1. business and industrial
2. company
3. merger and acquisition

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 a licensed securities dealer, bank manager, solicitor, professional accountant or
other professional adviser.
If you have sold or transferred all your shares in China Development Bank International
Investment Limited, you should at once hand this circular, together with the accompanying form
of proxy, to the purchaser(s) or transferee(s) or to the bank, licensed securities dealer or other
agent through whom the sale or transfer was effected for transmission to the purchaser(s) or
transferee(s).
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.
China Development Bank International Investment Limited
國開國際投資有限公司
(Incorporated in the Cayman Islands with limited liability)
(Stock Code: 1062)
CONNECTED TRANSACTION
Independent Financial Adviser
to the Independent Board Committee and the Independent Shareholders
A letter from the Board is set out on pages 4 to 12 of this circular. A letter from the Independent
Board Committee is set out on pages 13 to 14 of this circular. A letter from Quam Capital
containing its advice to the Independent Board Committee and the Independent Shareholders is
set out on pages 15 to 27 of this circular.
The Company will convene the EGM at 10th Floor, Winland International Financial Center, No.7
Financial Street, Xicheng District, Beijing, the People’s Republic of China, on Thursday, 13
November 2014 at 11:00 a.m.. The notice convening the EGM is set out on pages 33 to 34 of
this circular. A form of proxy for use at the EGM is enclosed with this circular.
Whether or not you are able to attend the EGM, 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 branch 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 the holding of the EGM or any adjournment thereof.
Completion and return of the enclosed form of proxy will not preclude you from attending and
voting in person at the EGM or at any adjourned meetings should you so wish.
24 October 2014
CONTENTS
Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
LETTER FROM THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . . . .
13
LETTER FROM QUAM CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15
APPENDIX − GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
28
NOTICE OF EXTRAORDINARY GENERAL MEETING . . . . . . . . . . . . . . . . . . .
33
–i–
DEFINITIONS
In this circular, unless the context otherwise requires, the following expressions have
the following meanings:
“associate”
shall have the meaning ascribed to it under the Listing
Rules
“Board”
the board of Directors
“CDB”
China Development Bank Corporation, a company
incorporated under the laws of the PRC and the
ultimate parent company of CDBIH
“CDBC”
China Development Bank Capital Corporation Ltd （國
開金融有限責任公司）, a company incorporated under the
laws of the PRC and a wholly-owned subsidiary of
CDB
“CDB Group”
CDB and its subsidiaries
“CDBIH”
China Development Bank International Holdings
Limited, a wholly-owned subsidiary of CDBC and the
controlling Shareholder of the Company which directly
held approximately 66.16% of the issued share capital
of the Company as at the Latest Practicable Date
“Company”
China Development Bank International Investment
Limited, a company incorporated in the Cayman
Islands with limited liability and whose Shares are
listed on the Stock Exchange
“connected person”
has the same meaning ascribed to it under the Listing
Rules
“Director(s)”
the director(s) of the Company
“EGM”
the extraordinary general meeting of the Company to
be held on Thursday, 13 November 2014 for the
Independent Shareholders to consider and, if thought
fit, approve Jade Sino Subscription Agreement and the
transaction contemplated thereunder
“GW”
gigawatt, a unit of power equal to one billion watts
“Group”
the Company and its subsidiaries
“HK$”
Hong Kong dollars, the lawful currency of Hong Kong
–1–
DEFINITIONS
“Hong Kong”
the Hong Kong Special Administrative Region of the
PRC
“HKFRS”
Hong Kong Financial Reporting Standards, the accounting
standards adopted by the Company in preparing its
financial results
“IFRS”
International Financial Reporting Standards
“Independent Board Committee”
the independent board committee of the Board
comprising Mr WANG Xiangfei, Mr SIN Yui Man and
Mr FAN Ren Da, Anthony, all of whom are
independent non-executive Directors, to advise and
provide
recommendations
to
the
Independent
Shareholders on Jade Sino Subscription Agreement and
the transaction contemplated thereunder
“Independent Shareholders”
Shareholders other than CDBIH and its associates
“Jade Sino”
Jade Sino Ventures Limited, a company incorporated in
the British Virgin Islands with limited liability which is
mainly engaged in investment holding businesses, and a
wholly owned subsidiary of CDBIH as at the Latest
Practicable Date
“Jade Sino Subscription
Agreement”
the share subscription agreement dated 29 September
2014 entered into among the Company, CDBIH and
Jade Sino in relation to the subscription of 11,904 and
13,096 ordinary shares of Jade Sino by the Company
and CDBIH, respectively
“JinkoSolar Holding”
JinkoSolar Holding Co., Ltd., a company incorporated
in the Cayman Islands with limited liability and whose
shares are listed on the New York Stock Exchange
(NYSE: JKS)
“JinkoSolar Power”
JinkoSolar Power Engineering Group Limited, a
company incorporated in the Cayman Islands with
limited liability which is mainly engaged in the
development and operation of solar power projects, and
a subsidiary of JinkoSolar Holding
“JinkoSolar Power Subscription
Agreement”
The subscription agreement dated 25 July 2014 entered
into among Jade Sino and JinkoSolar Power in relation
to the subscription of an aggregate of 26,809 preferred
shares in JinkoSolar Power by Jade Sino
–2–
DEFINITIONS
“Latest Practicable Date”
22 October 2014, being the latest practicable date prior
to the printing of this circular for ascertaining certain
information contained herein
“Listing Rules”
the Rules Governing the Listing of Securities on The
Stock Exchange of Hong Kong Limited
“Macquarie”
Macquarie Greater China Infrastructure Fund
“MW”
megawatt, a unit of power equal to one million watts
“PRC”
the People’s Republic of China and for the purpose of
this circular, excluding Hong Kong, the Macau Special
Administrative Region and Taiwan
“PV”
photovoltaic
“Quam Capital” or “Independent
Financial Adviser”
Quam Capital Limited, a licensed corporation to
conduct type 6 (advising on corporate finance)
regulated activity as defined under the SFO, and being
the independent financial adviser to the Independent
Board Committee and the Independent Shareholders in
respect of Jade Sino Subscription Agreement and the
transactions contemplated thereunder
“SFO”
Securities and Futures Ordinance (Cap. 571 of the
Laws of Hong Kong)
“Share(s)”
ordinary share(s) of HK$0.01 each in the share capital
of the Company
“Shareholder(s)”
the holder(s) of the Share(s)
“Stock Exchange”
The Stock Exchange of Hong Kong Limited
“Subscription”
the subscription of 11,904 ordinary shares of Jade Sino
by the Company pursuant to Jade Sino Subscription
Agreement
“US$”
the lawful currency of the United States of America
“%”
per cent
–3–
LETTER FROM THE BOARD
China Development Bank International Investment Limited
國開國際投資有限公司
(Incorporated in the Cayman Islands with limited liability)
(Stock Code: 1062)
Executive Directors:
Mr TENG Rongsong
(Chairman and Chief Executive Officer)
Mr BAI Zhe
Mr LIU Xiao Guang
Mr YUAN Chun
Registered office:
Cricket Square
Hutchins Drive
P.O. Box 2681
Grand Cayman KY1-1111
Cayman Islands
Independent Non-Executive Directors:
Mr WANG Xiangfei
Mr SIN Yui Man
Mr FAN Ren Da, Anthony
Head office and principal place of
business in Hong Kong:
Suites 4506-4509
Two International Finance Centre
No. 8 Finance Street
Central, Hong Kong
24 October 2014
To the Shareholders
Dear Sir or Madam,
CONNECTED TRANSACTION
Reference is made to the Company’s announcement on connected transaction dated 29
September 2014. On 29 September 2014, the Company and CDBIH entered into Jade Sino
Subscription Agreement with Jade Sino, a wholly owned subsidiary of CDBIH, pursuant to
which the Company and CDBIH have agreed to subscribe for 11,904 and 13,096 ordinary
shares of Jade Sino, representing approximately 23.81% and 26.19% of the enlarged issued
share capital of Jade Sino, respectively. After the subscription, each of the Company and
CDBIH will hold approximately 23.81% and 76.19% of the enlarged share capital of Jade
Sino.
