Aowei Holding Limited — Capital/Financing Update 2016

Jul 5, 2016

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 appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities of the Company.

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HENGSHI MINING INVESTMENTS LIMITED 恒實礦業投資有限公司

(incorporated in the British Virgin Islands and continued in the Cayman Islands with limited liability)

(Stock Code: 1370)

DISCLOSEABLE TRANSACTION ACQUISITION OF 100% ISSUED SHARE CAPITAL IN THE TARGET COMPANY INVOLVING ISSUE OF CONSIDERATION SHARES UNDER GENERAL MANDATE

THE SALE AND PURCHASE AGREEMENT

The Board is pleased to announce that on 4 July 2016 (after trading hours), the Company entered into the Sale and Purchase Agreement with the Vendor and the Guarantors, pursuant to which the Company conditionally agreed to purchase, and the Vendor conditionally agreed to sell the Sale Interest at the consideration of RMB213,000,000 (equivalent to approximately HK$248,600,000). The Consideration for the Acquisition will be settled by the issuance of the Consideration Shares under the General Mandate.

LISTING RULES IMPLICATIONS

Since some of the applicable percentage ratios (as defined under the Listing Rules) in respect of the Acquisition exceed 5% but are less than 25%, the transaction contemplated under the Sale and Purchase Agreement constitutes a discloseable transaction for the Company under Chapter 14 of the Listing Rules and is subject to the requirements of reporting and announcement, but is exempted from the requirement of shareholders’ approval pursuant to Chapter 14 of the Listing Rules.

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GENERAL MANDATE

The Consideration Shares will be issued under the General Mandate granted to the Board by the Shareholders to allot, issue and deal with Shares not exceeding 20% of the number of issued shares of the Company at the annual general meeting of the Company held on 26 May 2016. Shareholders’ approval will not be required for the allotment and issue of the Consideration Shares as the Consideration Shares will be issued under the General Mandate. Application will be made to the Stock Exchange for the listing of, and permission to deal in the Consideration Shares.

The Board is pleased to announce that, on 4 July 2016 (after trading hours), the Company entered into the Sale and Purchase Agreement with the Vendor and the Guarantors, pursuant to which the Company conditionally agreed to purchase, and the Vendor conditionally agreed to sell the Sale Interest at the consideration of RMB213,000,000 (equivalent to approximately HK$248,600,000).

THE SALE AND PURCHASE AGREEMENT

Date

4 July 2016 (after trading hours)

Parties

Vendor: Jovial Link Purchaser: the Company Guarantors: (1) Mr. Li (2) Mr. Li Shunfa (3) Ms. Lee

Assets to be acquired

Pursuant to the Sale and Purchase Agreement, the Company has conditionally agreed to purchase, and the Vendor has conditionally agreed to sell the Sale Interest, representing 100% of the entire issued share capital of the Target Company, subject to fulfilment or waiver (if applicable) of the Conditions Precedent.

The Consideration

The Consideration for the sale and purchase of the Sale Interest is RMB213,000,000 and will be satisfied by the Company by issuance of the Consideration Shares to the Vendor (or its nominees) at the Issue Price upon Completion.

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The Consideration was determined after arm’s length negotiations between the parties to the Sale and Purchase Agreement after taking into consideration of the following factors:

• (i) a valuation report prepared by an independent valuer, Beijing Lixin Donghua Assets Valuation Company Limited* (北京立信東華資產評估有限公司). Based on the Valuation Report, the value of the entire equity interest of the Target Company as at 22 June 2016 was RMB213,765,600;

• (ii) the business development and prospects of the Target Group in the medium to long term; and

• (iii) the Profit Guarantee provided by the Vendor and the Guarantors.

