China State Construction 'l : Announcements and Notices - Connected Transaction - Formation of Joint Venture with China State Construction Engineering & Design Company Limited for Xinyi Project

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(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 3311)

CONNECTED TRANSACTION

Formation of Joint Venture with ʕܔʈ೻ணࠇϞࠢʮ̡

(China State Construction Engineering & Design Company Limited)

For Xinyi Project

On 2 November 2018, CSCIICL (a wholly-owned subsidiary of the Company), SCOC (a wholly-owned subsidiary of the Company) and CSCED entered into the Cooperation Agreement, pursuant to which the parties agreed to (a) form Xinyi JV with Xuzhou Xinyi for the purposes of investing into the Xinyi Project; and (b) regulate their respective rights and obligations in Xinyi JV.

CSCED is a subsidiary of CSCECL, which in turn is the intermediate holding company of the Company. Accordingly, CSCED is a connected person of the Company and the Transaction constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules.

As one or more of the applicable percentage ratios calculated with reference to the Transaction exceed 0.1% but are less than 5%, the Transaction is subject to the reporting and announcement requirements but exempt from the independent shareholders' approval requirement under Chapter 14A of the Listing Rules.

INTRODUCTION

Recently, CSCIICL (a wholly-owned subsidiary of the Company), SCOC (a wholly-owned subsidiary of the Company) and CSCED formed the tender consortium and jointly submitted a bid for the Xinyi Project. The tender consortium was awarded the bid for the Xinyi Project. Initially, CSCIICL and Xuzhou Xinyi formed Xinyi JV at the equity interest ratio of 90% and 10%. Pursuant to the tender documents and after negotiation between the local government and the tender consortium, CSCIICLand Xuzhou Xinyi shall transfer part of their equity interests in Xinyi JV to SCOC and CSCED, all of whom shall further contribute to the registered capital of Xinyi JV. Upon which, Xinyi JV will be owned by CSCIICL, SCOC, CSCED and Xuzhou Xinyi as to 88.5%, 1%, 0.5% and 10%.

On 2 November 2018, CSCIICL, SCOC and CSCED entered into the Cooperation Agreement, pursuant to which the parties agreed to (a) form Xinyi JV with Xuzhou Xinyi for the purposes of investing into the Xinyi Project; and (b) regulate their respective rights and obligations in Xinyi JV.

COOPERATION AGREEMENT

Date

2 November 2018

Parties

• (a) CSCIICL, a wholly-owned subsidiary of the Company;

• (b) SCOC, a wholly-owned subsidiary of the Company; and

• (c) CSCED, a subsidiary of CSCECL, which in turn is the intermediate holding company of the Company.

Formation of Xinyi JV

CSCIICL, SCOC, CSCED and Xuzhou Xinyi shall hold 88.5%, 1%, 0.5% and 10% equity interests in Xinyi JV respectively. Xinyi JV will be accounted for as a subsidiary of the Group.

CSCIICL, SCOC and CSCED agreed to the following major terms concerning Xinyi JV in the Cooperation Agreement:

Capital commitment

:

Registered Capital of Xinyi JV

Xinyi JV shall have a registered capital of RMB 287,500,000 (equivalent to approximately HK$323,033,708), which shall be contributed by the equity interest holders of Xinyi JV in proportion to their respective equity interests in Xinyi JV as follows:

CSCIICL
SCOC	RMB2,875,000 (equivalent	to
approximately HK$3,230,337)
CSCED	RMB1,437,500 (equivalent	to
approximately HK$1,615,169)

RMB254,437,500 (equivalent to approximately HK$285,884,831)

Xuzhou RMB28,750,000 (equivalent to Xinyi approximately HK$32,303,371)

The respective contribution to the registered capital of Xinyi JV is determined after arm's length negotiations between the parties with reference to the proposed capital requirements of the Xinyi Project and the parties' interests in Xinyi JV.

Performance Bond by CSCIICL

CSCIICL shall contribute to a performance bond for the construction period in the sum of RMB20,000,000 (equivalent to approximately HK$22,471,910) in favour of the relevant government authority within 14 business days from the effective date of the PPP Project Agreement. This performance bond shall have effect from the date of the provision of performance bond and up to the date on which the Xinyi Project is accepted as having been duly completed.

CSCIICL shall contribute to a performance bond for the operation period in the sum of RMB1,000,000 (equivalent to approximately HK$1,123,596) in favour of the relevant government authority on the commencement date of the operation of the Xinyi Project. This performance bond shall have effect from the date on which the Xinyi Project is accepted as having been duly completed and up to the commencement date of the transfer of the Xinyi Project.

Prior to six months before the expiry of the Xinyi Project, CSCIICL shall contribute to a performance bond for the transfer of the project in the sum of RMB1,000,000 (equivalent to approximately HK$1,123,596) in favour of the relevant government authority. This performance bond shall have effect from the commencement date of the transfer of the Xinyi Project and up to the completion date of the transfer.

Board composition

• : The board of directors of Xinyi JV shall comprise five directors; four of whom shall be appointed by CSCIICL and one of whom shall be appointed by Xuzhou Xinyi.

  Profit/loss sharing

• : The profit/loss after tax and expenses to be derived from Xinyi JV under the PPP Project Agreement shall be shared by CSCIICL, SCOC and CSCED in proportion to their respective equity interests in Xinyi JV.

Future financing

• : Any additional funding requirements of the Xinyi Project (other than the registered capital) shall be arranged by Xinyi JV with banks or financial institutions and guaranteed by CSCIICL, SCOC and CSCED in proportion to their respective equity interests in Xinyi JV.

  Restriction on transfers

• : Neither CSCIICL, SCOC nor CSCED may transfer or assign all or any part of its equity interest in Xinyi JV without written consent from the other parties.

OWNERSHIP STRUCTURE OF XINYI JV

The chart below shows the ownership structure of Xinyi JV upon its establishment:

CSCIICL

SCOC

CSCED

Xuzhou Xinyi

88.5%

1%

0.5%

10%Xinyi JV

INFORMATION ON XINYI JV AND XINYI PROJECT

Xinyi JV is a joint venture company to be invested by CSCIICL, SCOC, CSCED and Xuzhou Xinyi for the purposes of project financing, investment, construction, operation, maintenance and transfer of the Xinyi Project.

The Xinyi Project is a Public-Private-Partnership (PPP) project relating to construction, operation and transfer of the Science and Technology Innovation Park in the Xinyi Economic Development Zone, Jiangsu, the PRC (Ϫᘽอӥ຾᏶ක೯ਜ ߅௴෤PPPධͦ). The Xinyi Project includes, but not limited to, the construction of workshops, warehouses, science and technology research and development centres, enterprise research institutes, residential buildings, canteens, commercial facilities and infrastructure. The gross floor area of the Xinyi Project is estimated to be 300,000 square metres.