The purpose of this circular is:
(1)
to provide further details of Jade Sino Subscription Agreement and the transaction
contemplated thereunder;
(2)
to set out the recommendation of the Independent Board Committee in respect of
Jade Sino Subscription Agreement and the transaction contemplated thereunder;
(3)
to set out the letter of advice from Quam Capital to the Independent Board
Committee and the Independent Shareholders in respect of Jade Sino Subscription
Agreement and the transaction contemplated thereunder; and
–4–
LETTER FROM THE BOARD
(4)
1.
to set out the notice of EGM.
JADE SINO SUBSCRIPTION AGREEMENT
Set out below are the principal terms of Jade Sino Subscription Agreement.
Date
29 September 2014
Parties
(1)
Subscribers:
the Company and CDBIH; and
(2)
Issuer:
Jade Sino
Target Equity Interests of the Subscription
Pursuant to Jade Sino Subscription Agreement, the Company has agreed to subscribe
for, and Jade Sino has agreed to issue, 11,904 ordinary shares, representing approximately
23.81% of the enlarged issued share capital of Jade Sino, at the consideration of
US$24,998,400 (equivalent to approximately HK$193,737,600). CDBIH has agreed to
subscribe for, and Jade Sino has agreed to issue, 13,096 ordinary shares, representing
approximately 26.19% of the enlarged issued share capital of Jade Sino, at the consideration
of US$27,501,600 (equivalent to approximately HK$213,137,400). The subscription of
approximately 23.81% and 26.19% of the enlarged issued share capital of Jade Sino by the
Company and CDBIH, respectively, is not inter-conditional on each other.
There is no restriction on the subsequent sale of such shares under Jade Sino
Subscription Agreement. The Company does not intend to acquire further equity interest in
Jade Sino.
After completion of the Subscription, Jade Sino will be treated as an associate of the
Company, and its results and assets and liabilities will be accounted for by using the equity
method of accounting.
Consideration
The consideration of US$24,998,400 (equivalent to approximately HK$193,737,600) to
be paid by the Company to Jade Sino under Jade Sino Subscription Agreement was arrived
at after arm’s length negotiation with reference to the following factors:
(1)
as at the date of Jade Sino Subscription Agreement, the book value of the net
assets of Jade Sino was US$52.5 million (equivalent to approximately HK$406.88
million) and Jade Sino had a total of 25,000 ordinary shares in issue. Therefore,
the book value of the net assets of Jade Sino was approximately US$2,100 per
ordinary share; and
–5–
LETTER FROM THE BOARD
(2)
the Company had agreed to subscribe for 11,904 ordinary shares of Jade Sino at
the price of US$2,100 per ordinary share.
After completion of the Subscription, the book value of the net assets of Jade Sino will
be increased to US$105 million (equivalent to approximately HK$813.76 million) through
further capital contribution from both the Company and CDBIH.
Such consideration will be paid in cash and financed by the Company’s internal
resources.
Conditions precedent
The completion of the Subscription is conditional upon, among other things, the
passing of an ordinary resolution to approve Jade Sino Subscription Agreement and the
transaction contemplated thereunder by the Independent Shareholders at the EGM.
2.
INFORMATION OF PARTIES INVOLVED
The Company
The Company is an investment company incorporated in the Cayman Islands with
limited liability and its Shares are listed on the Main Board of the Stock Exchange pursuant
to Chapter 21 of the Listing Rules. The principal activity of the Company is to invest in
capital markets, equity and debt related securities in listed or unlisted entities on a global
basis, with a view to achieve medium to long-term capital appreciation of its assets.
CDBIH
CDBIH is the controlling Shareholder of the Company and directly held approximately
66.16% of the issued share capital of the Company as at the Latest Practicable Date.
Jade Sino
Jade Sino was incorporated in the British Virgin Islands in June 2014. It was a wholly
owned subsidiary of CDBIH as at the Latest Practicable Date and is mainly engaged in
investment holding businesses.
On 25 July 2014, Jade Sino entered into JinkoSolar Power Subscription Agreement,
pursuant to which Jade Sino had agreed to subscribe for an aggregate of 26,809 preferred
shares of JinkoSolar Power, representing approximately 21.00% of the enlarged issued share
capital of JinkoSolar Power on a fully diluted basis. As at the Latest Practicable Date, Jade
Sino had completed the subscription of 13,404 preferred shares of JinkoSolar Power,
representing approximately 11.73% of the enlarged share capital of JinkoSolar Power on a
fully diluted basis.
–6–
LETTER FROM THE BOARD
As at the Latest Practicable Date, the principal assets of Jade Sino was the 13,404
preferred shares of JinkoSolar Power. After completion of the Subscription, Jade Sino will
apply the amount of US$52.5 million (equivalent to approximately HK$406.88 million)
contributed by the Company and CDBIH to complete the subscription of the remaining
13,405 preferred shares of JinkoSolar Power. The subscription of the remaining 13,405
preferred shares of JinkoSolar Power by Jade Sino is expected to be completed as soon as
practicable and in any event by end of 2014.
JinkoSolar Power
JinkoSolar Power was incorporated in the Cayman Islands in November 2013. It is a
subsidiary of JinkoSolar Holding and is mainly engaged in the development and operation of
solar power projects. JinkoSolar Holding is a global leader in the solar PV industry and is
currently listed on the New York Stock Exchange (NYSE: JKS).
According to the unaudited management accounts of JinkoSolar Power prepared under
the IFRS, as at 31 December 2013 and 30 June 2014, the book value of the net assets of
JinkoSolar Power was approximately US$7.42 million and US$158.16 million, respectively
(equivalent to approximately HK$57.48 million and HK$1,225.77 million, respectively). To
the best knowledge of the Directors, such increase was attributable to the further capital
contribution from JinkoSolar Holding.
JinkoSolar Holding announced that, on 30 July 2014, CDBIH (through Jade Sino),
Macquarie and New Horizon Capital had agreed to invest a total of US$225 million in
JinkoSolar Power, representing a total of approximately 45% of the equity interest in
JinkoSolar Power upon completion of such investment and additional capital contribution by
JinkoSolar Holding. As a result of such investment the book value of the net assets of
JinkoSolar Power will be further increased. Of the 45% equity interest, Jade Sino had agreed
to subscribe for 26,809 preferred shares of JinkoSolar Power pursuant to JinkoSolar Power
Subscription Agreement, representing approximately 21.00% of the enlarged issued share
capital of JinkoSolar Power. To the best knowledge of the Directors, each of Macquarie,
New Horizon Capital and JinkoSolar Holding was independent of the Company and its
connected persons as of the Latest Practicable Date.
As at the Latest Practicable Date, other various parties had completed their respective
capital contribution into JinkoSolar Power while Jade Sino was expected to complete the
subscription of the remaining 13,405 preferred shares of JinkoSolar Power as soon as
practicable and in any event by end of 2014.
Set out below is the shareholding structure of Jade Sino and JinkoSolar Power as of the
Latest Practicable Date, and the estimated shareholding structure of Jade Sino and Jinkosolar
Power (i) immediately after the completion of the Subscription; and (ii) immediately after
the completion of the subscription of an aggregate of 26,809 preferred shares in JinkoSolar
Power by Jade Sino:
–7–
LETTER FROM THE BOARD
(i)
as of the Latest Practicable Date:
CDBIH
66.16%
The Company
100%
JinkoSolar Holding
(through its wholly-owned subsidiary)
Jade Sino
International Investors
(including Macquarie and New Horizon Capital)
11.73%
61.45%
26.82%
JinkoSolar Power
(ii) immediately after the completion of the Subscription:
CDBIH
66.16%
The Company
76.19%
23.81%
JinkoSolar Holding
(through its wholly-owned subsidiary)
Jade Sino
International Investors
(including Macquarie and New Horizon Capital)
11.73%
61.45%
26.82%
JinkoSolar Power
(iii) immediately after the completion of the subscription of an aggregate of 26,809
preferred shares in JinkoSolar Power by Jade Sino:
CDBIH
66.16%
The Company
76.19%
23.81%
JinkoSolar Holding
(through its wholly-owned subsidiary)
55.00%
Jade Sino
21.00%
JinkoSolar Power
–8–
International Investors
(including Macquarie and New Horizon Capital)
24.00%
LETTER FROM THE BOARD
The net profits of JinkoSolar Power for the year ended 31 December 2013 are as
follows:
For the year ended
31 December 2013
(US$)
Net profits before taxation
5,160,321.1
Net profits after taxation
4,915,365.5
There are no material differences between the book value of net assets or net profits of
JinkoSolar Power prepared under the IFRS and the HKFRS.
3.
