Beijing Yunji Technology Co., Ltd. — M&A Activity 2018

Jan 18, 2018

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 any securities of the Company.

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(Incorporated in Bermuda with limited liability) (Stock code: 1196)

VERY SUBSTANTIAL ACQUISITION AND CONNECTED TRANSACTION IN RELATION TO

THE ACQUISITION OF THE ENTIRE EQUITY INTEREST IN REALORD VENTURES LIMITED AND MANUREEN VENTURES LIMITED

THE ACQUISITION AGREEMENT

On 18 January 2018, the Company and the Vendors entered into the Acquisition Agreement, pursuant to which (i) the Company has conditionally agreed to acquire, and the Vendors have conditionally agreed to sell, the Sale Shares for the Share Consideration of RMB3,837 million (equivalent to approximately HK$4,498 million) (subject to adjustment); and (ii) the Company has also conditionally agreed to provide the Shareholder’s Loan to the Target Group for the settlement of the Target’s Outstanding Debts as at the date of Completion on a dollar for dollar basis. As at 31 August 2017, the Target’s Outstanding Debts amounted to approximately RMB2,383 million (equivalent to approximately HK$2,794 million).

The Total Consideration comprising the Share Consideration and the Shareholder’s Loan of approximately RMB6,220 million (equivalent to approximately HK$7,292 million) (subject to adjustment) will be satisfied (i) by way of cash in an amount between RMB3,000 million (equivalent to approximately HK$3,517 million) and RMB3,600 million (equivalent to approximately HK$4,221 million) (i.e. Cash Consideration); (ii) as to approximately RMB1,136 million (equivalent to approximately HK$1,331 million) by way of allotment and issue of 280,998,482 new Shares at the issue price of HK$4.738 per Consideration Share; and (iii) by way of the issue of the Promissory Notes in two tranches with an aggregate principal amount ranging from approximately RMB1,484 million (equivalent to approximately HK$1,740 million) to approximately RMB2,084 million (equivalent to approximately HK$2,443 million) (subject to adjustment). Pursuant to the Acquisition Agreement, the amount of the Cash Consideration and the portion of the Total Consideration to be settled by the First Tranche Promissory Notes shall be determined by the Company at its discretion prior to Completion. It is intended that the Cash Consideration will be financed by way of bank and/or other facilities of the Company.

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The Total Consideration was arrived at by reference to the sum of (i) the Properties Valuation of RMB6,220 million (equivalent to approximately HK$7,292) million); and (ii) the Ancillary Net Items of the Target Group (being other assets and liabilities of the Target Group unrelated to the Properties) as at the date of Completion. As the appraised value of the Guangming Land and the Staff Housings as at 30 September 2017 is zero, the Properties Valuation of RMB6,220 million (equivalent to approximately HK$7,292) million) was attributable to the appraised value of (i) the Guanlan Property of approximately RMB3,300 million (equivalent to approximately HK$3,869.0 million); and (ii) the Guangming Property of approximately RMB2,920 million (equivalent to approximately HK$3,423 million).

The Total Consideration is subject to adjustment to the amount of the Ancillary Net Items as shown on the audited financial statements of the Target Group as at the date of Completion. As at 31 August 2017, the Ancillary Net Items amounted to RMB424,766 (equivalent to approximately HK$498,000) in the negative. For illustration purpose, assuming the balance of the Ancillary Net Items remain at RMB424,766 (equivalent to approximately HK$498,000) in the negative as at the date of Completion, the Total Consideration will be RMB6,220 million (equivalent to approximately HK$7,292 million). Upon Completion, the Target Group will virtually be debt free save for the Shareholder’s Loan from the Company.

The Sale Shares represent the entire equity interests in Realord Ventures and Manureen Ventures, which together hold a 100% interest in Realord Investment. Realord Investment in turn through its indirect wholly-owned subsidiaries owns the Properties. The substance of the Acquisition is the principal assets held by the Target Group, comprising (i) the Guanlan Property; (ii) the Guangming Property; (iii) the Guangming Land; and (iv) the Staff Housings (i.e. the Properties). The Guanlan Property and the Guangming Property were developed and completed by the Target Group and are presently vacant, while the Guangming Land is a bare land for industrial use. The Staff Housings were acquired by the Target Group from the local government and is currently used as staff quarters of the Target Group.

The Company intends to hold the Guanlan Property and Guangming Property for rental purpose after Completion, while the Guangming Land is intended to be held as it is without plan to redevelop it after Completion. The Staff Housings will remain as staff quarters of the Target Group after Completion.

LISTING RULES IMPLICATIONS

As the percentage ratios in respect of the Acquisition under Chapter 14 of the Listing Rules exceed 100%, the Acquisition constitutes a very substantial acquisition for the Company under Chapter 14 of the Listing Rules. In addition, given the Vendors are Directors and Manureen Holdings (as the noteholder of the Promissory Notes as nominated by the Vendors) is a controlling Shareholder and thus connected persons of the Company, the Acquisition also constitutes a connected transaction under Chapter

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14A of the Listing Rules. Accordingly, the Acquisition Agreement and the transactions contemplated thereunder are subject to the approval of the Independent Shareholders by way of poll. The IBC will be established to give recommendation to the Independent Shareholders on the terms of the Acquisition, and an independent financial adviser will be appointed to advise the IBC and the Independent Shareholders in this regard. The SGM will also be convened and held for the purpose of considering and, if thought fit, approving the resolution(s) in respect of the Acquisition Agreement and the transactions contemplated thereunder.

A circular containing, among other things, (i) details of the Acquisition Agreement; (ii) the letter of recommendation from the IBC to the Independent Shareholders in respect of the Acquisition; (iii) the letter of advice from the independent financial adviser to be appointed to advise the IBC and the Independent Shareholders in respect of the Acquisition; (iv) the financial information of the Group; (v) the financial information of the Target Group; (vi) the Properties Valuation; (vii) the unaudited pro forma financial information of the Enlarged Group; (viii) a notice convening the SGM; and (ix) other information as required under the Listing Rules is expected to be despatched to the Shareholders on or before 15 February 2018.

