China Energy Storage Technology Development Limited — Capital/Financing Update 2017

Oct 11, 2017

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.

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CHINA HEALTHCARE ENTERPRISE GROUP LIMITED 華 夏 健 康 產 業 集 團 有 限 公 司

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 1143)

MAJOR TRANSACTION AND RESUMPTION OF TRADING

THE ACQUISITION

On 11 October 2017, the Purchaser and the Vendor entered into the Sale and Purchase Agreement, pursuant to which the Purchaser has conditionally agreed to purchase, and the Vendor has conditionally agreed to sell, the Sale Shares.

LISTING RULES IMPLICATIONS

As one or more of the applicable percentage ratios as defined in the Listing Rules exceed(s) 25% but less than 100%, the Sales and Purchase Agreement and the transactions contemplated thereunder constitute a major transaction of the Company and are subject to the notification, announcement and shareholders’ approval requirements under Chapter 14 of the Listing Rules.

The EGM will be convened for the Shareholders to consider and, if thought fit, approve the Sale and Purchase Agreement and the transactions contemplated thereunder. To the best of the Directors’ knowledge, information and belief having made all reasonable enquires, no Shareholder has a material interest in the transactions contemplated under the Sale and Purchase Agreement. As such, no Shareholder will be required to abstain from voting in favour of the resolution(s) to approve the Sale and Purchase Agreement and the transactions contemplated thereunder at the EGM.

Mr. Bao Jinqiao, an independent non-executive Director, is interested in 0.3115% equity interest of the Target Company. Mr. Bao Jinqiao has abstained from voting for the Board resolutions to approve the Sales and Purchase Agreement.

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A circular containing, among others, (i) details of the Acquisition, the Sale and Purchase Agreement and the transactions contemplated thereunder; (ii) further information of the Target Company; and (iii) the notice of the EGM is expected to be despatched to the Shareholders on or before 30 November 2017 as additional time is required to prepare such information.

TRADING HALT AND RESUMPTION OF TRADING

At the request of the Company, trading in the Shares on the Stock Exchange was halted with effect from 9:00 a.m. on 11 October 2017 pending the release of this announcement. An application has been made by the Company to the Stock Exchange for the resumption of trading in the Shares on the Stock Exchange with effect from 9:00 a.m. on 12 October 2017.

WARNING

The Acquisition is subject to a number of conditions precedents which may or may not be fulfilled. Shareholders and potential investors are reminded to exercise caution when dealing in the Shares.

THE ACQUISITION

On 11 October 2017, the Purchaser and the Vendor entered into the Sale and Purchase Agreement, pursuant to which the Purchaser has conditionally agreed to purchase, and the Vendor has conditionally agreed to sell, the Sale Shares.

The Sale and Purchase Agreement

Date: 11 October 2017 Parties: The Purchaser, an indirect wholly-owned subsidiary of the Company; The Vendor; and The Target Company

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, the Vendor is an investment holding company; it and its ultimate beneficial owner are Independent Third Parties.

Assets to be acquired

The Sale Shares, being 270 million shares in the Target Company (representing approximately 84.11% of the entire issued share capital of the Target Company).

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As at the date of the Sale and Purchase Agreement, 70 million shares in the Target Company is owned by the Vendor and 200 million shares in the Target Company is owned by Lanxin Jinxiu. The Vendor undertakes it will procure Lanxin Jinxiu to transfer its 200 million shares in the Target Company to the Vendor such that the Vendor will become the sole beneficial owner of the Sale Shares before Completion.

Consideration

The consideration for the Sale Shares is RMB360 million (representing approximately HK$414 million) at maximum, which shall be paid in cash by the Purchaser.

The consideration was reached based on arm’s length negotiation between the Company and the Vendor by reference to (i) the net asset value of the Target Company; (ii) the business prospects of the Target Company; and (iii) the Profit Guarantee mechanism as described in the paragraph headed ‘‘Profit Guarantee’’ in this announcement. The consideration will be satisfied by the Group’s internal resources and debt financing.

Conditions Precedent

Completion of the Sales and Purchase Agreement shall only take place after all of the following conditions precedent is satisfied:

• (a) the Purchaser being satisfied with the outcome of the financial, legal and business due diligence against the Target Company;

• (b) the passing by the directors of the Vendor all necessary resolutions for approving the Sale and Purchase Agreement and the transactions contemplated thereunder;

• (c) the undertakings and warranties remaining true and correct in all respects and not misleading in any respect at Completion as if repeated at all times between the date of the Sale and Purchase Agreement up to Completion;

• (d) the passing of a resolution by the Shareholders in a general meeting approving the Sales and Purchase Agreement and the transactions contemplated thereunder; and

• (e) all necessary approvals, permits, consents and authorization having been obtained by the parties in connection with the transactions contemplated under the Sale and Purchase Agreement, whether pursuant to law, regulatory compliance or the Listing Rules or otherwise.

