on pages GM-1 to GM-3 of this circular. A form of proxy for use at the General Meeting is enclosed with this circular. The form of proxy is also published on the designated website of the Stock Exchange ( and on the website of the Company ( Whether or not you are able to attend the General Meeting, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return the same at the share registrar of the Company, Tricor Standard 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 appointed for the holding of the General Meeting or any adjournment thereof (excluding public holidays in Hong Kong). Completion and return of the form of proxy will not preclude you from attending and voting in person at the General Meeting or any adjournment thereof should you so wish. RECOMMENDATION The Directors consider that the terms of the New Heat Supply Services Agreements, the New Property Management Agreements and the Kingdom Guorui Sales Office Management Agreement (including the annual caps thereof) have been agreed based on arm s length negotiations between AOCEAN Property Management and the Beijing Guorui Group and are entered into in the ordinary and usual course of business of the Group, on normal commercial terms or better, fair and reasonable and in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend the Independent Shareholders to vote in favour of the ordinary resolutions to be proposed at the General Meeting to approve the New Heat Supply Services Agreements, the New Property Management Agreements, the Kingdom Guorui Sales Office Management Agreement, the transactions contemplated thereunder and the annual caps thereof. 22

25 LETTER FROM THE BOARD The Independent Board Committee has been established to advise the Independent Shareholders on the terms of the New Heat Supply Services Agreements, the New Property Management Agreements, the Kingdom Guorui Sales Office Management Agreement, the transactions contemplated thereunder and the annual caps thereof. Quam Capital has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this regard. The respective letters from the Independent Board Committee and the Independent Financial Adviser are set out from pages 24 to 25 and from pages 26 to 45 of this circular, respectively. You are advised to read the letters carefully before making your voting decision. ADDITIONAL INFORMATION Your attention is also drawn to the additional information on the Group set out in the appendix to this circular. The English text of this circular shall prevail over the Chinese text in the event of inconsistency. By order of the Board GR Properties Limited Wei Chunxian Chairman * For identification purpose only 23

26 LETTER FROM THE INDEPENDENT BOARD COMMITTEE (Incorporated in Hong Kong with limited liability) (Stock Code: 108) 23 December 2015 To the Independent Shareholders Dear Sir or Madam, CONTINUING CONNECTED TRANSACTIONS (I) THE NEW HEAT SUPPLY SERVICES AGREEMENTS; (II) THE NEW PROPERTY MANAGEMENT AGREEMENTS; AND (III) THE KINGDOM GUORUI SALES OFFICE MANAGEMENT AGREEMENT We refer to the circular of the Company dated 23 December 2015 (the Circular ), of which this letter forms part. Terms defined in the Circular shall have the same meanings when used herein unless the context otherwise requires. We have been appointed as members of the Independent Board Committee to advise the Independent Shareholders on the terms of the New Heat Supply Services Agreements, the New Property Management Agreements, the Kingdom Guorui Sales Office Management Agreement, the transactions contemplated thereunder and the annual caps thereof. Quam Capital has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this regard. Having taken into account (i) the terms and conditions of the agreements of the Continuing Connected Transactions, (ii) the discussion with the management of the Company about the background to and nature of the Continuing Connected Transactions, (iii) the basis upon which the annual caps in respect of the Continuing Connected Transactions have been determined, and (iv) the advice and recommendations of Quam Capital as set out from pages 26 to 45 of the Circular, we are of the opinion that (i) the terms of the New Heat Supply Services Agreements, the New Property Management Agreements, the Kingdom Guorui Sales Office Management Agreement and the transactions contemplated thereunder have been agreed based on arm s length negotiations, (ii) are entered into in the ordinary and usual course of business of the Group on normal commercial terms or better, (iii) are fair and reasonable and are in the interests of the Company and the Shareholders as a whole, and (iv) that the proposed annual caps for the Continuing Connected Transactions are fair and reasonable and in the interests of the Company and its Shareholders as a whole. 24

27 LETTER FROM THE INDEPENDENT BOARD COMMITTEE Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolutions to be proposed at the General Meeting to approve the New Heat Supply Services Agreements, the New Property Management Agreements, the Kingdom Guorui Sales Office Management Agreement, the transactions contemplated thereunder and the annual caps thereof. Yours faithfully, For and on behalf of the Independent Board Committee Mr. Tung Woon Cheung Eric Mr. Chui Tsan Kit Mr. Mak Kwong Yiu Independent non-executive Directors 25

28 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER The following is the full text of the letter of advice from Quam Capital, the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders, in respect of the New Heat Supply Services Agreements, the New Property Management Agreements and the Kingdom Guorui Sales Office Management Agreement which have been prepared for the purpose of inclusion in this circular. CAPITAL 23 December 2015 To the Independent Board Committee and the Independent Shareholders GR Properties Limited Suite 1603, 16/F. Wheelock House 20 Pedder Street Central, Hong Kong Dear Sirs or Madams, CONTINUING CONNECTED TRANSACTIONS (I) THE NEW HEAT SUPPLY SERVICES AGREEMENTS; (II) THE NEW PROPERTY MANAGEMENT AGREEMENTS; AND (III) THE KINGDOM GUORUI SALES OFFICE MANAGEMENT AGREEMENT INTRODUCTION We refer to our appointment as the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the New Heat Supply Services Agreements, the New Property Management Agreements and the Kingdom Guorui Sales Office Management Agreement, details of which are set out in the Letter from the Board (the Letter from the Board ) contained in the circular dated 23 December 2015 issued by the Company to the Shareholders (the Circular ), of which this letter forms part. Terms used in this letter shall have the same meanings as defined in the Circular unless the context otherwise requires. Since the terms of the Heat Supply Services Agreements have ended on 15 September 2015, the Company has entered into the New Heat Supply Services Agreements with each of Beijing Guorui Property and Beijing Guolong on 27 November 2015, respectively. On the same day, the Company has renewed the Property Management Agreements by entering into the New Property Management Agreements with each of Beijing Guorui Property and Beijing Guolong, respectively, and has also entered into the Kingdom Guorui Sales Office Management Agreement with Beijing Guorui Property. 26

29 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER As at the Latest Practicable Date, Mr. Wei is the Controlling Shareholder of the Company and is therefore a connected person of the Company. Mr. Wei is a director and the controlling shareholder of Beijing Guorui Property holding approximately 89.6% equity interest (the remaining equity interest of approximately 10.4% being held by Mr. Sun) and each of Mr. Sun and Ms. Liu is a director of Beijing Guorui Property. As such, each of the members of the Beijing Guorui Group, including Beijing Guorui Property and Beijing Guolong is a connected person of the Company. The transactions contemplated under the New Heat Supply Services Agreements, the New Property Management Agreements and the Kingdom Guorui Sales Office Management Agreement would therefore constitute continuing connected transaction for the Company under Chapter 14A of the Listing Rules. As one or more of the applicable percentage ratios calculated pursuant to Rule of the Listing Rules for the annual caps for each of the New Heat Supply Services Agreements, the New Property Management Agreements and the Kingdom Guorui Sales Office Management Agreement, respectively, exceed 25%, the transactions contemplated thereunder constitute non-exempt continuing connected transactions for the Company under Chapter 14A of the Listing Rules and are subject to the reporting, annual review, announcement and Independent Shareholders approval requirements. The Company will seek the Independent Shareholders approval of the transactions contemplated under the New Heat Supply Services Agreements, the New Property Management Agreements and the Kingdom Guorui Sales Office Management Agreement, and the annual caps thereof at the General Meeting by way of poll whereby Wintime, Mr. Sun and their respective associates shall abstain from voting. The Independent Board Committee, comprising all the independent non-executive Directors, namely Mr. Tung Woon Cheung Eric, Mr. Chui Tsan Kit and Mr. Mak Kwong Yiu, has been established to advise the Independent Shareholders as to whether the terms of the New Heat Supply Services Agreements, the New Property Management Agreements and the Kingdom Guorui Sales Office Management Agreement are fair and reasonable so far as the Company and Independent Shareholders are concerned and whether the terms of the New Heat Supply Services Agreements, the New Property Management Agreements and the Kingdom Guorui Sales Office Management Agreement are in the interests of the Company and the Shareholders as a whole, and to advise the Independent Shareholders as to whether to vote in favour of the relevant resolutions to be proposed at the General Meeting to approve the New Heat Supply Services Agreements, the New Property Management Agreements and the Kingdom Guorui Sales Office Management Agreement. As the independent financial adviser, our role is to give an independent opinion to the Independent Board Committee and the Independent Shareholders in such regard. As at the Latest Practicable Date, Quam Capital did not have any relationships or interests with the Company or the Beijing Guorui Group that could reasonably be regarded as relevant to the independence of Quam Capital. In the last two years, there was no engagement between the Group and Quam Capital. Apart from normal professional fees paid or payable to us in connection with this appointment as the Independent Financial Adviser, no arrangements exist whereby we have received or will receive any fees or benefits from the Company or the Beijing Guorui Group. Accordingly, we are qualified to give independent advice in respect of the New Heat Supply Services Agreements, the New Property Management Agreements and the Kingdom Guorui Sales Office Management Agreement. 27