As Completion is subject to fulfilment or waiver (as the case may be) of the conditions precedent to the Acquisition Agreement, the Acquisition may or may not proceed. Shareholders and potential investors of the Company should exercise caution when dealing in the Shares.

INTRODUCTION

The Board is pleased to announced that on 18 January 2018, the Company and the Vendors entered into the Acquisition Agreement, pursuant to which the Company has conditionally agreed to acquire, and the Vendors have conditionally agreed to sell, the Sale Shares for the Share Consideration of RMB 3,837 million (equivalent to approximately HK$4,498 million) (subject to adjustment). The Company has also conditionally agreed to provide the Shareholder’s Loan to the Target Group for the settlement of the Target’s Outstanding Debts as at the date of Completion on a dollar for dollar basis. As at 31 August 2017, the Target’s Outstanding Debts amounted to approximately RMB2,383 million (equivalent to approximately HK$2,794 million). Details of the Acquisition Agreement are set out below.

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THE ACQUISITION AGREEMENT

Date

18 January 2018

Parties

• Purchaser : the Company Vendors : Dr. Lin, the sole and beneficial owner of 100% equity interest in Realord Ventures

• : Madam Su, the sole and beneficial owner of 100% equity interest in Manureen Ventures

Given that Dr. Lin and Madam Su are executive Directors, they are connected persons of the Company under Chapter 14A of the Listing Rules.

Assets to be acquired

The assets to be acquired under the Acquisition Agreement are the Sale Shares, which represent the entire equity interest in Realord Ventures and the entire equity interest in Manureen Ventures. Realord Ventures and Manureen Ventures hold 70% and 30% of the equity interest in Realord Investment respectively. The principal assets of the Target Group are the Properties, details of which are set out in the section headed “Information on the Target Group”.

Total Consideration

It has been agreed that the Total Consideration of RMB6,219,575,234 (equivalent to approximately HK$7,291,892,000) (subject to adjustment to the Ancillary Net Items as at the date of Completion as detailed below) will be split into the Share Consideration and the Shareholder’s Loan. As the Shareholders’ Loan will be provided by the Company to the Target Group for the settlement of the Target’s Outstanding Debts as at the date of the Completion on a dollar for dollar basis, the actual amount of the Shareholders Loan will be determined based on the amount of the Target’s Outstanding Debts as at the date of Completion as shown on the Completion Account. After the Target’s Outstanding Debts as at the date of Completion and thus the amount of the Shareholder’s Loan have been ascertained, the remaining amount of the Total Consideration will be the Share Consideration. As at 31 August 2017, the Target’s Outstanding Debts amounted to approximately RMB2,383 million (equivalent to approximately HK$2,794 million).

For illustration purpose, assuming the balance of the Target’s Outstanding Debts remains at RMB2,383 million (equivalent to approximately HK$2,794 million) as at the date of Completion, the Total Consideration would be apportioned as to (i) RMB2,383 million (equivalent to approximately HK$2,794 million) attributable to the Shareholder’s Loan; and (ii) RMB 3,837 million (equivalent to approximately HK$4,498 million) attributable to the Share Consideration.

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The Total Consideration of RMB6,219,575,234 (equivalent to approximately HK$7,291,892,000) (subject to adjustment to the Ancillary Net Items as at the date of Completion as detailed below) calculated based on the Target’s Management Accounts as at 31 August 2017 shall be satisfied by the Company in the following manner:

• (i) as to an amount between RMB3,000,000,000 (equivalent to approximately HK$3,517,230,000) and RMB3,600,000,000 (equivalent to approximately HK$4,220,676,000) payable by way of cash at Completion (i.e. the Cash Consideration);

• (ii) as to RMB1,135,584,657 (equivalent to approximately HK$1,331,371,000) by way of allotment and issuance of 280,998,482 Consideration Shares at the issue price of HK$4.738 per Consideration Share at Completion;

• (iii) as to an amount between RMB1,383,990,577 (equivalent to approximately HK$1,622,604,000) and RMB1,983,990,577 (equivalent to approximately HK$2,326,050,000) by way of the issue of the First Tranche Promissory Note at Completion; and

• (iv) as to RMB100,000,000 (equivalent to approximately HK$117,241,000) (subject to adjustment) by way of the issue of the Second Tranche Promissory Note within 5 Business Days following the issue of the Completion Accounts.

Pursuant to the Acquisition Agreement, the exact amount of the Cash Consideration and the portion of the Total Consideration to be settled by way of the First Tranche Promissory Notes shall be determined by the Company at its discretion before Completion. For illustrative purpose, assuming the Cash Consideration is RMB3,000 million (equivalent to approximately HK$3,517 million), the portion of the Total Consideration to be settled by the First Tranche Promissory Notes would be approximately RMB1,984 million (equivalent to approximately HK$2,326 million). If the Cash Consideration amounted to RMB3,600 million (equivalent to approximately HK$4,221 million), the portion of the Total Consideration to be settled by the First Tranche Promissory Notes would be RMB1,384 million (equivalent to approximately HK$1,623 million).

Pursuant to the Acquisition Agreement, the Cash Consideration will be payable first in the form of the Shareholder’s Loan to be provided by the Company to the Target Group for the full settlement of the Target’s Outstanding Debts as at the date of Completion shall there be surplus of the Cash Consideration after full settlement of the Target’s Outstanding Debts, the balance of the Cash Consideration will be payable to the Vendors directly as part payment of the Share Consideration. For illustration purpose, assuming the Target’s Outstanding Debts as at the date of Completion is approximately RMB2,383 million (equivalent to approximately HK$2,794 million), the Cash Consideration in the same amount will be payable in the form of the Shareholder’s Loan. The remaining balance ranging from approximately RMB617 million (equivalent to approximately

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HK$724 million) (where the Cash Consideration amounts to RMB3,000 million) to RMB1,217 million (equivalent to approximately HK$1,427 million) (where Cash Consideration amounts to RMB3,600 million) will be payable to the Vendors directly as part payment of the Share Consideration.

