ADDCHANCE HOLDINGS LIMITED

Transcription

1 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. This announcement has been prepared pursuant to, and in order to comply with, the Listing Rules and the Takeovers Code and does not constitute an offer to buy, or the solicitation of an offer to sell or subscribe for, any securities or an invitation to enter into an agreement to do any such things, nor is it calculated to invite any offer to buy, sell or subscribe for any securities of the Company. ADDCHANCE HOLDINGS LIMITED (Incorporated in the Cayman Islands with limited liability) (Stock Code: 3344) (I) PROPOSED SUBSCRIPTION OF NEW SHARES UNDER SUBSCRIPTION MANDATE; (II) APPLICATION FOR WHITEWASH WAIVER; (III) PROPOSED PLACING OF NEW SHARES UNDER PLACING MANDATE; AND (IV) RESUMPTION OF TRADING Financial Adviser to the Company Placing Agent THE SUBSCRIPTION On 27 November 2015 (after trading hours) the Company and the Subscriber entered into the Subscription Agreement, pursuant to which the Subscriber has conditionally agreed to subscribe for and the Company has conditionally agreed to allot and issue 2,010,000,000 Subscription Shares to the Subscriber at the Subscription Price of HK$0.56. The 2,010,000,000 Subscription Shares represent: (a) approximately % of the existing issued share capital of the Company as at the date of this announcement; (b) approximately 74.01% of the issued share capital of the Company as enlarged by the allotment and issue of the Subscription Shares upon Subscription Completion; and 1

2 (c) approximately 50.05% of the issued share capital of the Company as enlarged by the allotment and issue of the Subscription Shares and the Placing Shares upon Subscription Completion and Placing Completion (assuming the Placing is completed in full). The obligation of the Subscriber to subscribe for the Subscription Shares under the Subscription Agreement is conditional upon, among others, the terms and conditions as set forth in the Subscription Agreement. Shareholders and potential investors should note that the Subscription is subject to conditions to be fulfilled and/or waived and the Subscription may or may not proceed. Shareholders and potential investors are reminded to exercise caution when dealing in the securities of the Company. WHITEWASH WAIVER Upon Subscription Completion, the Subscriber (together with the Concert Party Group) will in aggregate be interested in a total of 2,010,000,000 Shares representing approximately 74.01% of the issued share capital of the Company as enlarged by the allotment and issue of the Subscription Shares (assuming that there is no change in the issued share capital of the Company other than the issue of the Subscription Shares) and (as the case may be) approximately 50.05% of the issued share capital of the Company as enlarged by the allotment and issue of the Subscription Shares and the Placing Shares (assuming the Placing is completed in full and that there is no change in the issued share capital of the Company other than the issue of the Subscription Shares and the Placing Shares between the date of this announcement and the Subscription Completion). Under Rule 26.1 of the Takeovers Code, the Subscriber would be obliged to make a mandatory general offer to the Shareholders for all the issued Shares and other securities of the Company not already owned or agreed to be acquired by it or parties acting in concert with it unless the Whitewash Waiver is obtained from the Executive. In this regard, the Subscriber will make an application to the Executive for the Whitewash Waiver pursuant to Note 1 on Dispensation from Rule 26 of the Takeovers Code in respect of the allotment and issue of the Subscription Shares. The Whitewash Waiver, if granted by the Executive, will be subject to, among other things, approval by the Independent Shareholders at the EGM by way of poll. THE PLACING On 27 November 2015 (after trading hours) the Company and the Placing Agent entered into the Placing Agreement (as supplemented by the Supplemental Placing Agreement), pursuant to which the Company has conditionally agreed to place through the Placing Agent, on a best effort basis, up to 1,300,000,000 Placing Shares at a price of HK$0.56 per Placing Share. The 1,300,000,000 Placing Shares represent: (a) approximately % of the existing issued share capital of the Company as at the date of this announcement; 2

3 (b) approximately 64.82% of the issued share capital of the Company as enlarged by the allotment and issue of the Placing Shares (assuming the Placing is completed in full); and (c) approximately 32.37% of the issued share capital of the Company as enlarged by the allotment and issue of the Subscription Shares and the Placing Shares (assuming the Placing is completed in full). Since completion of the Placing is subject to the fulfilment or waiver of the condition(s) as set out in the Placing Agreement, the Placing may or may not proceed. Shareholders and potential investors of the Company are reminded to exercise caution when dealing in the Shares. The Placing and the Subscription are not inter-conditional upon each other. GENERAL The EGM will be convened and held for the Shareholders to consider and, if thought fit, approve (i) the Subscription Agreement, the transactions contemplated thereunder (including the specific mandate for the allotment and issue of the Subscription Shares) and the Whitewash Waiver; and (ii) the Placing Agreement and the transactions contemplated thereunder (including the specific mandate for the allotment and issue of the Placing Shares). The Independent Board Committee has been established to advise the Independent Shareholders in respect of the proposed resolution(s) to approve the Subscription Agreement, the transactions contemplated thereunder and the Whitewash Waiver. Proton Capital has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Subscription Agreement, the transactions contemplated thereunder and the Whitewash Waiver. The appointment of the Independent Financial Adviser has been approved by the Independent Board Committee. A circular containing, among other things, (i) further details of the Placing; (ii) details of the Subscription and the Whitewash Waiver; (iii) the recommendation of the Independent Board Committee to the Independent Shareholders in relation to the Subscription and the Whitewash Waiver; (iv) the letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in relation to the Subscription and the Whitewash Waiver; and (v) a notice convening the EGM, will be despatched to the Shareholders on or before 26 January RESUMPTION OF TRADING At the request of the Company, trading in the Shares has been suspended from 9:00 a.m. on 30 November 2015 pending the release of this announcement. An application has been made by the Company for the resumption of trading in the Shares on the Stock Exchange on 6 January