30 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER BASIS OF OUR OPINION In formulating our opinion and advice, we have relied on (i) the information and facts contained or referred to in the Circular; (ii) the information supplied by the Group; (iii) the opinions expressed by and the representations of the Directors and the management of the Group; and (iv) our review of the relevant public information. We have assumed that all the information provided and representations and opinions expressed to us or contained or referred to in the Circular were true, accurate and complete in all respects as at the date thereof and may be relied upon. We have also assumed that all statements contained and representations made or referred to in the Circular are true at the time they were made and continue to be true as at the date of the Circular and all such statements of belief, opinions and intention of the Directors and the management of the Group and those as set out or referred to in the Circular were reasonably made after due and careful enquiry. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the Directors and/or the management of the Group. We have also sought and received confirmation from the Directors that no material facts have been withheld or omitted from the information provided and referred to in the Circular and that all information or representations provided to us by the Directors and the management of the Group are true, accurate, complete and not misleading in all respects at the time they were made and continued to be so until the date of the General Meeting. We consider that we have reviewed the relevant information currently available to reach an informed view and to justify our reliance on the accuracy of the information contained in the Circular so as to provide a reasonable basis for our recommendation. We have not, however, carried out any independent verification of the information provided, representations made or opinion expressed by the Directors and the management of the Group, nor have we conducted any form of in-depth investigation into the business, affairs, operations, financial position or future prospects of the Company, Beijing Guorui Property, Beijing Guolong or any of their respective subsidiaries or associates. PRINCIPAL FACTORS AND REASONS CONSIDERED In arriving at our recommendation, we have considered the following principal factors and reasons: Information of the Group The Group is principally engaged in property management, hotel management, property investment and property development. The property management, hotel management and property investment segments are located in the PRC, the property development segment is located in the United States of America. The following table summarises the audited financial information of the Group for the eleven months ended 31 December 2014 and the financial year ended 31 January 2014, and the unaudited financial information of the Group for the six months ended 30 June 2015, as extracted from the annual report ( 2014 Annual Report ) of the Company for the eleven months ended 31 December 2014 and the interim report ( 2015 Interim Report ) of the Company for the six months ended 30 June 2015, respectively. 28

31 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER For the For the eleven For the six year ended months ended months ended 31 January December June 2015 HK$ 000 HK$ 000 HK$ 000 (audited) (audited) (unaudited) Revenue from continuing operations 5,892 5,937 11,874 Property investment 5,892 5,937 3,406 Property management N/A (Note) N/A (Note) 8,468 (Loss) for the period/year from continuing operations (34,306) (13,454) (13,452) Note: The Group was not engaged in the property management segment during these year/period. As illustrated in the table above, the Group recorded stable revenue for the financial year ended 31 January 2014 and the eleven months ended 31 December 2014 whilst the loss for the period narrowed significantly from approximately HK$34.3 million to approximately HK$13.5 million. According to the 2014 Annual Report, the Group generated its revenue mainly by leasing out properties held in Fuzhou City, the PRC to independent tenants through two wholly-owned subsidiaries of the Company, which generated stable income to the Group throughout the period. The substantial decrease in loss was mainly attributed to the recognition of imputed interest expense on convertible bonds during the year ended 31 January 2014 whilst the convertible bonds were fully redeemed in February 2014 and hence the imputed interest expense recognised was greatly reduced during the eleven months ended 31 December According to the 2015 Interim Report, in view of the continuous urbanisation development in the PRC and the potential for development in the business of professional and specialised property management, the Group entered into a purchase agreement with AOCEAN Holdings in relation to the acquisition of the entire equity interest in AOCEAN Business Management on 8 January The acquisition was completed on 27 May Upon Completion, the Group has successfully expanded into the property management business in the PRC. In this regard, the Group began to recognise revenue from the segment of property management during the six months ended 30 June 2015, which constituted approximately 71.3% of the Group s revenue for the period. Nonetheless, no revenue has been generated from the segments of hotel management and property development, and the Group continued to record a loss for the period principally due to the fair value loss on investment properties of approximately HK$16.2 million. Information on Beijing Guorui Group Beijing Guorui Group is principally engaged in the development of residential, commercial/ residential and commercial complex property projects in Beijing. AOCEAN Business Management and AOCEAN Property Management have been providing property management services to some of the residential and residential/commercial property projects developed by the Beijing Guorui Group since

32 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER Reasons for the entering into of the New Heat Supply Services Agreements, the New Property Management Agreements and the Kingdom Guorui Sales Office Management Agreement According to the Letter from the Board, following Completion, the Company has expanded into the property management industry in the PRC leveraging on AOCEAN Business Management s and AOCEAN Property Management s experience and operations in the property management industry. Throughout the years, AOCEAN Business Management and AOCEAN Property Management have been selected, through tender process, by the Beijing Guorui Group for the management of a number of property projects developed by the Beijing Guorui Group and a strong business relationship has been established between the two. As at the Latest Practicable Date, the Company managed seven major property projects through AOCEAN Property Management, all of which were property projects developed by the Beijing Guorui Group. In light of the well-established business relationship between AOCEAN Business Management and AOCEAN Property Management and the Beijing Guorui Group, the Directors consider it beneficial to the Group to continue to conduct the continuing connected transactions contemplated under the New Heat Supply Services Agreements for each of the three years ending 15 September 2018, the New Property Management Agreements for each of the three years ending 31 December 2018, as well as the Kingdom Guorui Sales Office Management Agreement for each of the three years ending 7 October 2018 given that they are in line with the Group s strategies to expand into the property management industry in the PRC, and are able to continue to generate stable revenue and income to the Group. As mentioned in the paragraph headed Information of the Group above and according to the 2015 Interim Report, notwithstanding that the Acquisition was completed on 27 May 2015, the Group recorded approximately 71.3% of its revenue from the segment of property management and approximately 28.7% of its revenue from the segment of property investment during the six months ended 30 June Apart from the segment of property management, the Group also carried on business in the segments of hotel management and property development. Nonetheless, no revenue had been recorded from the aforementioned segments. In this regard, we concur with the Directors that the entering into of the New Heat Supply Services Agreements, the New Property Management Agreements and the Kingdom Guorui Sales Office Management Agreement for the provision of property management services to property projects developed by the Beijing Guorui Group, which generated a stable stream of income and contributed a majority of the Group s revenue for the six months ended 30 June 2015, are in the interest of the interest of the Shareholders and the Group as a whole. (I) THE NEW HEAT SUPPLY SERVICES AGREEMENTS As at the Latest Practicable Date, AOCEAN Property Management provided heat supply and maintenance services to a total of approximately 8,700 property units of Beijing Guorui Property and Beijing Guolong with a total floor area of approximately 789,000 square metres. The heat supply provided under the Heat Supply Services Agreements is sourced from independent third parties by AOCEAN Property Management and will continue to be sourced from independent third parties by AOCEAN Property Management under the New Heat Supply Services Agreements. 30