REASONS FOR AND BENEFITS OF THE SUBSCRIPTION
As an investment company, the Company has always been seeking investment
opportunities in line with its investment strategies. The Company has decided to invest into
the PV industry through the Subscription with the expectation that the PV industry in the
PRC will experience significant growth, especially based on the factors:
(1)
favourable industry policies: power generation from solar PV is a clean energy
technology and therefore is encouraged by the PRC government. The PRC
government has issued various policies and measures that are favorable to the PV
industry in both national and provincial levels, which have promoted the growth
of the PV industry;
(2)
rapid growth in installed capacity: the annual PV installed capacity in the PRC
has experienced remarkable growth in recent years from 40MW in 2008 to
approximately 12 GW in 2013, and is expected to continue growing significantly
in the next several years; and
(3)
stable investment return: the PRC government has provided financial assistance
grant in order to support the development of the PV industry and therefore the
investment return is relatively stable. It is expected that the investment return in
the PV industry will be more secured along with the development of technology,
improvement of equipment quality and promotion of after-sale service.
Leveraging its expertise in manufacturing high quality solar modules and substantial
experience in the solar industry, JinkoSolar Holding commenced developing solar power
projects in late 2011. It completed solar projects with a total capacity of approximately 213
MW in 2013, and expects to complete more solar projects with an additional capacity of 600
MW in 2014, of which 139 MW had been completed as of 10 September 2014. In addition,
in the second quarter of 2014, electricity revenues generated from solar projects of
JinkoSolar Holding amounted to RMB61.0 million (equivalent to approximately US$9.8
million) (including the revenue contributed by JinkoSolar Power), representing an increase
of approximately 26.1% from the first quarter of 2014 and an increase of approximately
–9–
LETTER FROM THE BOARD
104.7% from the fourth quarter of 2013. JinkoSolar Power, as a subsidiary of JinkoSolar
Holding mainly engaged in its downstream solar power project business, is expected to
achieve more market share and electricity revenues with its business expansion.
After considering the restriction on its investment amount as an investment company,
the timing of investment and relatively easier exiting route, the Company has decided to
invest in JinkoSolar Power through Jade Sino, instead of investing into JinkoSolar Power
directly. In addition, the Company does not have any intention to invest into JinkoSolar
Holding because the business of JinkoSolar Holding is more diversified compared to
JinkoSolar Power while the Company intends to focus its investment in the development and
operation of solar power projects at the current stage.
Given that Jade Sino will hold approximately 21.00% equity interest in JinkoSolar
Power after completion of the subscription under JinkoSolar Power Subscription Agreement,
the Directors believe that the Subscription will provide the Company with a good
opportunity to share the future growth of JinkoSolar Power.
The Directors (including the independent non-executive Directors) consider that the
terms of Jade Sino Subscription Agreement are fair and reasonable and that the Subscription
is in the interests of the Company and its Shareholders as a whole.
Going forward, the Company will also consider other potential investment opportunities
to balance its investment portfolio and avoid over-concentration in any particular industry.
4.
LISTING RULES IMPLICATIONS
As at the Latest Practicable Date, Jade Sino was a wholly-owned subsidiary of CDBIH,
which is the controlling Shareholder of the Company. Therefore, Jade Sino is an associate of
CDBIH and a connected person of the Company under the Listing Rules. Accordingly, the
transaction contemplated under Jade Sino Subscription Agreement constitutes a connected
transaction of the Company under Chapter 14A of the Listing Rules. As certain applicable
percentage ratios are more than 5% but below 25%, the transaction contemplated under Jade
Sino Subscription Agreement is subject to the reporting, announcement and independent
shareholders’ approval requirements under the Listing Rules.
Mr TENG Rongsong has abstained from voting on the Board resolutions approving
Jade Sino Subscription Agreement due to his directorship in Jade Sino. Save as disclosed
above, none of the other Directors has material interest in Jade Sino Subscription
Agreement.
5.
EGM
The Company will convene the EGM to, among other things, consider and approve
Jade Sino Subscription Agreement and the transaction contemplated thereunder. The notice
convening the EGM is set out on pages 33 to 34 of this circular. A form of proxy for use at
the EGM is enclosed with this circular.
– 10 –
LETTER FROM THE BOARD
CDBIH and its associates, who held approximately 66.16% of the issued share capital
of the Company as at the Latest Practicable Date, are required to abstain from voting on the
resolution to approve Jade Sino Subscription Agreement and the transaction contemplated
thereunder at the EGM.
A form of proxy for use by the Shareholders at the EGM is enclosed with this circular.
Such form of proxy for use at the EGM is also published on the websites of the Stock
Exchange at www.hkexnews.hk and the Company at www.cdb-intl.com. Whether or not you
are able to attend the EGM, 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
branch 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 of the EGM or any adjournment thereof.
Completion and return of the enclosed form of proxy will not preclude you from attending
and voting in person at the EGM or any adjourned meeting should you so wish.
In accordance with the Listing Rules, the vote of the Independent Shareholders taken at
the EGM will be taken by poll. The voting results will be announced after the EGM.
6.
RECOMMENDATION
Your attention is drawn to the letter from the Independent Board Committee as set out
on pages 13 to 14 of this circular which contains its recommendation to the Independent
Shareholders on the terms of Jade Sino Subscription Agreement. Your attention is also drawn
to the letter of advice received from Quam Capital as set out on pages 15 to 27 of this
circular which contains, among other things, its advice to the Independent Board Committee
and the Independent Shareholders in relation to the terms of Jade Sino Subscription
Agreement, the casting of votes for or against the resolution approving Jade Sino
Subscription Agreement by poll at the EGM as well as the principal factors and reasons
considered by it in concluding its advice.
The Independent Board Committee, after taking into account the terms of Jade Sino
Subscription Agreement, the advice and recommendation from Quam Capital and the
information contained herein, has come to the view that Jade Sino Subscription Agreement
is on normal commercial terms and in the ordinary and usual course of business of the
Group, its terms are fair and reasonable and the transaction contemplated thereunder is in
the interests of the Company and the Shareholders as a whole. Accordingly, the Independent
Board Committee recommends the Independent Shareholders to vote for the resolution to
approve Jade Sino Subscription Agreement and the transaction contemplated thereunder at
the EGM.
– 11 –
LETTER FROM THE BOARD
The Directors (including the independent non-executive Directors) consider that Jade
Sino Subscription Agreement is in the interests of the Company and the Shareholders as a
whole. Accordingly, the Directors recommend that Independent Shareholders vote in favour
of Jade Sino Subscription Agreement and the transaction contemplated thereunder at the
EGM.
By Order of the Board
China Development Bank International Investment Limited
TENG Rongsong
Chairman
– 12 –
LETTER FROM THE INDEPENDENT BOARD COMMITTEE
China Development Bank International Investment Limited
國開國際投資有限公司
(Incorporated in the Cayman Islands with limited liability)
(Stock Code: 1062)
Office address:
Suites 4506-4509
Two International Finance Centre
No. 8 Finance Street
Central, Hong Kong
24 October 2014
To the Independent Shareholders
Dear Sir or Madam,
CONNECTED TRANSACTION
We refer to the circular issued by the Company to the Shareholders dated 24 October
2014 (the “Circular”) of which this letter forms part. Terms defined in the Circular shall
have the same meanings in this letter unless the context otherwise requires.
Under the Listing Rules, the transaction contemplated under Jade Sino Subscription
Agreement constitutes a connected transaction of the Company, and is subject to the
approval of the Independent Shareholders at the EGM.
We have been appointed as the Independent Board Committee to consider the terms of
Jade Sino Subscription Agreement and to advise the Independent Shareholders in connection
with Jade Sino Subscription Agreement as to whether, in our opinion, its terms are fair and
reasonable and whether Jade Sino Subscription Agreement is in the interests of the Company
and the Shareholders as a whole. Quam Capital has been appointed as the independent
financial adviser to advise us in this respect.
We wish to draw your attention to the letter from the Board and the letter from Quam
Capital as set out in the Circular. Having considered the terms of Jade Sino Subscription
Agreement, the advice and recommendation from Quam Capital as set out in the letter from
Quam Capital and the information contained in the letter from the Board, we consider that
Jade Sino Subscription Agreement is on normal commercial terms and in the ordinary and
usual course of business of the Group, its terms are fair and reasonable and the transaction
contemplated thereunder is in the interests of the Company and the Shareholders as a whole.