Conditions Precedent

Completion of the sale and purchase of the Sale Interest is subject to the following conditions:

• (a) the Purchaser, at its absolute discretion, is satisfied with the results of the due diligence review on, the financial, legal, commerce, trade, asset, corporation, taxation, operation and other conditions of each member of the Target Group;

• (b) the warranties, representations and undertakings given by the Vendor and the Guarantors in the Sale and Purchase Agreement remain true, accurate and not misleading in every respect as at the date of completion of the Acquisition;

• (c) there has not been any material adverse change in respect of the Target Group since the date of the Sale and Purchase Agreement or the occurrence of any incident which will have a material adverse effect on the business, prospects, operating performance or financial position of the Target Group;

• (d) all requisite filings or registrations having been made with, and all requisite authorisations (if required) having been obtained from all applicable governmental authorities, or other third parties (including but not limited to the Stock Exchange) which are necessary in connection with the execution and performance of the Sale and Purchase Agreement;

• (e) all companies comprising the Target Group having obtained all necessary and valid consents, approvals, orders, permits, authorisations, registrations, notices, waivers from any other governmental authorities for the purposes of their existing business operations in accordance with the laws of the places where they were incorporated; and

• (f) the Listing Committee of the Stock Exchange granting approval for the listing of and permission to deal in the Consideration Shares.

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The Company may at its absolute discretion at any time waive any of the above Conditions Precedent except for (d), (e) and (f) which cannot be waived. If the Conditions Precedent are not fulfilled or waived (if applicable) on or before 30 September 2016 or such other day as the parties may agree in writing, the Company shall not be obliged to complete the purchase of the Sale Interest and the Sale and Purchase Agreement shall lapse and be of no further effect and no party to the Sale and Purchase Agreement shall have any claim against or liability to the other parties.

Profit Guarantee

Pursuant to the Sale and Purchase Agreement, the Vendor and the Guarantors warrant and guarantee to the Purchaser that for the years ending 31 December 2016 and 31 December 2017 (each a “ Guaranteed Period ”), the audited consolidated profit after tax attributable to the Target Group shall be as follows:

• (a) not less than RMB2,500,000 for the year ending 31 December 2016;

• (b) not less than RMB7,750,000 for the year ending 31 December 2017.

• (each a “ Guaranteed Profit ”, and collectively the “ Profit Guarantee ”).

The Vendor and the Guarantors shall provide assistance to the auditors of the Target Group to complete the preparation of the audited consolidated accounts of the Target Group within three months after the end of each Guaranteed Period.

In the event that the actual profit after tax of the Target Group during a Guaranteed Period is less than the Guaranteed Profit for that Guaranteed Period (the “ Difference ”), the Vendor and the Guarantors shall pay the Difference in cash to the Company.

For the avoidance of doubt, in the event that the actual profit after tax of the Target Group during a Guaranteed Period is more than the Guaranteed Profit for that Guaranteed Period, there will not be any upward adjustment to the Consideration.

Pledge of Shares

40% of the Consideration Shares shall be deposited with the Company by way of security and, subject to satisfaction of the Profit Guarantee by the Vendor, be released to the Vendor within 30 days from the date of issuance of the audited report of the consolidated financial statements of the Target Company for the year ending 31 December 2017.

Completion

Completion of the Sale and Purchase Agreement shall take place on the fifth Business Day (or such other later date as agreed between the parties) after the date on which all the Conditions Precedent have been satisfied, fulfilled and/or waived (as the case may be).

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Upon completion of the Acquisition, the Company will hold 100% of the issued share capital of the Target Company. The Target Company will become a subsidiary of the Company and the financial information of the Target Group will be consolidated into the accounts of the Group.

CONSIDERATION SHARES

The Consideration Shares comprise a total of 127,486,892 Shares which will be issued pursuant to the General Mandate. The Consideration Shares, when issued, would represent approximately 8.45% of the existing issued share capital of the Company as at the date of this announcement and approximately 7.80% of the issued share capital of the Company as enlarged by issue of the Consideration Shares.

The maximum number of Shares that can be issued under the General Mandate is 301,568,600 Shares. As at the date of this announcement, the General Mandate has not been utilized. Accordingly, the issue of the Consideration Shares is not subject to the Shareholders’ approval.