The Total Consideration was arrived at with reference to the sum of (i) the Properties Valuation of approximately RMB6,220 million (equivalent to approximately HK$7,292 million) as at 30 September 2017; and (ii) the Ancillary Net Items (i.e. the assets and liabilities unrelated to the Properties, including other property, plant and equipment, other receivables, other payables and accrued charges of the Target Group) as at the date of Completion. As the appraised value of both Guangming Land and the Staff Housings is zero as at 30 September 2017, the Properties Valuation of RMB6,220 million (equivalent to approximately HK$7,292 million) was attributable to the appraised value of (i) the Guanlan Property of approximately RMB 3,300 million (equivalent to approximately HK$3,869 million); and (ii) the Guangming Property of approximately RMB2,920 million (equivalent to approximately HK$3,423 million) as at 30 September 2017.

The Total Consideration is subject to adjustment to the Ancillary Net Items as shown on the Completion Accounts as compared to that on the Target’s Management Accounts. Pursuant to the Acquisition Agreement, the Company shall procure the auditors appointed by the Company to prepare and provide the Completion Accounts within five months from the date of Completion. As at 31 August 2017, the Ancillary Net Items amounted to approximately RMB424,766 (equivalent to approximately HK$498,000) in the negative. For illustration purpose, assuming the balance of the Ancillary Net Items remain at RMB424,766 (equivalent to approximately HK$498,000) in the negative as at the date of Completion, the Total Consideration will be approximately RMB6,220 million (equivalent to approximately HK$7,292 million).

The Vendors have warranted that the Target Group shall not have any debts or liabilities outstanding as at the date of Completion other than the liabilities included in the Ancillary Net Items and the Shareholder’s Loan.

Conditions precedent

Completion is conditional upon the satisfaction or waiver (as the case may be) of the following conditions:

• (i) the Vendors having obtained all necessary consents, authorisations and approvals in respect of the Acquisition;

• (ii) the Company having obtained all necessary consents, authorisations and approvals in respect of the Acquisition;

• (iii) there being no situation, facts or circumstances which constitute or may constitute any breach of warranties under the Acquisition Agreement;

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• (iv) the Company and/or a wholly-owned subsidiary of the Company having obtained bank and/or other facilities of not less than RMB3,000 million on such terms and conditions satisfactory to the Company;

• (v) the passing of the necessary resolution(s) by the Independent Shareholders at the SGM to approve the Acquisition Agreement and the transactions contemplated thereunder (including but not limited to the allotment and issuance of the Consideration Shares under specific mandate);

• (vi) the Listing Committee of the Stock Exchange having granted the listing of, and permission to deal in, the Consideration Shares;

• (vii) the Company having obtained a legal opinion issued by a firm of PRC lawyers appointed by the Company in respect of the Acquisition Agreement and the transactions contemplated thereunder (including but not limited to the legality in respect of the ownership of assets and operation of business by the Target Group after Completion, the due incorporation and valid existence of the PRC Subsidiaries, and whether the PRC Subsidiaries have obtained all the approvals, permits, licences) in such form and substance satisfactory to the Company;

• (viii) the Company being satisfied with the results of the due diligence review on the assets, liabilities, operations and affairs of the Target Group to be carried out by the Company;

• (ix) the Stock Exchange not having deemed the Acquisition as a reverse takeover under Chapter 14 of the Listing Rules; and

• (x) the valuation of the Properties as prepared by the valuer appointed by the Company being not be less than RMB6.2 billion in such form and substance satisfactory to the Company.

The Company may at any time waive the conditions set out in (iii), (vii) and (viii) above by notice in writing to the Vendors. No other conditions may be waived by any parties to the Acquisition Agreement.

If any of the above conditions have not been fulfilled or waived by the Company (as the case may be) on or before 31 March 2018 (or such later date as agreed by the parties to the Acquisition Agreement in writing), the Acquisition Agreement shall cease and determine and no party to the Acquisition Agreement shall have any obligations and liabilities towards each other thereunder save for any antecedent breaches of the Acquisition Agreement.

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Completion

Completion shall take place within the third Business Day after all the conditions precedent under the Acquisition Agreement having been fulfilled or waived by the Company (as the case may be) (or such other date as agreed by the parties to the Acquisition Agreement).

Upon Completion, Realord Ventures and Manureen Ventures will become wholly-owned subsidiaries of the Company and the financial statements of the Target Group will be consolidated into the financial statements of the Group.

CONSIDERATION SHARES

Pursuant to the terms of Acquisition Agreement, 280,998,482 Consideration Shares will be allotted and issued at the issue price of HK$4.738 per Consideration Share. The issue price of HK$4.738 per Consideration Share represents:

• (i) a discount of approximately 7.82% to the closing price of HK$5.14 per Share as quoted on the Stock Exchange on the Last Trading Day;

• (ii) a discount of approximately 8.74% to the average of the closing prices of Shares as quoted on the Stock Exchange for the last ten trading days up to and including the Last Trading Day, being approximately HK$5.192 per Share;

• (iii) a discount of approximately 9.49% to the average of the closing prices of Shares as quoted on the Stock Exchange for the last 30 trading days up to and including the Last Trading Day, being approximately HK$5.235 per Share;

• (iv) a discount of approximately 11.59% to the average of the closing prices of Shares as quoted on the Stock Exchange for the last 60 trading days up to and including the Last Trading Day, being approximately HK$5.359 per Share;

• (v) a discount of approximately 4.38% to the average of the closing prices of Shares as quoted on the Stock Exchange for the last 90 trading days up to and including the Last Trading Day, being approximately HK$4.955 per Share;

• (vi) the average of the closing prices of Shares as quoted on the Stock Exchange for the last 120 trading days up to and including the Last Trading Day, being approximately HK$4.738 per Share;

• (vii) a premium of approximately 3.71% over the average of the closing prices of Shares as quoted on the Stock Exchange for the last 180 trading days up to and including the Last Trading Day, being approximately HK$4.568 per Share; and

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• (viii) a premium of approximately 438.41% over the unaudited consolidated equity attributable to the Shareholders of approximately HK$0.88 per Share as at 30 June 2017 (based on the unaudited consolidated equity attributable to the Shareholders of approximately HK$1,007,373,000 as at 30 June 2017 as disclosed in the interim report of the Company for the six months ended 30 June 2017 and 1,150,751,398 Shares in issue as at the date of this announcement).