– 13 –
LETTER FROM THE INDEPENDENT BOARD COMMITTEE
Accordingly, we recommend the Independent Shareholders to vote in favour of the
ordinary resolution to approve Jade Sino Subscription Agreement and the transaction
contemplated thereunder at the EGM.
Yours faithfully,
For and on behalf of the Independent Board Committee
Mr WANG Xiangfei, Mr SIN Yui Man, Mr FAN Ren Da, Anthony
Independent non-executive Directors
China Development Bank International Investment Limited
– 14 –
LETTER FROM QUAM CAPITAL
The following is the full text of a letter of advice from Quam Capital, the Independent
Financial Adviser to the Independent Board Committee and the Independent Shareholders,
which has been prepared for the purpose of incorporation into this circular, setting out its
advice to the Independent Board Committee and the Independent Shareholders in respect of
Jade Sino Subscription Agreement and the transaction contemplated thereunder.
24 October 2014
To the Independent Board Committee and the Independent Shareholders
China Development Bank International Investment Limited
Suites 4506-4509
Two International Finance Centre
No. 8 Finance Street, Central
Hong Kong
Dear Sir or Madam,
CONNECTED TRANSACTION
SUBSCRIPTION OF APPROXIMATELY 23.81% EQUITY INTEREST
IN JADE SINO
INTRODUCTION
We refer to our appointment as the Independent Financial Adviser to the Independent
Board Committee and the Independent Shareholders in respect of Jade Sino Subscription
Agreement and the transaction contemplated thereunder, details of which are set out in the
Letter from the Board (the “Letter from the Board”) contained in the circular issued by the
Company to the Shareholders dated 24 October 2014 (the “Circular”), of which this letter
forms part. Capitalised terms used in this letter shall have the same meanings as defined in
the Circular unless the context otherwise requires.
On 29 September 2014, the Company and CDBIH entered into Jade Sino Subscription
Agreement with Jade Sino, pursuant to which the Company and CDBIH have agreed to
subscribe for 11,904 and 13,096 ordinary shares of Jade Sino, respectively, representing
approximately 23.81% and 26.19% of the enlarged issued share capital of Jade Sino,
respectively. After the subscription, each of the Company and CDBIH will hold
approximately 23.81% and 76.19% of the enlarged share capital of Jade Sino, respectively.
Jade Sino is a wholly-owned subsidiary of CDBIH, the controlling Shareholder.
Therefore, Jade Sino is an associate of CDBIH and a connected person of the Company
pursuant to Chapter 14A of the Listing Rules. Accordingly, the transaction contemplated
under Jade Sino Subscription Agreement constitutes a connected transaction of the Company
pursuant to Chapter 14A of the Listing Rules. As certain applicable percentage ratios are
– 15 –
LETTER FROM QUAM CAPITAL
more than 5% but below 25%, the transaction contemplated under Jade Sino Subscription
Agreement is subject to the approval by the Independent Shareholders in accordance with
the requirements of the Listing Rules.
Mr WANG Xiangfei, Mr SIN Yui Man, and Mr FAN Ren Da, Anthony, the independent
non-executive Directors, have been appointed as members of the Independent Board
Committee to advise the Independent Shareholders as to (i) whether the terms of Jade Sino
Subscription Agreement are on normal commercial terms, fair and reasonable, and in the
interests of the Company and the Shareholders as a whole; and (ii) whether to vote in favour
of the ordinary resolution to be proposed at the EGM to approve the Jade Sino Subscription
Agreement and the transaction contemplated thereunder. 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 Limited did not have any relationship
with or interest in the Company, CDBIH, Jade Sino, JinkoSolar Holding or JinkoSolar Power
that could reasonably be regarded as relevant to the independence of Quam Capital Limited.
In the last two years, there was no engagement between the Group and Quam Capital
Limited. 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 had
received any fees or benefits from the aforesaid companies. Accordingly, we are qualified to
give independent advice in respect of Jade Sino Subscription Agreement and the transaction
contemplated thereunder.
BASIS OF OUR OPINION
In formulating our recommendation, we have relied on (i) the information and facts
contained or referred to in the Circular; (ii) the information supplied by the Company and its
advisers; (iii) the opinions expressed by and the representations of the Directors and
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 at
the time they were made and continued to be so up to the date of the Circular and may be
relied upon. We have no reason to doubt the truth, accuracy and completeness of such
information and representations provided to us by the Directors, the management of the
Group and the advisers of the Company. 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 regarding
the Company, Jade Sino, JinkoSolar Power and Jade Sino Subscription Agreement and the
transaction contemplated thereunder provided to us by the Company and/or the Directors, the
management of the Group and the advisers of the Company are true, accurate, complete and
not misleading in all aspects at the time they were made and continued to be so until the
date of the Circular.
We consider that we have reviewed sufficient information currently available to reach
an informed view and to justify our reliance on the accuracy of the information contained in
the Circular and information or representations regarding the Company, Jade Sino,
JinkoSolar Power and Jade Sino Subscription Agreement and the transactions contemplated
– 16 –
LETTER FROM QUAM CAPITAL
thereunder so as to provide a reasonable basis for our recommendation. We have not,
however, carried out any independent verification of the information, nor have we conducted
any form of in-depth investigation into the business, affairs, operations, financial position or
future prospects of the Company, CDBIH, Jade Sino, JinkoSolar Power or any of their
respective subsidiaries and associates.
THE JADE SINO SUBSCRIPTION AGREEMENT
On 29 September 2014, the Company and CDBIH entered into Jade Sino Subscription
Agreement with Jade Sino, pursuant to which the Company and CDBIH has agreed to
subscribe for 11,904 and 13,096 ordinary shares of Jade Sino, respectively, representing
approximately 23.81% and 26.19% of the enlarged issued share capital of Jade Sino,
respectively. After the subscription, each of the Company and CDBIH will hold
approximately 23.81% and 76.19% of the enlarged share capital of Jade Sino, respectively.
As stated in the Letter from the Board, after considering the restriction on its
investment amount as an investment company, the timing of investment and relatively easier
exiting route, the Company has decided to invest in JinkoSolar Power through Jade Sino,
instead of investing into JinkoSolar Power directly. In addition, the Company does not have
any intention to invest into JinkoSolar Holding because the business of JinkoSolar Holding
is more diversified compared to JinkoSolar Power while the Company intends to focus its
investment in the development and operation of solar power projects at the current stage.
PRINCIPAL FACTORS AND REASONS CONSIDERED
In arriving at our recommendation in respect of Jade Sino Subscription Agreement and
the transaction contemplated thereunder, we have taken into consideration the following
principal factors and reasons:
1.
Background and financial information of the Group
The Company is an investment company incorporated in the Cayman Islands with
limited liability and its shares are listed on the Main Board of the Stock Exchange pursuant
to Chapter 21 of the Listing Rules. The principal activity of the Company is to invest in
capital markets, equity and debt related securities in listed or unlisted entities on a global
basis, with a view to achieve medium to long-term capital appreciation of its assets.
According to the interim report of the Company for the six months ended 30 June 2014
(the “2014 Interim Report”), the Group had investments in listed and unlisted companies in
diverse business, including but not limited to, manufacturing of industrial gases, construction
of drilling rigs, meat and food processing, scientific measuring and industrial control
equipment production, internet and mobile value-added services and online advertising
services, insurance, banking, telecommunications and e-commerce. As stated in the 2014
Interim Report, in order to improve the performance of the Group and deliver the best
returns to the Shareholders, the Group will continue to look for investment opportunities
which can strengthen its profitability under acceptable risk in the portfolio of the Group.
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LETTER FROM QUAM CAPITAL
The following table sets out certain selected financial information of the Group for
each of the two years ended 31 December 2012 and 2013 and six months ended 30 June
2013 and 2014 as extracted from the annual report of the Company for the year ended 31
December 2013 and the 2014 Interim Report:
Six months ended 30
June
2014
2013
HK$’000
HK$’000
(unaudited) (unaudited)
Investment income
Profit (loss) before taxation
Profit (loss) for the year/
period
Year ended 31
December
2013
2012
HK$’000
HK$’000
(audited)
(audited)
29,762
28,016
5,130
(10,308)
27,676
20,459
1,019
(8,265)
27,643
(10,663)
18,184
(8,669)
As at 30 June
2014
HK$’000
(unaudited)
Net assets
Bank balances and cash
1,091,284
516,193
As at 31 December
2013
2012
HK$’000
HK$’000
(audited)
(audited)
1,064,321
442,729
1,049,458
716,942
The investment income of the Group consists of dividend income from financial assets
held for trading and interest income from investment designated at fair value through profit
or loss. As shown in the above table, the investment income of the Group increased
significantly from approximately HK$1.0 million for the year ended 31 December 2012 to
approximately HK$27.7 million for the year ended 31 December 2013. Such increase was
due to interest income from the convertible notes, convertible bonds as well as loan and
warrant instruments for the year ended 31 December 2013 whereas no such interest income
was recognised for the year ended 31 December 2012. This factor also attributable to the
significant increase in investment income of the Group for the six months ended 30 June
2014 as compared to the first half of 2013. As a result of the substantial increase in
investment income, the Group’s became profitable for the year ended 31 December 2013 and
recorded a 159.2% increment in net profit for the six months ended 30 June 2014 as
compared to the same period in 2013.