The issue price of the Consideration Shares is HK$1.95 per Consideration Share, which represents:

• (i) a discount of approximately 18.75% to the closing price of HK$2.40 per Share as quoted on the Stock Exchange on 4 July 2016, being the date of the Sale and Purchase Agreement;

• (ii) a discount of approximately 17.02% to the average of the closing prices of the Shares as quoted on the Stock Exchange for the last five consecutive full trading days prior to the date of the Sale and Purchase Agreement of HK$2.35 per Share;

• (iii) a discount of approximately 21.05% to the average of the closing prices of the Shares as quoted on the Stock Exchange for the last twenty consecutive full trading days prior to the date of the Sale and Purchase Agreement of HK$2.47 per Share;

• (iv) a discount of approximately 2.01% to the average of the closing prices of the Shares as quoted on the Stock Exchange for the last sixty consecutive full trading days prior to the date of the Sale and Purchase Agreement of HK$1.99 per Share; and

• (v) a premium of approximately 13.37% to the average of the closing prices of the Shares as quoted on the Stock Exchange for the last one hundred and eighty consecutive full trading days prior to the date of the Sale and Purchase Agreement of HK$1.72 per Share.

The Company will apply to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in the Consideration Shares. The Consideration Shares, when issued, will rank pari passu in all respects among themselves and with the Shares in issue on the day of issue of the Consideration Shares.

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INFORMATION OF THE VENDOR, THE TARGET COMPANY, THE TARGET GROUP AND THE GUARANTORS

Information of the Vendor

The Vendor is a company incorporated in the BVI with limited liability and is an investment holding company. As at the date of this announcement, the issued share capital of the Vendor is owned as to 40%, 30% and 30% by the Guarantors, being Mr. Li, Ms. Lee and Mr. Li Shunfa respectively.

Information of the Target Company

The Target Company is an investment holding company incorporated in the BVI on 3 January 2013 with limited liability and is wholly-owned by the Vendor. Save and except for the 100% equity interest in Xinan Limited, the Target Company has no other material assets and liabilities as at the date of the Sale and Purchase Agreement.

Information of Xinan Limited

Xinan Limited is an investment holding company incorporated in Hong Kong on 9 October 2014 with limited liability and is wholly-owned by the Target Company. Save and except for the 100% equity interest in the PRC Company, Xinan Limited has no other material assets and liabilities as at the date of the Sale and Purchase Agreement.

Information of the PRC Company

The PRC Company is incorporated in Hebei province, China on 20 June 2016 with limited liability and is principally engaged in medical management consulting (excluding medical diagnosis) and corporate management consulting (excluding intermediary services).

The PRC Company will leverage on its advantage in management of medical institutes, human resources and information resources and draw on experience from the mature business model of foreign healthcare institute management corporations to conduct business cooperation including healthcare institute management, hospital department development and receive management fees along with other related service fees. The PRC Company has entered into agreement with some experts that specialize in related healthcare areas. The experts have deep understanding of the Chinese healthcare market and seasoned industry experience in hospital management, strategic consulting, healthcare technique and marketing.

As at the date of this announcement, the entire equity interest of the PRC Company is owned by Xinan Limited. As at the date of the signing of the Sale and Purchase Agreement, the PRC Company has entered into the Agreement on Management of Rongcheng County Hospital of Traditional Chinese Medicine* (《托管經營容城縣中醫醫院的合作協議書》) with the Healthcare and Family Planning Bureau of Rongcheng County, Baoding, Hebei Province relating to the management of the Rongcheng County Hospital of Traditional Chinese Medicine and the Management Agreement with Rongcheng County Hospital of Traditional Chinese Medicine (《托管協議書》) relating to the management.

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Financial Information of the Target Group

With reference to the Target Group’s unaudited financial statements as at 22 June 2016, the Target Group’s recorded no turnover or expense and had a net asset value of approximately RMB677,000.

Information of the Guarantors

The Guarantors collectively owns the entire issued share capital of the Vendor. As at the date of this announcement, the entire issued share capital of the Vendor is owned as to 40%, 30% and 30% by Mr. Li, Ms. Lee and Mr. Li Shunfa respectively.

As at the date of this announcement, to the best of the Directors’ knowledge, information and belief, and having made all reasonable enquiries, each of the Vendor, the Guarantors and their ultimate beneficial owners is third party independent of the Company and its connected persons.

