Kingwell Group Limited — M&A Activity 2016

Jul 31, 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.

==> picture [259 x 37] intentionally omitted <==

(Incorporated in Bermuda with limited liability) (Stock Code: 559)

DISCLOSEABLE TRANSACTION IN RELATION TO THE ACQUISITION OF THE ENTIRE SHARE CAPITAL OF EMISSION PARTICLE SOLUTION SWEDEN AB

References are made to the announcements of the Company dated 12 June 2016 and 30 June 2016 in relation to the MOU and the Possible Acquisition.

THE ACQUISITION

The Board announces that on 29 July 2016 (after trading hours of the Stock Exchange), the Purchaser and the Vendors entered into the Sale and Purchase Agreement, pursuant to which the Purchaser (or its nominee) has conditionally agreed to acquire and the Vendors have conditionally agreed to sell the Sale Shares at the Consideration of SEK239,000,000 (equivalent to approximately HK$220,573,000).

The Target Company is principally engaged in the development, manufacturing and distribution of the Product. The Product is a vegetable additive that can separate the molecular chains which exist in both fossil and bio fuels and facilitate the oxidation of the fuels during the combustion process. It also serves as a detergent which cleans the combustion chambers, intakes channels, spreaders and injectors from soot, bacteria and algae. The competitive advantages of the Product are reduction of particle emission such as nitric oxide (NO) and nitrogen dioxide (NO2) and carbon monoxide (CO), improvement to the fuel consumption and maintenance of engines. As particle emission from combustion process is one of the contributory factors to global warming, the Product has the effect of reducing global warming by reducing the emission of particle into the atmosphere.

Upon Completion, members of the Target Group will become subsidiaries of the Company and their results, assets and liabilities will be consolidated into the consolidated financial statements of the Company.

– 1 –

IMPLICATIONS UNDER THE LISTING RULES

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

WARNING

As the Completion is subject to the satisfaction and/or waiver (where applicable) of the conditions precedent set out in the Sale and Purchase Agreement, the Acquisition may or may not proceed to Completion. Shareholders and potential investors of the Company should exercise caution when dealing in the shares or any securities of the Company.

References are made to the announcements of the Company dated 12 June 2016 and 30 June 2016 in relation to the MOU and the Possible Acquisition.

The Board announces that on 29 July 2016 (after trading hours of the Stock Exchange), the Purchaser and the Vendors entered into the Sale and Purchase Agreement, pursuant to which the Purchaser (or its nominee) has conditionally agreed to acquire, and the Vendors have conditionally agreed to sell the Sale Shares for the Consideration of SEK239,000,000 (equivalent to approximately HK$220,573,000).

THE ACQUISITION

The Sale and Purchase Agreement

Date: 29 July 2016 (after trading hours of the Stock Exchange)

• Parties: (1) Perfect Essential Holdings Limited, a wholly-owned subsidiary of the Company, as the Purchaser; and

• (2) Quondino, Mr. Leslie, Juralen, Lestan, Xerigue, Perfero AB, Per Pedes AB and Rem Tene AB, collectively as the Vendors.

As at the date of this announcement, the Target Company is owned as to approximately 21.96% by Quondino, approximately 21.96% by Mr. Leslie, approximately 20.93% by Juralen, approximately 6.15% by Lestan, approximately 6.15% by Xerigue, approximately 4.03% by Perfero AB, approximately 4.03% by Per Pedes AB and approximately 14.79% by Rem Tene AB.

To the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, the Vendors and their respective ultimate beneficial owners are Independent Third Parties.

– 2 –

Assets to be acquired

Pursuant to the Sale and Purchase Agreement, the Purchaser (or its nominee) has conditionally agreed to acquire and the Vendors have conditionally agreed to sell the Sale Shares. The Sale Shares, representing the entire issued share capital of the Target Company, will be sold free from all encumbrances together with all rights to any dividend or other distribution declared, made or paid after the date of the Sale and Purchase Agreement.

The Purchaser (or its nominee) shall not be obliged to acquire any of the Sale Shares unless the acquisition of all the Sale Shares is completed simultaneously.

Consideration

The Purchaser shall procure the Company to pay to the Vendors the Consideration of SEK239,000,000 (equivalent to approximately HK$220,573,000) in cash at Completion.

