Zhidao International : RESUMPTION OF TRADING

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this 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 announcement.

ZHIDAO INTERNATIONAL (HOLDINGS) LIMITED

志 道 國 際（ 控 股 ）有 限 公 司 *

(Incorporated in Bermuda with limited liability)

(Stock code: 01220)

RESUMPTION OF TRADING

Financial advisor to the Company

ZZCI Corporate Finance Limited

This announcement is made by Zhidao International (Holdings) Limited (the ''Company'', and its subsidiaries, the ''Group'') pursuant to Rule 13.09 and Rule 13.24A of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the ''Listing Rules'') and the Inside Information Provisions under Part XIVA of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) (the ''SFO'').

Reference is made to the announcements of the Company dated 26 October 2018, 5 November 2018, 13 February 2019, 20 February 2019 and 11 July 2019, in relation to, among others, the suspension of trading in the shares of the Company (the ''Shares'') on The Stock Exchange of Hong Kong Limited (the ''Stock Exchange''); (ii) the announcement of the Company dated 24 July 2019 in relation to, among others, the resumption guidance imposed on the Company by the Stock Exchange (the ''Resumption Guidance Announcement'', and (iii) the announcement of the Company dated 10 October 2019, 10 January 2020, 9 April 2020, 10 July 2020, 9 October 2020, 8 January 2021 and 4 April 2021 in relation to the update on the business of the Group and the resumption plan. together with the aforesaid announcements referred to in (i) and (ii) above, collectively, (the ''Announcements'')). Capitalised terms used in this announcement shall bear the same meanings as defined in the Resumption Guidance Announcement unless otherwise stated.

• For identification purposes only

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1. FULFILLMENT OF THE RESUMPTION CONDITIONS AND THE REVIEW CONDITIONS

Trading in the Shares on the Stock Exchange has been suspended since 11 July 2019. On 10 July 2019, the Company received a letter from the Review Committee setting out its decision (the ''Second Review Decision'') to uphold the First Review Decision to suspend trading in the Company's shares under Rule 6.01(3) of the Listing Rules and proceed with the cancellation of the Company's listing under Rule 6.01A(1) of the Listing Rules. Under Rule 6.01A(1) of the Listing Rules, the Stock Exchange may cancel the listing of any securities that have been suspended from trading for a continuous period of 18 months. In the case of the Company, the 18-month period expires on 10 January 2021 (''Expiry Date'').

On 10 July 2019, the Company received a letter (the ''First Letter'') from the Stock Exchange, in which, among other things, the Stock Exchange sets out, that the Company's Construction Project Business (excluding the two new subsidiaries - Fortune Engineering & Consultants Limited (''Fortune'') and I Tong Engineering Company Limited (''I Tong'')) had recorded a low level of revenue and segment loss since 2014, and such low level of business operations did not appear to be a temporary downturn..

The Company failed to satisfy the Review Committee that the new business initiatives (i.e. the joint venture arrangement with Fortune and the acquisition of I Tong) were of substance and viable and sustainable. The size of both the JV Co and I Tong was small and they did not have any track record. Apart from the capital injections and the provision of working capital, it was not clear what other material value or contribution that the Company would make to the JV Co and I Tong. In particular, large majority of the projected revenue would be derived from a project of I Tong to be subtracted by Shanghai Construction Group (Macau) Limited (''SCG Macau''), and the reliance on SCG Macau gave rise to the Review Committee's concern over I Tong's ability to secure infrastructure projects independently.

On 22 July 2019, the Company received a letter (the ''Second Letter'') from the Stock Exchange, in which, among other things, the Stock Exchange sets out the resumption guidance (the ''Resumption Guidance'') for the Company that the Company has to demonstrate its compliance with Rule 13.24 of the Listing Rules. The Second Letter also states that the Company must remedy the issues causing its trading suspension and fully comply with the Listing Rules to the Stock Exchange's satisfaction before trading in its securities is allowed to resume.

The Company is pleased to announce that as at 7 May 2021, all the resumption conditions and the Resumption Guidance has been fulfilled and complied with and in particular, the business substance, viability and sustainability of the Company has been addressed as set out below:

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Refocusing on the Macau Construction Market

When the Company completed its restructuring and resumed trading in 2011, the Company was focusing on the construction market in Hong Kong. However, in the last decade, there was an aging trend of construction workers in Hong Kong. Together with limited new workforce in the industry, there has been a shortage of construction workers in Hong Kong resulting in inflating construction costs. The project costs and duration was becoming difficult to control.

In view of this change in the industry landscape, the Company has been very selective in participating in the construction projects in Hong Kong. As a result, there was a declining revenue and profitability in previous few years and thus, led to the potential non-compliance of the Listing Rule 13.24. Over the last two years, the Company has been shifting the focus from Hong Kong to the Macau construction market. In contrast to the inflating labour costs in Hong Kong, the construction cost in the Macau market is comparatively controllable with the import of labour. In addition, the Macau Government would normally provide advances (up to 30% of contract sum) to contractors which would lessen the financial pressures and costs.