4 Reference is made to the announcements of the Company dated 2 November 2015 and 7 December 2015, in relation to, among other things, a non-legally binding memorandum of understanding entered into by the Company and the Subscriber in relation to the subscription of new Shares and its subsequent updates. THE SUBSCRIPTION On 27 November 2015 (after trading hours) the Company and the Subscriber entered into the Subscription Agreement, pursuant to which the Subscriber has conditionally agreed to subscribe for and the Company has conditionally agreed to allot and issue 2,010,000,000 Subscription Shares to the Subscriber at the Subscription Price of HK$0.56. The Subscription Agreement Date 27 November 2015 Issuer The Company Subscriber Rongsheng Asset Management Co., Limited For further details about the Subscriber, please refer to the section headed Information of the Subscriber in this announcement. To the best knowledge, information and belief of the Directors, having made all reasonable enquiries, the Subscriber and its associates are Independent Third Parties and not connected with nor are acting in concert with any of the Directors, chief executive or Shareholders of the Company or its subsidiaries or their respective associates and parties acting in concert with any of them. Prior to entering into the Subscription Agreement, the Subscriber and the Concert Party Group were not interested in any Shares, warrants, options, derivatives or other securities that are convertible or exchangeable into Shares or other types of shareholding interest in the Company. The Subscription Shares The 2,010,000,000 Subscription Shares represent (i) approximately % of the existing issued share capital of the Company as at the date of this announcement; (ii) approximately 74.01% of the issued share capital of the Company as enlarged by the allotment and issue of the Subscription Shares upon Subscription Completion; and (iii) approximately 50.05% of the issued share capital of the Company as enlarged by the allotment and issue of the Subscription Shares and the Placing Shares upon Subscription Completion and Placing Completion (assuming the Placing is completed in full). The aggregate nominal value of the Subscription Shares is HK$20.10 million. 4

5 The Subscription Price The Subscription Price of HK$0.56 per Subscription Share represents: (i) a discount of approximately 60.84% to the closing price of HK$1.43 per Share as quoted on the Stock Exchange on the Last Trading Day; (ii) a discount of approximately 66.86% to the average closing price of approximately HK$1.69 per Share as quoted on the Stock Exchange for the last five consecutive trading days up to and including the Last Trading Day; (iii) a discount of approximately 61.38% to the average closing price of approximately HK$1.45 per Share as quoted on the Stock Exchange for the last ten consecutive trading days up to and including the Last Trading Day; and (iv) a discount of approximately 62.42% to the unaudited consolidated net asset value per Share of approximately HK$1.49 as at 30 June The Subscription Price was arrived at after arm s length negotiations between the Company and the Subscriber after taking into account, among others, the following factors: (a) the average closing price of approximately HK$1.45 per Share on the Stock Exchange for the last 10 trading days up to and including the date of the Last Trading Day; (b) the outstanding bank borrowings of over HK$1 billion as at 30 June 2015 which would due within one year, and the loan restructuring of the Group as announced by the Company on 10 June 2015; and (c) the unsatisfactory financial performance of the Group as the Group recorded loss of approximately HK$ million for the year ended 31 December 2014 and loss of approximately HK$61.60 million for the six months ended 30 June The Subscriber considered the risks involved in investing in the Group with a weak liquidity position, the low cash level of the Group as compared to its current liabilities (as demonstrated by the net current assets of the Group of approximately HK$39.69 million and the Group s bank balances and cash of approximately HK$73.36 million while the Group s current liabilities was amounted to approximately HK$1, million, as at 30 June 2015) and the continued loss-making business operation. On the other hand, the Directors believe that the introduction of the Subscriber as Shareholder will improve the financial position of the Group by providing sufficient funding for the Company to repay bank loans and invest in new business opportunities. The gross proceeds of the Subscription amount to approximately HK$1, million and the net proceeds from the Subscription will be approximately HK$1, million (after deduction of relevant expenses of the Subscription). On such basis, the net issue price will be approximately HK$0.55 per Subscription Share. 5