As at 30 June 2014, the unaudited consolidated net assets and bank balances and cash
of the Group amounted to approximately HK$1,091.3 million and HK$516.2 million
respectively.
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LETTER FROM QUAM CAPITAL
2.
Background and financial information of Jade Sino and JinkoSolar Power
2.1 Background of Jade Sino
As stated in the Letter from the Board, Jade Sino was incorporated in the British
Virgin Islands in June 2014. It is wholly-owned by CDBIH as at the Latest Practicable Date
and is mainly engaged in investment holding businesses.
On 25 July 2014, Jade Sino entered into JinkoSolar Power Subscription Agreement,
pursuant to which Jade Sino have agreed to subscribe for an aggregate of 26,809 preferred
shares of JinkoSolar Power, representing approximately 21.00% of the enlarged issued share
capital of JinkoSolar Power on a fully diluted basis. As at the Latest Practicable Date, Jade
Sino had completed the subscription of 13,404 preferred shares of JinkoSolar Power,
representing approximately 11.73% of the enlarged share capital of JinkoSolar Power on a
fully diluted basis.
As at the Latest Practicable Date, the principal asset of Jade Sino was 13,404 preferred
shares of JinkoSolar Power. After completion of the Subscription, Jade Sino will apply the
amount of US$52.5 million (equivalent to approximately HK$406.88 million) contributed by
the Company and CDBIH to complete the subscription of the remaining 13,405 preferred
shares of JinkoSolar Power. The subscription of the remaining 13,405 preferred shares of
JinkoSolar Power by Jade Sino is expected to be completed as soon as practicable and in
any event by end of 2014.
As Jade Sino was incorporated in June 2014, no management accounts have been
prepared.
2.2 Background and financial information of JinkoSolar Power
As stated in the Letter from the Board, JinkoSolar Power is a subsidiary of JinkoSolar
Holding and is mainly engaged in the development and operation of solar power projects.
JinkoSolar Holding is a global leader in the solar PV industry and is listed on the New York
Stock Exchange (NYSE: JKS).
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LETTER FROM QUAM CAPITAL
JinkoSolar Power was incorporated in the Cayman Islands in November 2013. Set out
below are the extracts of financial information of JinkoSolar Power for the year ended 31
December 2013 according to the unaudited management accounts of JinkoSolar Power
prepared under the IFRS:
For the year ended 31 December 2013
US$
Net profits before taxation
Net profits after taxation
5,160,321.1
4,915,365.5
As at 31 December 2013
US$
Net assets value
7,416,473.8
As at 30 June 2014, net assets of JinkoSolar Power were approximately US$158.16
million (equivalent to approximately HK$1,225.77 million) based on its management
accounts. As advised by the Company, the substantial increase in net assets value of
JinkoSolar Power as at 30 June 2014 as compared to 31 December 2013 was attributable to
further capital contribution from JinkoSolar Holding.
JinkoSolar Holding announced that, on 30 July 2014, CDBIH (through Jade Sino),
Macquarie and New Horizon Capital had agreed to invest a total of US$225 million in
JinkoSolar Power, representing a total of approximately 45% of the equity interest in
JinkoSolar Power upon completion of such investment and additional capital contribution by
JinkoSolar Holding. As a result of such investment, the book value of the net assets of
JinkoSolar Power will be further increased. Of the 45% equity interest, Jade Sino had agreed
to subscribe for 26,809 preferred shares of JinkoSolar Power pursuant to the JinkoSolar
Power Subscription Agreement, representing approximately 21% of the enlarged issued share
capital of JinkoSolar Power. To the best knowledge of the Directors, each of Macquarie,
New Horizon Capital and JinkoSolar Holding was independent of the Company and its
connected persons as of the Latest Practicable Date.
As at the Latest Practicable Date, other various parties had completed their respective
capital contributions into JinkoSolar Power while Jade Sino is expected to complete the
subscription of the remaining 13,405 preferred shares of JinkoSolar Power as soon as
practicable and in any event by the end of 2014.
According to the presentations published by JinkoSolar Holding in July and August
2014, 12 solar power projects in Xinjiang, Qinghai, Jiangsu and Gansu with total PV
electricity generation capacity of 252MW were in operation as at 30 June 2014. The
proceeds from the aforesaid three investors will be applied to the construction of new
downstream solar power projects in the PRC. Its downstream capacity was planned to
increase to over 800MW by the end of 2014.
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LETTER FROM QUAM CAPITAL
2.3 Overview of the PV industry in the PRC
PV is a method of generating electrical power by converting sunlight into direct current
electricity using semiconducting materials that exhibit the PV effect. Power generation from
solar PV is a clear energy technology.
According to the Global Market Outlook for Photovoltaics 2014 – 2018 published by
the European Photovoltaic Industry Association, the PRC became the top PV market in the
world in 2013 and achieved the world’s largest PV installed capacity in one year with
approximately 12GW. The PV installation in the PRC has experienced remarkable growth in
recent years. The installed capacity in one year in the PRC increased from 40MW in 2008 to
approximately 12GW in 2013.
According to the Report on the Photovoltaic Industry for the First Half of 2014（2014年
上半年光伏產業運行情況）and Report on the Photovoltaic Industry for 2013（2013年我國光伏產
業運行情況）published by the Ministry of Industry and Information Technology of the PRC
on 19 August 2014 and 23 April 2014, respectively, the condition of the industry was
improving during 2013 and the first half of 2014. The total PV electricity generation unit
installed capacity was approximately 12GW and 3.3GW for 2013 and the first half of 2014.
The total PV installed capacity in the PRC in aggregate was over 20GW by the end of 2013.
Given the target installation capacity approximately of 14GW in 2014, it is expected that the
PV power industry in the PRC will experience significant growth in the second half of 2014.
The PRC government has formulated various policies and measures that are favourable
to the PV industry in both national and provincial levels.
The National Energy Administration published a Notice on the Further Implementation
of the Relevant Policies of Distributed Photovoltaic Power Generation（國家能源局關於進一步
落實分散式光伏發電有關政策的通知） on 2 September 2014 which emphasises the PRC
government’s view that PV electricity generation is of high importance in view of its
strategic significance in (i) optimising the energy structure in PRC; (ii) ensuring energy
security; and (iii) improving the environment. As such the installation and application of the
PV electricity generation is highly encouraged through, including but not limited to, (i)
requesting local governments to include the development and application of PV electricity
generation in their town planning; (ii) encouraging the application of PV electricity
generation at train stations, airports, stadiums, car parks, highway service area, and
large-scale integrated transport hub; (iii) improving the subsidies allocation process for PV
electricity generation projects; and (iv) encouraging banks to grant borrowings to PV
electricity generation projects.
According to the Catalogue of Encouraged Industries in the Western Region（西部地區
鼓勵類產業目錄） issued by National Development and Reform Commission (the “NDRC”),
PV electricity generation projects in Tibet, Gansu, Qinghai, Ningxia, Xinjiang and Inner
Mongolia are within the scope of the encouraged industries. Further, according to the
Announcement on Issues Concerning Enterprise Income Tax Relating to Enhancing the
Western Region’s Development Strategy （關於深入實施西部大開發戰略有關企業所得稅問題的公
告）issued by the State Administration of Taxation of the PRC, from 1 January 2011 to 31
December 2020, companies generated over 70% of its revenue from the industries which are
– 21 –
LETTER FROM QUAM CAPITAL
within the scope of the Catalogue of Encouraged Industries in the Western Region will enjoy
preferential enterprise income tax rate of 15% instead of the normal enterprise income tax
rate of 25%.