The Sale and Purchase Agreement shall be terminated automatically if any of the above conditions is not satisfied on or before 31 March 2018 (the ‘‘Long Stop Date’’) (unless the parties have agreed in writing to extend the Long Stop Date for fulfilment of any of the relevant conditions) and none of the parties to the Sale and Purchase Agreement shall have any claim against the other party save in respect of any antecedent breaches of the terms of the Sale and Purchase Agreement.

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Profit Guarantee

Subject to Completion, the Vendor irrevocably and unconditionally guarantees to the Purchaser that the audited profit after tax of the Target Company for the year ending 31 December 2018 and 2019 shall be no less than RMB180 million and RMB400 million respectively (the ‘‘Guaranteed Profit’’).

If the actual audited profit after tax of the Target Company (the ‘‘Actual Profit’’) for of the year ending 31 December 2018 and 2019 shall be less than the relevant Guaranteed Profit, the Vendor shall repay the shortfall in cash to the Purchaser according to the following formula:

Shortfall = (Guaranteed Profit — Actual Profit)

Where the Actual Profit is negative, it shall be deemed to be zero. The total maximum amount of the shortfall shall be RMB360 million. The Vendor and the Purchaser shall procure that the audited financial statements of the Target Company for the year ending 31 December 2018 and 2019 shall be prepared and reported on by the auditor nominated by the Purchaser within three months after the said periods or any other date as agreed by both parties.

INFORMATION ON THE TARGET COMPANY

The Target Company was incorporated on 7 January 2016 in the PRC with limited liability. The Target Company is located in the Scisky Waterborne Technology Industry Park of Lanzhou* (蘭州科天水性科技產業園) in the PRC. It is principally engaged in the manufacturing and selling of polyurethane condoms, which are branded as ‘‘Zhong Chuan 001* (中川001)’’ and ‘‘Zhong Chuan 002* (中川002)’’.

Set out below is the group chart of the Target Company before Completion:

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----- Start of picture text ----- Other shareholdersVendor Lanxin Jinxiu(including Mr. Bao Jinqiao)21.8% 62.3% 15.9%Target Company----- End of picture text -----

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Set out below is the group chart of the Target Company after Completion:

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----- Start of picture text ----- Other shareholdersPurchaser(including Mr. Bao Jinqiao)84.1% 15.9%Target Company----- End of picture text -----

Based on the information provided by the Vendor, set out below is a summary of the financial information of the Target Company:

Based on the audited account based on PRC accounting standard as at 31 December 2016:

	For the period
	from date of
	incorporation to
	31 December
	2016
	RMB’000
	(audited)
Revenue	3,420
Net loss before taxation	(1,519)
Net loss after taxation	(1,519)

Based on the unaudited management account as at 30 September 2017:

			As at
		30	September
			2017
			RMB’000
			(unaudited)
Net	assets		313,378

Upon Completion, the Target Company will become a non wholly-owned subsidiary to the Company, and its financial results will be consolidated into the accounts of the Group.

REASONS FOR AND BENEFITS OF THE ACQUISITION

The Group is principally engaged in (i) electronic manufacturing services; (ii) marketing and distribution of communications products; (iii) trading and selling of medical equipments; and (iv) securities and other assets investments.

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The Group plans to shift its business focus on the medical and healthcare industry in the PRC, which is now expanding at a high speed. Having considered the Target Company’s business and financial performance, the Acquisition represents a good opportunity for the Group to expand into the healthcare related industry and to broaden its income base. The Profit Guarantee could also reduce the Group’s potential risk exposure to this new business segment. The terms of the Agreement were arrived at arm’s length negotiations between the Purchaser and the Vendor. The Board (excluding Mr. Bao Jinqiao) considers the terms of the Agreement are normal commercial terms and fair and reasonable, and, if materialized, will be in the interests of the Company and its Shareholders as a whole.

LISTING RULES IMPLICATIONS

As one or more of the applicable percentage ratios as defined in the Listing Rules exceed(s) 25% but less than 100%, the Sales and Purchase Agreement and the transactions contemplated thereunder constitute a major transaction of the Company and are subject to the notification, announcement and shareholders’ approval requirements under Chapter 14 of the Listing Rules.

The EGM will be convened for the Shareholders to consider and, if thought fit, approve the Sale and Purchase Agreement and the transactions contemplated thereunder. To the best of the Directors’ knowledge, information and belief having made all reasonable enquires, no Shareholder has a material interest in the transactions contemplated under the Sale and Purchase Agreement. As such, no Shareholder will be required to abstain from voting in favour of the resolution(s) to approve the Sale and Purchase Agreement and the transactions contemplated thereunder at the EGM.