6 Mandate for the issue of the Subscription Shares The Subscription Shares will be allotted and issued pursuant to the Subscription Mandate to be sought from the Independent Shareholders at the EGM. Ranking The Subscription Shares will rank pari passu in all respects with the Shares in issue as at the date of allotment and issue of the Subscription Shares. Listing application An application will be made to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Subscription Shares. Conditions precedent The obligation of the Subscriber to subscribe for the Subscription Shares under the Subscription Agreement is conditional upon: (a) the Company, in accordance with the relevant requirements of the Takeovers Code, the Listing Rules, the Companies law of the Cayman Islands and its articles of association, having obtained the approvals at the EGM on the Subscription Agreement and the transactions contemplated thereunder, the Whitewash Waiver, the Subscription and the Subscription Mandate; (b) the Executive granting the Whitewash Waiver to the Subscriber; (c) (i) the Listing Committee of the Stock Exchange granting approval for the listing of and permission to deal in the Subscription Shares to be issued (and such approval not being subsequently revoked prior to the Subscription Completion); and (ii) the Company will not be rendered unable to meet the minimum public float requirements under the Listing Rules by reason of the Subscription Agreement and the transactions contemplated thereunder; (d) there being no suspension on the trading of Shares on the Stock Exchange prior to and upon Subscription Completion (save for (i) trading halt or suspension which are not more than 5 consecutive Business Days, other than suspension due to the Subscription Agreement and the transactions contemplated thereunder; or (ii) suspension for such period or circumstance which is agreed by the Subscriber); (e) all applicable laws and regulations relevant to the Subscription (including the Listing Rules and the Takeovers Code) having been complied with by each parties to the Subscription Agreement, and the Group has obtained all approval and consent for the transactions contemplated under the Subscription Agreement (including but not limited to such consent by third party(ies) as required under any material contracts or financing contracts as a result of the change of controlling shareholder of the Group or for the conducting of transactions contemplated under the Subscription Agreement), and having performed all necessary legal procedures; 6

7 (f) no judicial governmental or regulatory authorities making, issuing or ordering any order, judgement, limitations or decision to restrict or prohibit the transactions contemplated under the Subscription Agreement; (g) no third party having applied to any court or governmental authorities of competent jurisdictions claiming or threatening to claim for material compensation, to restrict or prohibit the transactions contemplated under the Subscription Agreement, or to declare the transactions contemplated under the Subscription Agreement illegal; (h) the representations, warranties and undertakings given by the Company under the Subscription Agreement remain true and accurate in all material respects, and not materially misleading, since the date of the Subscription Agreement up to the Subscription Completion; (i) the Company having performed all its obligations and undertakings under the Subscription Agreement; (j) the Subscriber having performed all its obligations and undertakings under the Subscription Agreement; (k) there being, in the reasonable opinion of the Subscriber, no material adverse change in the prospects, operation, financial and other aspects (and no development or event that may be expected to lead to material adverse change having happened) since the date of the Subscription Agreement up to the Subscription Completion; (l) the Subscriber being reasonably satisfied with due diligence results on the legal and financial aspects of the Group; and (m) the Company having provided to the Subscriber Hong Kong, Macau, British Virgin Islands and the Cayman Islands legal opinions in relation to the Company and its subsidiaries in Hong Kong, Macau and the Cayman Islands, in such form and substance to the satisfaction of the Subscriber. Waiver of the conditions precedent The Company shall use its best endeavours to ensure the fulfillment of the conditions (a), (e), (i), (k) and (l) above before the Long Stop Date. The Subscriber shall use its best endeavours to ensure the fulfillment of the conditions (b) and (j) above before the Long Stop Date. Save that the Subscriber has the absolute right to waive condition (d), (g), (h), (i), (k), (l) and (m) above and the Company has the absolute right to waive condition (j) above, none of the above conditions can be waived by any party to the Subscription Agreement. In the event that the conditions have not been fulfilled or waived (as the case may be) by the Long Stop Date, the Subscription Agreement will be automatically terminated, and the parties shall be released from all liabilities and obligations thereunder (save for clauses with respect to confidentiality, notices, general provisions, governing law as stated in the Subscription Agreement), but without prejudice to any rights accrued by the parties prior to the termination. 7

8 Notwithstanding the above, in relation to the due diligence review in condition (l) above, the Subscriber shall prior to 26 December 2015 give notice to the Company and specify if it required further time to conduct the due diligence review, and the Company and the Subscriber shall agree for a further time estimated by which the due diligence review will be completed. In the event that such the parties are unable to agree to such a further estimated time, the Subscription Agreement will be forthwith terminated, and neither party shall claim the other party for any damages, expenses and other costs. In the event that the parties agree to a further estimated time and proceed with the Subscription, and prior to the Subscription Completion the representations, warranties and undertakings are found to be in breach, the Subscriber may choose to (i) proceed with the Subscription Completion in accordance with the provisions relating to the conditions precedent above, or to delay the date for the Subscription Completion; or (ii) terminate the Subscription Agreement, and in any event, the Subscriber shall have no right to claim the Company for breach of such representations, warranties and undertakings. The Subscriber issued a notice prior to 26 December 2015 that it needs further time to conduct the due diligence review and the Company agreed to extend one month time for conducting the due diligence by the Subscriber to 26 January The Subscription is not conditional upon the establishment of the Trust Scheme. Whether or not the Trust Scheme is established, pursuant to the Subscription Agreement, the Subscriber would be under contractual obligation to complete the Subscription upon fulfilment or waiver of all the conditions precedents in accordance with the Subscription Agreement. Subscription Completion Subscription Completion shall take place on the tenth Business Day after the date upon which all of the conditions precedent of the Subscription Agreement have been fulfilled and/or waived (or such other date as may be agreed by the Subscriber and the Company in writing). On the Subscription Completion Date, among other things, the Subscriber shall effect payment of the aggregate Subscription Price in full, and the Company shall simultaneously, among other things, allot and issue the Subscription Shares to the Subscriber. Pursuant to the Subscription Agreement, each of the Directors (other than the independent non-executive Director) shall resign as a Director with effect from the Subscription Completion, and new executive Directors nominated by the Subscriber shall be appointed to the Board with effect from the Subscription Completion. Further announcement(s) will be made by the Company in this regard as and when appropriate. Shareholders and potential investors should note that the Subscription is subject to conditions to be fulfilled and/or waived and the Subscription may or may not proceed. Shareholders and potential investors are reminded to exercise caution when dealing in the securities of the Company. 8