In July 2011, the NDRC released “The Notice on Perfection of Policy Regarding FiT
Feed-in Tariff of Power Generated by Solar Photovoltaic”《關於完善太陽能光伏發電上網電價政
策的通知》
（發改價格[2011]1594號）. According to the notice, standard on-grid tariff of RMB1.0
(except Tibet) shall be provided for each kilowatt hour (“KWh”) for solar projects in the
PRC. In August 2013, NDRC released The Notice on Leveraging the Price for the
Development of the Solar Energy Industry《國家發展改革委關於發揮價格槓桿作用促進光伏產業
健康發展的通知》
（發改價格[2013]1638號）. According to this notice, solar power projects are
categorised into three energy zones according to the geographic locations, namely energy
zone I (including but not limited to Ningxia, Qinghai Haixi, Gansu Jiayuguan and Xinjiang
Hami, etc.), II (including but not limited to Beijing, Tianjin, Qinghai, Heilongjiang, Liaoning
and Yunnan, etc.) and III (including all locations other than energy zones I and II). The
on-grid tariff of RMB0.9/KWh, RMB0.95/KWh and RMB1.0/KWh shall be provided to solar
projects in energy zone I, II and III respectively.
The supportive governmental policies and measures are the driving forces to the growth
of the PV industry in the PRC. Therefore, we consider that the prospect of the PRC’s PV
industry is promising in the coming years.
3.
Reasons for and benefits of the Subscription
As stated in the Letter from the Board, the Company has decided to invest into the PV
industry through the Subscription with the expectation that the PV industry in the PRC will
experience significant growth, especially based on the following factors: (i) favourable
industry policies; (ii) rapid growth in installed capacity; and (iii) stable investment returns.
For details, please refer to the section headed “Reasons for and benefits of the Subscription”
in the Letter from the Board. Given that Jade Sino will hold approximately 21.00% equity
interest in JinkoSolar Power on an enlarged share capital basis after completion of the
subscription under the JinkoSolar Power Subscription Agreement, the Directors believe that
the Subscription will provide the Company with a good opportunity to share the future
growth of JinkoSolar Power.
Based on our analysis set out in the section headed “Overview of the PV industry in
the PRC” above, we are of the view that there will be a rapid growth in the PRC’s PV
industry in coming years.
As stated in the section headed “Background and financial information of Jade Sino
and JinkoSolar Power” above, the downstream capacity was planned to increase to over
800MW by the end of 2014. We have discussed with management of the Company regarding
the PV electricity generation capacity of various projects on hand and potential projects of
JinkoSolar Power and noted that the target increment in PV electricity generation capacity is
achievable. We were also advised by the management of the Company that upon the
commencement of the solar power projects of JinkoSolar Power, the standard on-grid tariff
of RMB0.9/KWh, RMB0.95/KWh and RMB1.0/KWh shall be provided to JinkoSolar Power.
We have reviewed The Notice on Leveraging the Price for the Development of the Solar
– 22 –
LETTER FROM QUAM CAPITAL
Energy Industry 《國家發展改革委關於發揮價格槓桿作用促進光伏產業健康發展的通知》
（發改價格[2
013]1638號）released by the NDRC, and noted that standard on-grid tariff of RMB0.9/KWh,
RMB0.95/KWh and RMB1.0/KWh shall be provided. We, therefore, concur with the
Directors’ view that the Subscription will provide the Company with an opportunity to share
the future growth of JinkoSolar Power.
Given that the principal activity of the Company is to invest in capital markets, equity
and debt related securities in listed or unlisted entities, we consider that the Subscription is
in the ordinary and usual course of business of the Group.
Based on the aforesaid, we consider that the Subscription is in the interests of the
Company and the Shareholders as a whole.
4.
Principal term of Jade Sino Subscription Agreement
The principal asset of Jade Sino is the investment in JinkoSolar Power. As advised by
the Company, Jade Sino has negligible liabilities. Therefore, our assessment of the fairness
and reasonableness of the consideration for the Subscription is based on the approximately
5% effective interest in JinkoSolar Power to be held by the Company.
The consideration for the Subscription of US$24,998,400 (equivalent to approximately
HK$193,737,600) to be paid by the Company to Jade Sino under Jade Sino Subscription
Agreement was arrived at after arm’s length negotiation with reference to the following
factors:
(1)
as at the date of Jade Sino Subscription Agreement, the book value of the net
assets of Jade Sino was US$52.5 million (equivalent to approximately HK$406.88
million) and Jade Sino had a total of 25,000 ordinary shares in issue; and
(2)
the Company had agreed to subscribe for 11,904 ordinary shares of Jade Sino.
After completion of the Subscription, the book value of the net assets of Jade Sino will
be increased to US$105 million (equivalent to approximately HK$813.76 million) through
further capital contribution from both the Company and CDBIH, and the Company will hold
approximately 23.81% of the enlarged share capital of Jade Sino.
The consideration will be paid in cash and financed by the Company’s internal
resources.
Given that Jade Sino was incorporated in June 2014, no management accounts have
been prepared. We were advised that the principal asset and net assets value of Jade Sino of
US$52.5 million (equivalent to approximately HK$406.88 million) as at 30 June 2014
represented the investment of 13,404 preferred shares of JinkoSolar Power pursuant to the
JinkoSolar Power Subscription Agreement. Taking into account of the net asset value of
US$52.5 million and the number of issued shares of Jade Sino immediately before the
Subscription, the book value of the net assets of Jade Sino per ordinary share was
US$2,100; whilst the consideration per share pursuant to the Jade Sino Subscription
Agreement is US$2,100, taking into account of the number of shares to be subscribed by the
– 23 –
LETTER FROM QUAM CAPITAL
Company of 11,904 shares and the consideration of Subscription of US$24,998,400. As such,
the subscription price per share of Jade Sino payable by the Company and CDBIH pursuant
to Jade Sino Subscription Agreement are the same.
5.
Analysis on the fairness and reasonableness of the consideration for the Subscription
Upon completion of the Subscription and the subscription under JinkoSolar Power
Subscription Agreement, the Company will hold approximately 23.81% of the equity interest
in Jade Sino, which in turn will hold approximately 21.00% equity interest in JinkoSolar
Power.
In evaluating the fairness and reasonableness of the consideration for the Subscription,
we have attempted, on a best effort basis, to identify comparable companies that are listed
on the Stock Exchange and principally engaged in the development and operation of solar
power projects in the PRC. Based on the information available on the website of the Stock
Exchange and with our best endeavour, we are unable to identify any comparable companies.
Alternatively, we have based on the information available on the website of the Stock
Exchange and with our best endeavour, identified six transactions involving the acquisition
of solar power plants in the PRC, which were in operation as at the transaction date, by
companies listed on the Stock Exchange that are engaged in solar power related industry
(the “Comparable Transactions”) in the past three years prior to the date of the Jade Sino
Subscription Agreement. We considered that the Comparable Transactions are fair and
representative samples as compared to the Subscription in view of the subject assets or
entities acquired under the Comparable Transactions are comparable to that of JinkoSolar
Power and thus provide general reference as to the valuation of acquisition targets in
transactions similar to the Subscription.
In assessing whether the consideration for the Subscription is fair and reasonable, we
have considered the two most commonly used valuation benchmarks, price to earnings
multiples (“P/E Ratio”) and price to net asset value multiples (“P/NAV Ratio”). According
to the presentation materials of JinkoSolar Holding, it is noted that out of the 213MW power
projects completed in 2013, most of which were completed in the second half of 2013. As
such, we consider that the net profit of JinkoSolar Power for the year ended 31 December
2013 did not fully reflect the profitability of its then completed power projects. Thus we
consider that the P/E Ratio is not an appropriate valuation benchmark to assess the fairness
and reasonableness of the consideration for the Subscription.