33 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER As confirmed by the Directors, the terms under the New Heat Supply Services Agreements have been agreed based on arm s length negotiations between AOCEAN Property Management and Beijing Guorui Group, and have been entered into by AOCEAN Property Management in its ordinary and usual course of business and either (i) on normal commercial terms or better, or (ii) on terms no less favourable to AOCEAN Property Management than those available to or from independent third parties. The salient terms of the New Heat Supply Services Agreements are summarised as follows: Beijing Guorui Property Heat Supply Services Agreement Date : 27 November 2015 Term : From 16 September 2015 to 15 September 2018 (both days inclusive) Parties : AOCEAN Property Management Beijing Guorui Property Nature of transactions : AOCEAN Property Management s responsibilities include (i) overlooking the daily operation and provision of repair and maintenance services of the heat exchange station and facilities and the pipeline network located in the property projects developed by Beijing Guorui Property, namely Fortune Street Phase One* ( 財 滿 街 一 期 ), Fortune Street Phase Two* ( 財 滿 街 二 期 ) and Rui City International Building* ( 銳 城 國 際 大 廈 ) in Chaoyang District, Beijing, and Kingdom Guorui* ( 國 銳 金 嵿 ) in Daxing District, Beijing; and (ii) ensuring that the heat supplied complies with governmental guidelines and standards, etc. AOCEAN Property Management charges the individual owners/tenants of the property units directly for those units which are occupied. Beijing Guorui Property will be responsible for the fees of the vacant units within the aforesaid property projects. Fees : Residential properties: RMB30 per square metre per Heat Supply Season, payable on annual basis Commercial properties: RMB42 per square metre per Heat Supply Season for Fortune Street Phase One* ( 財 滿 街 一 期 ), Fortune Street Phase Two* ( 財 滿 街 二 期 ) and Rui City International Building* ( 銳 城 國 際 大 廈 ), and RMB40 per square metre per Heat Supply Season for Kingdom Guorui* ( 國 銳 金 嵿 ), payable on annual basis 31

34 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER Beijing Guolong Heat Supply Services Agreement Date : 27 November 2015 Term : From 16 September 2015 to 15 September 2018 (both days inclusive) Parties : AOCEAN Property Management Beijing Guolong Nature of transactions : AOCEAN Property Management s responsibilities include (i) overlooking the daily operation and provision of repair and maintenance services of the heat exchange station and facilities and the pipeline network located in the property project developed by Beijing Guolong, namely North Garden* ( 北 花 園 ) at Gaobeidian, Chaoyang District, Beijing; and (ii) ensuring that the heat supplied complies with governmental guidelines and standards, etc. AOCEAN Property Management charges the individual owners/tenants of the property units directly for those units which are occupied. Beijing Guolong will be responsible for the fees of the vacant units within the aforesaid property project. Fees : Residential properties: RMB30 per square metre per Heat Supply Season, payable on annual basis Pricing and Payment Terms As disclosed in the Letter from the Board, AOCEAN Property Management charges heat supply services fees in accordance with the prevailing heat supply prices as stipulated by the relevant regulatory authorities of the Beijing municipal government, being the Notice Regarding the Adjustment of the Heat Supply Price for Non-Residential Purpose in the City (Jing Fa Gai [2015] No. 2619) ( 關 於 調 整 本 市 非 居 民 供 熱 價 格 的 通 知 ( 京 發 改 號 ) ) and the Notice Regarding the Adjustment of Residential-use Heat Supply Price and Ex-Factory Price of Heat from Thermal Power Plants for the City (Jing Jia (Shang) Zi [2001] No. 372) ( 關 於 調 整 我 市 民 用 供 熱 價 格 和 熱 電 廠 熱 力 出 廠 價 格 的 通 知 ( 京 價 ( 商 ) 字 號 ) ) (the Notices ). The Directors are of the opinion that AOCEAN Property Management strictly complies with the heat supply government regulated prices of the regulatory authorities for the purpose of charging heat supply fees under the New Heat Supply Services Agreements. In this regard, we have reviewed the Notices as well as the New Heat Supply Services Agreements and we noted that the rate for heat supply service has been set according to the Notices, which is subject to changes from time to time. Pursuant to the New Heat Supply Services Agreements, should there be any changes to policies issued by the Beijing municipal government, the Group will liaise with the Beijing Guorui Group and charge at the rate directed by the Beijing municipal government from time to time. 32

35 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER We have discussed with the management of the Group and reviewed the internal control policy (the Policy ) adopted by the Group in monitoring the continuing connected transactions conducted or to be conducted by AOCEAN Property Management with the Beijing Guorui Group. As noted from the Policy, the Company has taken, among others, the following measures for monitoring the pricing and terms of the transactions contemplated under the New Heat Supply Services Agreements and for ensuring that the transactions conducted under such agreements are entered into based on normal commercial terms: (1) prior to entering into the New Heat Supply Services Agreements, the legal department, the financial department and the operation department of AOCEAN Property Management are responsible for the negotiation of the terms of the New Heat Supply Services Agreements with reference to the fees of heat supply services of comparable properties provided by at least two independent-third-party market players and the contract terms thereof to ensure that the management fees charged by AOCEAN Property Management and the terms of the agreements are in conformity with normal commercial terms that are no less favourable to the Company than those available to or from independent third parties; (2) upon execution of the New Heat Supply Services Agreements, the legal department of AOCEAN Property Management is responsible for continuously monitoring and checking the government regulated heat supply prices announced on the websites of the relevant regulatory authorities and formal notices issued by the said authorities on quarterly basis, in order to ensure that the price paid by property owners remains consistent with the government regulated prices; and (3) throughout the term of the New Heat Supply Services Agreements, the operation department and the financial department are responsible for monitoring the implementation of the New Heat Supply Services Agreements to ensure that the terms, including the fees charged under the New Heat Supply Services Agreements are strictly adhered to by the parties to the agreements. Any deviation from the contract terms thereof should be reported to the management of the Company for further actions. In addition, the management of the Company will perform spot checks on the implementation of the New Heat Supply Services Agreements to ensure compliance of the contract terms as and when necessary. As confirmed by the Directors, the Group has strictly complied with the Policy for the transactions under the Heat Supply Services Agreements. 33

36 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER Annual caps under the New Heat Supply Services Agreements The table below summarises the actual transaction amounts, being the fees paid/payable by each of Beijing Guorui Property and Beijing Guolong to AOCEAN Property Management in respect of the heat supply services provided by AOCEAN Property Management for vacant property units for the three years ended 15 September 2015 and the period from 16 September 2015 to 31 October From 16 From 16 From 16 From 16 September September September September 2012 to to to to 31 September September September October Actual transaction amounts (RMB) (RMB) (RMB) (RMB) Beijing Guorui Property 276, , ,000 Nil Beijing Guolong 774,000 1,780,000 2,790,000 Nil The Company estimates that the transaction amounts for the continuing connected transactions contemplated under the Beijing Guorui Property Heat Supply Services Agreement for the three years ending 15 September 2018 will not exceed RMB1,466,000, RMB2,291,000 and RMB4,258,000, respectively, and such amounts have accordingly been set as the proposed annual caps for the Beijing Guorui Property Heat Supply Services Agreement for the three years ending 15 September 2018, respectively. The proposed annual caps have been determined by the Company after taking into account of (i) the historical actual transaction amounts, being the fees paid/payable by Beijing Guorui Property to AOCEAN Property Management in respect of the heat supply services provided by AOCEAN Property Management for vacant property units for the three years ended 15 September 2015; (ii) the estimated number of vacant units of the relevant property projects during the three years ending 15 September 2018 having taken into account the estimated completion of the construction of new property units of Kingdom Guorui* ( 國 銳 金 嵿 ) with a total floor area of approximately 286,000 square metres during the corresponding periods based on the current construction plan and information available as at the Latest Practicable Date; and (iii) the fees chargeable per square metre per Heat Supply Season during such period as stipulated under the Beijing Guorui Property Heat Supply Services Agreement. As at the Latest Practicable Date, AOCEAN Property Management provided heat supply and maintenance services to a total of approximately 2,420 property units developed by Beijing Guorui Property. Amongst these property units, approximately 2,350 property units were occupied by individual owners/tenants with a total floor area of approximately 332,530 square metres whereas approximately 65 property units were vacant property units with a total floor area of approximately 7,400 square metres. 34

