OSL Group Limited — M&A Activity 2016

Sep 14, 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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BRANDING CHINA GROUP LIMITED 品牌中國集團有限公司

(incorporated in the Cayman Islands with limited liability)

(Stock code: 0863)

DISCLOSEABLE TRANSACTION ACQUISITION OF 90% EQUITY INTEREST IN SHANGHAI JINGWEI INDUSTRY & TRADE DEVELOPMENT CO., LTD.*

EQUITY TRANSFER AGREEMENT

On 13 September 2016 （after trading hours）, Ju Liu Software, an indirect wholly-owned subsidiary of the Company, and Ningbo Hongyuan, Shanghai Jingtai, Shanghai Chenxing and Shanghai Yuxin entered into the Equity Transfer Agreement, pursuant to which Ju Liu Software agreed to purchase and Ningbo Hongyuan, Shanghai Jingtai, Shanghai Chenxing and Shanghai Yuxin agreed to sell 90% equity interest in Shanghai Jingwei, at the Consideration of RMB40.50 million. Upon completion of the Equity Transfer Agreement, Shanghai Jingwei will be held as to 90%, 5% and 5% by Ju Liu Software, Shanghai Jingtai and Shanghai Chenxing respectively, and will become an indirect non-wholly-owned subsidiary of the Company.

REASONS FOR AND BENEFITS OF ENTERING INTO THE EQUITY TRANSFER AGREEMENT

The acquisition of 90% equity interest Shanghai Jingwei is in line with the Group’s new business strategy of developing park area management business (for details of the business strategy, please refer to the announcement of the Company dated 16 November 2015), and contributes to the Group’s long-term development.

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LISTING RULES IMPLICATIONS

As the applicable percentage ratios for acquisition of 90% equity interest in Shanghai Jingwei under the Equity Transfer Agreement exceed 5% but less than 25%, the acquisition of 90% equity interest in Shanghai Jingwei constitutes a discloseable transaction of the Company, and is subject to the reporting and announcement requirements under Chapter 14 of the Listing Rules.

EQUITY TRANSFER AGREEMENT

On 13 September 2016（after trading hours）, Ju Liu Software, and Ningbo Hongyuan, Shanghai Jingtai, Shanghai Chenxing and Shanghai Yuxin entered into the Equity Transfer Agreement, pursuant to which Ju Liu Software agreed to purchase and Ningbo Hongyuan, Shanghai Jingtai, Shanghai Chenxing and Shanghai Yuxin agreed to sell 90% equity interest in Shanghai Jingwei, at the Consideration of RMB40.50 million. Upon completion of the Equity Transfer Agreement, Shanghai Jingwei will be held as to 90%, 5% and 5% by Ju Lin Software, Shanghai Jingtai and Shanghai Chenxing respectively, and will become an indirect non-wholly-owned subsidiary of the Company. The main terms of the Equity Transfer Agreement are as follows:

Date: 13 September 2016（after trading hours）

Transferors:

(1) Ningbo Hongyuan

(2) Shanghai Jingtai

(3) Shanghai Chenxing

(4) Shanghai Yuxin

To the best of the knowledge and belief of the Board, and after having made all reasonable enquiries, each of Ningbo Hongyuan, Shanghai Jingtai, Shanghai Chenxing and Shanghai Yuxin and their ultimate beneficial owners are third parties independent of the Company and the connected persons of the Company.

Transferee:

Ju Liu Software

Target Company: Shanghai Jingwei

Assets to be acquired:

A total of 90% equity interest in Shanghai Jingwei, of which 45%, 20%, 13% and 12% were held by Ningbo Hongyuan, Shanghai Jingtai, Shanghai Chenxing and Shanghai Yuxin respectively.

Consideration:

RMB40.50 million

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Payment terms:

Ju Liu Software shall pay RMB20.25 million, RMB9.00 million, RMB5.85 million and RMB5.40 million, being an aggregate of RMB40.50 million, to Ningbo Hongyuan, Shanghai Jingtai, Shanghai Chenxing and Shanghai Yuxin respectively within 20 working days from the date of the Equity Transfer Agreement.

Completion of equity transfer

The Transferors shall, within 2 working days after full payment of the Consideration by the Transferee, immediately coordinate with the Transferee to handle all necessary procedures in the administrative department for industry and commerce in the location of Ju Liu Software on the changes in business registration of the Target Company in respect of the equity transfer contemplated under the Equity Transfer Agreement (including but not limited to submission of legal documents including the shareholders’ resolutions, the amended Articles of Association and the application for changes of registration). The Transferors shall guarantee, within 15 working days after full payment of the Consideration by Ju Liu Software, the transfer of 90% equity interest in the Target Company will be completed (i.e. the Target Company having obtained the new business licence).