The issue price of HK$4.738 per Consideration Share was determined after arm’s length negotiations between the Company and the Vendors with reference to the prevailing market prices of the Shares.

The 280,998,482 Consideration Shares, when allotted and issued, will represent (i) approximately 24.42% of the existing issued Shares as at the date of this announcement; and (ii) approximately 19.63% of the issued Shares as enlarged by the allotment and issuance of the Consideration Shares.

The Consideration Shares will be allotted and issued under special mandate of the Company to be sought at the SGM. The Consideration Shares, when allotted and issued, will rank pari passu in all respects with the existing Shares then in issue.

An application will be made by the Company to the Stock Exchange for the listing of, and permission to deal in, the Consideration Shares.

THE PROMISSORY NOTES

The principal terms of the Promissory Notes are as follows:

Issuer: the Company Noteholder: Manureen Holdings, being the nominee of the Vendors Principal amount with (i) First Tranche Promissory Notes: issue date: from RMB1,383,990,577 to RMB1,983,990,577 to be issued at Completion

• (ii) Second Tranche Promissory Notes: RMB100,000,000 (subject to adjustment) within 5 Business Days following the issue of the Completion Accounts

Maturity: the date falling on the fifth anniversary of the date of the respective issue of Promissory Notes

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Interest:

at an interest rate equivalent to 2% less than the interest rate of the bank and/or other facilities obtained by the Company and/or any wholly-owned subsidiary of the Company for the payment of the cash portion of the Total Consideration

Early redemption:

the Company may redeem all or part of the outstanding principal amount of the Promissory Notes at any time prior to the maturity date by serving not less than 10 Business Days’ prior written notice to the noteholder, provided that each redemption shall be made in the principal amount of not less than RMB1,000,000 (or the entire outstanding principal amount if the outstanding principal amount of the Promissory Notes is less than RMB1,000,000)

Transferability:

the Promissory Notes are transferrable

As Manureen Holdings, which is nominated by the Vendors as the noteholder of the Promissory Notes under the Acquisition Agreement, is owned as to 70% and 30% by Dr. Lin and Madam Su respectively and is the controlling Shareholder holding 790,001,518 Shares, representing 68.65% of the issued Shares as at the date of this announcement, Manureen Holdings is a connected person of the Company under Chapter 14A of the Listing Rules.

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INFORMATION ON THE TARGET GROUP

The diagram below depicts the group structure of the Target Group as at the date of this announcement:

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

Dr. Lin Madam Su
100% 100%
Realord Manureen
Ventures Ventures
70% 30%
Realord Investment
100%
Realord Technology
100%
Manureen Technology
100%
Shenzhe n Weilu
100% 100%
RIH
Shenzhen Sherpe Guangming Guangming Staff
(dormant) Property Land Housings
100% 100%
Shenzhen
Guanlan
Realord Realty
Manureen
Property
----- End of picture text -----

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The major operating subsidiaries of the Target Group were Shenzhen Weilu and Shenzhen Sherpe, through which the Target Group was previously engaged in trading of electronic components (the “ Trading Business ”) and property development business. However, the scale of the Trading Business was minimal in FY2015 and FY2016 (merely one single transaction in each year) and no transaction has been carried out in 2017. The number of staff responsible for the Trading Business has also reduced to zero since 2016. Further, after completion of the construction and development of the Guanlan Property and the Guangming Property, the Target Group is no longer engaged in property development business. The Target Group currently only holds (i) the Guanlan Property; (ii) the Guangming Property; (iii) the Guangming Land; and (iv) the Staff Housings. The existing six staff of the Target Group, which previously oversaw the property development of the Guanlan Property and the Guangming Property, will be responsible for overseeing the leasing of these properties after Completion.

The substance of the Acquisition was Guanlan Property and the Guangming Property, given both the Staff Housings and the Guangming Land have no commercial value according to the Properties Valuation. Set out below are the details of the Properties and the existing qualification and agreement of the Target Group:

The Guanlan Property

The Guanlan Property comprises a commercial/apartment building, retail shops and all car parking spaces with a total gross floor area of approximately 51,039 sqm and is situated within the Realord Villas, which is a mixed residential and commercial development located on the southern side of Huangan South Road within the Guanlan High-Tech Industrial Park of Guanlan. The Realord Villas was developed by Shenzhen Sherpe. As at the date of this announcement, the Guanlan Property remains vacant while other part of the Realord Villas (the “ Government Housings ”) have already been delivered to the local government at cost (i.e. approximately HK$933.5 million) in September 2017 according to the terms agreed between the Target Group and the government for the approval of the development of Realord Villas at the outset. Accordingly, the Total Consideration has not taken into account the Government Housings. As at 31 August 2017, the carrying value of the Guanlan Property amounted to approximately HK$1,629.0 million. According to the Properties Valuation, the appraised value of the Guanlan Property as at 30 September 2017 amounted to approximately RMB3,300 million (equivalent to approximately HK$3,869.0 million).

The Company intends to hold the Guanlan Property for rental purpose after Completion. It is expected that the lease of the commercial building of the Guanlan Property will commence in first quarter of 2018 while that of the retail part in second quarter of 2018.

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The Guangming Property

The Guangming Property consists of two blocks of office building with 26 storeys and 4 storeys over a basement car park respectively, with a total gross floor area of approximately 53,973 sq.m. The Guangming Property was developed by the Target Group and its construction work has been completed in 2017. It is ready for rental as at the date of this announcement. As at 31 August 2017, the carrying value of the Guangming Property amounted to approximately HK$954.5 million. According to the Properties Valuation, the appraised value of the Guangming Property as at 30 September 2017 amounted to approximately RMB2,920 million (equivalent to approximately HK$3,423.4 million).

The Company intends to hold the Guangming Property for rental purpose after Completion. It is expected that the lease will commence in first quarter of 2018.

