China Zhongwang : Announcements and Notices - Connected Transaction Finance Lease Arrangement

130460 Eng.indd

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(incorporated in the Cayman Islands with limited liability)

(Stock Code: 01333) ANNOUNCEMENT CONNECTED TRANSACTION FINANCE LEASE ARRANGEMENT FINANCE LEASE AGREEMENT

On 26 April 2016, Yingkou Zhongwang entered into the Finance Lease Agreement with Hongtai Lease, pursuant to which Yingkou Zhongwang has agreed to lease from Hongtai Lease the Lease Assets, which shall be transferred from Yingkou Zhongwang to Hongtai Lease at the Transfer Consideration of RMB600,000,000. The Lease Assets will then be leased to Yingkou Zhongwang with a Lease Period of eight years. The aggregate amount of the Lease Rent is the amount of RMB882,240,000, and Yingkou Zhongwang has also agreed to pay the Consulting Fee at an amount of RMB19,200,000 to Hongtai Lease pursuant to the Finance Lease Agreement.

LISTING RULES IMPLICATIONS

As Hongtai Lease is an indirect non-wholly-owned subsidiary held by Mr. Liu Zhongtian ("Mr. Liu") who is the controlling shareholder of the Company, Hongtai Lease is an associate of Mr. Liu and therefore is also a connected person of the Company under Chapter 14A Listing Rules. As such, the Transaction constitutes a connected transaction of the Company.

As the highest applicable percentage ratio applied in accordance with Rule 14.07 of the Listing Rules in respect of the Transaction exceeds 0.1% but is less than 5%, the Transaction is subject to the reporting and announcement but is exempt from independent shareholders' approval requirement under Chapter 14A of the Listing Rules.

FINANCE LEASE AGREEMENT

On 26 April 2016, Yingkou Zhongwang entered into the Finance Lease Agreement with Hongtai Lease, pursuant to which Yingkou Zhongwang has agreed to lease from Hongtai Lease the Lease Assets, which shall be transferred from Yingkou Zhongwang to Hongtai Lease at the Transfer Consideration of RMB600,000,000. The Lease Assets will then be leased to Yingkou Zhongwang with a Lease Period of eight years.

Parties: Hongtai Lease, an indirect non-wholly-owned subsidiary held by Mr. Liu who is the controlling shareholder of the Company (as the Lessor); and

Yingkou Zhongwang, an indirect wholly-owned subsidiary of the Company (as the Lessee)

Lease Assets

The Lease Assets consists manufacturing equipment currently owned by Yingkou Zhongwang with a book value of RMB600,539,416 as of 29 February 2016, the ownership of which will be transferred to Hongtai Lease pursuant to the Finance Lease Agreement.

Lease Period

The Lease Period lasts a term of eight years with the Commencement Day at 26 April 2016.

Lease Rent and Consulting Fee

Lease Rent

The Lease Rent consists of the Principal Amount of RMB600,000,000 (equivalent amount of the Transfer Consideration) and the lease interest which is determined based on a fixed interest rate of 5.88% per year. The total lease interest for the Lease Period is RMB282,240,000. Therefore, the aggregate amount of the Lease Rent is RMB882,240,000.

Consulting Fee

In addition to the Lease Rent, Yingkou Zhongwang has also agreed to pay the Consulting Fee with an amount of RMB19,200,000 to Hongtai Lease pursuant to the Finance Lease Agreement.

The Lease Rent and the Consulting Fee were determined after arm's length negotiation between Yingkou Zhongwang and Hongtai Lease with reference to the prevailing market rate for comparable assets finance leases.

Payment

Lease Rent

Yingkou Zhongwang will pay the Lease Rent to Hongtai Lease in 16 instalments on each Payment Date during the Lease Period.

For each of the first 15 instalments, Yingkou Zhongwang shall pay an amount of RMB17,640,000, representing the amount of the lease interest of each respective instalment. For the last instalment, Yingkou Zhongwang shall pay an amount of RMB617,640,000, representing the aggregated value of the Principal Amount and the lease interest of the last instalment.

Consulting Fee

Yingkou Zhongwang shall pay the Consulting Fee in eight instalments with each instalment at a fixed amount of RMB2,400,000 on a date before April of each year during the Lease Period.

Ownership and Purchase Option

Titles of the Lease Assets shall belong to Hongtai Lease throughout the Lease Period.

Upon the expiry of the term of the Finance Lease Agreement, Yingkou Zhongwang is entitled to purchase the Lease Assets from Hongtai Lease at a price of RMB1.00 under the condition that Yingkou Zhongwang has paid up the Lease Rent and the Consulting Fee contemplated under the Finance Lease Agreement.

REASONS FOR AND BENEFITS OF ENTERING INTO THE FINANCE LEASE AGREEMENT

The entering into of the Finance Lease Agreement will expand the financing channels and optimize the financing structure of the Company. Besides, it also enables the Company to control its financing risk and lower the financing cost for Yingkou Zhongwang.

The Directors (including the independent non-executive Directors) are of the view that the terms of the Finance Lease Agreement are on normal commercial terms and fair and reasonable and are in the interest of the Company and its Shareholders as a whole.

LISTING RULES IMPLICATIONS

As Hongtai Lease is an indirect non-wholly-owned subsidiary held by Mr. Liu who is the controlling shareholder of the Company, Hongtai Lease is an associate of Mr. Liu and therefore is also a connected person of the Company under Chapter 14A Listing Rules. As such, the Transaction constitutes a connected transaction of the Company.

As the highest applicable percentage ratio applied in accordance with Rule 14.07 of the Listing Rules in respect of the Transaction exceeds 0.1% but is less than 5%, the Transaction is subject to the reporting and announcement but is exempt from independent shareholders' approval requirement under Chapter 14A of the Listing Rules.

Due to his relationship with Hongtai Lease, Mr. Liu has abstained from voting on the Board resolutions approving the Finance Lease Agreement and the Transaction. Save as disclosed above, none of the Directors has any material interest under the Finance Lease Agreement.

INFORMATION OF THE PARTIES Yingkou Zhongwang

Yingkou Zhongwang, an indirect wholly-owned subsidiary of the Company, mainly engages in manufacturing of aluminium products.

Hongtai Leasing

Hongtai Lease is an indirect non-wholly-owned subsidiary held by Mr. Liu, mainly engages in finance leasing, leasing, purchasing leasing assets, salvage value disposal and maintenance of the leasing asset, lease transaction consultation and guarantee.

DEFINITIONS

In this announcement, unless the context requires otherwise, the following expressions have the following meanings:

"Board" the board of directors of the Company

"Company" China Zhongwang Holdings Limited ( 中國忠旺控股有限公司 ), a company incorporated in the Cayman Islands with limited liability and the issued shares of which are listed on the Stock Exchange

"Consulting Fee" an amount of RMB19,200,000 to be paid by Yingkou Zhongwang to Hongtai Lease according to the Finance Lease Agreement "Commencement Day" 26 April 2016 "Directors" the director(s) of the Company