China New Town Development Participates in Urbanization Project through Investment Partnership - Rapid Project Launch with High Return and Low Risk

There was a series of good news recently for China New Town Development Co., Ltd. ("China New Town" or "CNTD" or the "Group", Stock Code: 1278.HK). Subsequent to the Strategic Cooperation Framework Agreement with Sino IC Investment in the end of May and the establishment of the CDB (Beijing) New-Type Urbanization Development Fund in the middle of June, leveraging off the extensive project pipeline and network resources of China Development Bank Capital Corporation Limited ("CDB Capital"), the first project was rapidly launched within one month of entering into the Partnership agreement. It is likely this strong business momentum will continue into foreseeable future and uncovering the Company's excellent prospect.

As just announced, the Group will inject RMB 4,500,000 to the CDB (Beijing) New Type Urbanization Development Fund to invest in Luzhou shanty-town reformation project. Luzhou is located in the south-east of Sichuan Province, and it has achieved a GDP of RMB 126 billion in 2014, the third year in a row of over RMB 100 billion with growth economic indicators ranking among the highest in Sichuan Province. This project is the major shanty town reformation project, and has been included in the 10-million-unit national shanty town reformation plan. Luzhou Jiangnan Construction and Investment Company ("Jiangnan Company") has been designated as the project company. CDB (Beijing) New Type Urbanization Development Fund (the "Partnership"), amounting to RMB 10 billion initiated by CDB Capital, focuses on old town reformation, shanty town reformation, primary land development and integrated land and property development. It will also explore investment opportunities in municipal facilities, such as water supply, waste disposal, environment protection, public utilities, etc. The partnership intends to contribute RMB 300 million of capital to Luzhou Jiangnan Construction Development Company Limited (the "Project Company") for a period of four years. China New Town, as the junior-tranche limited partner, proportionally contributes 1.5% of the total amount.

Project Supported by National Policy with High Security
Shanty town reformation project is oriented by to the policy support. The total project investment is about RMB 7.7 billion and has received a credit facility of RMB 6.2 billion from Capital Development Bank ("CDB"), fully representing the synergies of direct investment of CDB Capital and loans brought by CDB. Jiangnan Company is required to make a payment of investment return at 12.4% per annum to the Partnership in each fiscal year, and purchase the equity interest in the Project Company held by the Partnership at the expiry date of the four-year term. The cash outlay in relation to the guaranteed investment return and equity purchase arrangements will be included in the Luzhou City's fiscal budget, and there are multiple layers of credit enhancement, namely, the Luzhou Municipal Finance Bureau will pledge all of its holdings in Jiangnan Company to the Partnership as security for its obligations; Luzhou Industrial Investment Group, a subsidiary of the Luzhou Municipal Government, will provide an irrevocable and unlimited responsibility guarantee; and Jiangnan Company or the Project Company will provide appropriate assets or land-use rights as collaterals. The investment has high security and low risk.

Annual Return Almost 50%
CBD Capital, the parent company of China New Town Development, co-invests with the group as junior tranche partner in the RMB 10 billion Partnership. Relying on the strong credit background of CDB Capital, the Partnership efficiently uses a high financial gearing to enhance return on investment. According to the guaranteed investment return and the profit sharing mechanism of the Partnership, CNTD as the junior-tranche limited partner shall enjoy an annual rate of return on investment close to 50%, achieving extremely attractive investment return while exposing to relatively low risk.

Rapid Project Launch
The project of Luzhou Shanty Town Reformation is the first shanty town reformation project after the establishment of the Partnership. The rapid launch of the project fully represents the advantages and experience of CDB Capital, our controlling shareholder. With reference to track record of the previously launched urbanization funds managed by CDB Capital, we expect the Partnership will be able to deploy multi-billion RMB investment volume within a year, quickly establishing its return profile.

We believe in the future along with more investment projects launching in succession, our Group is able to participate in more diversified urbanization projects nationwide with relatively low investment amount. While enjoying a high return on investment, we have the opportunity to explore other downstream business, solidifying the Group's investment model while enhancing the project diversification and economy of scale. As PRC's leading investment institute in urbanization, CDB Capital, our controlling shareholder, is fully committed to helping China New Town to rapidly expand its project network and business scale, to accelerate our value creation to shareholders.