The Consideration was arrived at after arm’s length negotiations between the Vendors and the Purchaser after taking into account (i) the Valuation Report prepared by Grant Sherman, which indicated that the fair value of the entire issued share capital of the Target Company as at 30 April 2016 was approximately SEK286,600,000 (equivalent to approximately HK$264,503,000); and (ii) the business development and future prospects of the Target Company in the medium to long term.

Establishment of a steering committee

The Vendors shall procure the Target Company to convene and hold a board meeting to approve the establishment of a steering committee of the Target Company with effect from the date of the Sale and Purchase Agreement comprising a chairman with final and decisive power and three committee members as appointed by the Purchaser from time to time.

Conditions precedent

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

• (i) all necessary consents and approvals required to be obtained on the part of the Vendors in respect of the sale and purchase of the Sale Shares having been obtained;

• (ii) all necessary consents and approvals required to be obtained on the part of the Purchaser and the Company in respect of the sale and purchase of the Sale Shares having been obtained;

• (iii) the Purchaser being satisfied at its sole discretion with the results of the due diligence review to be conducted on the assets, liabilities, operations and affairs of the Target Company;

• (iv) no events have occurred that would result in any breach of any of the warranties or other obligations of the Vendors pursuant to the Sale and Purchase Agreement;

– 3 –

• (v) if required by the Purchaser, Mr. Leslie having executed a deed of modification to modify the terms of the IP Transfer Confirmation Agreement, the form of which shall be subject to further negotiation by the parties and in form and substance satisfactory to the Purchaser;

• (vi) if required by the Purchaser, Environmental Lubrication having entered into or Mr. Leslie having procured Environmental Lubrication to enter into a supplemental agreement to modify the terms of the Supply Agreement, the form of which shall be subject to further negotiation by the parties and in form and substance satisfactory to the Purchaser;

• (vii) the Target Company and its subsidiaries having provided reasonable evidence that not less than SEK60,000,000 revenue would be recognised and not less than SEK30,000,000 net profit after taxation would be recorded during the period commencing from the Completion Date to 31 December 2017 by way of the agreements and/or orders, and in such manners pursuant to the Sale and Purchase Agreement;

• (viii) the Vendors (save for Mr. Leslie) having executed the Non-Competition Deeds;

• (ix) Mr. Leslie and Mr. David Leslie, son of Mr. Leslie, having executed the Strong NonCompetition Deeds;

• (x) the key management of the Target Company to be decided by the Purchaser upon Completion having executed the management agreements with effect from Completion, the content of which shall be subject to further negotiation; and

• (xi) fund raising exercise or corporate financing with proceeds (or amount) of not less than HK$221,000,000 to be conducted by the Company having becoming unconditional.

The Vendors shall use their best endeavours to assist the Purchaser in connection with the due diligence review to be conducted according to the terms set out in the Sale and Purchase Agreement. The Purchaser may, in its absolute discretion, waive either in whole or in part at any time by notice in writing to the Vendors any of the conditions precedent (i), (iii), (iv) and (vii). All other conditions precedent cannot be waived by the Purchaser or the Vendors.

Pursuant to the Sale and Purchase Agreement, each party shall use all reasonable endeavors to procure the fulfillment of such of the conditions precedent that is under the reasonable control of such party.

In the event that (i) the conditions precedent set out above have not been satisfied, or waived by the Purchaser, at the latest three (3) months after the date of the Sale and Purchase Agreement, or (ii) the Stock Exchange has deemed the transaction contemplated under the Sale and Purchase Agreement as a reserve takeover under the Listing Rules, the Purchaser or the Vendors (as the case may be) may terminate the Sale and Purchase Agreement with immediate effect by written notice to the Vendors or the Purchaser (as the case may be).

– 4 –

Completion

Completion shall take place on the 3rd Business Day following the date on which the last condition set out above has been satisfied or waived (the ‘‘Initial Completion Date’’). Commencing on the Initial Completion Date, actions as set out in the Sale and Purchase Agreement shall take place aiming to allow the Purchaser to verify the List of Ingredients, the List of Suppliers and the Technical Production Specification and to transfer the knowhow necessary to produce the Product to the Purchaser (the ‘‘Verification Process’’). Provided conclusion of the Verification Process, the parties thereto shall commence the Completion immediately after conclusion of the Verification Process (the ‘‘Completion Date’’).