37 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER As for Beijing Guolong, the Company estimates that the transaction amounts for the continuing connected transactions contemplated under the Beijing Guolong Heat Supply Services Agreement for the three years ending 15 September 2018 will not exceed RMB3,351,000, RMB3,159,000 and RMB3,217,000, respectively, and such amounts have accordingly been set as the proposed annual caps for the Beijing Guolong Heat Supply Services Agreement for the three years ending 15 September 2018, respectively. The proposed annual caps have been determined by the Company after taking into account of (i) the historical actual transaction amounts, being the fees paid/payable by Beijing Guolong to AOCEAN Property Management in respect of the heat supply services provided by AOCEAN Property Management for vacant property units for the three years ended 15 September 2015; (ii) the estimated number of vacant units of the relevant property project during the three years ending 15 September 2018 having taken into account the estimated completion of the construction of new property units of North Garden* ( 北 花 園 ) with a total floor area of approximately 190,000 square metres during the corresponding periods based on the current construction plan and information available as at the Latest Practicable Date; and (iii) the fees chargeable per square metre per Heat Supply Season during such period as stipulated under the Beijing Guolong Heat Supply Services Agreement. As at the Latest Practicable Date, AOCEAN Property Management provided heat supply and maintenance services to a total of approximately 6,280 property units developed by Beijing Guolong. Amongst these property units, approximately 4,700 property units were occupied by individual owners/tenants with a total floor area of approximately 334,500 square metres whereas approximately 1,580 property units were vacant property units with a total floor area of approximately 115,000 square metres. In assessing the reasonableness of the annual caps under the New Heat Supply Services Agreements, we have discussed with the management of the Group on the bases and assumptions adopted. We were advised that Kingdom Guorui* ( 國 銳 金 嵿 ) and North Garden* ( 北 花 園 ) were under construction as at the Latest Practicable Date and are expected to be completed by the end of 2018 and no earlier than 2018, respectively, based on the construction and sales plan of Beijing Guorui Group. In this relation, we have sought and received from the Company the expected area of completion of Kingdom Guorui* ( 國 銳 金 嵿 ) and North Garden* ( 北 花 園 ) as well as the expected area and period of vacancy for each of the residential and commercial units. Upon our review, we noted that the estimated fees chargeable by AOCEAN Property Management is calculated as the multiple of the estimated number of days of vacancy, estimated area in square metre remained vacant during the period and the fee chargeable per square metre as stipulated under the New Heat Supply Services Agreements. The Company confirmed that the expected area of vacancy as well as the period of vacancy was prepared and estimated by Beijing Guorui Group based on their construction plan and the historical vacancy rate. We noted from the calculations that the Company has further added a buffer of 10% to the estimated fees payable for vacant property units of Kingdom Guorui* ( 國 銳 金 嵿 ) and North Garden* ( 北 花 園 ) for flexibility. As for Fortune Street Phase One* ( 財 滿 街 一 期 ), Fortune Street Phase Two* ( 財 滿 街 二 期 ) and Rui City International Building* ( 銳 城 國 際 大 廈 ), we were advised that these properties has completed construction and occupied by tenants since As such, the Company has assumed the vacancy rate of these properties would be stable and estimated the fee payable by Beijing Guorui Property based on the amount charged during the period from 16 September 2014 to 15 September In this regard, we noted from the calculation that the vacancy rate of these properties were estimated to be ranged from approximately 0.8% to 3.5%, which were equal to the vacancy rate of the respective properties during the period from 16 September 2014 to 15 September Having considered the above, we consider the annual caps under the New Heat Supply Services Agreements are acceptable. 35

38 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER (II) THE NEW PROPERTY MANAGEMENT AGREEMENTS Each of Beijing Guorui Property and Beijing Guolong has renewed its property management agreement with AOCEAN Property Management for management of the vacant units within its residential and commercial property projects by entering into the relevant property management agreements. As confirmed by the Directors, the terms under the New Property Management Agreements have been agreed based on arm s length negotiations between AOCEAN Property Management and Beijing Guorui Group, and have been entered into by AOCEAN Property Management in its ordinary and usual course of business and either (i) on normal commercial terms or better, or (ii) on terms no less favourable to AOCEAN Property Management than those available to or from independent third parties. The salient terms of the New Property Management Agreements are summarised as follows: Beijing Guorui Property Management Agreement Date : 27 November 2015 New term : 1 January 2016 to 31 December 2018 (both days inclusive) Parties : AOCEAN Property Management Beijing Guorui Property Premises : Fortune Street Phase One* ( 財 滿 街 一 期 ), Fortune Street Phase Two* ( 財 滿 街 二 期 ), Rui City International Building* ( 銳 城 國 際 大 廈 ), and GOLDEN TOWER* ( 金 長 安 大 廈 ) in Chaoyang District, Beijing, and Kingdom Guorui* ( 國 銳 金 嵿 ) at Daxing District, Beijing Nature of transactions : AOCEAN Property Management is responsible for (i) safekeeping of the keys of the vacant units; (ii) carrying out monthly inspections of the vacant units and keeping records accordingly; (iii) carrying out monthly cleaning of the vacant units; and (iv) inspecting the vacant units during bad weather conditions, etc. Fees : The management fee ranges from RMB2.25 to RMB9.4 per square metre per month for different types of commercial and residential property units, payable on quarterly basis. The management fees are determined by AOCEAN Property Management and Beijing Guorui Property having regard to, inter alia., the historical management fees, the costs of the management services, the area of the properties, the service standard as required, the type and use of the properties (e.g. residential or commercial properties), the age of the properties and the prevailing market prices for the provision of comparable property management services. 36

39 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER Beijing Guolong Property Management Agreement Date : 27 November 2015 New term : 1 January 2016 to 31 December 2018 (both days inclusive) Parties : AOCEAN Property Management Beijing Guolong Premises : North Garden*( 北 花 園 ) at Gaobeidian, Chaoyang District, Beijing Nature of transactions : AOCEAN Property Management is responsible for (i) safekeeping of the keys of the vacant units; (ii) carrying out monthly inspections of the vacant units and keeping records accordingly; (iii) carrying out monthly cleaning of the vacant units; and (iv) inspecting the vacant units during bad weather conditions, etc. Fees : RMB2.25 per square metre per month, payable on quarterly basis. The management fee is determined by AOCEAN Property Management and Beijing Guolong having regard to, inter alia., the historical management fee, the nature of the properties, the costs of the management services, the area of the properties, the service standard as required, the age of the properties and the prevailing market prices for the provision of comparable property management services. Pricing and Payment Terms As disclosed in the Letter from the Board, AOCEAN Property Management is entitled to independently negotiate and fix the charge rates with the landlord in accordance with the prevailing market price levels and charging practices in the industry. Hence, AOCEAN Property Management collects property management fees based on the market-adjusted price approach under the New Property Management Agreements. The management fees under the New Property Management Agreements are determined by AOCEAN Property Management and members of the Beijing Guorui Group based on arm s length negotiations having regard to, inter alia., the historical management fees under the Property Management Agreements which are of high reference value, the costs of management services as required under the individual property management agreement, the area of the properties served, the service standard as required, the type and use of the properties involved (e.g. residential or commercial properties), the age of the properties involved and the prevailing market prices for the provision of comparable property management services. When determining the fees under the New Property Management Agreements, the management of the Company are required to comply with the Company s internal control measures in relation to connected transactions to ensure that the fees charged by AOCEAN Property Management and the terms of the New Property Management Agreements are fair and reasonable and in the interest of the Company. 37