REASONS FOR AND BENEFITS OF THE ACQUISITION

Background for the Company to enter into the healthcare industry

The Group is principally engaged in the exploration, mining, processing and trading of iron ore products in China and major products including iron ores, preliminary concentrates and iron ore concentrates.

As the economic growth slows down and the supply of the steel industry exceeds demand in China, both the demand and selling price of iron ore have been declining continuously, which also has negative effect on the operating results of the Group. Based on the principle of maximizing the Shareholder’s interests, the Company has strived to maintain profitability by improving operation and sales and cutting down costs on the one hand, and on the other hand, has attempted to improve the Group’s profitability by continuously exploring new opportunities of investment.

After a comprehensive study of the resources and demand of the healthcare market of Baoding, Hebei Province, the management of the Company determined that it is a good opportunity for the Group to enter into the healthcare industry by acquiring the Target Group and conducting business in relation to hospital management, establishment of specialist clinics supply of medical consumables and nursing service.

China has the largest population in the world, and also has one of the world’s largest medical service markets. According to the research of a renowned market research consulting company, the total healthcare expenses will amount to RMB5,367 billion in 2017 (amounting to approximately 6.0% of the gross domestic product of China). However, comparing with developed countries, the healthcare expenses per capita of China are still in a low level, which means that the healthcare industry still has high potential of growth.

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Meanwhile, under the current domestic healthcare system in China, there remains a mismatch between the supply and demand of healthcare resources. High-quality healthcare resources and experts are concentrated in public hospitals, first-tier cities and provincial cities, while privately owned hospitals, mid-small cities and local medical institutions are disadvantaged, which resulted in the patients concentrating into the large hospitals in first and second-tier cities. Large numbers of mid-small size hospitals face the dilemma of insufficient supply of high-quality healthcare resources and weak hospital operation.

On the basis of the above analyses, the Company believes that by providing high-quality healthcare resources and facilitating information sharing, the unbalanced conditions of healthcare resources distribution will be resolved, and the operation results of large numbers of mid-small size hospitals will be improved, and the profit of the hospital management companies will also be improved in return.

The information on the hospital managed by the PRC Company

The Rongcheng County Hospital of Traditional Chinese Medicine (the “ Hospital ”) was established in 1987. In 1994, the hospital set up a 120 Emergency Call Center in Rongcheng County. The Hospital has a total area of approximately 9,000 square meters, of which approximately 8550 square meters are floor area. The Hospital has 192 employees in total, among which 156 employees are healthcare personnel. The Hospital has 150 beds in total and 13 first-level clinical departments.

Rongcheng County has a total population of approximately 260,000. According to the statistics of 2015, the total citizens healthcare expenses amounted to approximately RMB700 million. However, since the healthcare standard of Rongcheng County cannot satisfy the need of local citizens, approximately RMB500 million of the healthcare expenses flowed to areas outside of the county including Baoding and Beijing, with only approximately RMB200 million left in the county. These expenses that flowed out of Rongcheng County represent the huge potential of the healthcare market in Rongcheng County.

The PRC Company has entered into the Agreement with the Healthcare and Family Planning Bureau and the Management Agreement with Rongcheng County Hospital of Traditional Chinese Medicine. According to the Agreement and Management Agreement, the PRC Company will leverage on its medical service resources and experts team to provide services including but not limited to hospital management, establishment of specialist clinics, supply of medical consumable and nursing service, aiming to improve the operation results of the Hospital and grasp the high potential of the healthcare market of this region.

To achieve the above goals, the PRC Company will take measures including (i) introduction of the experts from the First-class Hospital (三甲醫院) from Beijing to improve the level of diagnosis and treatment as well as the ability of research and development; (ii) development of three key departments including the cardiovascular department, the neurology department and gastroenterology department to form specialty healthcare, drive the coefficient development of other departments and attract patient from surrounding regions; (iii) increase of outpatient volume and hospitalization rate by expansion of beds, equipment, improvement of hospital environment and quality of service.

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In addition to management fees, the PRC Company will also try to generate profit by obtaining exclusive management right of the supply chain of the Rongcheng County Hospital of Traditional Chinese Medicine through the Management Agreement and exclusive supply of medicine, equipment and medical consumables by proprietary or strategic cooperation with other suppliers.