In the event that the results of the Verification Process are negative, the Purchaser may terminate the Sale and Purchase Agreement with immediate effect by written notice to the Vendors.

Upon Completion, members of the Target Group will become subsidiaries of the Company and their results, assets and liabilities will be consolidated into the consolidated financial statements of the Company.

Undertaking

Pursuant to the Sale and Purchase Agreement, upon Completion, Mr. Leslie and Mr. David Leslie shall deliver and procure Environmental Lubrication to deliver to the Purchaser the Undertaking, pursuant to which Environmental Lubrication undertakes (i) to transfer all the assets, businesses and operations of Environmental Lubrication to the Target Company (or its nominee) pursuant to the Assets Transfer Agreement at no further consideration; and (ii) all the assets, businesses and operations of Environmental Lubrication to be transferred to the Target Company (or its nominee) shall carry a book value of zero amount, in good working order and have been regularly and properly maintained, and are not expected to require replacement, repair or additions within the 18 months following the Completion at a cost of more than SEK200,000.

INFORMATION ON THE TARGET COMPANY, MR. LESLIE AND MR. DAVID LESLIE

The Target Company is a company domiciled in Sweden with limited liability and as at the date of this announcement is principally engaged in the development, manufacturing and distribution of the Product i.e. a fuel additive product namely EuroAd which can reduce fuel consumption and environmental impact.

The Product is a vegetable additive that can separate the molecular chains exist in both fossil and bio fuels and facilitate the oxidation of the fuels during the combustion process. It also serves as a detergent which cleans the combustion chambers, intakes channels, spreaders and injectors from soot, bacteria and algae. The competitive advantages of the Product are reduction of particle emission such as those nitric oxide (NO) and nitrogen dioxide (NO2) and carbon monoxide (CO), improvement to fuel consumption and maintenance of engines. As particle emission from combustion process is one of the contributory factors to global warming, the Product has the effect of reducing global warming by reducing the emission of particle into the atmosphere.

– 5 –

At the date of this announcement, the Product is manufactured and supplied by Environmental Lubrication, a company directly and wholly owned by Mr. Leslie, to the Target Company under the Supply Agreement and the Target Company in turn sells and distributes the Product to customers over the world.

As Mr. Leslie and his son, Mr. David Leslie, are in possession with all the confidential information and intellectual property in the Product, upon Completion, Mr. Leslie and Mr. David Leslie shall execute the Strong Non-Competition Deed in favour of the Group.

Financial information of the Target Company

Set out below are the key financial information extracted from the annual reports of the Target Company for the financial years ended 30 April 2015 and 30 April 2016, which were prepared in accordance with the Swedish Annual Accounts Act and the Swedish Accounting Standards Board BFNAR 2012: 1 Annual Report and Consolidated (K3):

	For the year	For the year
	ended	ended
	30 April	30 April
	2016	2015
	SEK’000	SEK’000
	(audited)	(audited)
Revenue	7,742	6,661
Net (loss) profit before taxation	744	747
Net (loss) profit after taxation	744	747

The audited total asset value and net asset value of the Target Company as at 30 April 2016 were approximately SEK10,700,000 and SEK4,978,000 respectively.

REASONS FOR AND BENEFITS OF THE ACQUISITION

The Group is 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.

The electric cycles business of the Group has been the first step to step into new energy industry that it uses new, sustainable and non-conventional energy source to replace the use of conventional fuel in transportation.

The Company has been actively seeking for suitable business opportunities from time to time in order to expand its new energy business to combat against climate changes and global warming. Saving energy and minimising environmental impact have become the recent trend all over the world and have been our aims. The Product has been tested to reduce fuel consumption and global warming effectively. The Group seizes this opportunity to further expand its new energy business portfolio into other segment of new energy industry worldwide. The Group is expected to be benefited from the synergy arising from the Acquisition. In addition, in consideration of the Valuation and the future prospects of the Target Company, the Board considers that the terms of the Sale and Purchase Agreement are fair and reasonable and in the interest of the Company and its Shareholders as a whole.

