China Zhongwang : CONNECTED TRANSACTION IN RELATION TO LEASE AGREEMENTS

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.

(incorporated in the Cayman Islands with limited liability)

(Stock Code: 01333)

CONNECTED TRANSACTION

IN RELATION TO LEASE AGREEMENTS

LEASE AGREEMENTS

On 6 December 2019, the Company and Liaoning Zhongwang entered into the Lease Agreement I and the Lease Agreement II with Beijing Zhongyan to lease the Premises I and Premises II from Beijing Zhongyan, respectively, for a term of two years.

LISTING RULES IMPLICATION

As at the date of this announcement, Beijing Zhongyan is an associate of Mr. Liu Zhongtian, the controlling shareholder of the Company. Therefore, under Chapter 14A of the Listing Rules, the entering of the Lease Agreement I and Lease Agreement II and Rent Payment constitute connected transactions of the Company.

Given that all the applicable percentage ratios in respect of the Lease exceed 0.1% but are less than 5%, the Lease is exempt from the circular and Shareholders' approval requirement, but are subject to the reporting and announcement requirements under the Chapter 14A of the Listing Rules.

As Mr. Lu Changqing is the chairman of J.K. Life Insurance Corporation, a company holding 100% equity interest in Beijing Zhongyan, and Mr. Chen Yan is a director of J.K. Life Insurance Corporation as at the date of this announcement, Mr. Lu Changqing and Mr. Chen Yan are deemed to have a material interest in the Lease Agreement I and Lease Agreement II. Therefore, Mr. Lu Changqing and Mr. Chen Yan have abstained from voting on the relevant Board resolutions approving the transactions contemplated under the Lease Agreement I and Lease Agreement II. Save for the above, to the best knowledge, information and belief of the Directors after having made all reasonable enquiries, no other Director has a material interest in the Lease Agreement I and Lease Agreement II and will be required to abstain from voting on the relevant Board resolution approving the Lease Agreement I and Lease Agreement II and the transactions contemplated thereunder.

- 1 -

1. INTRODUCTION
   On 6 December 2019, the Company and Liaoning Zhongwang entered into the Lease Agreement I and the Lease Agreement II with Beijing Zhongyan to lease the Premises I and Premises II from Beijing Zhongyan, respectively, for a term of two years.
2. LEASE AGREEMENTS
   I. Principal Terms of the Lease Agreement I

Date	:	6 December 2019
Parties	:	(i)	the Company as the lessee
		(ii)	Beijing Zhongyan as the lessor
Premises I	: the	39th floor of Zhongwang Tower (Building 1, Zone 4 of
		Wangjing East Park, Chaoyang District, Beijing), with a total
		gross floor area of approximately 2,292.01 sq.m.
Terms	: two years, commencing from 1 January 2020 and ending on 31
		December 2021
Rent	: The rent per sq.m. per month is RMB483 and the total monthly
		rent is RMB1,107,040.83 (excluding the related value-added
		taxes).
		The Company shall pay the rent for six months by the 25th day
		of the month before the commencement of every six-month
		period, except that the Company shall pay the rent for the first
		six months by 6 February 2020.
Deposit	:	The Company shall pay a deposit of RMB7,793,980.08,
		equivalent to the total rent and property management fees (to be
		paid to an independent third party property management
		company) for the first six months (including the related value-
		added taxes).
II. Principal Terms of the Lease Agreement II
Date	:	6 December 2019
Parties	:	(i)	Liaoning Zhongwang as the lessee
		(ii)	Beijing Zhongyan as the lessor
Premises II	:	the	6th, 7th, 8th, 9th, 10th, 15th, 30th, 31st, 32nd, 33rd, 35th,

36th, 37th, 38th, 40th, 41st, 42nd and 43rd floors of Zhongwang Tower (Building 1, Zone 4 of Wangjing East Park, Chaoyang District, Beijing), with the total gross floor area of approximately 39,960.55 sq.m.