BASIS OF THE CONSIDERATION

Pursuant to the Equity Transfer Agreement, Ju Liu Software shall pay RMB40.50 million to the Transferors as the Consideration for the 90% equity interest in the Target Company. The Consideration was determined after arm’s length negotiation and taking into consideration of various factors, including historical financial performance of the Target Company, price-to-earning ratios of similar subjects as well as the location of the park leased by the Target Company, strength of tenants and development potential of the Target Company.

PROFIT GUARANTEE AND COMPENSATION

Pursuant to the Equity Transfer Agreement, the Transferors have guaranteed the following:

• (1) the Transferors guaranteed that the entering into and performance of the Equity Transfer Agreement shall not have any influence on the continuing performance of the Tenancy Agreement with the Landlord and the Major Lease Agreement;

• (2) the Transferors guaranteed that the counterparties to the Tenancy Agreement with the Landlord and the Major Lease Agreement shall not terminate the overall performance of the said agreements due to any reasons other than major defaults of the Target Company, major faults of the Transferee or operation and management personnel assigned by the Transferee and breach of law by the Target Company, and no government department or judicial and magistrate

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authorities will order or judge the termination of the performance of the Tenancy Agreement with the Landlord and the Major Lease Agreement during the period from 1 September 2016 to 31 December 2020;

Based on the above guarantees, the Transferors have guaranteed the following in respect of the performance of the Target Company during the period from 1 September 2016 to 31 December 2020:

• (1) during the 4 calendar months from 1 September 2016 to 31 December 2016, provided that the operating expenses (excluding depreciation and amortisation) of the Target Company do not exceed RMB700,000, the total net profit of the Target Company after deduction of nonrecurring profit or loss shall be no less than RMB3,000,000 (hereinafter referred to as the “First Profit Guarantee”); and

• (2) during the 4 calendar years from 1 January 2017 to 31 December 2020, provided that the operating expenses (excluding depreciation and amortisation) of the Target Company for each calendar year do not exceed RMB2,000,000, the total net profit of the Target Company for each calendar year after deduction of non-recurring profit or loss shall be no less than RMB9,000,000 (hereinafter referred to as the “Annual Profit Guarantee”);

The Transferors further agreed the following:

• (1) (a) during the period from September to December 2016, if (90% of the First Profit Guarantee ≤total net profit of the Target Company after deduction of non-recurring profit or loss < the First Profit Guarantee), the Transferee shall be entitled to profit distribution calculated based on (the First Profit Guarantee x 90%), and the remaining profit of the Target Company will be distributed as to 50% to each of the remaining shareholders of the Target Company, namely Shanghai Jingtai and Shanghai Chenxing;

• (b) during the period from September to December 2016, if (total net profit of the Target Company after deduction of non-recurring profit or loss < 90% of the First Profit Guarantee), the Transferee shall be entitled to the total net profit of the Target Company after deduction of non-recurring profit or loss, and the Transferors shall pay the compensation amount to the Transferee in cash before 31 March 2017 calculated in accordance with the following manner:

compensation amount = (the First Profit Guarantee x 90%) - the total net profit of the Target Company after deduction of non-recurring profit or loss;

• (2) (a) in any year during the period from 2017 to 2020, if (90% of the Annual Profit Guarantee ≤ total net profit of the Target Company after deduction of non-recurring profit or loss < the Annual Profit Guarantee), the Transferee shall be entitled to profit distribution based on (the Annual Profit Guarantee x 90%) for such year, and the remaining profit of the Target Company will be distributed as to 50% to each of the remaining shareholders of the Target Company, namely Shanghai Jingtai and Shanghai Chenxing;

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• (b) in any year during the period from 2017 to 2020, if (total net profit of the Target Company after deduction of non-recurring profit or loss < 90% of the Annual Profit Guarantee), the Transferee shall be entitled to the total net profit of the Target Company after deduction of non-recurring profit or loss for such year, and the Transferors shall pay the compensation amount to the Transferee in cash prior to 31 March of the following year calculated in accordance with the following manner:

compensation amount = (the Annual Profit Guarantee x 90%) – the total net profit of the Target Company after deduction of non-recurring profit or loss;

• (3) in case of the delayed payment of the compensation amount for any term, the Transferors shall pay penalty fee for delayed payment to the Transferee in the amount of 0.05% of the outstanding compensation amount for each day delayed, till the settlement of the compensation amount in full;