Mr. Bao Jinqiao, an independent non-executive Director, is interested in 0.3115% equity interest of the Target Company. Mr. Bao Jinqiao has abstained from voting for the Board resolutions to approve the Sales and Purchase Agreement.

A circular containing, among others, (i) details of the Acquisition, the Sale and Purchase Agreement and the transactions contemplated thereunder; (ii) further information of the Target Company; and (iii) the notice of the EGM is expected to be despatched to the Shareholders on or before 30 November 2017 as additional time is required to prepare such information.

TRADING HALT AND RESUMPTION OF TRADING

At the request of the Company, trading in the Shares on the Stock Exchange was halted with effect from 9:00 a.m. on 11 October 2017 pending the release of this announcement. An application has been made by the Company to the Stock Exchange for the resumption of trading in the Shares on the Stock Exchange with effect from 9:00 a.m. on 12 October 2017.

WARNING

The Acquisition is subject to a number of conditions precedents which may or may not be fulfilled. Shareholders and potential investors are reminded to exercise caution when dealing in the Shares.

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DEFINITIONS

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

‘‘Acquisition’’	the acquisition of the Sale Shares by the Purchaser	the acquisition of the Sale Shares by the Purchaser
	pursuant to the Sale and Purchase Agreement
‘‘Board’’	the board of Directors
‘‘Company’’	China Healthcare Enterprise Group Limited, a company
	incorporated in the Cayman Islands with limited liability
	and the securities of which are listed on the Main Board
	of the Stock Exchange
‘‘Completion’’	the completion of the Acquisition
‘‘connected person(s)’’	has the meaning ascribed thereto under the Listing Rules
‘‘Directors’’	the directors of the Company
‘‘EGM’’	the extraordinary general meeting of the Company to	be
	heldandconvenedtoconsiderandapprove	the
	Acquisition
‘‘Group’’	the Company and its subsidiaries
‘‘HK$’’	Hong Kong dollars, the lawful currency of Hong Kong
‘‘Hong Kong’’	Hong Kong Special Administrative Region of the PRC
‘‘Independent Third Party(ies)’’	party(ies) which is/are independent of the Group and	the
	connected persons of the Company
‘‘Lanxin Jinxiu’’	蘭州新區蘭新錦綉健康科技資產管理合夥企業(有限合夥)
	(LanzhouNewDistrictLanxinJinxiuHealthcare
	TechnologyAssetManagementLimitedPartnership
	Corporation*), an Independent Third Party
‘‘Listing Rules’’	the Rules Governing the Listing of Securities on	the
	Stock Exchange
‘‘PRC’’	the People’s Republic of China, which for the purpose	of
	this announcement shall exclude Hong Kong, the Macau
	Special Administration Region of the PRC and Taiwan
‘‘Profit Guarantee’’	the profit guarantee provided by the Vendor to	the
	Purchaser pursuant to the Sale and Purchase Agreement

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• ‘‘Purchaser’’ 華氏管理諮詢( 深 圳)有限公司 (Huashi Management Consultancy (Shenzhen) Limited*), an indirect whollyowned subsidiary of the Company incorporated in the PRC

• ‘‘RMB’’ Renminbi, the lawful currency of the PRC ‘‘Sale and Purchase the conditional sale and purchase agreement in relation to Agreement’’ the Acquisition entered into between the Purchaser and the Vendor on 11 October 2017

• ‘‘Sale Shares’’ 270 million shares of the Target Company, representing approximately 84.11% of the entire issued share capital of the Target Company as at the date of this announcement

• ‘‘Share(s)’’ ordinary share(s) HK$0.001 each in the share capital of the Company

• ‘‘Shareholder(s)’’ the holder(s) of the Share(s) ‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited ‘‘Target Company’’ 蘭 州 科 天 健 康 科 技 股 份 有 限 公 司 (Lanzhou Scisky Healthcare Science and Technology Company Limited*), a company incorporated in the PRC

• ‘‘Vendor’’ 蘭 州 科 天 投 資 控 股股 份 有 限 公 司 (Lanzhou Scisky Investment CMI Holding Company Limited*), a company incorporated in the PRC

• ‘‘%’’ per cent.

By order of the Board

China Healthcare Enterprise Group Limited Gong Shaoxiang Chairman and Executive Director

Hong Kong, 11 October 2017

As at the date of this announcement, the Board comprises Mr. Gong Shaoxiang (Chairman), Mr. Lee Chi Hwa Joshua and Mr. Duan Chuanhong as executive Directors, Mr. Cao Yuyun as non-executive Director and Mr. Bao Jinqiao, Mr. Wong Chun Hung and Mr. Leung Pok Man as independent non-executive Directors.

• For identification purposes only

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