In view of the above analysis, the future market prospects for the PRC Company and the Agreement and Management Agreement entered into by the Hospital, the Board believes that the terms of the Sale and Purchase Agreement are fair and reasonable and are in the interests of the Company and its Shareholders as a whole.

TARGET GROUP STRUCTURE

The following diagrams set out the shareholding structure of the Target Group as at the date of this announcement and immediately upon Completion.

Shareholding structure of the Target Group as at the date of this announcement

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----- Start of picture text -----

Mr. Li Ms. Lee Mr. Li Shunfa
40% 30% 30%
Vendor
100%
Target Company
100%
Xinan Limited
100%
PRC Company
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Shareholding structure of the Target Group immediately upon Completion

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----- Start of picture text -----

The Company
100%
Target Company
100%
Xinan Limited
100%
PRC Company
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CHANGE OF SHAREHOLDING STRUCTURE OF THE COMPANY

The following table illustrates the change of shareholding structure of the Company immediately before and after the allotment and issue of the Consideration Shares (assuming no further Shares will be issued or repurchased before the allotment and issue of the Consideration Shares):

Name of Shareholders Hengshi International Investments Limited (Notes 1 and 3) Aowei International Developments Limited (Notes 2 and 3) Public Shareholders The Vendor Other Public Shareholders Total	As at the date of this announcement Immediately after allotment and issue of the Consideration Shares Number of Shares Approximate % Number of Shares Approximate % 1,091,250,000 72.37 1,091,250,000 66.73 33,750,000 2.24 33,750,000 2.06 – 127,486,892 7.80 382,843,000 25.39 382,843,000 23.41 1,507,843,000 100 1,635,329,892 100

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Notes:

1. Hengshi Holdings Limited holds 100% issued share capital of Hengshi International Investments Limited, thus Hengshi Holdings Limited is deemed to be interested in the 1,091,250,000 Shares held by Hengshi International Investments Limited. Chak Limited holds 100% issued share capital of Hengshi Holdings Limited, thus Chak Limited is deemed to be interested in the 1,091,250,000 Shares held by Hengshi International Investments Limited.

2. Seven Limited holds 100% issued share capital of Aowei International Developments Limited, thus Seven Limited is deemed to be interested in the 33,750,000 Shares held by Aowei International Developments Limited.

3. Mr. Leung Hongying Li Ziwei and Mr. Li Yanjun, each an executive Director, are the ultimate controlling shareholders of Chak Limited, Hengshi Holdings Limited, Hengshi International Investments Limited, Seven Limited and Aowei International Developments Limited.

LISTING RULE IMPLICATIONS

Since some of the applicable percentage ratios (as defined under the Listing Rules) in respect of the Acquisition exceed 5% but are less than 25%, the transaction contemplated under the Sale and Purchase Agreement constitutes a discloseable transaction for the Company under Chapter 14 of the Listing Rules and is subject to the requirements of reporting and announcement, but is exempted from the requirement of shareholders’ approval pursuant to Chapter 14 of the Listing Rules.

DISCLOSURE IN RELATION TO PROFIT FORECAST OF THE TARGET COMPANY

As the Valuer has adopted the revenue approach involving use of the discounted cash flow methodology in preparing the Valuation Report, the Target Company Valuation is regarded as a profit forecast under Rule 14.61 of the Listing Rules (the “ Profit Forecast ”), and as such, the requirements under Rules 14.60A and 14.62 of the Listing Rules are applicable.

The Company has delegated an independent Valuer, the Beijing Lixin Donghua Assets Valuation Company Limited (北京立信東華資產評估有限公司) to evaluate the value of the equity interest of the Target Company, and the Consideration for the Sale Interest was determined with reference to the valuation by the Valuer. According to the Valuation Report dated 4 July 2016, the fair value of 100% equity interest of the Target Company as at 22 June 2016 (the “ Valuation Date* ”) was RMB213,765,600.