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LETTER FROM QUAM CAPITAL
Based on the selection criteria, set out below is the exhaustive list of the analysis of
the P/NAV Ratios of the Comparable Transactions in the past three years prior to the date of
the Jade Sino Subscription Agreement:
Date of announcement/
circular
Company (stock
code)
Target
Implied P/NAV
Ratio (times)
05 March 2013
China Gogreen
Assets Investment
Limited (397)
Jun Yang Solar
Power Investment
Holdings Limited
1.6
02 September 2013
Solargiga Energy
Holdings Limited
(757)
Golmud Solargiga
Energy Electric
Power Co., Ltd
1.1
22 November 2013
United
Photovoltaics
Group Limited
(686)
Fengxian Huize
Photovoltaic
Energy Limited
N/A (Note 1)
16 May 2014
United
Photovoltaics
Group Limited
(686)
Changzhou
Dinghui New
Energy Company
Limited
15.7
06 June 2014
Jun Yang Solar
Power
Investments
Limited (397)
Jun Yang Solar
Power Investment
Holdings Limited
1.8
21 July 2014
United
Photovoltaics
Group Limited
(686)
Gonghe County
Xinte Photovaltaic
Co., Ltd
21.7
Maximum
21.7
Minimum
1.1
Average
8.4 (Note 1)
The consideration for
the Subscription
3.2 (Note 2)
Source: Website of the Stock Exchange
– 25 –
LETTER FROM QUAM CAPITAL
Notes:
1.
Fengxian Huize Photovoltaic Energy Limited had consolidated net liabilities as at 30 June 2013 as set
out in the circular dated 22 November 2013 issued by United Photovoltaics Group Limited.
Therefore, the transaction is not included in calculation of the average P/NAV Ratio.
2.
The implied P/NAV Ratio is calculated by dividing the consideration for the Subscription of
US$24,998,400 (equivalent to approximately HK$193,737,600) by approximately HK$61.3 million,
being approximately 5% of the unaudited net asset value of JinkoSolar Power as at 30 June 2014 of
approximately US$158.16 million (equivalent to approximately HK$1,225.77 million).
Based on the above table, we note that the P/NAV Ratio of the Comparable
Transactions ranged from approximately 1.1 times to 21.7 times with an average of
approximately 8.4 times. The P/NAV Ratio as implied by the Subscription of approximately
3.2 times is within the range of those of the Comparable Transactions.
It is noted that JinkoSolar Holding announced that, on 30 July 2014, CDBIH (through
Jade Sino), Macquarie, a fund managed by Macquarie Infrastructure and Real Assets, and
New Horizon Capital have agreed to invest a total of US$225 million in JinkoSolar Power,
representing a total of approximately 45% of the equity interest in JinkoSolar Power upon
completion of such investment and additional capital contribution by JinkoSolar Holding. As
a result of such investment, the book value of the net assets of JinkoSolar Power will be
further increased. Accordingly, the implied P/NAV Ratio as at the date of the Jade Sino
Subscription Agreement shall be lower than 3.2 times, which is considered to be more
favourable to the Company.
Given that (i) the P/NAV Ratio as implied by the Subscription is within the range of
those of the Comparable Transactions; and (ii) the subscription price per share of Jade Sino
payable by the Company and CDBIH pursuant to Jade Sino Subscription Agreement are the
same, we consider that the consideration for the Subscription is fair and reasonable in this
regard.
6.
Financial effects of the Subscription on the Group
Effect on net assets value and earnings
The Company shall effectively hold approximately 23.81% equity interest in Jade Sino
and approximately 5% effective equity interest of JinkoSolar Power immediately upon the
completion of the Subscription. As advised by the Company, Jade Sino will be treated as an
associate of the Company, and its results and assets and liabilities will be accounted for by
using the equity method of accounting. Under the equity method, an investment in an
associate is initially recognised in the consolidated statement of financial position at cost
and adjusted thereafter to recognise the Group’s share of the profit or loss and other
comprehensive income of the associate. Given that the principal asset of Jade Sino will be
its 21.00% equity interest in JinkoSolar Power and the consideration for the Subscription
will be settled in cash, the Company considers that the Subscription will not have any
material adverse impacts on the net assets position and earnings of the Group upon the
completion of Subscription.
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LETTER FROM QUAM CAPITAL
Effect on working capital
As stated in the Letter from the Board, the consideration for the Subscription of
US$24,998,400 (equivalent to approximately HK$193,737,600) will be settled entirely by
cash and financed by the Company’s internal resources.
As disclosed in the 2014 Interim Report, the bank balances and cash of the Group as at
30 June 2014 were approximately HK$516.2 million and the Group had no borrowings. As
such, the Subscription will not lead to any material adverse impact on the working capital of
the Group.
In light of the above, we consider that the Subscription is not expected to have any
material adverse financial impact on the Group upon completion of Jade Sino Subscription
Agreement.
RECOMMENDATION
Having considered the principal factors and reasons as discussed above, we are of the
opinion that Jade Sino Subscription Agreement and the transaction contemplated thereunder
is in the ordinary and usual course of business and the terms of Jade Sino Subscription
Agreement are on normal commercial terms, fair and reasonable so far as the Independent
Shareholders are concerned and are in the interests of the Company and the Shareholders as
a whole. Accordingly, we advise the Independent Shareholders as well as the Independent
Board Committee to recommend the Independent Shareholders to vote in favour of the
ordinary resolution to be proposed at the EGM to approve Jade Sino Subscription Agreement
and the transaction contemplated thereunder.
Yours faithfully,
For and on behalf of
Quam Capital Limited
Noelle Hung
Managing Director
Ms. Noelle Hung is a licensed person and a responsible officer of Quam Capital
Limited registered with the SFC to carry out type 6 (advising on corporate finance)
regulated activities under the SFO since 2007 and has participated in the provision of
independent financial advisory services for various transactions involving companies listed
in Hong Kong.
– 27 –
APPENDIX
1.
GENERAL INFORMATION
RESPONSIBILITY STATEMENT
This circular, for which the Directors collectively and individually accept full
responsibility, includes particulars given in compliance with the Listing Rules for the
purpose of giving information with regard to the Company. 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.
DISCLOSURE OF INTERESTS
(a)
Disclosure of Interests of Directors and Chief Executive of the Company
As at the Latest Practicable Date, none of the Directors or the chief executive of the
Company or their respective associates had any interests or short positions in any Shares,
underlying Shares or debentures of the Company or any of its associated corporations
(within the meaning of Part XV of the SFO), which were required (i) to be notified to the
Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO
(including interests and short positions which he was taken or deemed to have under such
provisions of the SFO); or (ii) to be recorded in the register required to be kept under
section 352 of the SFO; or (iii) to be notified to the Company and the Stock Exchange
pursuant to the Model Code for Securities Transactions by Directors of Listed Companies set
out in Appendix 10 to the Listing Rules.
(b)
Disclosure of Interests by Substantial Shareholders
Save as disclosed below, the Directors or the chief executive of the Company were not
aware that there was any party who, as at the Latest Practicable Date, had an interest or
short position in the Shares or underlying Shares of the Company which would fall to be
disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO
as recorded in the register required to be kept by the Company under section 336 of the
SFO:
Nature of
Interests
Name of Shareholder
Capacity
CDB (Note 1)
Interest of
Corporate
controlled
interest
corporation
– 28 –
Number of
issued Shares
of the
Company held
1,920,000,000
Approximate
percentage
of the
existing
issued
share
capital of
Long/Short
the
position
Company
Long
66.16%
APPENDIX
GENERAL INFORMATION
Nature of
Interests
Number of
issued Shares
of the
Company held
Approximate
percentage
of the
existing
issued
share
capital of
Long/Short
the
position
Company
Name of Shareholder
Capacity
CDBC (Note 1)
Interest of
Corporate
controlled
interest
corporation
1,920,000,000
Long
66.16%
CDBIH (Note 1)
Beneficial
owner
Corporate
interest
1,920,000,000
Long
66.16%
LIU Tong
Interest of
Corporate
controlled
interest
corporation
163,702,560
Long
5.64%
Yoobright Investments
Limited
(“Yoobright”)
(Note 2)
Beneficial
owner
163,702,560
Long
5.64%
Corporate
interest
Notes:
3.
1.
CDBIH is a wholly-owned subsidiary of CDBC. CDBC is a wholly-owned subsidiary of CDB. Thus,
CDB and CDBC are deemed to be interested in the same percentage of Shares held by CDBIH.
2.
Yoobright is beneficially and wholly-owned by Mr LIU Tong. Mr LIU Tong is therefore deemed to
be interested in the same percentage of Shares held by Yoobright.
MATERIAL CONTRACTS
The Company has not entered into any material contracts (not being contracts made in
the ordinary course of business) within the two years immediately preceding the Latest
Practicable Date which are or may be material.
4.
DIRECTORS’ SERVICE AGREEMENTS
As at the Latest Practicable Date, none of the Directors of the Company had any
existing or proposed service contract with any member of the Group (excluding contracts
expiring or determinable by the Company within one year without payment of compensation
(other than statutory compensation)).