With I Tong's participation in the Macau Prison project, which has a contract sum of approximately MOP717.5 million, I Tong should have sufficient track record, and will be targeting projects with contract sum over MOP100 million. The management believed and continues to believe that the focus in the Macau construction market will soon bring improved revenue and profitability to the Company.

Acquisition of I Tong

1. Background and operating history
   The Company acquired 51.84% interests in I Tong, a company incorporated in the Macau Special Administrative Region of the People's Republic of China (''Macau'') with limited liability in 2018. And in November 2019, the Company further acquired the remain 48.16% interests of I Tong, which was completed in February 2020. (Please refer to the Company's announcement on 26 November 2019 and 25 February 2020 for details.)

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I Tong is a registered construction contractor with the Land, Public Works and Transport Bureau of the Government of Macau (the ''Macau Bureau''), and is principally engaged in acting as contractor and/or subcontractor to provide project management and sourcing of raw material and labour to Macau construction projects. Since its incorporation in 2008 and before the Company's acquisition in late 2019, I Tong has been awarded 13 construction projects from the Macau Bureau and 12 of which was completed with total contract sum of approximately MOP326.9 million. During the past 5 years, I Tong tendered 20 projects from the Macau Bureau and was awarded 5 contracts. Since the acquisition of I Tong, it has contributed to the Group a total gross profit of HK$34.8 million up to the end of February 2021. The following table sets out the projects of I Tong since the acquisition by the Company:

		Contract sum
Project	Award year	(MOP'million)	Current Status
Avenida da Amizade Footbridge	2017	26.70	Completed
Project
Avenida da Amizade Footbridge	2018	0.11	Completed
- Temporary facilities
Reservatorio Seac Pai Van	2018	119.05	Completed
Project
Macau Prison Project	2018	717.5	In progress

Hence, I Tong's operating history, construction projects awarded by the Macau Bureau and profitability of the same have addressed the Review Committee's concerns regarding I Tong's lack of business substance (in terms of short track record and low profitability).

1. Securing projects via partnership and/or joint venture in the Macau construction market
   Since the Company's acquisition of I Tong, I Tong has completed one project, as a joint venture partner with Chon Tit (Macao) Investment and Development Co. Ltd. (a subsidiary of China Railway Construction Corporation Limited) and Iao Sang Construction Engineering Company Limited of contract sum of approximately MOP26.7 million; and secured two projects, as joint venture partner with and sub- contractor to SCG Macau, with total contract sum of approximately MOP836.6 million.
   I Tong focuses on sizable construction projects of the Government of Macau, which has a systematic scoring scheme in contractor selection. The scoring scheme, in addition to the estimated contract costs, considered other factors such as experiences in relevant discipline, project design, project completion track record, safety record, etc. It is a common practice to broaden the experience and track record base by partnership or joint venture in the tendering of projects from the Government of Macau. While I Tong will continue to cooperate with the existing partners in future tendering, it will also expand the base of potential partners with reference to the partners' experience and track record.

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The joint tendering arrangement and I Tong's partnership with a number of main contractors other than SCG Macau have addressed the Review Committee's concern regarding I Tong's reliance on SCG Macau and ability to independently source projects.

Securing projects via the JV with Fortune in Hong Kong

The Company established a joint venture with Fortune in 2018 for sourcing of construction of projects in Hong Kong. The JV participates in construction projects in Hong Kong as a sub-contractor. As a common practice of the construction industry, the JV, as a sub-contractor, mainly responsible for the completion of the contracted works including project planning, project management, safety management, human resources and sourcing of raw materials.

Given the Company's strategy described above, the management of the Company and the JV will continue tender potential projects selectively in the Hong Kong market.

Management team and relevant experience

With the current and planned expansion in the Macau market, the Company has retained and equipped with expertise with extensive experience in the construction industry, including:

Mr. Kwong Kin Fai, Eric, was appointed as an Executive Director of the Company on 2 September 2018. Mr. Kwong had over 28 years of experience in the engineering industry. Mr. Kwong served as an apprenticeship as a mechanical engineering technician (construction plant) in Aegis Engineering Co., Ltd. from 1985 to 1989 and obtained the higher certificate in mechanical engineering from Hong Kong Polytechnic (now known as Hong Kong Polytechnic University) in November 1989. Mr. Kwong then worked as an engineer, technical support engineer, building service engineer, project manager and quality assurance manager in several engineering companies and construction companies from 1990 to 2005. Since 2005, Mr. Kwong has founded Fortune and has been a shareholder and director of Fortune till now. Fortune is a company established in Hong Kong in May 2005 and its main business involves builder work and electrical and mechanical installations works, which includes additions and alternation work, builder repair and maintenance work, interior fitting-out work, and building service repair and maintenance work.

Mr. Ng Ting Wai, was appointed as the General Manager of the Company since January 2012 and is responsible for overall operations of the Company's and its subsidiaries' projects including sales and marketing, production, installation and project management in Hong Kong and Macau. Mr. Ng has over 30 years of experience in the construction industry. When the Company completed its restructuring and resumed trading in 2011, Mr. Ng led the Company in the supply of construction materials in the Hong Kong market. Before joining the Company, Mr. Ng worked with various consultants and contractors in China and Hong Kong, including Shui On Group, Hip Hing Construction Group and Dickson Group, etc.

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