• (4) the Transferee agreed that, the total compensation amount (excluding the penalty fee for delayed payment) shall not exceed RMB9,000,000, i.e. if the total compensation amount accumulatively paid to the Transferee by the Transferors (excluding the penalty fee for delayed payment) has reached RMB9,000,000, the Transferors will not be required to pay any other compensation amount to the Transferee as agreed above;

• (5) the Transferors warranted that the Transferors as a whole shall assume joint and several liabilities to the Transferee for the payment of the compensation amount and penalty fee for delayed payment as detailed above; and

• (6) the Transferors confirmed that the payment of the compensation amount and the penalty fee for delayed payment shall be assumed as to 45%, 25%, 18% and 12% by Ningbo Hongyuan, Shanghai Jingtai, Shanghai Chenxing and Shanghai Yuxin respectively.

The above profit guarantee made by the Transferors does not represent the anticipated level of future profit of the Target Company and does not constitute a profit forecast under Rule 14.61 of the Listing Rules.

INFORMATION ON SHANGHAI JINGWEI

Shanghai Jingwei is a subsisting company with limited liability established in the PRC on 24 December 2014, and is principally engaged in park area operation and property management, etc. It currently manages and operates park area office properties in the core commercial centre of Shanghai, and has owned stable and strong client resources.

As at the date of the Equity Transfer Agreement, Shanghai Jingwei is owned as to 45%, 25%, 18% and 12% by Ningbo Hongyuan, Shanghai Jingtai, Shanghai Chenxing and Shanghai Yuxin, respectively.

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The table below sets out the unaudited financial information of Shanghai Jingwei for the year ended 31 December 2014, the year ended 31 December 2015 and the eight months ended 31 August 2016:

				For the eight
	For the year		For the year	months
		ended	ended	ended
	**31 **	December	31 December	31 August
		2014	2015	2016
	(unaudited)		(unaudited)	(unaudited)
		RMB	RMB	RMB
Net profit/(loss) before deducting tax and
extraordinary item		–	(26,279,562)	2,474,349
Net profit/(loss) after deducting tax and
extraordinary item		–	(19,875,312)	2,026,356

The unaudited total assets of Shanghai Jingwei was RMB16,720,777 and RMB29,434,976 as at 31 December 2015 and 31 August 2016, respectively. The unaudited net liability and net asset value of Shanghai Jingwei was RMB17,887,312 and RMB3,151,044 as at 31 December 2015 and 31 August 2016, respectively.

In December 2014, the Target Company established and started to lease Jingwei park. The main operating costs of Jingwei park mainly include the rent and investment attraction cost. Such costs shall be settled by the Target Company in time. After more than one year preliminary preparation, the Target Company secured stable clients in 2016, and entered into with them the lease agreements for term of 3 to 10 years.

INFORMATION ON TRANSFERORS

Ningbo Hongyuan is a company established in the PRC with limited liability, and is principally engaged in industrial investment and related consultancy services.

Shanghai Jingtai is a company established in the PRC with limited liability, and is principally engaged in property management, etc.

Shanghai Chenxing is a limited partnership enterprise established in the PRC, and is principally engaged in investment management and investment consultation.

Shanghai Yuxin is a company established in the PRC with limited liability, and is principally engaged in real estate development and corporate management consultancy.

To the best of the knowledge and belief of the Board, and after having made all reasonable enquiries, as at the date of this announcement, each of the Transferors and its ultimate beneficial owners are Independent Third Parties of the Company and its connected persons.

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INFORMATION ON TRANSFEREE

Ju Liu Software is a company established in the PRC with limited liability, and an indirect whollyowned subsidiary of the Company. Ju Liu Software is principally engaged in industrial investment, investment consultancy, software technology and information technology.

INFORMATION OF THE COMPANY

The Company is mainly engaged in provision of corporate services including park services, valueadded services, investment services and brand communication services in the PRC.

REASONS FOR AND BENEFITS OF ENTERING INTO THE EQUITY TRANSFER AGREEMENT

Shanghai Jingwei is principally engaged in park area operation and property management, and currently manages and operates park area office properties in the core commercial centre of Shanghai, and enjoys a stable and strong client resources. It has also signed the lease agreement with the lessor of the park area office for ten years to control the lease cost. The acquisition of Shanghai Jingwei is in line with the Group’s new business strategy of developing park area management business (for details of the business strategy, please refer to the announcement of the Company dated 16 November 2015), and contributes to the Group’s long-term development. The profit guarantee and compensation arrangement of the Transferors also enhance the security of the transaction.