– 6 –

IMPLICATIONS UNDER THE LISTING RULES

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

DISCLOSURE IN RELATION TO PROFIT FORECAST OF THE TARGET COMPANY

As Grant Sherman has adopted the discounted cash flows method under the income approach, the Valuation is regarded as a profit forecast under Rule 14.61 of the Listing Rules, and as such, the requirements under Rules 14.60A and 14.62 of the Listing Rules are applicable.

According to the Valuation Report, the fair value of the entire issued share capital of the Target Company as at 30 April 2016 was approximately SEK286,600,000 (equivalent to approximately HK$264,503,000).

Pursuant to Rule 14.62(1) of the Listing Rules, the principal assumptions (including commercial assumptions) upon which the Valuation is based are set out below:

Given the Product is the sole product and a key value driver of the Target Company’s business, strict confidentiality of the unpatented formula and know-how necessary to produce the Product is crucial to the competitiveness of the Target Company. According to the representation by the management of the Target Company, the formula, including the ingredients and their respective ratios, is currently possessed only with Mr. Leslie and Mr. David Leslie, son of Mr. Leslie. As such, it is an extraordinary assumption in the Valuation that the intellectual properties of the Target Company, including brand name and access to the formula and production know-how of the Product, will not be infringed upon in a manner which would materially affect the economic benefits attributable to the Target Company.

In addition, Grant Sherman has not been provided with the ingredients of the Product for valuation purposes because it is a trade secret. Instead, the management of the Target Company has represented to Grant Sherman that there is abundant supply of the Product’s ingredients and increase in production of the Product in the projected period will not push up their prices. This constitutes another extraordinary assumption needed to support the significant growth in the Target Company’s projected cash flows.

– 7 –

Other than the above extraordinary assumptions, Grant Sherman has also adopted the following major assumptions in the Valuation:

• There will be no major changes in the existing political, legal, and economic conditions in countries in which the Target Company operates that would materially affect the economic benefits attributable to the Target Company;

• There will be no major changes in the current taxation law in countries in which the Target Company operates, that the rates of tax payable will remain unchanged and that all applicable laws and regulations will be complied with;

• Effective tax rates, exchange rates and interest rates will not differ materially from those presently prevailing;

• Industry trends and market conditions for related industries will not deviate significantly from economic forecasts;

• The Target Company can keep abreast of the latest development of the industry such that its competitiveness and profitability can be sustained;

• The Target Company will successfully maintain its competitiveness and market share through optimizing the utilization of its assets and expanding its customer base;

• The Target Company will retain and have competent management, key personnel, and technical staff to support its ongoing operation;

• The Target Company will utilize and maintain its current operational, administrative and technical facilities to expand and increase its profitability;

• The availability of finance will not be a constraint on the forecast growth of the Target Company’s operations;

• The Target Company will transfer the title of its products to its customers in Sweden such that the Target Company will only be subject to Swedish tax;

• The IP Transfer Confirmation Agreement entered into between Mr. Leslie and the Target Company dated 10 March 2016 will be duly executed;

• The Product is not regarded as a restricted commodity;

• The Target Company will equip itself with sufficient capacity to process the forecasted sales volume;

• The Target Company has obtained and will obtain all necessary permits, license, certificates and approvals to carry out its business;

• The financial projection provided by the management of the Target Company has been prepared on a reasonable basis, reflecting estimates which have been arrived at after due and careful consideration;

– 8 –

• The Target Company will successfully implement its business and marketing plan as stipulated in the financial projection for the Valuation;

• The terminal growth rate is assumed to be 3%, which reflects a long-term worldwide inflation; and

• The USD:SEK exchange rate is assumed to be 8.0324 as at 30 April 2016.

Prism CPA Limited, the reporting accountants of the Company, has reported to the Board in respect of the arithmetical calculations and the compilations, in accordance with the bases and assumptions described above and adopted by the Board, of the discounted cash flows in connection with the Valuation prepared by Grant Sherman as set out in the Valuation Report.

The Board confirm that the Valuation prepared by Grant Sherman, which constitutes a profit forecast under Rule 14.61 of the Listing Rules, has been made after due and careful enquires.