9 Information on the Subscriber The Subscriber is a company incorporated under the laws of Hong Kong with limited liability and is principally engaged in investment holding. The Subscriber is an indirect wholly-owned subsidiary of Zhongrong, a company established in the PRC with limited liability. Zhongrong, a financial institution (License no. K0019H ) established in the PRC upon the approval of China Banking Regulatory Commission, and its subsidiaries are principally engaged in, among others, securities, equity investments and trust businesses. It is contemplated that, for the purpose of the Subscription, Zhongrong will develop and set up the Trust Scheme in the PRC by 15 January Upon establishment, the Trust Scheme will comprise approximately 960 million units (with each unit carrying a value of RMB1) (the Units, each a Unit ) to be subscribed by (i) the trustee (i.e. Zhongrong) of the Qualified Zhongrong Trust Product for public qualified investors (who would be the primary beneficiaries) (the Public Investors ) as to approximately two thirds of the total Units (the Public Units ); and (ii) Shenzhen Dasheng (as the secondary grantor as well as the secondary beneficiary) as to approximately one third of the total Units (the Private Units ). There is no maximum number of Units that can be subscribed by a public qualified investor. All the Units are expected to be subscribed by 15 January 2016 and the funds for subscription shall reach the trust account of the Trust Scheme within five business days upon (i) the Executive having granted the Whitewash Waiver; and (ii) the Company having obtained the approval from the Independent Shareholders of the transaction contemplated under the Subscription Agreement and the Whitewash Waiver. Zhongrong would be appointed as the trustee to hold the Units for and on behalf of the beneficiaries of the Trust Scheme, and its indirect wholly-owned subsidiary, Shenzhen Baosheng, would act as the fund manager to manage the investment(s) in Zhongrong s investment vehicle namely, the Subscriber, which would in turn invest into a specific company listed on the Stock Exchange, currently the Company. Upon twelve months after the establishment of the Trust Scheme, Zhongrong (in the capacity as the trustee) would be entitled to require Shenzhen Dasheng to purchase the Public Units at a fixed premium. Upon six months after the establishment of the Trust Scheme, with the prior consent of Zhongrong, Shenzhen Dasheng can purchase the Public Units from Zhongrong (in the capacity as the trustee) at the same premium. As at the date of this announcement, Mr. Zhou owned as to 99% of the equity interest in Shenzhen Dasheng. The purpose of the Trust Scheme is to identify and invest in shares of a listed company in Hong Kong. Based on the mutual understanding between the Subscriber and Shenzhen Dasheng/ Mr. Zhou as at the date of this announcement, the change of the investment target under the Trust Scheme would require the consent of Shenzhen Dasheng (being the secondary grantor), but all other decision making and management of the Trust Scheme would vest in the fund manager, being Shenzhen Baosheng. Qualified Zhongrong Trust Product shall be a trust product developed and managed by Zhongrong which has readily available funds but without specific investment targets, where Zhongrong, has full discretionary power to manage, dispose of and make investment with the funds contributed by the Public Investors under the trust product for the benefit of the Public Investors and the Public Investors have no 9

10 voting power or control over the funds (including the investment decision) and the assets in which the funds invest but are only entitled to fix return from the products and information right with respect to the management and disposal of the funds or assets thereunder. For the purpose of the Trust Scheme, each subscriber holder of the Units shall make representation, warrant and undertaking in accordance with the deed of Trust Scheme that, among other things, (i) it and its parties acting in concert have not conducted and will not conduct any acts results in disqualifying transactions of the Whitewash Waiver (as defined under paragraph 3 of Schedule VI to the Takeovers Code) or special deals relating to the Subscription and the Whitewash Waiver (as defined under Rule 25 of the Takeovers Code); and (ii) it is not a Shareholder. Intentions of the Subscriber regarding the Group As at the date of this announcement, the Subscriber intends to continue the existing business of the Group and does not intend to introduce any major changes to the existing operation and business of the Company or dispose of any of the assets of the Group other than in the ordinary course of business. It is, however, contemplated that the Group may expand its investment in entities which are principally engaged in the operation of the natural gas business, details of which are disclosed in the announcement of the Company dated 23 October The Group is also expecting certain investment in an intelligent, electric motor vehicle manufacturer and setting up a new a financial leasing company. Given the poor liquidity of the Group as at the date of this announcement, the Subscriber intends to procure the Group to repay certain bank borrowings to improve the liquidity and financial position of the Group. For details please refer to the subsection headed Reasons for the Subscription, the Placing and the use of proceeds below. Following the Subscription Completion, the Subscriber will conduct a detailed review on the operations of the Group with a view to improving the performance of the Group and to developing a corporate strategy to broaden the income stream of the Group. Subject to the result of the review, the Subscriber will consider all possible options to improve the existing operations and business of the Group or to seek new business opportunities to improve the Group s financial position and prospects. The Company will comply with all applicable requirements of the Listing Rules and/or the Takeovers Code as and when appropriate. IMPLICATIONS UNDER THE TAKEOVERS CODE Dealing and interest of the Subscriber and the Concert Party Group in the securities of the Company The Subscriber has confirmed that it and the Concert Party Group have not acquired or disposed of or entered into any agreement or arrangement to acquire or dispose of, voting rights in the Company in the six months prior to and up to and including 2 November 2015, being the date of the announcement of the Company in relation to the possible subscription and possible whitewash waiver as contemplated under a non-legally binding memorandum of understanding dated 30 October 2015 and entered into between the Subscriber and the Company. 10

