Kingwell Group Limited — Capital/Financing Update 2012

Jun 28, 2012

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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KINGWELL GROUP LIMITED 京 維 集 團 有 限 公 司

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 1195)

DISCLOSEABLE TRANSACTION IN RELATION TO THE DISPOSAL OF 100% EQUITY INTEREST IN TEMPEST TRADING LIMITED

Financial Adviser

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On 28th June, 2012 (after trading hours), the Company and the Purchaser entered into the Sale and Purchase Agreement, pursuant to which the Company conditionally agreed to sell, and the Purchaser conditionally agreed to purchase the entire equity interest in Tempest at a consideration of HK$500,000, which will be satisfied in cash upon Completion.

As the relevant percentage ratios (as defined in the Listing Rules) in respect of the Disposal are more than 5% but less than 25%, the Disposal constitutes a discloseable transaction of the Company under Chapter 14 of the Listing Rules and is therefore subject the reporting and announcement requirements under the Listing Rules.

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The Board wishes to announce that on 28th June, 2012 (after trading hours), the Company and the Purchaser entered into the Sale and Purchase Agreement in respect of the Disposal. Details of the Sale and Purchase Agreement are as follows:

THE SALE AND PURCHASE AGREEMENT

Date

28th June, 2012

Parties

• Vendor : the Company Purchaser : Grand Smart Development Limited, a company incorporated in the British Virgin Islands with limited liability

As at the date of this announcement, to the best of the Directors’ knowledge, information and belief, and after having made all reasonable enquires, the Purchaser and its ultimate beneficial owner are third parties independent of the Company and connected persons of the Company.

Assets to be disposed

Pursuant to the Sale and Purchase Agreement, the Company has conditionally agreed to sell, and the Purchaser has conditionally agreed to purchase, the Sale Share, representing the entire issued share capital of Tempest.

Consideration

The Purchaser shall pay the Consideration of HK$500,000 in cash upon Completion.

The Consideration for the Disposal was determined after arm’s length negotiations between the Company and the Purchaser, taking into account, inter alia, of the followings: (i) the net liabilities of Tempest Group of RMB156.9 million (equivalent to HK$191.2 million) as at 31st March, 2012 before diminution of assets and waive of shareholder’s loan; (ii) diminution of assets of RMB54.6 million (equivalent to HK$66.6 million) and waive of shareholder’s loan by the Company of RMB210.0 million (equivalent to HK$256.0 million) resulting in the net liabilities of Tempest Group of RMB1.5 million (equivalent to HK$1.8 million) as at 31st March, 2012; (iii) the audited net loss after tax of the Tempest Group for the past 3 years ended 30th June, 2011 of approximately RMB62.0 million, RMB64.9 million and RMB39.7 million respectively (equivalent to approximately HK$75.6 million, HK$79.1 million and HK$48.4 million); (iv) the opportunity to avoid further investment in the production facilities in order to upgrade the production technology, which expensed the Group approximately RMB54.0 million and RMB1.6 million (approximately HK$65.8 million and HK$2.0 million) in the past two years ended 30th June,

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2011 and 2010 respectively; and (v) the recoverable amount of the shareholder’s loan due to the Company of RMB14.0 million (approximately HK$17.1 million), which bare no interest and repayable by the Purchaser within one year.

Completion

Completion shall take place on the Completion Date or such other time as shall be mutually agreed by the parties hereto when all of the of the following businesses shall be transacted:

• i. The Company shall deliver or cause to be delivered to the Purchaser:

• (a) duly executed transfer documents in respect of the Sale Share transferring the Sale Share to the Purchaser or its nominee together with the relevant share certificate(s);

• (b) resolution of the board of directors of Tempest approving the registration of the Purchaser or its nominee(s) as members of Tempest;

• (c) all the statutory and other books and records duly written up to date of Tempest and its certificate of incorporation, current business registration certificate, authorised chops and common seal, all agreements, cheques, books, accounts, journals and ledgers, all return and correspondences of Tempest with the relevant Taxation Department and other governmental departments, all receipts in respect of deposits and advanced payments, title deeds and all other relevant deeds, documents and correspondences relating to the affairs of Tempest; and

• (d) all reasonably relevant approvals, consents, licenses and/or permits required in relation to the transaction contemplated hereunder.

• ii. The Company shall on Completion (i) cause such number of directors of Tempest nominated by the Purchaser to be validly appointed as directors and/or company secretary of Tempest; and (ii) cause such directors of Tempest as requested by the Purchaser to resign with effect from the date of Completion.