The Guangming Land

The Guangming Land is a bare land with a site area of approximately 12,599 sq.m. located at the southwestern side of Jufeng Road within Guangming High-Tech Industrial Park of Guangming New District. It is for industrial use and is currently vacant. According to the Properties Valuation, the appraised value of the Guangming Land as at 30 September 2017 is zero.

As the Target Group will not engage in property development business after Completion, the Guangming Land is intended to be held as investment assets of the Group after Completion.

The Staff Housings

The Staff Housings comprise four social housing units of Fu Bao Gui Hua Yuan, which is a property estate located on the southern side of Gui Hua Road within the Futian Free Trade Zone of Shenzhen. Its total gross floor area is approximately 350 sq.m.. It was acquired by the Target Group from the government authorities and it is currently occupied as staff quarters of the Target Group. As at 31 August 2017, the carrying value of the Staff Housings amounted to approximately HK$2.0 million. As the transfer of the Staff Housings is subject to the approval by the relevant government authority (i.e. not freely-transferrable), the appraised value of the Staff Housings as at 30 September 2017 is zero. In the event that it becomes freely transferrable, its capital value would be in the region of RMB20 million for indication purpose only. For the avoidance of doubt, the Company has only taken into account the appraised value of the Staff Housings at its non-freely-transferrable status (i.e. zero) when determining the Total Consideration.

The Company intends to maintain the existing use of the Staff Housings after Completion.

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Existing qualification and agreement

As mentioned above, the Target Group has not engaged in property development business after completion of the development of the Guanlan Property and the Guangming Property and it will not engage in property development after Completion. The Company intends to hold the Guanlan Property and Guangming Property for investment purpose after Completion. Accordingly, the Company will amend the scope of business activities of the Target Group under its business licence will be amended to exclude property development and change to property investment after Completion. The qualification of Level 4 qualification of real estate development enterprise under the 中 國房地產開發企業資質證書 (the Qualification Certificate of the Real Estate Development Enterprises of the PRC) issued by 深圳市規劃和國土資源委員會 (the Urban Planning, Land & Resources Commission of Shenzhen Municipality) (the “ Property Development Qualification ”) currently held by the Target Group will be surrendered by the Target Group after Completion.

In August 2016, the Target Group and Zhangkengjing Company entered into a joint development agreement, pursuant to which the Target Group is responsible for the application for the change of the land use of the Land (which is provided by Zhangkengjing Company) from industrial use to domestic use and for the property development on the Land. The Zhangkengjing Company, in return, will be entitled to a total gross building area of 3,000 square metres on the Land. In February 2017, the Target Group has made the application and no approval has been granted as at the date of this announcement. The Company confirms that in the event that the approval is granted, the Group will assess the risks and benefits as to the dealing with the Land, but in any event the Target Group will not carry out any development work of the Land.

The Land is situated in Longhua New District, Shenzhen, the PRC with a total area of approximately 5,730 sqm. It is currently for industrial use. As the Land is currently pending the approval of the change of land use, it has no commercial value based on the Properties Valuation. For reference purpose only, had the change of the land use been approved, the capital value of the Land as at 30 September 2017 would be in the region of RMB170,000,000, assuming that (i) all land premium and other costs of ancillary utility services have been settled in full; (ii) the Land may be redeveloped to achieve a maximum plot ratio of 6 (or a maximum gross floor area of approximately 43,374.14 sq.m.); and (iii) Realord Realty owns the Land and is entitled to let the Land within its residual term of land use rights.

Financial information of the Target Group

Realord Ventures and Manureen Ventures

As Realord Ventures and Manureen Ventures are investment holding companies and have not carried out any operations since incorporation save for the holding of their respective interests in Realord Investment, no revenue or profit was generated during the Track Record Period. The net asset value of the Realord Ventures and Manureen Ventures was approximately HK$7,800 each.

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Realord Investment

Set out below are the unaudited consolidated financial information of Realord Investment prepared in accordance with Hong Kong Financial Reporting Standards, for the Track Record Period:

Profit and loss

Profit and loss
(HK$’million)	FY2016	FY2015	FY2014	8M2017	8M2016
Revenue	274.5	2.8	–	–	274.5
Gross profit	3.9	0.02	–	–	3.9
Other income	1.5	14.7	12.6	1.1	1.1
Profit/(loss)
before and
after taxation	(10.0)	2.1	(3.4)	(8.8)	(5.4)

All revenue of Realord Investment for the Track Record Period was generated from the Trading Business. However, the scale of the Trading Business was minimal in FY2015 and FY2016 (merely one single transaction in each year) and no transaction in this segment had been carried out in 8M2017. Given the Government Housings within Realord Villas had only been delivered in September 2017 and other than this, no other property development has been delivered by end of August 2017, no revenue was generated from the property development during the Track Record Period. Other income generated during the Track Record was mainly bank interest income. Other than the profit before taxation of approximately HK$2.1 million for FY2015, which was mainly generated from the bank interests, the losses before and after taxation of the Target Group during the Track Record Period were mainly due to administrative expenses incurred and finance costs not eligible to be capitalized as development costs of the Properties.

Financial position

Financial position
	As at		As at
	31 August		31 December
(HK$’ million)	2017	2016	2015	2014
Total assets	4,182.4	3,315.4	3,937.7	3,400.5
Properties under development	3,517.0	3,187.7	2,866.0	1,492.9
Cash	428.4	2.1	366.1	451.3
Trade and other receivables	160.1	15.6	603.5	1,196.3
Other assets	76.9	110.0	102.1	260.0
Total liabilities	4,170.0	3,295.0	3,905.6	3,306.3
Trade and other payables	930.6	1,492.1	2,242.5	2,124.6
Bank borrowings and bonds	2,479.6	1,371.3	1,229.9	738.2
Other liabilities	759.8	431.6	433.2	443.5
Net asset value	12.4	20.4	32.2	94.1

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The total assets of the Target Group as at 31 December 2014, 2015 and 2016 and 31 August 2017 mainly consisted of (i) the properties under development; (ii) trade and other receivables; and (iii) cash. The properties under development mainly consist of the Guanlan Property, the Guangming Property, the Guangming Land, the Government Housing. The Staff Housings were accounted for as properties, plant and equipment. The carrying value of the Government Housing was approximately HK$933.5 million as at 31 August 2017 and it has been delivered to the local government at cost in September 2017. If taking into account the delivery of the Government Housing in September 2017, the carrying value of the properties under development of the Target Group would be reduced to approximately HK$2,598.8 million. The decline in trade and other receivables as at 31 December 2015 and 2016, as compared to as 31 December 2014 mainly represent the settlement of trade receivables from the Trading Business carried forwarded from the years prior to the Track Record Period, the balance of which were all settled on or prior to FY2016. The substantial increase in trade and other receivables as at 31 August 2017, as compared to as at 31 December 2016, was mainly attributable to advances made to contractor for the construction work of the Properties.

