Wang On : TitleJOINT ANNOUNCEMENT - DISCLOSEABLE TRANSACTION IN RELATION TO TERM SHEET AND AGREEMENT IN RELATION TO THE DIVESTMENT OF INTEREST, THE FORMATION OF A JOINT VENTURE AND THE LEASE IN RELATION TO THE PROPERTY AT LAKE SILVER

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this joint announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this joint announcement.

WANG ON GROUP LIMITED	WANG ON PROPERTIES LIMITED
（宏 安 集 團 有 限 公 司）*	宏 安 地 產 有 限 公 司
(Incorporated in Bermuda with limited liability)	(Incorporated in Bermuda with limited liability)
(Stock Code: 1222)	(Stock Code: 1243)
JOINT ANNOUNCEMENT
DISCLOSEABLE TRANSACTION	VOLUNTARY ANNOUNCEMENT

TERM SHEET AND AGREEMENT

IN RELATION TO THE DIVESTMENT OF INTEREST,

THE FORMATION OF A JOINT VENTURE

AND

THE LEASE IN RELATION TO THE PROPERTY AT LAKE SILVER

Reference is made to the joint announcement of WOG and WOP dated 24 January 2019 in relation to the successful bid made by the Purchaser (as the Property Holder), an indirect wholly-owned subsidiary of WOP, to acquire the Property at a consideration of HK$653.0 million.

The board of directors of each of WOG and WOP is pleased to announce that on 29 April 2019, WOP has entered into the Agreement with KKR, an Independent Third Party, whereby the parties agreed that, among other things, the KKR JV Partner will acquire and subscribe for new shares, and the WOP JV Partner will dispose of a 50% equity interest in the JV Co, an indirect wholly-owned subsidiary of WOP and an indirect holding company of the Property Holder. Following completion of the Divestment, the equity interest in the JV Co will be owned as to 50% by each of the KKR JV Partner and the WOP JV Partner and each member of the JV Group will cease to be subsidiaries of WOP, and will be recognised as joint ventures of WOP and their accounts will not be consolidated with those of the WOG Group or the WOP Group.

*For identification purpose only

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Pursuant to the terms of the Agreement, the Property Holder will, upon or as soon as possible following completion of the acquisition of the Property, grant the Lease of certain parts of the Property to an affiliate of WOP, which will cover its holding company and fellow subsidiaries.

The board of directors of each of WOG and WOP is also pleased to announce that on 29 April 2019, pursuant to the terms of the Agreement, WOP and the WOP JV Partner have entered into the Share Sale Agreement with the KKR JV Partner in relation to the Divestment.

All the applicable percentage ratios (as defined in Rule 14.07 of the Listing Rules) in respect of the Divestment, the Lease and the Joint Venture in respect of the JV Co are less than 5% for WOP.

All the applicable percentage ratios (as defined in Rule 14.07 of the Listing Rules) in respect of the Divestment are less than 5% for WOG. However, as one of the applicable percentage ratios (as defined in Rule 14.07 of the Listing Rules) in respect of each of the Lease and the Joint Venture in respect of the JV Co is more than 5% but is less than 25% for WOG, the Lease and the Joint Venture in respect of the JV Co each constitutes a discloseable transaction for WOG and is subject to the reporting and announcement requirements under the Listing Rules.

INTRODUCTION

Reference is made to the joint announcement of WOG and WOP dated 24 January 2019 in relation to the successful bid made by the Purchaser (as the Property Holder), an indirect wholly-owned subsidiary of WOP, to acquire the Property at a consideration of HK$653.0 million.

The board of directors of each of WOG and WOP is pleased to announce that on 29 April 2019, WOP has entered into the Agreement with KKR, an Independent Third Party, whereby the parties agreed that, among other things, the KKR JV Partner will acquire and subscribe for new shares, and the WOP JV Partner will dispose of a 50% equity interest in the JV Co, an indirect wholly-owned subsidiary of WOP and an indirect holding company of the Property Holder.

AGREEMENT

Date	:	29 April 2019
Parties	:	(i)	WOP; and
		(ii)	KKR, an Independent Third Party.

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Subject matter

The KKR JV Partner will acquire and subscribe for new shares, and the WOP JV Partner will dispose of a 50% equity interest in the JV Co. The total sum payable by the KKR JV Partner for the Investment amounts to approximately HK$180 million, of which:

(i)approximately HK$60.4 million equivalent to 50% of all equity investment already paid by the WOP JV Partner in the JV Co, will be paid to the WOP JV Partner for acquiring 50% of the entire issued share capital of the JV Co from the WOP JV Partner; and

(ii)the remaining balance for an amount not exceeding HK$122 million, will be paid to the JV Co for subscription of new shares in the JV Co at the same time the WOP JV Partner subscribes for an equal number of new shares for the same subscription monies in the JV Co.