– 29 –
APPENDIX
5.
EXPERT’S QUALIFICATIONS AND CONSENTS
(a)
6.
GENERAL INFORMATION
The following sets out the qualifications of the expert which has given its opinion
or advice as contained in this circular:
Name
Qualifications
Quam Capital
a licensed corporation to carry out type 6
(advising on corporate finance) regulated
activity under the SFO
(b)
As at the Latest Practicable Date, Quam Capital did not have any shareholding,
direct or indirect, in any members of the Group or any rights (whether legally
enforceable or not) to subscribe for or to nominate persons to subscribe for
securities in any members of the Group.
(c)
As at the Latest Practicable Date, Quam Capital did not have any interest, direct
or indirect, in any assets which have been acquired or disposed of by or leased to
any members of the Group, or which are proposed to be acquired or disposed of
by or leased to any members of the Group since 31 December 2013, the date to
which the latest published audited financial statements of the Company were made
up.
(d)
Quam Capital has given and has not withdrawn its written consent to the issue of
this circular with the inclusion of its letter and references to its name in the form
and context in which they are included.
DIRECTORS’ INTEREST IN ASSETS
As at the Latest Practicable Date, so far as the Directors are aware, none of the
Directors had any interest, directly or indirectly, in any assets which had been, or were
proposed to be acquired or disposed of by or leased to any member of the Group since 31
December 2013, being the date to which the latest published audited consolidated financial
statement of the Group were made up.
7.
DIRECTORS’ INTEREST IN CONTRACTS OR ARRANGEMENTS OF
SIGNIFICANCE
None of the Directors was materially interested, directly or indirectly, in any contract
or arrangement entered into with any member of the Group subsisting as at the Latest
Practicable Date which was significant in relation to the business of the Group taken as a
whole.
8.
NO MATERIAL ADVERSE CHANGE
The Directors are not aware of any material adverse change in the financial or trading
position of the Group since 31 December 2013, being the date to which the latest published
audited financial statements of the Group were made up.
– 30 –
APPENDIX
9.
GENERAL INFORMATION
LITIGATION
As at the Latest Practicable Date, no member of the Group was involved in any
litigation, arbitration or claim of material importance and no litigation, arbitration or claim
of material importance was known to the Directors to be pending or threatened or made
against any member of the Group.
10. COMPETING INTEREST
As at the Latest Practicable Date:
(a)
Mr TENG Rongsong, Mr BAI Zhe and Mr YUAN Chun held certain positions in
CDB Group, which engaged in the same businesses of investment in Hong Kong
and overseas as the Company. The potential conflicts of interest may arise in the
allocation of investment opportunities to the Company and the other entities under
CDB Group;
(b)
Mr TENG Rongsong is an executive Director and the chairman of the Board. Mr
TENG also serves as the president of CDBIH and the chief investment officer of
CDBC;
(c)
Mr BAI Zhe is an executive Director of the Company. Mr BAI also serves as the
deputy chief executive officer of CDBIH; and
(d)
Mr YUAN Chun is an executive Director and vice president of the Company. Mr
YUAN also serves as the managing director of investment division of CDBIH.
Save as disclosed above, as at the Latest Practicable Date, none of the Directors or
their respective associates had interests in the business which compete or are likely to
compete, either directly or indirectly, with the businesses of the Group.
11.
MISCELLANEOUS
(a)
The registered office of the Company is located at Cricket Square, Hutchins
Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands. The head
office and principal place of business in Hong Kong is Suites 4506-4509, Two
International Finance Centre, No. 8 Finance Street, Central, Hong Kong.
(b)
The Hong Kong branch share registrar and transfer office of the Company is
Tricor Standard Limited at Level 22, Hopewell Centre, 183 Queen’s Road East,
Hong Kong.
(c)
The company secretary of the Company is Mr WONG Kwok Ho, a fellow
member of the Association of Chartered Certified Accountant and the Hong Kong
Institute of Certified Public Accountants.
(d)
The auditors of the Company are Deloitte Touche Tohmatsu, certified public
accountants qualified for practicing in Hong Kong.
– 31 –
APPENDIX
(e)
GENERAL INFORMATION
This circular has been prepared in both English and Chinese, the English text of
which shall prevail over the Chinese text in the event of inconsistency.
12. DOCUMENTS AVAILABLE FOR INSPECTION
Copies of the following documents will be available for inspection at the principal
place of business in Hong Kong of the Company at Suites 4506-4509, Two International
Finance Centre, No. 8 Finance Street, Central, Hong Kong during normal business hours
from the date of this circular up to and including 7 November 2014:
(a)
Jade Sino Subscription Agreement;
(b)
Letter from Quam Capital; and
(c)
Letter from the Independent Board Committee.
– 32 –
NOTICE OF EXTRAORDINARY GENERAL MEETING
China Development Bank International Investment Limited
國開國際投資有限公司
(Incorporated in the Cayman Islands with limited liability)
(Stock Code: 1062)
NOTICE OF EXTRAORDINARY GENERAL MEETING
NOTICE IS HEREBY GIVEN that an extraordinary general meeting (the “EGM”) of
China Development Bank International Investment Limited (the “Company”) will be held at
10th Floor, Winland International Financial Center, No. 7 Financial Street, Xicheng District,
Beijing, the People’s Republic of China on Thursday, 13 November 2014 at 11:00 a.m. to
consider, and if thought fit pass, with or without modifications the following resolution as
an ordinary resolution of the Company:
ORDINARY RESOLUTION
“THAT
(a)
the entering into of Jade Sino Subscription Agreement and the Subscription (as
defined in the circular of the Company dated 24 October 2014 (the “Circular”)),
be and is hereby approved, ratified and confirmed;
(b)
the directors of the Company be and are hereby authorised, for and on behalf of
the Company, to execute all such documents and agreements and to do all such
acts, matters and things as they may in their absolute discretion consider
necessary or otherwise desirable for the purposes of or in connection with the
Subscription and all transactions incidental to, or in connection with, the
Subscription.”
By Order of the Board
TENG Rongsong
Chairman
Hong Kong, 24 October 2014
Principal place of business:
Suites 4506-4509
Two International Finance Centre
No. 8 Finance Street
Central, Hong Kong
– 33 –
NOTICE OF EXTRAORDINARY GENERAL MEETING
Notes:
(a)
Any member entitled to attend and vote at the meeting is entitled to appoint another person as his/her proxy
to attend and vote on his/her behalf. A member who is the holder of two or more Shares may appoint more
than one proxy to attend on the same occasion. A proxy need not be a member of the Company. In order to
be valid, proxy forms in prescribed form together with the power of attorney or other authority (if any)
under which it is signed, or a certified copy of such power or authority should be returned to the
Company’s Branch Share Registrar, Tricor Standard Limited at Level 22, Hopewell Centre, 183 Queen’s
Road East, Hong Kong not less than 48 hours before the time fixed for holding the EGM or adjournment
thereof.
(b)
In the case of joint holders of Shares, any one of such joint holders may vote, either in person or by proxy,
in respect of such Share as if he/she/it were solely entitled thereto, but if more than one of such joint
holders are present at the EGM, personally or by proxy, that one of the said persons so present whose name
stands first in the register in respect of such Shares shall alone be entitled to vote in respect thereof.
(c)
The above resolution will be put to vote at the above meeting by way of poll.
(d)
In order to determine the identity of the shareholders who are entitled to attend and vote at the forthcoming
EGM, all transfers accompanied by the relevant share certificates must be lodged with the Company’s Hong
Kong branch share registrar and transfer office, Tricor Standard Limited at Level 22, Hopewell Centre, 183
Queen’s Road East, Hong Kong, not later than 4:30 p.m. on Monday, 10 November 2014. The register of
members of the Company will be closed from Tuesday, 11 November 2014 to Thursday, 13 November 2014
(both dates inclusive), during which time no share transfers will be registered. Shareholders of the Company
whose names appear on the register of the members of the Company at the opening of business on
Thursday, 13 November 2014 are entitled to attend the EGM.
(e)
As at the date hereof, the Board is comprised of Mr TENG Rongsong, Mr BAI Zhe, Mr LIU Xiao Guang
and Mr YUAN Chun as Executive Directors; and Mr WANG Xiangfei, Mr SIN Yui Man and Mr FAN Ren
Da, Anthony as Independent Non-executive Directors.
– 34 –