Pursuant to Rule 14.62 of the Listing Rules, the Company has submitted the letters from Prism CPA Limited and the Board relating to the Valuation to the Stock Exchange, the context of which are included in Appendices I and II to this announcement, respectively.

EXPERTS AND CONSENTS

The qualifications of the experts who have given their opinion and advice in this announcement are as follows:

Name		Qualification
Grant	Sherman Appraisal Limited	Independent Professional Valuer
Prism	CPA Limited	Certified Public Accountants

To the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, each of Grant Sherman and Prism CPA Limited is an Independent Third Party.

As at the date of this announcement, none of Grant Sherman and Prism CPA Limited has any shareholding in any member of the Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

Each of Grant Sherman and Prism CPA Limited has given and has not withdrawn its consent to the publication of this announcement with the inclusion of its opinion and advice and all references to its name in the form and context in which they are included.

WARNING

As the Completion is subject to the satisfaction and/or waiver (where applicable) of the conditions precedent set out in the Sale and Purchase Agreement, the Acquisition may or may not proceed to Completion. Shareholders and potential investors of the Company should exercise caution when dealing in the shares or any securities of the Company.

– 9 –

DEFINITIONS

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

• ‘‘Acquisition’’

• the acquisition of the entire issued share capital of the Target Company under the Sale and Purchase Agreement

• ‘‘Assets Transfer Agreement’’ an assets transfer agreement to be executed by Environmental Lubrication and the Target Company (or the Canadian Company) whereby Environmental Lubrication shall transfer all its assets, business, machinery, equipment and operations to the Target Company (or the Canadian Company), the content of which shall be subject to further negotiation

• ‘‘Board’’ the board of Directors

• ‘‘Business Day’’ a day (excluding a Saturday, Sunday and public holiday) on which licensed banks in Hong Kong are generally open for business

• ‘‘Canadian Company’’ a limited liability company to be incorporated in Canada by the Target Company, the Purchaser or its subsidiaries, which shall either be the holding company or a subsidiary of the Target Company

• ‘‘Company’’ DeTai New Energy Group Limited, a company incorporated in Bermuda with limited liability, the issued shares of which are listed on the Main Board of the Stock Exchange (Stock Code: 559)

• ‘‘Completion’’ completion of the Acquisition pursuant to the Sale and Purchase Agreement

• ‘‘Completion Date’’ the date on which the Acquisition completed

• ‘‘Consideration’’ the consideration payable in respect of the Acquisition pursuant to the Sale and Purchase Agreement

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

• ‘‘Environmental Lubrication’’ Environmental Lubrication Solutions Inc., a company domiciled in Canada with limited liability and is wholly owned by Mr. Leslie

• ‘‘Grant Sherman’’ Grant Sherman Appraisal Limited, an independent professional valuer appointed for the Acquisition

• ‘‘Group’’ the Company and its subsidiaries

– 10 –

• ‘‘HK$’’ Hong Kong dollar, the lawful currency of Hong Kong ‘‘Hong Kong’’ the Hong Kong Special Administrative Region of the People’s Republic of China

• ‘‘Independent Third any person(s) or company(ies) and their respective ultimate Party(ies)’’ beneficial owner(s) are third parties independent of the Group and its connected persons in accordance with the Listing Rules

• ‘‘IP Transfer Confirmation the intellectual property transfer confirmation agreement Agreement’’ entered into between Mr. Leslie and the Target Company dated 10 March 2016 whereby Mr. Leslie confirmed the transfer all his rights, title and interests in the confidential information and intellectual property in the Product to the Target Company since 28 October 2011

• ‘‘Juralen’’ Juralen Holdings Limited, a company domiciled in Cyprus with limited liability, which is one of the Vendors

• ‘‘Lestan’’ Lestan Holdings Limited, a company domiciled in Cyprus with limited liability, which is one of the Vendors

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

• ‘‘List of Ingredients’’ a full list of ingredients required to mix the Product including the required proportions

• ‘‘List of Suppliers’’ a detailed summary, including supporting documentation, of all the ingredients purchased for the manufacture of the Product during the past twenty-four (24) months immediately preceding the date of the Sale and Purchase Agreement