• iii. The Purchaser shall deliver or cause to be delivered to the Company a cashier’s order drawn on a note issuing bank in Hong Kong for the balance of the Consideration in favour of the Company or its nominee(s).

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The Purchaser shall not be obliged to complete the Sales and Purchase Agreement or perform any obligations hereunder unless the Company complies fully with the requirements of the above conditions. If any provision of the above condition is not complied with by the Company on the Completion Date, the Purchaser may:

• i. defer Completion to a date falling not more than 28 days after the original Completion Date provided that, time shall be of the essence as regards the deferred Completion and if Completion is not effected on such deferred date, the Purchaser may rescind the Sales and Purchase Agreement and claim damages from the Company; or

• ii. proceed to Completion so far as practicable (but without prejudice to the Purchaser’s rights hereunder) insofar as the Company shall not have complied with its obligations.

Upon Completion, Tempest will cease to be a subsidiary of the Company.

INFORMATION ON THE COMPANY AND THE TEMPEST GROUP

The Company

The Company is a company incorporated in the Cayman Islands, the shares of which are listed on the Main Board of the Stock Exchange. The principal business activity of the Company is investment holding.

The Group is engaged principally in (i) manufacture and sales of rigid printed circuit boards and flexible printed circuit boards (‘‘Electronic Business’’); (ii) provision for surface mounting technology processing services; and (iii) property development.

The Tempest Group

Tempest is a company incorporated in the British Virgin Islands with limited liability and a wholly-owned subsidiary of the Company. Tempest is also the legal and beneficial owner of the entire issued share capital of Gemini. Besides the interest in Gemini, Tempest have no other assets or business.

Gemini is a wholly foreign owned enterprise incorporated in the PRC with limited liability and is primary engaged in manufacture of flexible printed circuit boards. The manufacturing facilities are situated in Huizhou city, Guangdong Province, with site covers approximately 46,669 square meters.

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Set out below is the financial information of the Tempest Group for each of the two years ended 30th June, 2010 and 2011:

	For the year ended	For the year ended
	30th June, 2010	30th June, 2011
	(Audited)	(Audited)
	RMB’000	RMB’000
Loss before taxation and extraordinary items	72,071	42,299
Loss after taxation and extraordinary items	64,948	61,994
Net liabilities	61,622	119,332

Upon Completion, the Group is expected to incur a loss on disposal business of approximately RMB66.2 million (equivalent to approximately HK$80.7 million), based on (i) the sales proceeds of RMB0.4 million (equivalent to approximately HK$0.5 million); and (ii) the unaudited net liabilities of the Tempest Group of RMB1.5 million (approximately HK$1.8 million) as at 31st March, 2012, minus the net loss of the Tempest Group of RMB68.1 million (approximately HK$83.0 million) for the nine months period ended 31st March, 2012, which was resulted by an diminution of asset of approximately RMB54.0 million (approximately HK$65.8 million) and a net operating loss of RMB14.1 million (approximately HK$17.2 million).

REASONS FOR AND BENEFITS OF THE DISPOSAL

Gemini is one of the manufacturing plants of the Group engaging in the Electronic Business. The Group’s electronic products are used in a broad range of applications in items such as mobile communication devices, consumer digital devices, automotive and medical devices. The Electronic Business is highly competitive and due to uncertainties in the global economy and the unfavorable operating environment, the Electronic Business has been deteriorating both in terms of sales and net profit after tax, with an audited loss of RMB92.8 million (approximately HK$113.1 million) for the year ended 30th June, 2011, as compared to an audited loss of RMB51.8 million (approximately HK$63.1 million) for the year ended 30th June, 2010, while Tempest Group recorded an audited loss of RMB62.0 million (approximately HK$75.6 million) for the year ended 30th June, 2011 and RMB64.9 million (approximately HK$79.1 million) for the year ended 30th June, 2010.

As stated in the announcement of the Company on 27th June, 2011, the Board announced its intention to allocate resources to investigate and identify investment opportunities in natural resources and mining projects, and on 22nd May, 2012, the Group has entered into a letter of intent with an independent third party for the possible acquisition of a controlling stake in a target company, which holds a mine exploration and exploitation permit of a gold mine in the Russian Federation.

