Shimao Property : Connected Transaction - Acquisition of a Property Holding Company

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(Incorporated in the Cayman Islands with limited liability)

On 29 May 2017 (after trading hours), the Purchaser (a wholly-owned subsidiary of the Company) and the Vendor entered into the Equity Transfer Agreement, pursuant to which the Purchaser has conditionally agreed to acquire, and the Vendor has conditionally agreed to sell, the Sale Share, representing the entire issued share capital of the Target at Completion, at a cash consideration of RMB138,730,000, subject to adjustment for the Additional Consideration of RMB58,900,000 (if applicable).

The Target is principally engaged in investment holding and its principal assets are the Properties, which are all situated in Wuyishan Town, the PRC.

By virtue of being an associate of Mr. Hui (an executive Director, the chairman of the Board and the controlling shareholder (as defined in the Listing Rules) of the Company), the Vendor is a connected person of the Company under the Listing Rules. Accordingly, the Acquisition constitutes a connected transaction of the Company for the purpose of Chapter 14A of the Listing Rules.

As the highest applicable percentage ratios (as defined in Rule 14.07 of the Listing Rules) in respect of the Acquisition (taking into account of the Additional Consideration) is more than 0.1% but less than 5%, the Acquisition (taking into account of the Additional Consideration) is only subject to the reporting and announcement requirements set out under Chapter 14A of the Listing Rules, and is exempt from the approval by the independent shareholders of the Company.

The Board is pleased to announce that on 29 May 2017 (after trading hours), the Purchaser (a wholly-owned subsidiary of the Company) and the Vendor entered into the Equity Transfer Agreement, pursuant to which the Purchaser has conditionally agreed to acquire, and the Vendor has conditionally agreed to sell, the Sale Share, representing the entire issued share capital of the Target at Completion, at a cash consideration of RMB138,730,000, subject to adjustment for the Additional Consideration of RMB58,900,000 (if applicable).

Set out below are the principal terms of the Equity Transfer Agreement: Date : 29 May 2017

Parties : (1) The Vendor, Shimao International Holdings Limited, a company incorporated in Bermuda and continued in the BVI with limited liability, which is beneficially owned as to 100% by Mr. Hui (an executive Director, the chairman of the Board and the controlling shareholder (as defined in the Listing Rules) of the Company). Therefore, the Vendor is an associate of Mr.

Hui and thus a connected person of the Company; and

(2) The Purchaser, Shimao Property Investments Limited, a wholly-owned subsidiary of the Company.

Subject to the terms of the Equity Transfer Agreement, the Purchaser has conditionally agreed to acquire, and the Vendor has conditionally agreed to sell, the Sale Share, representing the entire issued share capital of the Target at Completion, free from all encumbrances.

The principal assets of the Target Group are the Properties which consist of (i) the relevant land use rights of the Property A with a total site area of approximately 110,154 sq.m.; (ii) the relevant land use rights of the Property B with a gross floor area of approximately 385 sq.m.; and (iii) the relevant land use rights of the Property C with a gross floor area of approximately 3,735 sq.m.. As at the date of this announcement, an application has been made with the relevant governmental or regulatory authorities in the PRC for the change of permitted land uses of the Property A ("Change of Land Use") to the development of hotel(s).

The Consideration is RMB138,730,000, which shall be payable by the Purchaser in cash at Completion and financed by the internal resources of the Group.

Pursuant to the Equity Transfer Agreement, if within 12 months from the effective date of the Equity Transfer Agreement, approval in writing in respect of the Change of Land Use is obtained from the relevant governmental or regulatory authorities in respect of the Property A, the Consideration shall be adjusted and increased by an amount of RMB58,900,000 ("Additional Consideration") to RMB197,630,000. The Additional Consideration shall be payable by the Purchaser to the Vendor within 14 days from the date when the Target obtains the aforesaid approval.

The Consideration and the Additional Consideration were determined after arm's length negotiations between the Purchaser and the Vendor principally with reference to the market valuations of the Properties as at 26 April 2017, as appraised by the independent valuer engaged by the Company. According to the valuations, the aggregate market value of the Properties is approximately RMB138,730,000 before the Change of Land Use and will be approximately RMB197,630,000 after the Change of Land Use.

Completion is conditional on the fulfilment and/or wavier of the following conditions:

1. the warranties given by the Vendor under the Equity Transfer Agreement (as at the date of the Equity Transfer Agreement and Completion) remaining true and not misleading in all material respects by reference to the facts and circumstances subsisting on the date of the Equity Transfer Agreement and the date of Completion respectively; and

2. the Target having complied with the applicable laws and regulation in approving the transfer of the Sale Share and the matters contemplated under the Equity Transfer Agreement.

The Vendor shall use its reasonable effort to procure the fulfilment of the Conditions set out above as soon as reasonably practicable and in any event before the Long Stop Date. The Purchaser may waive the Condition set out in paragraph (1) above.

Subject to fulfilment of the Conditions, Completion shall take place on a date to be agreed by the Purchaser and the Vendor provided that such date shall not be later than the Long Stop Date.

The Target is a company established under the laws of the BVI with limited liability on 2 April 2007 and is principally engaged in investment holding. As at the date of this announcement, the Target Group has no business operation other than the holding of the Properties. For further details of the Properties, please refer to the sub-section headed "Equity Transfer Agreement - Assets to be acquired" of this announcement.

The unaudited consolidated total assets value and net assets value of the Target Group as at 31 December 2016 were approximately RMB7,737,882 and approximately RMB6,936,739 respectively and the unaudited consolidated net loss before taxation of the Target Group for the years ended 31 December 2015 and 31 December 2016 were approximately RMB379,240 and RMB399,168 respectively.

Based on the information provided by the Vendor, the aggregate original acquisition costs of the Properties paid by the Vendor in 1993 were approximately RMB17,680,000 (excluding construction costs).

The Group is primarily engaged in property development, property investment and hotel operation in the PRC.

The Directors are optimistic about the prospects of the tourism and leisure industry in the areas of Wuyishan Town and thus consider that the Acquisition (in particular the acquisition of the Property A and Property C, which are held by the Target Group) represents a good opportunity for the Group to expand its land bank for future development.

In view of the above, the Directors (including the independent non-executive Directors) are of the view that the Acquisition is in the interests of the Company and its shareholders as a whole and the terms of the Equity Transfer Agreement are fair and reasonable and on normal commercial terms.

Mr. Hui is considered to have a material interest in the Acquisition by virtue of his beneficial interest in the Vendor and has abstained from voting on the resolution to approve the Equity Transfer Agreement and the Acquisition.