Kingwell Group Limited — Capital/Financing Update 2016

Sep 26, 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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(Incorporated in Bermuda with limited liability)

(Stock Code: 559)

DISCLOSEABLE TRANSACTION SETTLEMENT DEED IN RELATION TO THE ACQUISITION OF 85% EQUITY INTEREST IN DELTA PRESTIGE HOLDINGS LIMITED

The Board announces that on 26 September 2016, the Company and the Vendor entered into a Settlement Deed for the full and final settlement of the Vendor’s obligations under the Profit Guarantee.

LISTING RULES IMPLICATIONS

This announcement is made by the Company pursuant to Rule 14.36 of the Listing Rules, as the entering into of the Settlement Deed constitutes material variation of the terms of the Acquisition previously announced under the Acquisition Announcements.

As the relevant percentage ratios under the Listing Rules in respect of the Settlement Deed are more than 5% but are less than 25%, the Settlement Deed constitutes a discloseable transaction on the part of the Company under Chapter 14 of the Listing Rules, and is therefore subject to the reporting and announcement requirements under the Listing Rules.

Reference is made to the announcements (the ‘‘Acquisition Announcements’’) dated 26 April 2015 and 29 May 2015 of DeTai New Energy Group Limited (the ‘‘Company’’) in relation to, amongst others, the acquisition of 85% equity interest in Delta Prestige Holdings Limited (the ‘‘Target Company’’) and the Company’s announcement dated 18 May 2016 in relation to, among other matters, the financial performance of the electric cycles business of the Group (the ‘‘Business Update Announcement’’). Unless otherwise defined, capitalised terms used in this announcement shall have the same meanings as defined in the Acquisition Announcements.

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BACKGROUND

On 29 May 2015, the Company acquired 85% equity interest in the Target Company.

As disclosed in the Business Update Announcement, the financial performance of the electric cycles business of the Group is expected to incur operating loss for the year ended 30 June 2016. The Group has strived to enhance the brand recognition and market penetration by various marketing activities. However, due to the slowdown of the Chinese economy, the turnover of the Group’s electric cycles, especially for the solar-powered electric cycles which were newly developed and introduced to the market subsequent to the acquisition of the electric cycles business by the Group in May 2015, was adversely affected. The acceptance by the general public towards the solar-powered electric cycles with advanced technology and comparatively higher selling price was below the expectation and maintained at low level. Based on the preliminary assessment of the information currently available, including the latest management accounts of the Group which have not been finalised, reviewed by the Company’s audit committee or audited by the auditor of the Company, impairment losses on the goodwill and intangible assets would be recorded for the year ended 30 June 2016.

Pursuant to the Acquisition Agreement, the Vendor has irrevocably warranted and guaranteed to the Company (the ‘‘Profit Guarantee’’) that the after-tax audited consolidated net profit (including net profit attributable to non-controlling interests) (the ‘‘Audited Net Profit’’) of the Target Group in accordance with the Hong Kong generally accepted accounting principles for the 2015 Financial Year shall not be less than HK$100,000,000 (the ‘‘Guaranteed Net Profit’’).

In the event that the Target Group cannot achieve the Guaranteed Net Profit, the Vendor has irrevocably undertaken to the Company to pay to the Company in cash within 10 Business Days from the date of receipt of the certificate from the auditors designated by the Company an amount equal to the shortfall (the ‘‘Profit Guarantee Compensation’’). If the Target Group records an audited net loss for the 2015 Financial Year, the Audited Net Profit will be deemed to be zero on the determination of the Profit Guarantee Compensation.

In view of the anticipated loss for the electric cycles business, the Company had approached the Vendor regarding the fulfillment of the Profit Guarantee. During the discussions between the Company and the Vendor, the Vendor had been requested to settle the Profit Guarantee Compensation of HK$100,000,000. After arm’s length negotiations, on 26 September 2016, the Vendor and the Company entered into a deed of settlement (the ‘‘Settlement Deed’’) regarding the settlement of the Profit Guarantee Compensation.