Set out below are the details of the valuation assumptions upon which the Target Company Valuation was based:

• (1) The Target Group will continue to operate after the Valuation Date;

• (2) There will be no major changes to the existing legal, policy and macroeconomic conditions in China, and no major changes in the political, economic and social conditions in the regions in which the parties to the Acquisition are located;

• (3) The operator of the Target Group is responsible and the management is competent to implement their duties;

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• (4) The management approach and standard of the Target Group will meet the expected level;

• (5) The Target Group will recruit and have competent management personnel, key personnel, and technical staff to implement its business plan and projects;

• (6) The business plan and the projections have been prepared on a reasonable basis, reflecting estimates which have been arrived at after due and careful consideration;

• (7) The Target Group is able to control their resources and maintain their key competitive strengths, including the recruitment of experts team, upgrade of fixed assets and expansion of operating area;

• (8) The Management Agreement of the PRC Company will be enforced effectively and will be renewed upon expiration;

• (9) The full compliance of governing laws and regulations of the Target Group;

• (10) The accounting policies adopted by the Target Group are consistent with the accounting policies adopted in the Valuation Report prepared by the Valuer in material aspects;

• (11) There will be no major changes to the interests rate, exchange rate, taxation basis and tax rate and levies required by government policies; and

• (12) There will be no other force majeure or non-foreseeable factors that will have major negative effect on the Target Group.

KPMG, the auditor of the Company, has reported to the Directors in respect of the arithmetical calculations and the compilations, in accordance with the bases and assumptions described above and adopted by the Directors, of the discounted cash flows in connection with the valuation of the Target Company prepared by the Valuer as set out in the Valuation Report dated 4 July 2016.

The Directors confirm that the valuation of the Target Company prepared by the Valuer, which constitutes a profit forecast under Rule 14.62 of the Listing Rules, has been made after due and careful enquires.

Letters from KPMG and the Board relating to the valuation of the Target Company are set out as Appendix I and II to this announcement, respectively, for the purpose of Rules 14.60A of the Listing Rules.

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EXPERTS AND CONSENTS

The qualifications of the experts who have given their opinion and advice in this announcement are as follows:

Name

Qualification

Beijing Lixin Donghua Assets	an independent qualified valuer in the PRC engaged in
Valuation Company Limited*	valuation
(北京立信東華資產評估有限公司)
KPMG	Certified Public Accountants

To the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, each of the Valuer and the Reporting Accountants is a third party independent of the Company and its connected persons.

As at the date of this announcement, none of the Valuer and the KPMG has any shareholding in any member of the Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

Each of the Valuer and KPMG has given and has not withdrawn its consent to the publication of this announcement with the inclusion of its opinion and advice and all references to its name in the form and context in which they are included.

DEFINITIONS

Unless the context requires otherwise, the use of capitalized terms in this announcement shall have the following meanings:

“Acquisition”	the purchase of the Sale Interest by the Company in
	accordance with the terms of the Sale and Purchase
	Agreement
“Agreement”	the agreement dated 21 June 2016 entered into between the
	PRC Company and the Health and Family Planning Bureau
	relating to the management of Rongcheng County Hospital
	of Traditional Chinese Medicine
“Auditor”	KPMG, the auditor of the Company
“Board”	the board of Directors
“Business Day”	a day (other than Saturday, Sunday, public holiday or any
	day on which a tropical cyclone warning no.8 or above or a
	“black” rainstorm warning is hoisted or remains in effect at
	10:00 a.m.) on which banks in Hong Kong are open for their
	normal banking business

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“BVI”

British Virgin Islands

• “Company”

Hengshi Mining Investments Limited (恒實礦業投資有限公 司), a company incorporated in the BVI and continued in the Caymans Islands with limited liability, the issued shares of which are listed on the Main Board of the Stock Exchange

• “Completion” completion of the transactions contemplated under the Sale and Purchase Agreement

• “Conditions Precedent” the conditions precedent to the completion of the transactions contemplated under the Sale and Purchase Agreement

• “connected person” has the meaning ascribed to it in the Listing Rules

• “Consideration” the total consideration for the Acquisition in the sum of RMB213,000,000

• “Consideration Shares” 127,486,892 new Shares to be allotted and issued by the Company to the Vendor or its nominees at the Issue Price upon completion of the Acquisition, and “Consideration Share” means any of them