The total liabilities of the Target Group as at 31 December 2014, 2015 and 2016 and 31 August 2017 mainly comprised (i) trade and other payables; and (ii) bank borrowings and bonds, which were used solely for financing the development of the Properties. The slight increase in trade and other payables as at 31 December 2015, as compared to 31 December 2014, was mainly attributable to the increase in accrued expenditure for the construction of the Properties. The significant decrease in trade and other payables as at 31 December 2016 and 31 August 2017, as compared to 31 December 2015, was mainly due to the payments to contractor for the construction work of the Properties. The Target Group has obtained more bank borrowings and bonds along the Track Record Period to finance the development of the Properties. In particular, the substantial increase in bank borrowings and bonds as at 31 August 2017 mainly reflected the issue of a bond by a wholly-owned subsidiary of the Target Group in the PRC in the principal amount of approximately HK$1,524.1 million.

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EFFECTS ON SHAREHOLDING STRUCTURE OF THE COMPANY

The following table illustrates the shareholding structure of the Company (i) as at the date of this announcement; and (ii) upon Completion and immediately after the allotment and issuance of 280,998,482 Consideration Shares in accordance to the terms of the Acquisition Agreement (assuming that there is no other change in the issued share capital of the Company since the date of this announcement):

			Upon Completion and immediately
			after the allotment and issuance of
			280,998,482 Consideration Shares
			(assuming that there is no other
			change in the issued share capital of
	As at the date of		the Company since the date of this
	this announcement		announcement)
	Number of Shares	_% _	Number of Shares %
The Vendors_(note)_	790,001,518	68.65	1,071,000,000 74.80
Public Shareholders	360,749,880	31.35	360,749,880 25.20
Total	1,150,751,398	100.0	1,431,749,880 100.0

Note: As at the date of this announcement, 790,001,518 Shares are held by Manureen Holdings, which is in turn owned as to 70% and 30% by Dr. Lin and Madam Su respectively.

REASONS FOR AND BENEFITS OF THE ACQUISITION

The Group is principally engaged in (i) provision of financial printing, digital printing and other related services; (ii) manufacture and sale of hangtags, labels, shirt paper boards and plastic bags; (iii) distribution and sales of motor vehicle parts; (iv) provision of securities brokerage services and margin financing; (v) trading of electronic products, computer equipment and consumer products; (vi) property investment (the “ Property Investment Business ”); and (vii) dismantling and trading of scrap material and acting as an agent by sourcing scrap material.

In addition to the principal activities as mentioned above, the Group has also initiated works to enable the redevelopment of the Qiankeng Property and the Zhangkenjing Property for a year. The Zhangkenjing Property was acquired by the Group in September 2015. In February 2017, the Group has made an application to the PRC government authority to change the land use of the Zhangkenjing Property from industrial use to residential apartments and office use for redevelopment purpose. In accordance with the notice from the government authority, the application is being processed and reviewed by the relevant authorities. The Qiankeng Property was acquired by the Group in June 2016 and the application for change of the land use of the Qiankeng Property from industrial use to public housing and residential use was also made to 深圳市龍華區住房 及建設局 in May 2017. The Company is uncertain about when the approvals will finally be granted but it expects that it should be granted in 2018, subject to government schedules, and thereafter the redevelopment works will commence.

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As detailed in the section headed “Information on the Target Group”, the principal assets of the Target Group are the Guanlan Property, the Guangming Property, the Guangming Land and the Staff Housings. The Target Group will only act as a holding company of the Properties after Completion and the existing six staff of the Target Group, which previously oversaw the property development of the Guanlan Property and the Guangming Property, will be responsible for overseeing the leasing of these properties after Completion. As the appraised value of both Guangming Land and the Staff Housings as at 30 September 2017 is zero, the substance of the Acquisition and thus the core basis of the Total Consideration is the aggregate appraised value of the Guanlan Property and the Guangming Property. The Company proposed to acquire the equity interest in the Target Group rather than the Properties directly because the Company considers that it would be more expedient to acquire the former given the transfer of equity interest in BVI companies only involves execution of instrument(s) of transfer and would not require specific approval from the relevant BVI authorities while the direct acquisition of the Properties would involve assignment of more than 360 property ownership certificates in respect of the units of the Properties, each of which requires approval by the relevant PRC authorities.

After Completion, the Company intends to hold the Guanlan Property and the Guangming Property for rental purpose, and the Staff Housings will be kept as it is for staff quarter purpose. The Guangming Land, which is currently a bare land, is intended to be held as investment assets of the Group, no development plan thereof as at the date of this announcement.

As at 30 June 2017, the Group’s portfolio of investment properties included six residential apartments and two car park spaces in Hong Kong, and one commercial building and two industrial properties in Shenzhen. The aggregate value of this portfolio amounted to approximately HK$1,273.4 million as at 30 June 2017. The Board considers that the Acquisition would enhance the Group’s portfolio of investment properties and strengthen the Property Investment Business by exploring additional stream of stable rental income and potential capital gain for the Group.

In view of the above, the Board considers that the Acquisition is in the interests of the Company and the Shareholders as a whole.