40 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER In this regard, we have reviewed the New Property Management Agreements and enquired into the Company for the basis for range of management fee charged by AOCEAN Property Management for different types of commercial and residential property units. We were advised that the basis in determining the fee was primarily based on, among others, the age of the properties, standard of services provided by AOCEAN Property Management and the usage type of the properties. In general, the management fee for commercial properties would be charged at a higher rate than residential properties and properties which were more newly built would also be charged at a higher rate than properties that were older. We have discussed with the management of the Group and reviewed the Policy adopted by the Group in monitoring the continuing connected transactions conducted or to be conducted by AOCEAN Property Management with the Beijing Guorui Group. As noted from the Policy, the Company has taken, among others, the following measures for monitoring the pricing and terms of the transactions contemplated under New Property Management Agreements and for ensuring that the transactions conducted under such agreements are entered into based on normal commercial terms: (1) prior to entering into the New Property Management Agreements, the legal department, the financial department and the operation department of AOCEAN Property Management are responsible for the negotiation of the terms of the New Property Management Agreements with reference to property management fees of comparable properties managed by at least two independent-third-party market players and the contract terms thereof to ensure that the management fees charged by AOCEAN Property Management and the terms of the agreements are in conformity with normal commercial terms that are no less favourable to the Company than those available to or from independent third parties; (2) upon execution of the New Property Management Agreements, the legal department of AOCEAN Property Management is responsible for continuously monitoring and checking on a monthly basis as to whether the relevant laws and regulations on property management prices have been amended, in order to ensure that the price paid by property owners remains consistent with the requirements pursuant to the relevant laws and regulations; and (3) throughout the term of the New Property Management Agreements, the operation department and the financial department are responsible for monitoring the implementation of the New Property Management Agreements to ensure that the terms, including the fees charged under the New Property Management Agreements are strictly adhered to by the parties to the agreements. Any deviation from the contract terms thereof should be reported to the management of the Company for further actions. In addition, the management of the Company will perform spot checks on the implementation of the New Property Management Agreements to ensure compliance of the contract terms as and when necessary. As confirmed by the Directors, the Group has strictly complied with the Policy for the transactions under the Property Management Agreements. 38

41 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER Annual caps under the New Property Management Agreements The table below summarises the actual transaction amounts, being the fees paid/payable by each of Beijing Guorui Property and Beijing Guolong to AOCEAN Property Management in respect of the property management services for vacant property units provided by AOCEAN Property Management for vacant property units for the two years ended 31 December 2014 and the ten months ended 31 October Ten months Year ended 31 Year ended 31 ended 31 Actual transaction amounts December 2013 December 2014 October 2015 (RMB) (RMB) (RMB) Beijing Guorui Property 934, ,000 1,241,000 Beijing Guolong 2,169,000 4,645,000 1,863,000 The Company estimates that the transaction amounts for the continuing connected transactions contemplated under the Beijing Guorui Property Management Agreement for the three years ending 31 December 2018 will not exceed RMB4,481,000, RMB6,858,000 and RMB7,497,000, respectively, and such amounts have accordingly been set as the proposed annual caps for the Beijing Guorui Property Management Agreement for the three years ending 31 December 2018, respectively. The proposed annual caps have been determined by the Company after taking into account of (i) the historical actual transaction amounts, being the fees paid/payable by Beijing Guorui Property to AOCEAN Property Management in respect of the property management services for vacant property units provided by AOCEAN Property Management for the two years ended 31 December 2014 and the ten months ended 31 October 2015; (ii) the estimated number of vacant units of the relevant property projects during the three years ending 31 December 2018 having taken into account the estimated completion of the construction of new property units of Kingdom Guorui* ( 國 銳 金 嵿 ) with a total floor area of approximately 286,000 square metres during the corresponding periods based on the current construction plan and information available as at the Latest Practicable Date; and (iii) the fees chargeable per square metre per month during such period as stipulated under the Beijing Guorui Property Management Agreement. As at the Latest Practicable Date, AOCEAN Property Management provided property management services to a total of approximately 2,420 property units developed by Beijing Guorui Property. Amongst these property units, approximately 2,350 property units were occupied by individual owners/tenants with a total floor area of approximately 332,530 square metres whereas approximately 65 property units were vacant property units with a total floor area of approximately 7,400 square metres. 39

42 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER As for Beijing Guolong, the Company estimates that the transaction amounts for the continuing connected transactions contemplated under the Beijing Guolong Property Management Agreement for the three years ending 31 December 2018 will not exceed RMB3,003,000, RMB2,642,000 and RMB2,907,000, respectively, and such amounts have accordingly been set as the proposed annual caps for the Beijing Guolong Property Management Agreement for the three years ending 31 December 2018, respectively. The proposed annual caps have been determined by the Company after taking into account of (i) the historical actual transaction amounts, being the fees paid/payable by Beijing Guolong to AOCEAN Property Management in respect of the property management services for vacant property units provided by AOCEAN Property Management for the two years ended 31 December 2014 and the ten months ended 31 October 2015; (ii) the estimated number of vacant units of the relevant property projects during the three years ending 31 December 2018 having taken into account the estimated completion of the construction of new property units of North Garden* ( 北 花 園 ) with a total floor area of approximately 190,000 square metres during the corresponding periods based on the current construction plan and information available as at the Latest Practicable Date; and (iii) the fees chargeable per square metre per month during such period as stipulated under the Beijing Guolong Property Management Agreement. As at the Latest Practicable Date, AOCEAN Property Management provided property management services to a total of approximately 6,280 property units developed by Beijing Guolong. Amongst these property units, approximately 4,700 property units were occupied by individual owners/tenants with a total floor area of approximately 334,500 square metres whereas approximately 1,580 property units were vacant property units with a total floor area of approximately 115,000 square metres. In assessing the reasonableness of the annual caps under the New Property Management Agreements, we have discussed with the management of the Group on the bases and assumptions adopted. As mentioned in the paragraph headed Annual caps under the New Heat Supply Services Agreements above, we have sought and received from the Company the expected area of completion of Kingdom Guorui* ( 國 銳 金 嵿 ) and North Garden* ( 北 花 園 ) as well as the expected area and period of vacancy for each of the residential and commercial units. We have reviewed the calculation in arriving the estimated fees chargeable by AOCEAN Property Management, which is calculated as the multiple of the estimated number of days of vacancy, estimated area in square metre remained vacant during the period and the fee chargeable per square metre as stipulated under the New Property Management Agreements. The Company confirmed that the expected area of vacancy as well as the period of vacancy was prepared and estimated by Beijing Guorui Group based on their construction plan and the historical vacancy rate. Similar to the annual caps under the New Heat Supply Services Agreements, the Company has adopted a buffer of 10% to the estimated fees payable for vacant property units of Kingdom Guorui* ( 國 銳 金 嵿 ) and North Garden* ( 北 花 園 ) for flexibility. As for Fortune Street Phase One* ( 財 滿 街 一 期 ), Fortune Street Phase Two* ( 財 滿 街 二 期 ), Rui City International Building* ( 銳 城 國 際 大 廈 ) and GOLDEN TOWER* ( 金 長 安 大 廈 ), we were advised that these properties has completed construction and occupied by tenants since Hence, the Company has assumed the vacancy rate of these properties would be stable and estimated the fee payable by Beijing Guorui Property based on the amount charged during the ten month period ended 31 October In this regard, we noted from the calculation that the vacancy rate of these properties was estimated to be ranged from approximately 0.8% to 8.0%, which were equal to the vacancy rate of the respective properties during Having considered the above, we consider the annual caps under the New Property Management Agreements are acceptable. 40