Taking into account the Disposal would (i) provide a chance for the Group to dispose of its loss making unit, which amounted to approximately RMB62.0 million, RMB64.9 million and RMB39.7 million for the past 3 years ended 30th June, 2011 respectively (equivalent to

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approximately HK$ 75.6 million, HK$79.1 million and HK$48.4 million); (ii) avoid further investment in the production facilities in order to upgrade the production technology, which expensed the Group approximately RMB54.0 million and RMB1.6 million (approximately HK$65.8 million and HK$2.0 million) in the past two years ended 30th June, 2011 and 2010 respectively; (iii) recover the shareholder’s loan due to the Company of RMB14.0 million (approximately HK$17.1 million); and (iv) allow the Group to focus on deploying more resources to natural resources and mining projects, the Board is of the view that the terms of the Sale and Purchase Agreement are fair and reasonable and the Disposal is in the interests of the Company and its Shareholders as a whole.

The expected net proceeds from the Disposal are approximately HK$150,000, which will be used as general working capital of the Group.

IMPLICATION UNDER THE LISTING RULES

As the applicable percentage ratios (as defined under the Listing Rules) in respect of the Disposal are more than 5% but less than 25%, the Disposal constitutes a discloseable transaction for the Company under Chapter 14 of the Listing Rules and is therefore subject to the reporting and announcement requirements under the Listing Rules.

DEFINITIONS

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

• ‘‘Board’’ board of directors of the Company ‘‘Business Day(s)’’ a day other than a Saturday or a Sunday on which banks in Hong Kong are open to the general public for business

• ‘‘Company’’ or ‘‘Vendor’’ Kingwell Group Limited (Stock Code: 1195), a company incorporated in the Cayman Islands with limited liability and the shares of which are listed on the Main Board of the Stock Exchange

• ‘‘Completion’’ completion of the Disposal in accordance with the terms and conditions of the Sale and Purchase Agreement

• ‘‘Completion Date’’ 30th June, 2012 or such other Business Day as may be agreed between the Vendor and the Purchaser in writing

• ‘‘Consideration’’ the consideration payable to by Purchaser to the Company for the Disposal pursuant to the Sale and Purchase Agreement, being HK$500,000 in cash upon Completion

• ‘‘Director(s)’’ the director(s) of the Company

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‘‘Disposal’’	the disposal of the Sales Share pursuant to the Sales and Purchase	the disposal of the Sales Share pursuant to the Sales and Purchase
	Agreement
‘‘Gemini’’	Gemini Electronics (Huizhou) Co., Ltd, a wholly foreign owned
	enterprise incorporated in the PRC with limited liability, a wholly
	owned subsidiary of Tempest
‘‘Group’’	the Company and its subsidiaries
‘‘HK$’’	Hong Kong dollars, the lawful currency of Hong Kong
‘‘Hong Kong’’	the Hong Kong Special Administrative Region of the PRC
‘‘Listing Rules’’	the Rules Governing the Listing of Securities on the Stock
	Exchange
‘‘PRC’’	the People’s Republic of China
‘‘Purchaser’’	Grand Smart Development Limited, a company incorporated	in
	the British Virgin Islands with limited liability
‘‘RMB’’	Renminbi, the lawful currency of the PRC
‘‘Sale and Purchase	the sale and purchase agreement dated 28th June, 2012 entered
Agreement’’	into between the Company and the Purchaser in respect of	the
	disposal of the entire equity interest in Tempest
‘‘Sale Share’’	1 ordinary share of US$1.0 par value in the issued share capital
	of Tempest, representing the entire issued share capital	of
	Tempest as at the date of the Sale and Purchase Agreement
‘‘Shareholder(s)’’	Shareholder(s) of the Company
‘‘Share(s)’’	ordinary share(s) of HK$0.10 each in the issued share capital	of
	the Company
‘‘Stock Exchange’’	The Stock Exchange of Hong Kong Limited
‘‘Tempest’’	Tempest Trading Limited, a company incorporated in the British
	Virgin Islands with limited liability and a wholly-owned
	subsidiary of the Company. It is also the legal and beneficial
	owner of Gemini

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Tempest and its subsidiary

‘‘Tempest Group’’

‘‘%’’ per cent

(The exchange rate used for the purpose of this announcement is at RMB 1 = HK$1.219)

By Order of the Board KINGWELL GROUP LIMITED Hui Lung Hing Executive Director

Hong Kong, 28th June, 2012

As at the date of this announcement, the Board comprises Mr. Hui Lung Hing, Mr. Xiang Song, Mr. Sze Ming Yee, Mr. Lin Wan Xin, Ms. Xu Yue Yue and Mr. Yang Xue Jun as executive Directors, and Mr. Huang Jian Zi, Mr. Cheung Chuen and Ms. Wong Lai Wing as independent non-executive Directors.

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