• ‘‘MOU’’ a memorandum of understanding dated 10 June 2016 entered into between the Purchaser and the Vendors in relation to the Possible Acquisition

• ‘‘Mr. Leslie’’ Robert Dwayne Leslie, who is one of the Vendors

• ‘‘Non-Competition Deed’’ a deed of non-competition to be executed by each of the Vendors (save for Mr. Leslie) in favour of the Group

• ‘‘Perfero AB’’

• a company domiciled in Sweden with limited liability, which is one of the Vendors

• ‘‘Per Pedes AB’’ a company domiciled in Sweden with limited liability, which is one of the Vendors

– 11 –

‘‘Possible Acquisition’’ the possible acquisition of the entire issued share capital of the Target Company under the MOU as disclosed in the announcements of the Company dated 12 June 2016 and 30 June 2016

• ‘‘Product’’ a fuel additive product namely EuroAd which can reduce fuel consumption and environmental impact

• ‘‘Purchaser’’ Perfect Essential Holdings Limited, a wholly-owned subsidiary of the Company

• ‘‘Quondino’’ Quondino Holdings Limited, a company domiciled in Cyprus with limited liability, which is one of the Vendors

• ‘‘Rem Tene AB’’ a company domiciled in Sweden with limited liability, which is one of the Vendors

• ‘‘Sale and Purchase the agreement dated 29 July 2016 entered into between the Agreement’’ Purchaser and the Vendors in relation to the Acquisition

• ‘‘Sale Shares’’ 1,366 shares in the Target Company, representing the entire issued share capital of the Target Company

• ‘‘SEK’’ Swedish krona, the lawful currency of Sweden

• ‘‘Share(s)’’ ordinary share(s) of HK$0.05 each of the Company

• ‘‘Shareholders’’ shareholders of the Company

• ‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited

• ‘‘Strong Non-Competition a deed of non-competition to be executed by Mr. Leslie and Deed’’ Mr. David Leslie, son of Mr. Leslie, in favour of the Group

• ‘‘Supply Agreement’’ the supply agreement entered into between Environmental Lubrication and the Target Company dated 10 March 2016 whereby Environmental Lubrication agrees to supply the Product to the Target Company

• ‘‘Target Company’’ Emission Particle Solution Sweden AB, a Swedish limited liability company with a share capital of SEK136,600 divided into 1,366 shares

• ‘‘Target Group’’ includes the Purchaser and all companies whose shares are directly or indirectly owned by the Purchaser and any companies engaged in the manufacturing and distribution of the Product

– 12 –

• ‘‘Technical Production A technical specification describing how the Product is Specification’’ manufactured, including any technical specifications regarding equipment necessary to manufacture the Product

• ‘‘Undertaking’’ an undertaking to be executed by Environmental Lubrication and Mr. Leslie set out under the section headed ‘‘Undertaking’’ of this announcement

• ‘‘Valuation’’ valuation of the entire issued share capital of the Target Company as at 30 April 2016 as set out in the Valuation Report

• ‘‘Valuation Report’’ the valuation report prepared by Grant Sherman dated 29 July 2016

• ‘‘Vendor(s)’’ Quondino, Mr. Leslie, Juralen, Lestan, Xerigue, Rem Tene AB, Perfero AB and Per Pedes AB

• ‘‘Verification Process’’ has the meanings as defined under the section headed ‘‘Completion’’ of this announcement

• ‘‘Xerigue’’ Xerigue Holdings Limited, a company domiciled in Cyprus with limited liability, which is one of the Vendors

‘‘%’’ per cent

Pursuant to the Sale and Purchase Agreement, the currency exchange rate of SEK and HK$ shall be determined according to the average closing currency rate for the period from 1 July 2015 to 30 June 2016 as fixed by Bloomberg, which is SEK1 = HK$0.9229.

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

Hong Kong, 29 July 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.

– 13 –

APPENDIX I — LETTER FROM PRISM CPA LIMITED

The following is the text of a report received from Prism CPA Limited prepared for the purpose of incorporation in the announcement.

