Honworld Group Limited — Capital/Financing Update 2016

May 9, 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.

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Honworld Group Limited 老 恒 和 釀 造 有 限 公 司[*]

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 2226)

DISCLOSEABLE TRANSACTION DEEMED DISPOSAL OF THE EQUITY INTEREST IN LAO HENG HE

INVESTMENT AGREEMENT

The Board announces that on 6 May 2016 (after trading hours), Lao Heng He, Huzhou Chen Shi and the CD Fund entered into the Investment Agreement in relation to the Capital Investment by CD Fund to Lao Heng He, which is currently an indirect wholly-owned subsidiary of the Company.

Pursuant to the Investment Agreement, CD Fund agreed to invest RMB133 million in Lao Heng He. Based on the currently available information and the unaudited net asset value of Lao Heng He as at 31 December 2015, the Company expects that the equity interest of Lao Heng He to be owned by CD Fund will be approximately 3.5%, which, however, may be adjusted according to the results of the Valuation Report to be issued within three months after the signing of the Investment Agreement. As such, the Company is deemed to dispose approximately 3.5% of equity interest of Lao Heng He or such other amount as to be determined by the Valuation Report to CD Fund under the Listing Rules.

• For identification purposes only

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LISTING RULES IMPLICATIONS

Based on the assumption that 3.5% equity interests would be deemed to be disposed to CD Fund pursuant to the Investment Agreement, the Company expects that the highest ratio of the applicable percentage ratios (as defined in Chapter 14 of the Listing Rules) would exceed 5% but would be less than 25%. Therefore, the transaction under the Investment Agreement would constitute a discloseable transaction of the Company, which is subject to the reporting and announcement requirements under Chapter 14 of the Listing Rules. Should a higher percentage of equity interests of Lao Heng He will be deemed to be disposed to CD Fund pursuant to the Valuation Report resulting in the applicable percentage ratios (as defined in Chapter 14 of the Listing Rules) becoming 25% or more, the Company will comply with the requirements under Chapter 14 of the Listing Rules prior to the completion of the Investment Agreement, including obtaining shareholders’ approval.

INVESTMENT AGREEMENT

Date

6 May 2016

Parties

• (1) CD Fund;

• (2) Lao Heng He; and

• (3) Huzhou Chen Shi

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, the CD Fund and their ultimate beneficial owners are third parties independent of the Company and its connected persons.

Subject of the Transaction

Pursuant to the Investment Agreement, CD Fund agreed to invest RMB133 million in Lao Heng He.

Capital Investment

As at the date of this announcement, Lao Heng He is wholly owned by Huzhou Chen Shi with a registered capital of RMB11 million. Pursuant to the Investment Agreement, CD Fund agreed to invest RMB133 million in Lao Heng He. Based on the currently available information and the unaudited net asset value of Lao Heng He as at 31

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December 2015, the Company expects that the equity interest of Lao Heng He to be owned by CD Fund will be approximately 3.5%, which, however, may be adjusted according to the results of the Valuation Report to be issued within three months after the signing of the Investment Agreement. As such, the Company is deemed to dispose approximately 3.5% of equity interest of Lao Heng He or such other amount as to be determined by the Valuation Report to CD Fund under the Listing Rules. Therefore, the Company expects that Lao Heng He will continue to be a subsidiary of the Company following the Deemed Disposal.

Conditions of the Transaction

The transaction under the Investment Agreement is conditional upon the satisfaction of, among others, the following conditions:

1. from the date of the Investment Agreement to the date of the Completion, there is no material adverse event that will adversely impact on the business prospects, assets and financial condition of Lao Heng He;

2. the articles of association of Lao Heng He has been amended according to the terms of the Investment Agreement;

3. all internal approvals of Lao Heng He, Huzhou Chen Shi, the Company and Huzhou Nantaihu with respect to the entry of the Investment Agreement have been obtained;

4. Lao Heng He has obtained the relevant undertaking documents from Huzhou City Wuxing Finance Bureau (湖州市吳興區財政局) for the Investment Project;

5. Lao Heng He has obtained the approval from the relevant local government authorities for the Investment Project; and

6. CD Fund completing its due diligence on Lao Heng He.

Use of Proceeds

Lao Heng He shall ensure that all proceeds of the Capital Investment to be used in the implementation of the Investment Project.