43 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER (III) THE KINGDOM GUORUI SALES OFFICE MANAGEMENT AGREEMENT As confirmed by the Directors, the terms under the Kingdom Guorui Sales Office Management Agreement have been agreed based on arm s length negotiations between AOCEAN Property Management and Beijing Guorui Group, and have been entered into by AOCEAN Property Management in its ordinary and usual course of business and either (i) on normal commercial terms or better, or (ii) on terms no less favourable to AOCEAN Property Management than those available to or from independent third parties. The salient terms of the Kingdom Guorui Sales Office Management Agreement are summarised as follows: Date : 27 November 2015 Term : 8 October 2015 to 7 October 2018 Parties : AOCEAN Property Management Beijing Guorui Property Premises : Kingdom Guorui* ( 國 銳 金 嵿 ) sales office and ancillary areas at Beijing Economic and Technological Development Area, Daxing District, Beijing Nature of transactions : AOCEAN Property Management is responsible for (i) welcoming and arranging customers to visit the show flats; (ii) coordinating services related to sales activities; (iii) the security, hygiene and concierge services of the property; (iv) the daily operation, management and maintenance of the common parts including the restaurants, bars and other amenities facilities and common facilities; (v) maintenance of the hygiene and security of the common parts of the property; (vi) refuse collection and disposal; (vii) maintenance and management of the greenery of the property, and so on. Fees : Beijing Guorui Property shall bear the following expenses, disbursements, costs and fees, which are paid by AOCEAN Property Management in advance and settled between the parties quarterly: the expenses incurred in the course of providing services to the property, including all supplies, materials and labour costs; disbursements including the costs incurred for external wall cleaning, floor brightening, maintenance of the exterior greenery as well as power charges and replacement costs of facilities; 41

44 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER the costs of acquiring the fixed assets, equipment and facilities necessary for the additional services if Beijing Guorui Property requests AOCEAN Property Management to provide additional services or themed activities related to sales; and the relevant taxation (being business tax of 5.6% of the total annual revenue generated under the agreement payable by AOCEAN Property Management) and profit margin of 10% over the actual costs and expenses incurred in the course of managing the property. Pricing and Payment Terms As disclosed in the Letter from the Board, AOCEAN Property Management is entitled to independently negotiate and fix the charge rates with the landlord in accordance with the prevailing market price levels and charging practices in the industry. Hence, AOCEAN Property Management collects property management fees based on the market-adjusted price approach under the Kingdom Guorui Sales Office Management Agreement. The management fees under the Kingdom Guorui Sales Office Management Agreement are charged on a cost plus basis with a 10% profit margin entitled by AOCEAN Property Management. The management fees and the profit margin are determined by AOCEAN Property Management and Beijing Guorui Property based on arm s length negotiations having regard to, inter alia., the historical management fees which are of high reference value, the scale of Kingdom Guorui sales office and its ancillary areas, the estimated actual costs and expenses to be incurred in managing and operating the Kingdom Guorui sales office and its ancillary areas as delineated above, the relevant taxation (being business tax of 5.6% of the total annual revenue generated under the agreement payable by AOCEAN Property Management) and the 10% profit margin entitled by AOCEAN Property Management. When determining the fees under the Kingdom Guorui Sales Office Management Agreement, the management of the Company are required to comply with the Company s internal control measures in relation to connected transactions to ensure that the fees charged by AOCEAN Property Management and the terms of the Kingdom Guorui Sales Office Management Agreement are fair and reasonable and in the interest of the Company. We have discussed with the management of the Group and reviewed the Policy adopted by the Group in monitoring the continuing connected transactions conducted or to be conducted by AOCEAN Property Management with the Beijing Guorui Group. As noted from the Policy, the Company has taken, among others, the following measures for monitoring the pricing and terms of the transactions contemplated under the Kingdom Guorui Sales Office Management Agreement and for ensuring that the transactions conducted under such agreement are entered into based on normal commercial terms: 42

45 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER (1) prior to entering into the Kingdom Guorui Sales Office Management Agreement, the legal department, the financial department and the operation department of AOCEAN Property Management are responsible for the negotiation of the terms of the Kingdom Guorui Sales Office Management Agreement with reference to property management fees of comparable properties managed by at least two independent-third-party market players and the contract terms thereof to ensure that the management fees charged by AOCEAN Property Management and the terms of the agreements are in conformity with normal commercial terms that are no less favourable to the Company than those available to or from independent third parties; (2) upon execution of the Kingdom Guorui Sales Office Management Agreement, the legal department of AOCEAN Property Management is responsible for continuously monitoring and checking on a monthly basis as to whether the relevant laws and regulations on property management prices have been amended, in order to ensure that the price paid by the property owner remains consistent with the requirements pursuant to the relevant laws and regulations; and (3) throughout the term of the Kingdom Guorui Sales Office Management Agreement, the operation department and the financial department are responsible for monitoring the implementation of the Kingdom Guorui Sales Office Management Agreement to ensure that the terms, including the fees charged under the Kingdom Guorui Sales Office Management Agreement are strictly adhered to by the parties to the agreements. Any deviation from the contract terms thereof should be reported to the management of the Company for further actions. In addition, the management of the Company will perform spot checks on the implementation of the Kingdom Guorui Sales Office Management Agreement to ensure compliance of the contract terms as and when necessary. Annual caps under the Kingdom Guorui Sales Office Management Agreement As disclosed in the Letter from the Board, Kingdom Guorui* ( 國 銳 金 嵿 ) is a large-scale property development project with leading sales prices oriented towards high-end purchasers located in the Economic and Technological Development Area, Daxing District, Beijing, which is a prime area of Beijing, the PRC. In line with the sales strategies for large-scale and high-end property projects in Beijing, potential purchasers or visitors to Kingdom Guorui* ( 國 銳 金 嵿 ) are expected to experience high-quality and pleasant services provided by AOCEAN Property Management both within the sales office and its ancillary areas, which include showrooms, restaurants and bars and various amenities facilities, etc. To maintain the required level of quality of services, a sufficient array of servicing staff members, including approximately 50 for cleanliness, 30 for security, and 50 for customer services is required. In light of the aforesaid, the annual expenditure in respect of the management of the Kingdom Guorui sales office and its ancillary areas is constituted by two main components, namely staff costs at approximately RMB6,708,000, and expenditure for other service items and actual expenditures at approximately RMB4,244,000 per year. 43

46 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER The proposed annual caps are determined by the Company after taking into account of (i) the scale of the Kingdom Guorui sales office and its ancillary areas, (ii) the estimated actual costs and expenses to be incurred by AOCEAN Property Management in managing and operating the Kingdom Guorui sales office and its ancillary areas; and (iii) the relevant taxation (being business tax of 5.6% of the total annual revenue generated under the agreement payable by AOCEAN Property Management) and the 10% profit margin entitled by AOCEAN Property Management as stipulated under the Kingdom Guorui Sales Office Management Agreement. Based on the abovementioned, the Company estimates that the transaction amounts for the continuing connected transactions contemplated under the Kingdom Guorui Sales Office Management Agreement for the three years ending 7 October 2018 will not exceed RMB12,048,000, RMB13,253,000 and RMB14,578,000, respectively, and such amounts have accordingly been set as the proposed annual caps for the Kingdom Guorui Sales Office Management Agreement for the three years ending 7 October 2018, respectively. In assessing the reasonableness of the annual caps under the Kingdom Guorui Sales Office Management Agreement, we have discussed with the management of the Group on the bases and assumptions adopted. As advised by the Directors, the estimated fees to be charged by AOCEAN Property Management are principally based on the historical costs and expenses incurred during the six months period ended 30 June In this regard, we have obtained and reviewed the breakdown of the costs and expenses incurred by AOCEAN Property Management during the six months period ended 30 June 2015 and we noted that the annual cap for the year ending 7 October 2016 represent close approximate to the annualised actual costs and expenses incurred for the six months period ended 30 June 2015, with the addition of a margin of 10% and relevant taxation (being business tax of 5.6% of the total annual revenue generated under the agreement payable by AOCEAN Property Management). As for the two years ending 7 October 2018, the Company included a yearly increase of 10% after taken into account of factors including inflation and buffer for extra expenses. In this regard, we have searched and reviewed the continuing connected transaction announcements issued by companies listed on the Stock Exchange during the six months period preceding the date of the Kingdom Guorui Sales Office Management Agreement that adopted the pricing basis of adding a margin to the cost for the provision of management services to connected persons. To the best of our knowledge, we have identified 11 transactions (the Comparables ) that met the said criteria, which represented an exhaustive list. We noted from the Comparables that the profit margin are either set at a reasonable margin to cost or at a predetermined margin which ranged from 0% to 15%. Having considered the above and that the margin of 10% under the Kingdom Guorui Sales Office Management Agreement is within the range of the Comparables, we consider the annual caps under the Kingdom Guorui Sales Office Management Agreement are acceptable. Annual review of the continuing connected transactions Pursuant to Rules 14A.55 and 14A.56 of the Listing Rules, the transactions contemplated under the New Heat Supply Services Agreements, New Property Management Agreements and the Kingdom Guorui Sales Office Management Agreement (collectively the CCTs ) are subject to the following requirements: (i) the independent non-executive Directors must review the CCTs every year and confirm in the annual reports that the CCTs have been entered into: in the ordinary and usual course of business of the Group; on normal commercial terms or better; and 44