Completion of the subscription of shares by the WOP JV Partner and the KKR JV Partner shall be conditional upon:-

(i)no breach of representations and warranties given by the WOP JV Partner under the Share Sale Agreement and no breach of representations and warranties by the parties under the definitive subscription agreement (excluding self-inflicted breach);

(ii)no law or order prohibiting the transaction; and

(iii)neither party has notice that the conditions under the sale and purchase agreement for the acquisition of the Property cannot or will not be satisfied or that the vendor of the Property is not ready, willing and able to proceed with completion of the acquisition of the Property.

Proceeds from the Divestment will be used for working capital of the WOP Group. Payment for the subscription of new shares by the WOP JV Partner in the JV Co is expected to be funded out of internal resources.

The total sum of Investment was determined by arm's length negotiations between WOP and KKR with reference to the sum of equity investment already made by the WOP JV Partner in the JV Co, the outstanding purchase consideration payable by the Property Holder to acquire the Property, and funds required to support the operation of the Property Holder after taking into account the third party finance that the JV Co and the Property Holder expect to obtain to fund the acquisition of the Property. The board of directors of both WOG and WOP consider the terms of the Divestment and the Investment to be fair and reasonable and in the interests of each of WOG and WOP and their respective shareholders as a whole.

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Completion of the Divestment is expected to take place on or before 6 May 2019. Following completion of the Divestment, the equity interest of the JV Co will be owned as to 50% by each of the KKR JV Partner and the WOP JV Partner, and each member of the JV Group will cease to be subsidiaries of WOP, and will be recognised as joint ventures of WOP and their accounts will not be consolidated with those of the WOG Group or the WOP Group. Final completion of the entire Investment covering the subscription of new shares by both the WOP JV Partner and the KKR JV Partner shall take place no later than three clear business days prior to completion of the acquisition of the Property, which is expected to take place on 16 May 2019. Following completion of the Investment, the equity capital of the JV Co will be increased to a maximum amount of approximately HK$360 million.

Funding for the JV Co

Pursuant to the Agreement, none of the partners of the JV Co has additional commitment above the sum of Investment and any further needs will come from external banks/financial institutions.

Management of the JV Co

The WOP JV Partner will have no less than half the board seats of the JV Co.

Business of the JV Co

The JV Co is a newly established company with no operation or assets other than its interest as the indirect holding company of the Property Holder and is expected to be engaged solely in the acquisition and holding of the Property through the Property Holder.

As set out in the joint announcement of WOG and WOP dated 24 January 2019, the JV Co intends to refurbish certain parts of the Property for retail purpose. Subject to the clauses and expiry dates of certain tenancies in respect of the Property, WOG and WOP will adjust the tenant mix to meet the demands of customers pursuing high quality, healthy and stylish living for a higher rental yield, which is expected to broaden its prospect and thus, increase the future rental value, thereby enhancing the future capital appreciation of the Property.

Lock Up

Save in the case of any related party transfers, (i) the WOP JV Partner may not dispose of its interest in the JV Co during the term of the joint venture except in a tag-along sale when the KKR JV Partner disposes of its interest in the JV Co; and (ii) the KKR JV Partner shall not dispose of its interest in the JV Co during the initial 12 months from completion of the acquisition of the Property by the Property Holder.

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Term of the joint venture

The proposed joint venture shall have a term of five years from completion of the acquisition of the Property by the Property Holder unless extended by the WOP JV Partner and the KKR JV Partner in writing.

LEASE

Pursuant to the terms of the Agreement, the Property Holder will, upon or as soon as possible following completion of the acquisition of the Property, grant the Lease of certain parts of the Property to an affiliate of WOP, which will cover its holding company and fellow subsidiaries, on the following terms:

Lease area:

A total gross floor area of approximately 28,200 sq. ft. to be designated as a retail area operated by the lessee which is currently subject to existing tenancies and licence(s) expiring in the period between 2019 to 2023 with an aggregate monthly rent of approximately HK$602,000. The management fees are apportioned among and borne by the tenants.

Term and rent:

The Lease will be for a term of 10 years commencing from the time vacant possession is delivered at a rent which will increase progressively over the lease term aggregating to an amount of approximately HK$270.1 million for the full lease term, with a 3-month rent free period. The lessee will be responsible for direct expenses such as rate, taxes and other outgoings but shall not be liable for the management fee. It is estimated that the Lease will, when taken up by an affiliate of WOP, which will cover its holding company and fellow subsidiaries, be recognised as a right of use at a value of HK$213.4 million in the accounts, such value which is solely based on a preliminary assessment by the management of WOP based on the available information relating to the Property, which has not been audited or reviewed by the auditor of WOP, and is therefore subject to change.

The proposed terms of the Lease were determined based on arm's length negotiations between WOG, WOP and KKR with reference to market rent of comparable properties of similar nature. The board of directors of each of WOG and WOP considers such terms to be fair and reasonable and in the interests of each of WOG and WOP and their respective shareholders as a whole.

Payment for the rent of the Lease is expected to be funded out of internal resources of the lessee.

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