In the opinion of the Directors, the Equity Transfer Agreement is entered into on normal commercial terms, and the terms of the Equity Transfer Agreement are fair and reasonable and are in the interests of the Company and the Shareholders as a whole.

LISTING RULES IMPLICATIONS

As the applicable percentage ratios for acquisition of 90% equity interest in Shanghai Jingwei under the Equity Transfer Agreement exceed 5% but less than 25%, the acquisition of 90% equity interest in Shanghai Jingwei constitutes a discloseable transaction of the Company, and is subject to the reporting and announcement requirements under Chapter 14 of the Listing Rules.

DEFINITIONS

“Board” the board of Directors;

“Company” Branding China Group Limited, a company incorporated in the Cayman Islands with limited liability, the issued Shares of which are listed on the Main Board of Stock Exchange (stock code: 863);

“connected person(s)” has the meaning ascribed to it under the Listing Rules;

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“Consideration”	RMB40.50 million, being the consideration payable by the
	Transferee to the Transferors for the acquisition of 90% equity
	interest in the Target Company;
“Director(s)”	director(s) of the Company;
“Equity Transfer Agreement”	the agreement entered into among Ju Liu Software and the
	Transferors on 13 September 2016, pursuant to which the
	Transferors agreed to transfer 90% equity interest in Shanghai
	Jingwei to Ju Liu Software;
“Independent Third Parties”	third parties independent of and not connected with the Company
	and its connected persons (having the meaning ascribed to it under
	the Listing Rules);
“Jingwei Park”	the properties located at 696 and 724, Weihai Road, Jingan District,
	Shanghai* (上海市�安區威海路696號、724號房屋);
“Ju Liu Software” or	Shanghai Ju Liu Software Co., Ltd.* (上海巨流軟件有限公司), a
“Transferee”	company established in the PRC with limited liability and an
	indirect wholly-owned subsidiary of the Company;
“Landlord”	Shanghai Jingan Land Property (Group) Co., Ltd.* (上海�安置業
	(集團)有限公司), a company established in the PRC with limited
	liability;
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange;
“Major Lease Agreement”	the lease agreement entered into between Shanghai Jingwei and a
	reputable global office lease company, pursuant to which such
	company leased part of the Jingwei Park from Shanghai Jingwei;
“Ningbo Hongyuan”	Ningbo Bonded Area Hongyuan Investment Holding Co., Ltd.* (寧
	波保稅區弘遠投資控股有限責任公司), a company established in
	the PRC with limited liability;
“PRC”	the People’s Republic of China, for the purposes of this
	announcement only, excluding Hong Kong, the Macau Special
	Administrative Region of the People’s Republic of China and
	Taiwan;
“RMB”	Renminbi, the lawful currency of the PRC;

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“Shanghai Chenxing” Shanghai Chenxing Investment Management Limited Partnership Enterprise (Limited Partnership) (上海琛興投資管理合夥企業(有 限合夥)), a limited partnership enterprise established in the PRC; “Shanghai Jingtai” Shanghai Jingtai Real Estate Development Co., Ltd. (上海憬泰置 業發展有限公司), a company established in the PRC with limited liability;

• “Shanghai Jingwei” or Shanghai Jingwei Industry & Trade Development Co., Ltd.* (上海 “Target Company” 憬威企業發展有限公司), a company established in the PRC with limited liability;

• “Shanghai Yuxin” Shanghai Yuxin Industrial Development Co., Ltd.* (上海�新實業 發展有限公司), a company established in the PRC with limited liability;

• “Shareholders” holder(s) of ordinary share(s) in the share capital of the Company; “Stock Exchange” The Stock Exchange of Hong Kong Limited;

• “Tenancy Agreement with the the tenancy agreement entered into between the Landlord and Landlord” Shanghai Jingwei in respect of the leasing of the Jingwei Park;

• “Transferors” collectively, Ningbo Hongyuan, Shanghai Jingtai, Shanghai Chenxing and Shanghai Yuxin; and

• “%” per cent.

By order of the Board

Branding China Group Limited Fang Bin Chairman

Shanghai, the PRC, 13 September 2016

As at the date of this announcement, the executive Directors are Mr. Fang Bin, Mr. Fan Youyuan, Mr. Patrick Zheng, Mr. Huang Wei and Mr. Song Yijun and the independent non-executive Directors are Mr. Zhou Ruijin, Mr. Lin Zhiming and Ms. Hsu Wai Man, Helen.

• For identification purpose only

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