47 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER according to the agreement governing them on terms that are fair and reasonable and in the interests of the Shareholders as a whole; (ii) the Company must engage its auditors to report on the CCTs for each financial year of the Company and that the Company s auditors must provide a letter to the Board confirming whether anything has come to their attention that causes them to believe that the CCTs: have not been approved by the Board; were not, in all material respects, in accordance with the pricing policies of the Group if the transactions involve the provision of goods or services by the Group; were not entered into, in all material respects, in accordance with the relevant agreement governing the transactions; and have exceeded the proposed annual caps. In view of the CCTs will be subject to annual review of the independent non-executive Directors and the auditors of the Company, we are of the view that appropriate measures will be in place to govern the conduct of the CCTs and safeguard the interests of the Independent Shareholders. RECOMMENDATION Having considered the principal factors and reasons as discussed above, we are of the opinion that the CCTs are conducted in the ordinary and usual course of business of the Group, the terms of the New Heat Supply Services Agreements, the New Propertys Management Agreements and the Kingdom Guorui Sales Office Management Agreement are on normal commercial terms and the annual caps thereof are fair and reasonable so far as the Company and the Independent Shareholders are concerned, and are in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolutions to approve the New Heat Supply Services Agreements, the New Property Management Agreements and the Kingdom Guorui Sales Office Management Agreement at the General Meeting. Yours faithfully, For and on behalf of Quam Capital Limited Gary Mui Deputy Chief Executive Officer Head of IPO and Capital Markets Mr. Gary Mui is a licensed person registered with the SFC and a responsible officer of Quam Capital to carry out Type 6 (advising on corporate finance) regulated activity under the SFO. He has over 15 years of experience in the finance and investment banking industry. * For identification purposes only 45

48 APPENDIX GENERAL INFORMATION 1. RESPONSIBILITY STATEMENT This circular, for which the Directors collectively and individually accept fully 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. 2. DIRECTORS AND CHIEF EXECUTIVES INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES As at the Latest Practicable Date, the interests and short positions of the Directors and the chief executives and their associates in the Shares of the Company and its associated corporations (within the meaning of Part XV of the SFO) (a) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interest or short positions which they were taken or deemed to have under such provisions of the SFO); or (b) which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (c) which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the Model Code ) contained in the Listing Rules, were as follows: Number and class of Percentage of issued Name of director Capacity securities ordinary share capital Mr. Wei Interest of controlled 492,814,591 Shares (L) 62.24% Corporation (Note) Mr. Sun Beneficial owner 47,510,510 Shares (L) 6% (L) denotes long position Note: Wintime is a wholly-owned subsidiary of Winluck Global Limited. The entire issued share capital of Winluck Global Limited is beneficially owned by Mr. Wei. Each of Winluck Global Limited and Mr. Wei was deemed to be interested in 492,814,591 Shares held by Wintime under the SFO. Save as disclosed herein, as at the Latest Practicable Date, none of the Directors nor the chief executive of the Company had or was deemed to have any interests or short positions in the Shares of the Company and its associated corporations (within the meaning of Part XV of the SFO) (a) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO); or (b) which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (c) which were required, to be notified to the Company and the Stock Exchange pursuant to the Model Code. I-1

49 APPENDIX GENERAL INFORMATION 3. INTERESTS AND SHORT POSITIONS OF SUBSTANTIAL SHAREHOLDERS To the best of the Directors knowledge, as at the Latest Practicable Date, the following persons (not being Director or chief executive of the Company) had, or were deemed to have, interests or short positions in Shares or underlying shares of the Company which would fall to be disclosed to the Company and the Stock Exchange pursuant to section 336 of the SFO or who were directly or indirectly interested in 5% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group: Name of Capacity Number and class Percentage of issued shareholders of securities ordinary share capital Wintime Beneficial (Note) 492,814,591 Shares (L) 62.24% Winluck Global Interest of controlled 492,814,591 Shares (L) 62.24% Limited corporation (Note) (L) denotes long position Note: Wintime is a wholly-owned subsidiary of Winluck Global Limited. The entire issued share capital of Winluck Global Limited is beneficially owned by Mr. Wei, an executive Director. Each of Winluck Global Limited and Mr. Wei was deemed to be interested in 492,814,591 Shares held by Wintime under the SFO. Save as disclosed above, as at the Latest Practicable Date, the Directors and chief executive of the Company were not aware of any other person (other than the Directors and the chief executive of the Company) who had, or was deemed to have, interests or short positions in the Shares or underlying shares of the Company which would fall to be disclosed to the Company and the Stock Exchange pursuant to section 336 of the SFO or who was directly or indirectly interested in 5% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group. 4. DIRECTORS INTERESTS IN CONTRACTS AND ASSETS As at the Latest Practicable Date, none of the Directors has any direct or indirect interests in any assets which had been acquired or disposed of by or leased to, or were proposed to be acquired or disposed of by or leased to, any member of the Group since 31 December 2014, being the date to which the latest published audited financial statements of the Group were made up. 5. COMPETING INTEREST The Directors confirm that there is no non-competition undertaking entered into by Beijing Guorui Property in favour of the Company as at the Latest Practicable Date. Beijing Guorui Property principally engages in property development and property investment business in Beijing, the PRC. Beijing Guorui Property does not engage in property management business in the PRC. The Company currently engages in property management, hotel management, property investment in the PRC and property development in the United States of America, respectively. Based on the geographical distinction, the Company considers it unlikely that its business will compete directly with the current business undertaken by Beijing Guorui Property. I-2

50 APPENDIX GENERAL INFORMATION Save as disclosed above, as at the Latest Practicable Date, none of the Directors or controlling Shareholder and their respective close associates was interested in any business apart from the Group s business which competes or is likely to compete, either directly or indirectly, with the Group s business. 6. MATERIAL ADVERSE CHANGE Up to the Latest Practicable Date, the Board is not aware of any material adverse change in the financial or trading position of the Group since 31 December 2014, the date to which the latest published audited consolidated financial statements of the Company were made up. 7. SERVICE CONTRACTS As at the Latest Practicable Date, none of the Directors had entered into any service contracts with the Company or any other member of the Group (excluding contracts expiring or which may be terminated by the Company within a year without payment of any compensation (other than statutory compensation)). 8. EXPERT S QUALIFICATION AND CONSENT The following is the qualification of the expert who has given its advice and recommendation which are included in this circular: Name Quam Capital Limited Qualification type a licensed corporation to carry out Type 6 (advising on corporate finance) regulated activity under the SFO As at the Latest Practicable Date, Quam Capital Limited did not have any direct or indirect interest in any securities of any member of the Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group nor did they have any interest, either directly or indirectly, in any assets which had been, since 31 December 2014 (being the date to which the latest published audited consolidated financial statements of the Company and its subsidiaries were made up), acquired or disposed of by or leased to or were proposed to be acquired or disposed of by or leased to any member of the Group. Quam Capital Limited has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letters, reports and/or summary of its opinions (as the case may be) and references to its name in the form and context in which they respectively appear herein. 9. LITIGATION As at the Latest Practicable Date, no member of the Group was engaged in any litigation or arbitration of material importance and there was no litigation or claim of material importance known to the Directors to be pending or threatened against any member of the Group. I-3