• “Director(s)” the director(s) of the Company “General Mandate” the general mandate granted to the Board by the Shareholders to allot, issue and deal with Shares not exceeding 20% of the issued share capital of the Company at the annual general meeting of the Company held on 26 May 2016

“Group” the Company and its subsidiaries “Guarantors” collectively, Mr. Li, Mr. Li Shunfa and Ms. Lee “Health and Family Planning the Health and Family Planning Bureau of Rongcheng Bureau” County, Baoding, Hebei Province “HK$” Hong Kong dollars, the lawful currency of Hong Kong “Hong Kong” the Hong Kong Special Administrative Region of the PRC “Issue Price” an issue price of HK$1.95 per Consideration Share “Listing Committee” the Listing Committee of the Stock Exchange

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“Listing Rules” the Rules Governing the listing of securities on the Stock Exchange of Hong Kong Limited “Management Agreement” the management agreement dated 21 June 2016 entered into between the PRC Company and the Rongcheng County Hospital of Traditional Chinese Medicine relating to the management of the Rongcheng County Hospital of Traditional Chinese Medicine “Mr. Li” Mr. Li Chung Tai (李忠泰) “Mr. Li Shunfa” Mr. Li Shunfa (李順發) “Ms. Lee” Ms. Lee Sam Mui (李三妹) “PRC” the People’s Republic of China which for the purpose of this announcement, shall exclude Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan “PRC Company” Baoding Xinan Medical Management Consulting Limited* (保定熹南醫療管理諮詢有限公司), a company established in the PRC with limited liability “RMB” Renminbi, the lawful currency of the PRC “Sale and Purchase the agreement dated 4 July 2016 entered into among the Agreement” Vendor, the Company and the Guarantors relating to the Acquisition “Sale Interest” 1 share of the Target Company, representing the entire issued share capital of the Target Company “Shareholders” shareholders of the Company “Shares” ordinary share(s) of HK$0.0001 each in the share capital of the Company “Stock Exchange” the Stock Exchange of Hong Kong Limited “Target Company” Xinan Investments Limited (熹南投資有限公司), a company incorporated in the BVI with limited liability “Target Company Valuation” valuation of the entire shareholders’ equity interests in the Target Company as at 22 June 2016 as set out in the Valuation Report

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“Target Group”	collectively the Target Company, Xinan Limited and the
	PRC Company
“Valuation Report”	the valuation report prepared by the Valuer dated 4 July
	2016
“Valuer”	Beijing Lixin Donghua Assets Valuation Company Limited*
	(北京立信東華資產評估有限公司) , a n i n d e p e n d e n t
	professional asset valuer appointed for the Acquisition
“Vendor” or “Jovial Link”	Jovial Link Investments Limited (連欣投資有限公司), a
	company incorporated in the BVI with limited liability
“Xinan Limited”	Xinan Limited (熹南有限公司), a company incorporated in
	Hong Kong with limited liability

In this announcement, if there is any inconsistency between the Chinese names of the entities or enterprises established in the PRC and their English translations, the Chinese names shall prevail. The English translation of names or any descriptions in Chinese which are marked with “*” is for identification purpose only.

By order of the Board Hengshi Mining Investments Limited Mr. Li Yanjun Chairman

Beijing, the PRC, 4 July 2016

As at the date of this announcement, the executive Directors are Mr. Li Yanjun, Mr. Leung Hongying Li Ziwei (also known as Li Ziwei), Mr. Huang Kai, Mr. Li Jinsheng, Mr. Sun Jianhua, and Mr. Tu Quanping and the independent non-executive Directors are Mr. Ge Xinjian, Mr. Meng Likun and Mr. Kong Chi Mo.

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APPENDIX I – LETTER FROM THE AUDITOR OF THE COMPANY

The following is the text of a report received from the Company’s auditor, KPMG, Certified Public Accountants, Hong Kong, for inclusion in this announcement.