==> picture [161 x 107] intentionally omitted <==

29 July 2016

The Board of Directors DeTai New Energy Group Limited 12/F., Henley Building, 5 Queen’s Road Central, Hong Kong

Dear Sirs,

We have examined the calculations of the discounted future estimated cash flows (the ‘‘Profit Forecast’’) on which the valuation prepared by Grant Sherman Appraisal Limited dated on 29 July 2016 in respect of fair value of 100% equity interest in Emission Particle Solution Sweden AB as at 30 April 2016. The Profit Forecast is regarded by The Stock Exchange of Hong Kong Limited as a profit forecast under paragraph 14.61 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

Directors’ responsibilities

The directors of the Company are responsible for the preparation of the discounted future estimated cash flows in accordance with the bases and assumptions determined by the directors. This responsibility includes carrying out appropriate procedures relevant to the preparation of the discounted future estimated cash flows for the valuation and applying an appropriate basis of preparation; and making estimates that are reasonable in the circumstances.

Our independence and quality control

We have complied with the independence and other ethical requirement of the Code of Ethics for Professional Accountants issued by the Hong Kong Institute of Certified Public Accountants (the ‘‘HKICPA’’), which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behavior.

The firm applies Hong Kong Standard on Quality Control 1 ‘‘Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements’’ and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

– 14 –

Reporting accountant’s responsibilities

Our responsibility is to express an opinion on the accounting policies and calculations of the Profit Forecast based on our procedures.

We conducted our engagement in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 500 ‘‘Reporting on Profit Forecasts, Statements of Sufficiency of Working Capital and Statements of Indebtedness’’ and with reference to Hong Kong Standard on Assurance Engagements 3000 (Revised) ‘‘Assurance Engagements Other Than Audits or Reviews of Historical Financial Information’’ issued by the HKICPA. Those standards require that we plan and perform our work to obtain reasonable assurance as to whether, so far as the accounting policies and calculations are concerned, the Company’s directors have properly compiled the Profit Forecast in accordance with the bases and assumptions made by the Company’s directors and as to whether the Profit Forecast is presented on a basis consistent in all material respects with the accounting policies normally adopted by the Group. Our work is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing issued by the HKICPA. Accordingly, we do not express an audit opinion.

Opinion

In our opinion, so far as the accounting policies and calculations are concerned, the Profit Forecast has been properly compiled in accordance with the bases and assumptions adopted by the directors of the Company as set out in the announcement and is presented on a basis consistent in all material respects with the accounting policies normally adopted by the Group.

Yours faithfully,

Prism CPA Limited

Certified Public Accountants

Lee Kwok Lun

Practising Certificate Number: P06294 Hong Kong

Room 1501, 15/F., Perfect Commercial Building, 20 Austin Avenue, Tsimshatsui, Hong Kong

– 15 –

APPENDIX II — LETTER FROM THE BOARD RELATING TO THE VALUATION

The following is the text of a letter from the Board prepared for the purpose of incorporation in this announcement.

29 July 2016

The Listing Division

The Stock Exchange of Hong Kong Limited 11th Floor, One International Finance Centre,

1 Harbour View Street, Central, Hong Kong

Dear Sirs,

Discloseable transaction in relation to the acquisition of the entire share capital of Emission Particle Solution Sweden AB (the ‘‘Target Company’’)

We refer to the valuation report dated 29 July 2016 prepared by Grant Sherman Appraisal Limited (‘‘Grant Sherman’’) in relation to the valuation of the entire share capital of the Target Company as at 30 April 2016 (the ‘‘Valuation’’). The Valuation was prepared based on income approach method with free cash flow modeling, which is based on discounted cash flow and constitutes a profit forecast under Rule 14.61 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

We have discussed with Grant Sherman about different aspects including the bases and assumptions upon which the Valuation has been prepared, and reviewed the Valuation for which Grant Sherman is responsible. We have also considered the report from our reporting accountant, Prism CPA Limited, regarding whether the Valuation was compiled properly so far as the calculations are concerned.

On the basis of the foregoing, we are of the opinion that the Valuation prepared by Grant Sherman has been made after due and careful enquiry.

Yours faithfully, For and on behalf of the board of directors of DeTai New Energy Group Limited Wong Hin Shek Chairman and Executive Director

– 16 –