Subsequent Purchase and Dividends

Huzhou Chen Shi agreed to repurchase the equity interest of Lao Heng He to be owed by CD Fund within 8 years after the payment of the Capital Investment according to the repurchase schedule under the Investment Agreement.

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Lao Heng He shall pay CD Fund returns in the form of, including but not limited to, dividend at an annual rate of return amounted to 1.2% of the Capital Investment. No dividend payment need to be made by Lao Heng He until 20 March 2018. On 20 March 2018, the CD Fund shall be paid the total dividend accumulated from the date of Completion of the Investment Agreement to 20 March 2018. Then the CD Fund will be paid a yearly dividend on or before 20 September every year after 20 March 2018.

In the event that Lao Heng He defaults in payment of such dividends or repayment of the Capital Investment, the Company and Huzhou Nantaihu are jointly obliged to compensate the CD Fund for such payment.

If Lao Heng He, the Company and Huzhou Nantaihu fail to pay up such payment, the Huzhou City Wuxing Financial Bureau (湖州市吳興區財政局) committed itself to allocate fund for making up such payment to the CD Fund.

INFORMATION ON CD FUND

CD Fund, a wholly-owned subsidiary of China Development Bank (國家開發銀行), was established on 25 August 2015 with a registered capital of RMB50 billion. CD Fund is principally engaged in the investment of financial bonds.

INFORMATION ON HUZHOU CHEN SHI

Huzhou Chen Shi is a wholly foreign-owned enterprise incorporated in the PRC on 5 February 2013 with limited liability and a wholly-owned subsidiary of the Company. The Company’s principal activities are management consulting.

INFORMATION ON LAO HENG HE

Lao Heng He is a wholly-owned subsidiary of Huzhou Chen Shi, principally engaged in the manufacturing of cooking wine, soy sauce, vinegar, soybean sauce products and other condiments products.

The unaudited total assets value and the net assets value of the Lao Heng He as at 31 December 2015 are approximately RMB2,050 million and RMB730 million, respectively. The unaudited financial information of Lao Heng He for the year ended 31 December 2014 and 2015 are as follows:

	For the year ended 31 December	For the year ended 31 December
	2014	2015
	RMB’000	RMB’000
Revenue	646,314	774,798
Net profits before tax	228,821	268,231
Net profits after tax	197,889	235,710

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INFORMATION ON THE COMPANY

The Company is a company incorporated in Cayman Islands as an exempted company with limited liability on 4 December 2012. The Company is an investment holding company.

INFORMATION ON HUZHOU NANTAIHU

Huzhou Nantaihu is a company incorporated in the PRC with limited liability on 8 May 2003 and is a state-owned company in the Wuxing Area of Huzhou City. Huzhou Nantaihu is entrusted by the Wuxing Government (吳興區政府) to construct and manage infrastructure projects in Wuxing Area and regional land development and property development.

REASONS FOR AND BENEFITS OF ENTERING INTO THE INVESTMENT AGREEMENT

There would be no gain or loss recognised for the Deemed Disposal, as the Group does not have the unconditional right to avoid delivering cash to CD Fund. The capital investment of RMB133 million made by CD Fund would be accounted for as financial liability for the Group.

As CD Fund is a well-recognised stated-owned company, its investment in the Company represents that the ‘‘Lao Heng He’’ brand have been widely recognized in the market, and demonstrates that the Company is well recognized for its leading position in the cooking wine and condiments industry.

The investment of CD Fund will further enhance the development of the Company and its credibility, which will enhance its capability in fund raising and attracting more customers and businesses.

BOARD’S APPROVAL

The proposal in respect of the entry into the Investment Agreement was approved at the Board meeting held by the Company on 6 May 2016. None of the Directors has material interests in the transaction under the Investment Agreement.

The Directors (including the independent non-executive Directors) considered that the terms of the Investment Agreement are fair and reasonable and are on normal commercial terms and the transactions contemplated under the Investment Agreement are in the interests of the Company and its shareholders as a whole.