11 As at the date of this announcement, save for the Subscription, the Subscriber has confirmed that, neither the Subscriber nor any member of the Concert Party Group: (a) holds, controls or has direction over any outstanding shares, options, warrants or any securities that are convertible into Shares or any derivatives in respect of securities in the Company, or hold any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company; (b) has borrowed or lent any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company; (c) has any arrangement referred to in Note 8 to Rule 22 of the Takeovers Code (whether by way of option, indemnity or otherwise) in relation to the relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company, which might be material to the Subscription and/or the Whitewash Waiver, with any other persons; (d) has any agreement or arrangement to which it is a party which relates to the circumstances in which it may or may not invoke or seek to invoke a pre-condition or a condition to the Subscription and/or the Whitewash Waiver (save as the conditions precedent to the Subscription); (e) has received any irrevocable commitment from anyone to vote for the Subscription and/or the Whitewash Waiver; or (f) has dealt in Shares, outstanding options, derivatives or other securities convertible or exchangeable into Shares, during the six months prior to the date of this announcement. The Whitewash Waiver Upon Subscription Completion, the Subscriber (together with the Concert Party Group) will in aggregate be interested in a total of 2,010,000,000 Shares representing approximately 74.01% of the issued share capital of the Company as enlarged by the allotment and issue of the Subscription Shares (assuming that there is no change in the issued share capital of the Company other than the issue of the Subscription Shares) and (as the case may be) approximately 50.05% of the issued share capital of the Company as enlarged by the allotment and issue of the Subscription Shares and the Placing Shares (assuming the Placing is completed in full and that there is no change in the issued share capital of the Company other than the issue of the Subscription Shares and the Placing Shares). Under Rule 26.1 of the Takeovers Code, in the absence of the Whitewash Waiver, the Subscriber would be obliged to make a mandatory general offer to the Shareholders for all the issued Shares and other securities of the Company not already owned or agreed to be acquired by it or parties acting in concert with it unless the Whitewash Waiver is obtained from the Executive. In this regard, the Subscriber will make an application to the Executive for the Whitewash Waiver pursuant to Note 1 on Dispensation from Rule 26 of the Takeovers Code in respect of the allotment and issue of the Subscription Shares. The Whitewash Waiver, if granted by the Executive, will be subject to, among other things, approval by the Independent Shareholders at the EGM by way of poll. The Subscriber and parties acting in concert with it and any Shareholders who are interested in or are involved in the Subscription Agreement and 11

12 the transactions contemplated thereunder and/or the Whitewash Waiver and their respective associates shall abstain from voting on the resolutions approving the Subscription and the transactions contemplated thereunder and the Whitewash Waiver at the EGM. If the Whitewash Waiver is approved by the Independent Shareholders, the potential holding of voting rights of the Company held by the Subscriber and parties acting in concert with it resulting from the Subscription will exceed 50% of the voting rights of the Company. The Subscriber may further increase their holdings of voting rights of the Company without incurring any further obligations under Rule 26 of the Takeovers Code to make a general offer. THE PLACING On 27 November 2015 (after trading hours) the Company and the Placing Agent entered into the Placing Agreement (as supplemented by the Supplemental Placing Agreement dated 5 January 2016), pursuant to which the Company has conditionally agreed to place through the Placing Agent, on a best effort basis, up to 1,300,000,000 Placing Shares at a price of HK$0.56 per Placing Share. The Placing Agreement Date 27 November 2015 (as supplemented by the Supplemental Placing Agreement dated 5 January 2016) Issuer The Company Placing Agent Qian Hai Securities Limited, a corporation licensed to carry out type 1 (dealing in securities) and type 4 (advising on securities dealing) regulated activities as defined under the Securities and Futures Ordinance. The Placing Agent has conditionally agreed to place up to 1,300,000,000 Placing Shares, on a best effort basis, to the Placees. The Placing Agent will receive a placing commission of 4.1% of the aggregate Placing Price of the Placing Shares actually placed by the Placing Agent on behalf of the Company in pursuance of its obligations under the Placing Agreement. Such placing commission was arrived at after arm s length negotiations between the Company and the Placing Agent under normal commercial terms and with reference to the market rate and after taking into account the size of the Placing. To the best knowledge, information and belief of the Directors, having made all reasonable enquiries and as confirmed by the Placing Agent, the Placing Agent and its associates are (i) Independent Third Parties; and (ii) the Placing Agent is not interested in any Shares, warrants, options, derivatives or other securities that are convertible or exchangeable into Shares or other types of shareholding interest in the Company. 12