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Principal terms of the Settlement Deed are set out below:

SETTLEMENT DEED

Date: 26 September 2016 Parties: (1) the Vendor; and

• (2) the Company.

To the best of the Directors’ knowledge, information and belief and having made all reasonable enquiries, the Vendor is independent of the Company and its connected persons (as defined in the Listing Rules). As confirmed by the Vendor, he and his associates do not hold any shares, options, warrants, derivatives or convertible securities of the Company as at the date of this announcement.

Pursuant to the Settlement Deed, the Vendor and the Company agreed that, in full and final settlement of the Vendor’s obligations under the Profit Guarantee, the Vendor shall pay HK$100,850,000 (being the sum of the Profit Guarantee Compensation of HK$100,000,000 and the additional amount of compensation of HK$850,000) to the Company (or its nominee) in the following manner:

• (a) HK$20,000,000 being the first installment shall be paid by the Vendor to the Company (or its nominee) in cash or cashier’s order or cheque within 5 Business Days upon execution of the Settlement Deed;

• (b) HK$20,400,000 shall be paid by the Vendor to the Company (or its nominee) in cash or cashier’s order or cheque on or before 31 March 2017;

• (c) HK$30,300,000 shall be paid by the Vendor to the Company (or its nominee) in cash or cashier’s order or cheque on or before 30 September 2017; and

• (d) HK$30,150,000 shall be paid by the Vendor to the Company (or its nominee) in cash or cashier’s order or cheque on or before 31 March 2018.

REASONS FOR AND BENEFITS OF ENTERING INTO OF THE SETTLEMENT DEED

The Company and its subsidiaries are principally engaged in the businesses of manufacturing and trading of electric cycles, trading and distribution of liquor and wine, provision of money lending services and investments in listed securities.

As the Vendor required additional time to arrange necessary fund flow for the repayment of the Profit Guarantee Compensation and taking into account that (i) the Company could receive a repayment of HK$20,000,000 within 5 Business Days from the date of the Settlement Deed; and (ii) the additional amount of compensation under the Settlement Deed, the Board considers that the terms of the Settlement Deed are on normal commercial terms, fair and reasonable and in the interest of the Group and the Shareholders as a whole.

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FUTURE PLAN OF THE COMPANY

Due to the slowdown the Chinese economy and the tumbling of the Chinese stock market during the second half of 2015, the acceptance of the general public towards products with high quality and advanced technology in higher selling price was far below expectation, and as a result the performance of the Group’s electric cycles business was adversely affected. The Group continuously carries on the electric cycles business. The Group had been aggressively restructuring its product mix with emphasis on fashionable design and advanced features on electric cycles and re-positioning the products in the electric cycles market targeting to different types of customers so as to re-develop the brand recognition and image.

LISTING RULES IMPLICATIONS

This announcement is made by the Company pursuant to Rule 14.36 of the Listing Rules, as the entering into of the Settlement Deed constitutes material variation of the terms of the Acquisition previously announced under the Acquisition Announcements.

As the relevant percentage ratios under the Listing Rules in respect of the Settlement Deed are more than 5% but are less than 25%, the Settlement Deed constitutes a discloseable transaction on the part of the Company under Chapter 14 of the Listing Rules, and is therefore subject to the reporting and announcement requirements under the Listing Rules.

By order of the Board DeTai New Energy Group Limited Wong Hin Shek Chairman and Executive Director

Hong Kong, 26 September 2016

As at the date of this announcement, the executive Directors are Mr. Wong Hin Shek and Mr. Chi Chi Hung, Kenneth; the non-executive Director is Mr. Chui Kwong Kau; and the independent non-executive Directors are Mr. Chiu Wai On, Mr. Man Kwok Leung and Dr. Wong Yun Kuen.

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