LISTING RULES IMPLICATIONS

As the percentage ratios in respect of the Acquisition under Chapter 14 of the Listing Rules exceed 100%, the Acquisition constitutes a very substantial acquisition for the Company under Chapter 14 of the Listing Rules. In addition, given the Vendors are Directors and Manureen Holdings is the controlling Shareholder and thus connected persons of the Company, the Acquisition also constitutes a connected transaction under Chapter 14A of the Listing Rules. Accordingly, the Acquisition Agreement and the transactions contemplated thereunder are subject to, among others, the approval of the Independent Shareholders.

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The SGM will be convened and held to consider and, if thought fit, approve, among other things, the Acquisition Agreement and the transactions contemplated thereunder, including the allotment and issue of the Consideration Shares under specific mandate. The Vendors, Manureen Holdings and their respective associates who are Shareholders will be required to abstain from voting on the resolution approving the Acquisition Agreement and the transactions contemplated thereunder at the SGM. As at the date of this announcement, Manureen Holdings holds 790,001,518 Shares, representing approximately 68.65% of the issued share capital of the Company. Save as disclosed, to the best of the Directors’ knowledge, information and belief having made all reasonable enquires, no other Shareholder has a material interest in the Acquisition Agreement and the transactions contemplated thereunder and is required to abstain from voting on the resolution(s) to approve the Acquisition Agreement and the transactions contemplated thereunder at the SGM.

Each of Dr. Lin, Madam Su and Mr. Lin Xiaodong (brother of Dr. Lin) has abstained from voting at the relevant board resolution(s) approving the Acquisition Agreement and the transactions contemplated thereunder.

The IBC will be established to give recommendation to the Independent Shareholders on the terms of the Acquisition, and an independent financial adviser will be appointed to advise the IBC and the Independent Shareholders in this regard. The SGM will also be convened and held for the purpose of considering and, if thought fit, approving the resolution(s) in respect of the Acquisition Agreement and the transactions contemplated thereunder (including but not limited to the allotment and issuance of the Consideration Shares under specific mandate).

A circular containing, among other things, (i) details of the Acquisition Agreement; (ii) the letter of recommendation from the IBC to the Independent Shareholders in respect of the Acquisition; (iii) the letter of advice from the independent financial adviser to be appointed to advise the IBC and the Independent Shareholders in respect of the Acquisition; (iv) the financial information of the Group; (v) the financial information of the Target Group; (vi) the Properties Valuation; (vii) the unaudited pro forma financial information of the Enlarged Group; (viii) a notice convening the SGM; and (ix) other information as required under the Listing Rules is expected to be despatched to the Shareholders on or before 15 February 2018, which has been determined after taking into account of the estimated time required for the Company to prepare relevant information for inclusion in the circular.

As Completion is subject to fulfilment or waiver (as the case may be) of the conditions precedent to the Acquisition Agreement, the Acquisition may or may not proceed. Shareholders and potential investors of the Company should exercise caution when dealing in the Shares.

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DEFINITIONS

In this announcement, the following expressions have the meanings set out below unless the context requires otherwise.

• “1H2017” the six months ended 30 June 2017

• “8M2016” the eight months ended 31 August 2016

• “8M2017” the eight months ended 31 August 2017

• “Acquisition” the proposed acquisition of the Sale Shares by the Company from the Vendors pursuant to the terms and conditions of the Acquisition Agreement

• “Acquisition Agreement” the conditional sale and purchase agreement dated 18 January 2018 entered into among the Company and the Vendors in relation to the Acquisition

• “Ancillary Net Items” the assets and liabilities unrelated to the Properties, including other property, plant and equipment, other receivables, other payables and accrued charges of the Target Group

• “Board” the board of Directors

• “Business Day(s)” a day(s) (excluding Saturday, Sunday or public holiday) on which licensed banks in Hong Kong generally open for business throughout their normal business hours

• “BVI” British Virgin Islands

• “Cash Consideration” the portion of the Total Consideration to be settled in cash

• “Company” Realord Group Holdings Limited, a company incorporated in Bermuda with limited liability and the Shares of which are listed on the Main Board of the Stock Exchange (stock code: 1196)

• “Completion” completion of the Acquisition in accordance with the terms and conditions of the Acquisition Agreement

• “Completion Accounts” the audited consolidated accounts of the Target Group as at Completion, which shall be prepared in accordance with Hong Kong Financial Reporting Standards

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• “Director(s)” director(s) of the Company “Dr. Lin” Dr. Lin Xiaohui, being an executive Director and spouse of Madam Su

• “Enlarged Group” the Group as enlarged by the Acquisition upon Completion

• “First Tranche Promissory the first tranche of the promissory notes to be issued by Notes” the Company to settle part of the Total Consideration at Completion

• “FY2014” the financial year ended 31 December 2014 “FY2015” the financial year ended 31 December 2015 “FY2016” the financial year ended 31 December 2016

• “Group” the Company and its subsidiaries “Guanlan Property” a commercial/apartment building, retail shops and all car parking spaces of the Realord Villas, which is a mixed residential and commercial development located on the southern side of Huangan South Road within the Guanlan High-Tech Industrial Park of Guanlan

• “Guangming Land” a bare land situated at southwestern side of Jufeng Road within Guangming High-Tech Industrial Park of Guangming New District, Shenzhen with a site area of approximately 12,600 sq.m. for industrial use

• “Guangming Property” a residential property project developed on a parcel of land situated at the southwestern side of Jufeng Road within Guangming High-Tech Industrial Park of Guangming New District, Shenzhen with a site area of approximately 8,000 sq.m.

