Putian Communication Group Limited — Capital/Financing Update 2018

Jan 22, 2018

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.

Putian Communication Group Limited 普天通信集團有限公司

(incorporated in the Cayman Islands with limited liability)

(Stock Code: 1720)

DISCLOSEABLE TRANSACTION ACQUISITION OF OPTICAL FIBER DRAWING TOWERS AND OPTICAL FIBER PRODUCTION LINES AND SERVICES AND TECHNOLOGY SUPPORT

INTRODUCTION

Reference is made to the Announcement and the Prospectus.

The Board is pleased to announce that subsequent to the entering into of the Equipment Acquisition Contract dated 3 January 2018, on 19 January 2018, the Group entered into with the Manufacturer (i) the Equipment Acquisition Contract II pursuant to which the Manufacturer agreed to sell and the Group agreed to purchase the Additional Optical Fiber Production Facilities at a total consideration of RMB15.8 million; and (ii) the Technology Agreement pursuant to which the Manufacturer agreed to provide services and technical support to the Group for the setting up of an optical fiber factory at a total service fee of RMB12 million.

LISTING RULES IMPLICATIONS

As the counterparty of the Equipment Acquisition Contract II and the Technology Agreement is the same as that of the Equipment Acquisition Contract, the entering into of the Equipment Acquisition Contract, the Equipment Acquisition Contract II and the Technology Agreement requires aggregation under Rule 14.22 of the Listing Rules.

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Given one of the applicable percentage ratios set out in Rule 14.07 of the Listing Rules in respect the Equipment Acquisition Contract, the Equipment Acquisition Contract II and the Technology Agreement exceeds 5% but less than 25%, the entering into of the Equipment Acquisition Contract, the Equipment Acquisition Contract II and the Technology Agreement constitutes a discloseable transaction for the Company under Chapter 14 of the Listing Rules and is therefore subject to the notification and announcement requirements under Chapter 14 of the Listing Rules.

INTRODUCTION

Reference is made to the announcement (the “ Announcement ”) of Putian Communication Group Limited (the “ Company ”, together with its subsidiaries, the “ Group ”) dated 4 January 2018 in respect of the acquisition of optical fiber drawing towers and optical fiber production lines and the prospectus (the “ Prospectus ”) of the Group dated 27 October 2017. In the section headed “Future Plans and Proposed Use of Proceeds – Use of Proceeds” in the Prospectus, it was mentioned that the Company intends to use approximately 46% of the net proceeds from the share offer (equivalent to approximately RMB57.3 million, based on the final offer price of the shares in the Company (the “ Shares ”) under the share offer of HK$0.66) for the upstream vertical expansion. Unless otherwise specified, capitalized terms used in this announcement shall have the same meanings as those defined in the Announcement.

The Board is pleased to announce that subsequent to the entering into of the Equipment Acquisition Contract dated 3 January 2018, on 19 January 2018, the Group entered into with the Manufacturer (i) the equipment acquisition contract (the “ Equipment Acquisition Contract II ”) pursuant to which the Manufacturer agreed to sell and the Group agreed to purchase one set of optical fiber drawing tower and two optical fiber production lines (collectively, “ Additional Optical Fiber Production Facilities ”) at a total consideration of RMB15.8 million; and (ii) the technology support agreement (the “ Technology Agreement ”) pursuant to which the Manufacturer agreed to provide services and technical support to the Group for the setting up of an optical fiber factory at a total service fee of RMB12 million.

THE EQUIPMENT ACQUISITION CONTRACT II

The principal terms of the Equipment Acquisition Contract II are set forth below:

Date : 19 January 2018 Parties : (i) Putian Cable; and (ii) the Manufacturer.

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• Supply of the : The Manufacturer will supply Putian Cable the Additional Additional Optical Optical Fiber Production Facilities. The consideration (the Fiber Production “ Consideration ”) for the Additional Optical Fiber Facilities Production Facilities is RMB15.8 million.

The Consideration was determined after arm’s length negotiations between the Group and the Manufacturer with reference to, among others, the market price of the Additional Optical Fiber Production Facilities. The Consideration will be financed by the Group’s internal fund and borrowings from independent third parties.

Payment terms

• : The Consideration will be paid in accordance with the following schedule:

  • (i) 60% of the Consideration (i.e. RMB9.48 million) will be paid not later than 26 January 2018;

  • (ii) 30% of the Consideration (i.e. RMB4.74 million) will be paid within 20 working days after the delivery of the Additional Optical Fiber Production Facilities; and

  • (iii) 10% of the Consideration (i.e. RMB1.58 million) will be paid within 10 days after the testing and acceptance of the Additional Optical Fiber Production Facilities by the Group.

• Installment and testing : The Manufacturer will commence to install and test the Additional Optical Fiber Production Facilities within 3 days upon receipt of 90% of the Consideration.

TECHNOLOGY AGREEMENT

The principal terms of the Technology Agreement are set forth below:

Date : 19 January 2018 Parties : (i) Putian Cable; and (ii) the Manufacturer.