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LISTING RULES IMPLICATIONS

Based on the assumption that 3.5% equity interests would be deemed to be disposed to CD Fund pursuant to the Investment Agreement, the Company expects that the highest ratio of the applicable percentage ratios (as defined in Chapter 14 of the Listing Rules) would exceed 5% but would be less than 25%. Therefore, the transaction under the Investment Agreement would constitute a discloseable transaction of the Company, which is subject to the reporting and announcement requirements under Chapter 14 of the Listing Rules. Should a higher percentage of equity interests of Lao Heng He will be deemed to be disposed to CD Fund pursuant to the Valuation Report resulting in the applicable percentage ratios (as defined in Chapter 14 of the Listing Rules) becoming 25% or more, the Company will comply with the requirements under Chapter 14 of the Listing Rules prior to the completion of the Investment Agreement, including obtaining independent Shareholders’ approval.

DEFINITIONS

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

• ‘‘Board’’ the board of Directors ‘‘Capital Investment’’ the capital investment of RMB133 million by CD Fund to Lao Heng He according to the Investment Agreement

• ‘‘CD Fund’’ China Development Fund Co,. Ltd* (國開發展基金有 限公司), a company incorporated in the PRC with limited liability on 25 August 2015 and an independent third party

• ‘‘Company’’ Honworld Group Limited (老恒和釀造有限公司), a company incorporated in Cayman Islands with limited liability on 4 December 2012, the ordinary shares of which are listed on the main board of the Stock Exchange (Stock Code: 2226)

• ‘‘Completion’’ completion of the Capital Investment in accordance with the Investment Agreement

• ‘‘connected persons’’ has the meaning ascribed thereto in the Listing Rules

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• ‘‘Deemed Disposal’’

• the deemed disposal of approximately 3.5% of equity interest of Lao Heng He or such other amount as to be determined by the Valuation Report by Lao Heng He to CD Fund under the Listing Rules

• ‘‘Director’’

• the Directors of the Company

• ‘‘Group’’

• the Company and its subsidiaries

• ‘‘Hong Kong’’

• the Hong Kong Special Administrative Region of the PRC

• ‘‘Huzhou Chen Shi’’

• Huzhou Chen Shi Tian Niang Management Consulting Co., Ltd (湖州陳氏天釀管理諮詢有限公司), a company established on 5 February 2013 under the laws of the PRC, which is a direct wholly-owned subsidiary of the Company

• ‘‘Huzhou Nantaihu’’ Huzhou Wuxing Nantaihu Construction Investment Co., Limited (湖州吳興南太湖建設投資有限公司), a company incorporated in the PRC with limited liability on 8 May 2003, an independent third party

• ‘‘Investment Agreement’’

• the investment agreement entered into among CD Fund, Lao Heng He and Huzhou Chen Shi on 6 May 2016 in relation to the Capital Investment by CD Fund to Lao Heng He

• ‘‘Investment Project’’ the construction of Lao Heng He’s natural ecological brewing production base (老恒和古法釀造生態生產 基地) in Wuxing Area, Huzhou City, Zhejiang Province, PRC

• ‘‘Listing Rules’’ the Rules Governing the Listing of Securities on the Stock Exchange

• ‘‘Lao Heng He’’

• Huzhou Lao Heng He Brewery Co., Ltd (湖州老恒和 釀造有限公司), a company incorporated in the PRC with limited liability on 1 July 1979, which is an indirect wholly-owned subsidiary of the Company

• ‘‘percentage ratios’’

• has the meaning ascribed to any of the five percentage ratios under Rule 14.07 of the Listing Rules

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‘‘PRC’’ the People’s Republic of China, which shall, for the purpose of this announcement, exclude Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan ‘‘RMB’’ Renminbi, the lawful currency of the PRC ‘‘Stock Exchange’’ the Stock Exchange of Hong Kong Limited ‘‘Valuation Report’’ the valuation report in respect of the unaudited net asset value of Lao Heng He as at a reference day to be agreed among CD Fund, Lao Heng He and Huzhou Chen Shi for the purpose of determining the equity interest of Lao Heng He to be owned by CD Fund according to the Investment Agreement

‘‘%’’ per cent

By order of the Board Honworld Group Limited CHEN WEI ZHONG Chairman

Hong Kong, 9 May 2016

As at the date of this announcement, the Board comprises Mr. Chen Weizhong, Mr. Sheng Mingjian and Mr. Wang Chao as Executive Directors; Mr. Zhang Bihong as Non-executive Director; and Mr. Shen Zhenchang, Mr. Lei Jiasu and Mr. Ma Chaosong as Independent Non-executive Directors.

• English translations of the names are provided for ease of reference only and they are not official English names of the companies and authority concerned

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