• “Hong Kong”

• the Hong Kong Special Administrative Region of the PRC

• “IBC”

• the independent board committe to be established by the Board to make recommendation to the Acquisition

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• “Independent Shareholders” Shareholders other than the Vendors, Manureen Holdings and their respective associates and other Shareholders who have a material interest in the Acquisition

• “Land” land with a total area of approximately 5,730 sqm, which is situated at Zhangkengjing, Guanlan, Longhua New District, Shenzhen, the PRC and is currently for industrial use

• “Last Trading Day” 17 January 2018, being the last trading day prior to the date of the Acquisition Agreement

• “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange

• “Madam Su” Su Jiaohua, being an executive Director and spouse of Dr. Lin

• “Manureen Holdings” Manureen Holdings Limited, a company incorporated in the BVI with limited liability

• “Manureen Technology” 美林科技(深圳)有限公司 (Manureen Technology (Shenzhen) Limited*), a company established in the PRC with limited liability

• “Manureen Ventures” Manureen Ventures Limited, a company incorporated in the BVI with limited liability

• “PRC” the People’s Republic of China which, for the purpose of this announcement, excludes Hong Kong, Macao Special Administrative Region and Taiwan

• “PRC Subsidiaries” Manureen Technology, Shenzhen Weilu, Shenzhen Sherpe, Shenzhen Manureen and Realord Realty

• “Promissory Notes” the promissory notes to be issued by the Company to settle part of the Total Consideration

• “Properties” the Guanlan Property, the Guangming Property, the Guangming Land and the Staff Housings

• “Properties Valuation” the independent valuation of the Properties conducted by Roma Appraisals Limited

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• “Qiankeng Property” The land, together with six factory buildings, an office building, two dormitory buildings, and other ancillary buildings situated at the Qiankeng Industrial Zone, Fumin Community, Guanlan Town, Baoan District, Shenzhen, the PRC

• “Realord Investment” Realord Investment Limited, a company incorporated in the BVI with limited liability

• “Realord Realty” 深圳市偉祿置業有限公司(Shenzhen Realord Realty Co. Ltd*), a company established in the PRC with limited liability

• “Realord Technology”

• Realord Technology Holdings Limited, a company incorporated in Hong Kong with limited liability

• “Realord Ventures”

• Realord Ventures Limited, a company incorporated in the BVI with limited liability

• “Realord Villas”

• the properties located on the southern side of Huangan South Road within Guanlan High-Tech Industrial Park of Guanlan and consists of six blocks of residential building, the Guanlan Property and other communal facilities

• “RIH” Realord Investment Holdings Limited, a company incorporated in Hong Kong with limited liability

• “Sale Shares”

• 1,000 shares of US$1 each in Realord Ventures and 1,000 share of US$1 each in Manureen Ventures, representing entire equity interest in both companies

• “Second Tranche Promissory Notes”

• the second tranche of the promissory notes to be issued b y t h e C o m p a n y t o s e t t l e p a r t o f t h e T o t a l Consideration within five business days following the issue of the Completion Accounts

• “SGM”

• the special general meeting of the Company to be convened and held for the Shareholders to consider and, if thought fit, approve the resolution(s) in respect of the Acquisition Agreement and the transactions contemplated thereunder

• “Share(s)” ordinary share(s) of HK$0.1 each in the issued share capital of the Company

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“Shareholder(s)”

• “Share Consideration”

• “Shareholder’s Loan”

• “Shenzhen Manureen”

• “Shenzhen Sherpe”

• “Shenzhen Weilu”

• “sq.m.”

• “Staff Housings”

• “Stock Exchange”

• “Target Group”

• “Target’s Management Accounts”

• “Target’s Outstanding Debts”

the holder(s) of the issued Share(s)

• the consideration payable by the Company to the Vendors for the Sale Shares pursuant to the Acquisition

• a loan to be provided by the Company to the Target Group for repayment of the Target’s Outstanding Debts as at the date of Completion on a dollar for dollar basis

• 美林商業運營管理有限公司 (Shenzhen Manureen Commercial Operation Management Co. Ltd*), a company established in the PRC with limited liability

• 深圳市夏浦光電技術有限公司 (Shenzhen Sherpe Photoelectricity Technology Co. Ltd*), a company established in the PRC with limited liability

• 深圳市偉祿科技控股有限公司 (Shenzhen Weilu Technology Holdings Co. Ltd*), a company established in the PRC with limited liability

• square meter

• four social housing units of 福保桂花苑 (Fu Bao Gui Hua Yuan*) located on the southern side of Gui Hua Road within Futian Free Trade Zone of Shenzhen

• The Stock Exchange of Hong Kong Limited

• Realord Ventures and Manureen Ventures and the direct and indirect subsidiaries held by them

• the unaudited consolidated management accounts of the Target Group prepared in accordance with the Hong Kong Financial Reporting Standards

• the aggregate amount of the outstanding debts owed by the Target Group to other parties in relation to the Properties, including the Vendors, companies controlled by any of them (excluding the Target Group), suppliers/contractors and the outstanding bank borrowings and bonds owed by the Target Group, net of advance paid to these parties (if any) and bank balances and cash of the Target Group, as at the date of Completion

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“Total Consideration” the total consideration to be payable by the Company (i) in cash; (ii) by way of issue of the Promissory Notes; and (iii) by way of issue of Consideration Shares “Track Record Period” the periods comprising FY2014, FY2015, FY2016, 8M2016 and 8M2017 “Vendors” Dr. Lin and Madam Su “HK$” Hong Kong dollars, the lawful currency of Hong Kong “RMB” Renminbi, the lawful currency of the PRC “US$” United States dollars, the lawful currency of the United States of America “Zhangkengjing Company” 深圳市樟坑徑股份合作公司 (Shenzhen Zhangkengjing Joint Stock Company*), a joint stock company held by local communal organization in Zhangkengjing, Shenzhen “Zhangkenjing Property” The land and a factory compound and two dormitory buildings situated at Zhangkeng Residents’ Association of Zhangkenjing Community, Guanlan Street, Baoan District, Shenzhen, the PRC “%” per cent.

In this announcement, amounts in RMB are translated into HK$ on the basis of RMB1 = HK$1.17241. The conversion rate is for illustration purpose only and should not be taken as a representation that RMB could actually be converted into HK$ at such rate or at all.

• the English translation of Chinese names or words in this announcement, where indicated, is included for information purpose only, and should not be regarded as the official English translation of such Chinese names or words.

By order of the Board Realord Group Holdings Limited Lin Xiaohui Chairman

Hong Kong, 18 January 2018

As at the date of this announcement, the executive Directors are Dr. Lin Xiaohui, Madam Su Jiaohua and Mr. Lin Xiaodong and the independent non-executive Directors are Mr. Yu Leung Fai, Mr. Fang Jixin and Dr. Li Jue.

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