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• Provision of services : The Manufacturer agreed to provide services and technical and technical support support for the setting up of an optical fiber factory, with the following major details:

• (i) the optical fiber factory will be constructed according to the design of the Manufacturer and the design contract will be entered into between Putian Cable and the design centre; the Manufacturer will facilitate the negotiation between Putian Cable and the design centre so as to ensure the design will match the Group’s production demand;

• (ii) the Manufacturer will commence the installment of the Optical Fiber Production Facilities and the Additional Optical Fiber Production Facilities (collectively, the “ New Production Facilities ”) within 11 months after Putian Cable acknowledging the receipt of the New Production Facilities provided that the factory building and the surrounding facilities having finished the construction and testing;

• (iii) the Manufacturer will finish the testing of the New Production Facilities within six months after installment; and

• (iv) during the testing period of the New Production Facilities, the Manufacturer will provide the technology training, production management training and optical fiber production manual to Putian Cable, so as to ensure the products to be produced will comply with the international standard.

Fee and payment term

• : The fee (the “ Fee ”) for the services and technology support provided by the Manufacturer will be RMB12 million. Under the Technology Agreement, the Fee will be paid according to the following schedule:

• (i) 30% of the Fee (i.e. RMB3.6 million) will be paid within 3 days after the entering into of the Technology Agreement;

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• (ii) 60% of the Fee (i.e. RMB7.2 million) will be paid within 30 days after the delivery of the New Production Facilities; and

• (iii) 10% of the Fee (i.e. RMB1.2 million) will be paid within one year after Putian Cable acknowledges the receipt of the New Production Facilities.

The Fee was determined after arm’s length negotiations between the Group and the Manufacturer with reference to, among others, the fee provided by other manufacturers with comparable size and industry experience as the Manufacturer. The Fee will be financed by the net proceeds from the share offer.

REASONS FOR AND BENEFITS OF THE ENTERING INTO OF THE EQUIPMENT ACQUISITION CONTRACT II AND THE TECHNOLOGY AGREEMENT

The Board believes that the upstream vertical expansion to optical fiber production will put the Group in a better position to secure steady supplies of optical fibers for its production of optical fiber cables and enable the Group to further increase its profit margin and enhance its competitiveness in the bidding or tendering processes, thus enabling it to capture more value in the optical fiber cable production value chain.

Upon listing of the Shares in November 2017 on the Main Board of the Stock Exchange, the Group’s corporate profile and credibility are enhanced by its listing status which enables the Group to obtain financing at a lower cost.

The Board expects that the market demand for optical fiber cables in the PRC will continue to increase as a result of the favourable government policy. Based on the above, the Board is of the view that the entering into of the Equipment Acquisition Contract II for further expansion of the Group’s optical fiber production capacity is in the best interest of the Group and its shareholders as a whole. In addition, the Board expects that the entering into of the Technology Agreement will enable the Group to equip with the required services and technology support to set up the optical fiber factory and operate the New Production Facilities to produce optical fibers with international standard and hence, the Board is of the view that the entering into of the Technology Agreement is in the best interest of the Group and its shareholders as a whole.

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INFORMATION OF THE GROUP AND PUTIAN CABLE

The Group is a well-established and fast growing communication cable manufacturer and structured cabling system product provider based in Jiangxi Province, the PRC.

Putian Cable is one of the wholly-owned subsidiaries of the Company. Since its incorporation, Putian Cable has been principally engaged in the production and sales of communication copper cables, optical fiber cables and structured cabling system products.

INFORMATION OF THE MANUFACTURER

The Manufacturer is a company established in the PRC with limited liability and is an optical fiber manufacturer in the PRC. To the best knowledge, information and belief of the Directors, the Manufacturer is a party independent of the Company and its connected person(s) (as defined in the Listing Rules) and their respective associates.

LISTING RULES IMPLICATIONS

As the counterparty of the Equipment Acquisition Contract II and the Technology Agreement is the same as that of the Equipment Acquisition Contract, the entering into of the Equipment Acquisition Contract, the Equipment Acquisition Contract II and the Technology Agreement requires aggregation under Rule 14.22 of the Listing Rules.

Given one of the applicable percentage ratios set out in Rule 14.07 of the Listing Rules in respect the Equipment Acquisition Contract, the Equipment Acquisition Contract II and the Technology Agreement exceeds 5% but less than 25%, the entering into of the Equipment Acquisition Contract, the Equipment Acquisition Contract II and the Technology Agreement constitutes a discloseable transaction for the Company under Chapter 14 of the Listing Rules and is therefore subject to the notification and announcement requirements under Chapter 14 of the Listing Rules.

By order of the Board Putian Communication Group Limited WANG Qiuping Chairlady

The PRC, 19 January 2018

As at the date of this announcement, the Board comprises Ms. Wang Qiuping, Mr. Zhao Xiaobao and Ms. Zhao Moge as executive Directors; and Ms. Cheng Shing Yan, Mr. Liu Guodong and Mr. Xie Haidong as independent non-executive Directors.

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