13 Placees The Placing Shares are currently expected to be placed to not less than six Placees, who will be individuals, corporate, institutional investors or other investors. The Placees, who and whose ultimate beneficial owners, shall be Independent Third Parties and not connected with nor are acting in concert with any of the Directors, chief executive or Shareholders of the Company or its subsidiaries or their respective associates, and the Subscriber or parties acting in concert with any of them. The Placing Agent undertook to take out all necessary steps to procure that all the Placees are third parties independent of and not acting in concert with the Company or the Subscriber and the Concert Party Group and that they will not become a substantial Shareholder (within the meaning of the Listing Rules) immediately after the Placing. The Placing Shares The 1,300,000,000 Placing Shares represent (i) approximately % of the existing issued share capital of the Company as at the date of this announcement; (ii) approximately 64.82% of the issued share capital of the Company as enlarged by the allotment and issue of the Placing Shares (assuming the Placing is completed in full); and (iii) approximately 32.37% of the issued share capital of the Company as enlarged by the allotment and issue of the Placing Shares (assuming the Placing is completed in full) and the Subscription Shares. The aggregate nominal value of the Placing Shares is HK$13 million. The Placing Price The Placing Price of HK$0.56 per Placing Share represents: (i) a discount of approximately 60.84% to the closing price of HK$1.43 per Share as quoted on the Stock Exchange on the Last Trading Day; (ii) a discount of approximately 66.86% to the average closing price of approximately HK$1.69 per Share as quoted on the Stock Exchange for the last five consecutive trading days up to and including the Last Trading Day; (iii) a discount of approximately 61.38% to the average closing price of approximately HK$1.45 per Share as quoted on the Stock Exchange for the last ten consecutive trading days up to and including the Last Trading Day; and (iv) a discount of approximately 62.42% to the unaudited consolidated net asset value per Share of approximately HK$1.49 as at 30 June The Placing Price was arrived at after arm s length negotiations between the Company and the Placing Agent after taking into account the following factors: (a) the average closing price of approximately HK$1.45 per Share on the Stock Exchange for the last 10 trading days up to and including the date of the Last Trading Day; 13

14 (b) the outstanding bank borrowings of over HK$1 billion as at 30 June 2015 which was due within one year and the loan restructuring of the Group as announced by the Company on 10 June 2015; and (c) the unsatisfactory financial performance of the Group as the Group recorded loss of approximately HK$ million for the year ended 31 December 2014 and loss of approximately HK$61.60 million for the six months ended 30 June The Placing Agent considered the risks of the potential Placees associated with their investment in the Group with a weak liquidity position, the low cash level of the Group as compared to its current liabilities (as demonstrated by the net current assets of the Group of approximately HK$39.69 million and the Group s bank balances and cash of approximately HK$73.36 million while the Group s current liabilities was amounted to approximately HK$1, million, as at 30 June 2015) and the continued loss-making business operation. The Directors believe that the Placing will improve the financial position of the Group by providing sufficient funding for the Company to repay bank loans and invest in new business opportunities. The gross proceeds of the Placing amount to approximately HK$728 million and the net proceeds from the Placing will be approximately HK$ million (after deduction of relevant expenses of the Placing). On such basis, the net issue price will be approximately HK$0.53 per Placing Share. Mandate for the issue of the Placing Shares The Placing Shares will be allotted and issued pursuant to the Placing Mandate to be sought from the Shareholders at the EGM. Ranking The Placing Shares will rank pari passu in all respects with the Shares in issue as at the date of allotment and issue of the Placing Shares. Listing application An application will be made to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Placing Shares. Conditions precedent Placing Completion is conditional upon fulfillment of the following conditions: (a) the passing by the Shareholders who are allowed to vote under the Listing Rules of the relevant resolution(s) to approve the Placing Agreement and the transactions contemplated thereunder, including the grant of the Placing Mandate at the EGM; 14

15 (b) the Listing Committee of the Stock Exchange granting or agreeing to grant listing of, and permission to deal in, the Placing Shares; and (c) the obtaining by all parties concerned of all necessary consents or approvals (if any) from the relevant authorities in respect of the entry and consummation of the Placing Agreement and the transactions contemplated thereunder. For the avoidance of doubt, the Placing is independent of the Subscription and is not conditional upon the Subscription Completion. None of the above conditions precedent can be waived. If any of conditions precedent above is not satisfied by the day falling on the 30th day from the date of the EGM or any adjournment thereof (or if such date is not a Business Day, the next Business Day immediately thereafter), the obligations and liabilities of the Company and the Placing Agent under the Placing Agreement shall be null and void and the Company and the Placing Agent shall be released from all rights and obligations thereunder, and neither party shall have any right to damages for any costs and expenses that it may have incurred in connection with or arising out of the Placing Agreement save for any antecedent breach hereof (and save that the Company shall reimburse for the reasonable out of pocket expenses incurred by the Placing Agent in respect of the Placing). Placing Completion Placing Completion shall take place on the third Business Day after the fulfilment and/or waiver of all the above conditions or on such other date as the Company and the Placing Agent may agree in writing. Since completion of the Placing is subject to the fulfilment or waiver of the condition(s) as set out in the Placing Agreement, the Placing may or may not proceed. Shareholders and potential investors of the Company are reminded to exercise caution when dealing in the Shares. The Placing and the Subscription are not inter-conditional upon each other. REASONS FOR THE SUBSCRIPTION, THE PLACING AND THE USE OF PROCEEDS The Group is principally engaged in the production and sale of dyed yarns, knitted sweaters, cotton yarns, provision of dyeing and knitting services, and trading of cotton and yarns. During the six months ended 30 June 2015, the Group s consolidated revenue decreased slightly by around 2.0% to approximately HK$ million as compared to the corresponding period in 2014 while the Group recorded a loss of approximately HK$61.60 million for the six months ended 30 June With termination of the reserve cotton policy by the PRC government since 2014 and the absence of a comprehensive nationwide policy on full-scale direct subsidies, the cotton textile trade and industry continued to experience a highly uncertain and sluggish growth during the six months ended 30 June As a result, the yarn textile industry was facing a downward trend in market price and the 15