51 APPENDIX GENERAL INFORMATION 10. MISCELLANEOUS (a) (b) (c) The registered office and the principal place of business of the Company is situated at Suite 1603, 16th Floor, Wheelock House, 20 Pedder Street, Central, Hong Kong. The shares registrar of the Company is Tricor Standard Limited, with its office situated at Level 22, Hopewell Centre, 183 Queen s Road East, Hong Kong. Ms. Tung Wing Yee Winnie, the company secretary of the Company, is an associate member of the Hong Kong Institute of Certified Public Accountants and a Certified Practicing Accountant of the CPA Australia. 11. DOCUMENTS AVAILABLE FOR INSPECTION Copies of the following documents will be available for inspection during normal business hours (i.e. from 9:30 a.m. to 5:00 p.m.) on any weekday other than public holidays at the principal place of business of the Company in Hong Kong at Suite 1603, 16th Floor, Wheelock House, 20 Pedder Street, Central, Hong Kong from the date of this circular up to and including the date of the General Meeting: (a) (b) (c) (d) (e) (f) (g) the New Heat Supply Services Agreements; the New Property Management Agreements; the Kingdom Guorui Sales Office Management Agreement; the written consent as referred to in the paragraph under the heading Expert s qualification and consent in this appendix; the letter from the Independent Board Committee as set out from pages 24 to 25 of this circular; the letter from the Independent Financial Adviser as set out from pages 26 to 45 of this circular; and this circular. I-4

52 NOTICE OF GENERAL MEETING (Incorporated in Hong Kong with limited liability) (Stock Code: 108) NOTICE IS HEREBY GIVEN that a general meeting (the General Meeting ) of GR Properties Limited (the Company ) will be held at Capital Conference Services Limited at Suite 2418, 24/F, Jardine House, 1 Connaught Place, Central, Hong Kong on Monday, 11 January 2016 at 11:30 a.m., for the purposes of considering and, if thought fit, passing the following resolutions as ordinary resolutions of the Company: 1. THAT: ORDINARY RESOLUTIONS the new heat supply services agreement (the Beijing Guorui Property Heat Supply Services Agreement ) dated 27 November 2015 entered into between 北 京 澳 西 物 業 管 理 有 限 公 司 (Beijing AOCEAN Property Management Company Limited*) ( AOCEAN Property Management ) and 北 京 國 銳 房 地 產 開 發 有 限 公 司 (Beijing Guorui Property Development Company Limited*) ( Beijing Guorui Property ) under which AOCEAN Property Management shall provide heat supply and maintenance services of heat exchange stations and facilities and pipeline networks to certain residential and commercial property projects of Beijing Guorui Property (a copy of which is tabled at the General Meeting, marked A and initialled by the chairman of the General Meeting for the purposes of identification), and the terms and conditions thereof, its proposed annual cap amounts, the transactions contemplated thereunder and the implementation thereof be and are hereby confirmed, ratified and approved. 2. THAT: the new heat supply services agreement (the Beijing Guolong Heat Supply Services Agreement ) dated 27 November 2015 entered into between AOCEAN Property Management and 北 京 國 隆 置 業 有 限 公 司 (Beijing Guolong Property Company Limited*) ( Beijing Guolong ) under which AOCEAN Property Management shall provide heat supply and maintenance services of heat exchange stations and facilities and pipeline networks to the residential property project of Beijing Guolong (a copy of which is tabled at the General Meeting, marked B and initialled by the chairman of the General Meeting for identification), and the terms and conditions thereof, its proposed annual cap amounts, the transactions contemplated thereunder and the implementation thereof be and are hereby confirmed, ratified and approved. GM-1

53 NOTICE OF GENERAL MEETING 3. THAT: the new property management agreement (the Beijing Guorui Property Management Agreement ) dated 27 November 2015 entered into between AOCEAN Property Management and Beijing Guorui Property under which AOCEAN Property Management shall provide property management services to the vacant units of certain residential and commercial property projects of Beijing Guorui Property (a copy of which is tabled at the General Meeting, marked C and initialled by the chairman of the General Meeting for the purposes of identification), and the terms and conditions thereof, its proposed annual cap amounts, the transactions contemplated thereunder and the implementation thereof be and are hereby confirmed, ratified and approved. 4. THAT: the new property management agreement (the Beijing Guolong Property Management Agreement ) dated 27 November 2015 entered into between AOCEAN Property Management and Beijing Guolong under which AOCEAN Property Management shall provide property management services to the vacant units of the residential property project of Beijing Guolong (a copy of which is tabled at the General Meeting, marked D and initialled by the chairman of the General Meeting for the purposes of identification), and the terms and conditions thereof, its proposed annual cap amounts, the transactions contemplated thereunder and the implementation thereof be and are hereby confirmed, ratified and approved. 5. THAT: the property management agreement (the Kingdom Guorui Sales Office Management Agreement ) dated 27 November 2015 entered into between AOCEAN Property Management and Beijing Guorui Property under which AOCEAN Property Management shall provide property management services, sales related services and ancillary services to the sales office and ancillary areas of the property project, 國 銳 金 嵿 (Kingdom Guorui*) developed by Beijing Guorui Property (a copy of which is tabled at the General Meeting, marked E and initialled by the chairman of the General Meeting for the purposes of identification), and the terms and conditions thereof, its proposed annual cap amounts, the transactions contemplated thereunder and the implementation thereof be and are hereby confirmed, ratified and approved. 6. THAT: any one of the directors of the Company be and is hereby authorised by and on behalf of the Company to execute all such documents, instruments and agreements (with or without affixation of common seal) and to do all such acts or things incidental to, ancillary to or in connection with the Beijing Guorui Property Heat Supply Services Agreement, Beijing Guolong Heat Supply Services Agreement, Beijing Guorui Property Management Agreement, Beijing Guolong Property GM-2

54 NOTICE OF GENERAL MEETING Management Agreement and the Kingdom Guorui Sales Office Management Agreement as may be necessary. By order of the Board GR Properties Limited Wei Chunxian Chairman Hong Kong, 23 December 2015 Executive Directors: Mr. Wei Chunxian (Chairman) Ms. Liu Shuhua (Chief Executive Officer) Mr. Sun Zhongmin Independent non-executive Directors: Mr. Tung Woon Cheung Eric Mr. Chui Tsan Kit Mr. Mak Kwong Yiu Registered office and principal place of business in Hong Kong: Suite 1603, 16th Floor Wheelock House 20 Pedder Street Central, Hong Kong Notes: 1. A member entitled to attend and vote at the General Meeting is entitled to appoint one or more proxy to attend and, subject to the provisions of the articles of association of the Company, to vote on his/her/its behalf. A proxy need not be a member of the Company but must be present in person at the General Meeting to represent the member. If more than one proxy is so appointed, the appointment shall specify the number and class of shares in respect of which each such proxy is so appointed. 2. In order to be valid, the form of proxy must be duly completed and signed in accordance with the instructions printed thereon and deposited together with a power of attorney or other authority, if any, under which it is signed, or a certified copy of such power or authority, at the Company s share registrar, Tricor Standard Limited at Level 22, Hopewell Centre, 183 Queen s Road East, Hong Kong as soon as possible and in any event not later than 48 hours before the time appointed for holding the General Meeting or any adjournment thereof. Completion and return of a form of proxy will not preclude a member from attending in person and voting at the General Meeting or any adjournment thereof, should he/she/it so wish and in such event, the form of proxy shall be deemed to be revoked. 3. In the case of joint holders of shares, any one of such holders may vote at the General Meeting, either personally or by proxy, in respect of such share(s) as if he/she/it was solely entitled thereto, but if more than one of such joint holders are present at the General Meeting personally or by proxy, that one of the said persons so present whose name stands first on the register of members of the Company in respect of such share(s) shall alone be entitled to vote in respect thereof. 4. The resolutions at the General Meeting will be taken by poll pursuant to the Rules Governing the Listing of Securities on the Stock Exchange (the Listing Rules ) and the results of the poll will be published on the websites of Hong Kong Exchanges and Clearing Limited and the Company in accordance with the Listing Rules. The English names of Chinese entities marked with * are translations of their Chinese names and are included for identification purpose only, and should not be regarded as their official English translation. In the event of any inconsistency, the Chinese name prevails. GM-3