8th Floor Prince’s Building 10 Chater Road Central Hong Kong 4 July 2016

REPORT ON THE DISCOUNTED FUTURE CASH FLOWS IN CONNECTION WITH THE VALUATION OF THE BUSINESS OF XINAN INVESTMENTS LIMITED

TO THE BOARD OF DIRECTORS OF HENGSHI MINING INVESTMENTS LIMITED

We refer to the discounted future cash flows on which the valuation (the “Valuation”) dated 4 July 2016 prepared by Beijing Lixin Donghua Assets Valuation Company Limited in respect of the appraisal of the fair value of Xinan Investments Limited (the “Target Company”) as at 22 June 2016 is based. The Valuation is prepared based on the discounted future cash flows and is regarded as a profit forecast under paragraph 14.61 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”).

Directors’ Responsibilities

The directors of Hengshi Mining Investments Limited (the “Directors”) are responsible for the preparation of the discounted future cash flows in accordance with the bases and assumptions determined by the Directors and as set out in the Valuation. This responsibility includes carrying out appropriate procedures relevant to the preparation of the discounted future cash flows for the Valuation and applying an appropriate basis of preparation; and making estimates that are reasonable in the circumstances.

Our Independence and Quality Control

We have complied with the independence and other ethical requirements of the Code of Ethics for Professional Accountants issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”), which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour.

The firm applies Hong Kong Standard on Quality Control 1 and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

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Auditor’s Responsibilities

Our responsibility is to report, as required by paragraph 14.62(2) of the Listing Rules, on the calculations of the discounted future cash flows used in the Valuation. The discounted future cash flows do not involve the adoption of accounting policies.

Basis of opinion

We conducted our engagement in accordance with the Hong Kong Standard on Assurance Engagements 3000 (Revised) “Assurance Engagements Other Than Audits or Reviews of Historical Financial Information” issued by the HKICPA. This standard requires that we plan and perform our work to obtain reasonable assurance as to whether, so far as the calculations are concerned, the Directors have properly compiled the discounted future cash flows in accordance with the bases and assumptions adopted by the Directors as set out in the Valuation. We performed procedures on the arithmetical calculations and the compilations of the discounted future cash flows in accordance with the bases and assumptions adopted by the Directors. Our work is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing issued by the HKICPA. Accordingly, we do not express an audit opinion.

Opinion

In our opinion, so far as the calculations are concerned, the discounted future cash flows have been properly compiled in all material respects in accordance with the bases and assumptions adopted by the Directors as set out in the Valuation.

Other matters

Without qualifying our opinion, we draw to your attention that we are not reporting on the appropriateness and validity of the bases and assumptions on which the discounted future cash flows are based and our work does not constitute any valuation of the Target Company or an expression of an audit or review opinion on the Valuation.

The discounted future cash flows depend on future events and on a number of assumptions which cannot be confirmed and verified in the same way as past results and not all of which may remain valid throughout the period. Our work has been undertaken for the purpose of reporting solely to you under paragraph 14.62(2) of the Listing Rules and for no other purpose. We accept no responsibility to any other person in respect of, arising out of or in connection with our work.

KPMG

Certified Public Accountants Hong Kong

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APPENDIX II – LETTER FROM THE BOARD RELATING TO THE PROFIT FORECAST

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HENGSHI MINING INVESTMENTS LIMITED 恒實礦業投資有限公司

(incorporated in the British Virgin Islands and continued in the Cayman Islands with limited liability)

(Stock Code: 1370)

4 July 2016

The Listing Division The Stock Exchange of Hong Kong Limited 11/F, One International Finance Centre 1 Harbour View Street Hong Kong

Dear Sirs,

RE: Hengshi Mining Investments Limited Announcement – Discloseable Transaction

We refer to the announcement of the Company dated 4 July 2016 (the “ Announcement ”) of which this letter forms part. Unless the context otherwise requires, terms defined in the Announcement shall have the same meanings when used herein.

In accordance with the requirements under Rule 14.62(3) of the Listing Rules, we confirm that the Profit Forecast in Xinan Investments Limited (熹南投資有限公司) has been made after due and careful enquiry by us.

Yours faithfully, For and on behalf of the Board Hengshi Mining Investments Limited Mr. Sun Jianhua Executive Director

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