16 overall production was decelerating. Moreover, the existing cotton policy in the PRC had also led to a continuous drop in the domestic cotton price, which in turn put a downward pressure on the average selling price of its textile products. Furthermore, the drop in the auction price of the national cotton reserve set by the PRC government had also caused further decline in the average yarn selling price in the PRC market which was already clouded by the prevailing pessimistic sentiment of the cotton and dyed yarns customers. During the six months ended 30 June 2015, orders from Europe started to recover, but the size and volume still did not return to the optimum level in the past. Although the order book for the Group s sweater business remained satisfactory, the Group was yet to effectively leverage down the production costs which adversely affected the baseline for its textile business in the first six months of On 31 July 2015, Anterra Energy Inc. (a public Canadian company listed on the TSX Venture Exchange Inc. under the stock code AE.A-V), entered into a non-legally binding memorandum of understanding with Dynamic Regal Limited (an indirect wholly-owned subsidiary of the Company) setting out the preliminary understanding in relation to the possible investments by Dynamic Regal Limited in Anterra Energy Inc., details of which are set out in the announcement of the Company dated 31 July The exclusivity of the said memorandum of understanding was lapsed on 30 August 2015 and the Company has no intention to proceed further with such possible investments. As at 30 June 2015, the Group had total outstanding bank borrowings of approximately HK$1.02 billion which was due within one year while the Company had only bank balances and cash of approximately HK$73.36 million. On 3 June 2015 and 4 June 2015, certain bankers of the Company (the Banks ) have demanded in writing that the Group shall make immediate repayment of the amounts outstanding or they may consider commencing legal proceedings against the Group. On 8 June 2015, upon discussion between the Group and the Banks, the Banks have agreed to withdraw the repayment demand and provide a new banking facility in the principal sum of HK$100 million to the Group in order to support the short-term cashflow requirements of the Group. Taking into account of the above, the Directors consider there is an imminent funding need of the Group and believe that the Subscription would improve the financial position of the Group to fund the existing business and acquisitions as the opportunity arises and to strengthen the working capital of the Company. Moreover, as disclosed in the announcement of the Company dated 3 December 2015, one of the Banks had demanded Addchance Limited, Sky Emperor International Limited and Chinakey (Hong Kong) Limited (collectively, the Relevant Group Companies ), all being indirect wholly-owned subsidiaries of the Company, to make immediate payment of the amounts under the banking facilities outstanding, otherwise they may consider commencing legal proceedings against the Relevant Group Companies which may include presentation of a petition seeking for the winding-up of the same if payment is not made within 21 days of the demand. Such incident enhanced the view of the Directors that there is an imminent funding need of the Group as mentioned above. Given the unsatisfactory performance of the Group s existing business as mentioned above, it is also the Group s intention to diversity its income streams by exploring new business development/investment opportunities in order to diversify its business and enhance the long-term growth potential of the Company. Such business development/investment opportunities include the followings: 16

17 Natural Gas Business As disclosed in the announcement of the Company dated 23 October 2015, Endless Rich Limited, an indirect wholly-owned subsidiary of the Company, entered into a memorandum of understanding in respect of the possible acquisition of 38% equity interest (the Possible Acquisition ) of a natural gas business (the Natural Gas Business ) in Shanxi Province, the PRC. The Natural Gas Business is principally engaged in the operation of the natural gas business which includes construction of pipelines, selling and distribution of natural gas to residential, commercial and industrial users, operation of compressed natural gas and liquefied natural gas fueling stations, as well as installation of natural gas equipment for customers. The demand for natural gas in the PRC increases along with the economic development. In view of the established scale of the operation of the Natural Gas Business, its historical financial results and continuous growth potential, the Directors consider that the Possible Acquisition provides an opportunity for the Group to broaden its income source, improve its financial performance as well as provide better return to the Shareholders in the long run. Electric Car Enterprise The Company intends to capture the development opportunities in the intelligent electric motor vehicles industry in the PRC by way of acquisition or capital injection into an intelligent, electric motor vehicle manufacturer (the Electric Car Enterprise ). The Electric Car Enterprise is principally engaged in the research and manufacture of intelligent, electric vehicles in PRC which includes the manufacture of lithium battery, assembly of electric vehicles, development of testing platform for electric system control and innovation electric vehicles. As the PRC government encourages the use of environmental friendly technologies in the automobile industry, the demand for intelligent, electric vehicles will increase. In this regard, the Company considers that the intelligent, electric vehicles have potential which present a feasible investment opportunity for the Company. Financial Leasing Enterprise The Company intends to capture the development opportunities in the financial leasing industry in the PRC by way of establishing a domestic financial leasing enterprise (the Financial Leasing Enterprise ). It is the Company s preliminary plan to invest into, amongst others, the automobile leasing sector. As the gross domestic products continues to grow, the capital spending continues to expand and the enabling policy environment all helps to fuel the growth of financial leasing industry. In this regard, the Company considers that the financial leasing business has potential which present a feasible investment opportunity for the Company. 17

18 The gross proceeds of the Subscription amount to approximately HK$1, million and the net proceeds from the Subscription will be approximately HK$1, million (after deduction of relevant expenses of the Subscription), which shall be used for the following purposes: (a) approximately HK$300 million for the repayment of existing bank loan; (b) approximately HK$500 million for the Possible Acquisition; (c) approximately HK$200 million for the investment in the Electric Car Enterprise; and (d) the remaining of the net proceeds, being approximately HK$98.37 million for the general working capital of the Company. The Directors (excluding the non-executive Directors and independent non-executive Directors who will express their views after receiving advice from the Independent Financial Adviser) consider that the Subscription Agreement is entered into on normal commercial terms and the terms of the Subscription Agreement (including the Subscription Price) are fair and reasonable and the Subscription is in the interest of the Company and the Independent Shareholders as a whole. The gross proceeds of the Placing amount to approximately HK$728 million and the net proceeds from the Placing will be approximately HK$ million (after deduction of relevant expenses of the Placing), which shall be used for the following purposes: (a) approximately HK$200 million for the repay existing bank loan; (b) approximately HK$200 million for setting up a Financial Leasing Enterprise; and (c) the remaining of the net proceeds, being approximately HK$ million, will be used as the general working capital of the Company. The Directors consider that the Placing Agreement is entered into on normal commercial terms and the terms of the Placing Agreement (including the Placing Price and the placing commission) are fair and reasonable and the Placing is in the interest of the Company and the Shareholders as a whole. 18

19 EQUITY FUND RAISING ACTIVITIES OF THE COMPANY DURING THE PAST 12 MONTHS Apart from the equity fund raising activity mentioned below, the Company had not conducted any other equity fund raising activities in the past 12 months immediately preceding the date of this announcement. Date of announcements Fund raising activity Net proceeds Raised Intended use of proceeds Actual use of proceeds 21 August 2015 and 16 September 2015 Placing of 90,000,000 new Shares under general mandate at the placing price of HK$1.05 Approximately HK$92.4 million General working capital and/or for future investments of the Group HK$10 million used for the payment of the part consideration of the acquisition of 13% interest in Coulman International Limited as announced on 13 March 2015, HK$40 million used for the payment of a refundable deposit for the possible further acqusition of 38% interest in Coulman International Limited as announced on 23 October 2015, HK$15 million used for repayment of a loan from a Shareholder, HK$26 million used for genreal working capital of the Group and the remaining HK$1.4 million was not utilised yet. 24 December 2014 Placing of 88,000,000 existing Shares at the placing price of HK$1.05 per Share and subscription of 88,000,000 new Shares at the subscription price of HK$1.05 per Share Approximately HK$90.6 million General working capital of the Group and for any potential investment opportunities in the future HK$50 million used for the payment of the part consideration of the acquisition of 13% interest in Coulman International Limited as announced on 13 March 2015, HK$39.3 million used for general working capital of the Group and the remaining HK$1.3 million at bank. 19

20 EFFECTS ON SHAREHOLDING STRUCTURE OF THE COMPANY The shareholding structure of the Company (i) as at the date of this announcement; (ii) immediately after the allotment and issue of the Subscription Shares but before the allotment and issue of the Placing Shares; (iii) immediately after the allotment and issue of the Placing Shares (assuming the Placing is completed in full) but before the allotment and issue of the Subscription Shares; and (iv) immediately after the allotment and issue of the Subscription Shares and the Placing Shares (assuming the Placing is completed in full) are as follows: As at the date of this announcement Immediately after the allotment and issue of the Subscription Shares but before the allotment and issue of the Placing Shares Immediately after the allotment and issue of the Placing Shares (assuming the Placing is completed in full) but before the allotment and issue of the Subscription Shares Immediately after the allotment and issue of the Subscription Shares and the Placing Shares (assuming the Placing is completed in full) Number of Shares % Number of Shares % Number of Shares % Number of Shares % Powerlink Industries Limited 112,800, ,800, ,800, ,800, ( Powerlink ) (Note) The Subscriber and the Concert 2,010,000, ,010,000, Party Group Placees 1,300,000, ,300,000, Existing public Shareholders 592,930, ,930, ,930, ,930, Total 705,730, ,715,730, ,005,730, ,015,730, Note: Powerlink is wholly and beneficially owned by Mr. Sung Chung Kwun ( Mr. Sung ), a director of certain subsidiaries of the Company, and the father of Mr. Sung Kim Ping, an executive Director. Upon the Subscription Completion and subject to further negotiation between the Company and the Subscriber, Mr. Sung Kim Ping shall resign as executive Director pursuant to the terms of the Subscription Agreement, and Mr. Sung might resign from all directorships in the subsidiaries of the Company, and taking into account of the dilution effect of the Subscription and Placing by the allotment and issue of the Subscription Shares and Placing Shares, in such event, Powerlink will cease to be a substantial Shareholder upon Subscription Completion and/or Placing Completion. Assuming the above shareholding remain unchanged prior to the Subscription Completion, in the event that the Placing Completion does not or is yet to be materialized and Mr. Sung does not resign from his directorships in the subsidiaries of the Company, the Shares held by Powerlink will not be regarded as part of the public and hence condition precedent (c) to the Subscription Agreement will not be fulfilled, and since it is a condition precedent that could not be waived, the Subscription Completion will not take place, unless and until all the conditions precedent (including condition (c) to the Subscription Agreement which cannot be waived) are fulfilled or waived, as the case may be, in accordance with the terms of the Subscription Agreement. 20