- 2 -

Terms	: two years, commencing from 1 January 2020 and ending on 31
	December 2021
Rent	:					Total monthly rent
				Rent per	(excluding the
				sq.m. per	related value-added
	Floor	Gross floor area	month	taxes)
	6th	2,129.10 sq.m.	RMB354	RMB753,701.40
	7th	2,137.38 sq.m.	RMB354	RMB756,632.52
	8th	2,059.76 sq.m.	RMB354	RMB729,155.04
	9th	2,007.89 sq.m.	RMB374	RMB750,950.86
	10th	1,989.55 sq.m.	RMB374	RMB744,091.70
	15th	1,984.86 sq.m.	RMB374	RMB742,337.64
	30th	2,343.18 sq.m.	RMB432	RMB1,012,253.76
	31st	2,343.20 sq.m.	RMB432	RMB1,012,262.40
	32nd	2,343.20 sq.m.	RMB432	RMB1,012,262.40
	33rd	2,343.91 sq.m.	RMB432	RMB1,012,569.12
	35th	2,343.91 sq.m.	RMB442	RMB1,036,008.22
	36th	2,343.91 sq.m.	RMB442	RMB1,036,008.22
	37th	2,343.90 sq.m.	RMB473	RMB1,108,664.70
	38th	2,334.76 sq.m.	RMB483	RMB1,127,689.08
	40th	2,028.35 sq.m.	RMB483	RMB979,693.05
	41st	2,287.42 sq.m.	RMB483	RMB1,104,823.86
	42nd	2,298.40 sq.m.	RMB723	RMB1,661,743.20
	43rd	2,297.87 sq.m.		RMB667		RMB1,532,679.29
	Total:	39,960.55 sq.m.	-	RMB18,113,526.46

- 3 -

	Liaoning Zhongwang shall pay the rent for six months by the
	25th day of the month before the commencement of every six-
	month period, except that Liaoning Zhongwang shall pay the rent
	for the first six months by 6 February 2020.
Deposit	: Liaoning Zhongwang shall pay a deposit of RMB128,120,128.86,
	equivalent to the total rent and property management fees (to be
	paid to an independent third party property management
	company) for the first six months (including the related value-
	added taxes).

1. 1. Accounting Implication of the Lease
      In accordance with the IFRSs applicable to the Group, the Rent Payment is capital in nature and will be recognised as assets of the Group at the commencement date of the Lease. The IFRSs applicable to the Company include IFRS 16 ''Leases'' which came into effect on 1 January 2019. Under IFRS 16 and in the consolidated statement of financial position of the Company, the Company as the lessee shall recognise a lease as a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments. The asset and the liability arising from the lease are initially measured on a present value basis and calculated by discounting the non-cancellable lease payments under the lease, using the incremental borrowing rate as the discount rate. Under IFRS 16 and in the consolidated statement of comprehensive income of the Company, the Company shall recognise (i) depreciation charge over the life of the right-of-use asset, and (ii) interest expenses from the lease liability amortised over the lease term.
2. INFORMATION ON THE PARTIES
3. 1. The Company
      The Company is incorporated in the Cayman Islands and has been listed on the Main Board of the Stock Exchange. The Group is principally engaged in the production of high precision, large section and high value-added industrial aluminium extrusion products and aluminium flat rolling products which are widely used in such sectors as transportation, machinery and equipment and electric power engineering etc..

II. Liaoning Zhongwang

Liaoning Zhongwang is a limited liability company incorporated under the laws of the PRC and an indirect subsidiary of the Company. Liaoning Zhongwang is principally engaged in the production and sale of the aluminium extrusion products.

1. Beijing Zhongyan
   Beijing Zhongyan is a limited liability company incorporated under the laws of the PRC. It is principally engaged in real estate development, sales and leasing of properties and property management.

- 4 -

1. REASONS FOR AND BENEFITS OF ENTERING INTO THE LEASE AGREEMENT I AND LEASE AGREEMENT II
   The Lease Agreement I and Lease Agreement II were entered into in the ordinary and usual course of business of the Group. The Premises I and Premises II will be used as the principal place of business in the PRC of the Company and Liaoning Zhongwang, respectively. The purpose of entering into the Lease Agreement I and Lease Agreement II was to secure a sizeable office space to enable the Group's operation.

The amount of the Rent Payment was arrived after arm's length negotiation between the parties to the Lease Agreement I and Lease Agreement II and determined with reference to, among other things, (i) market rent for Grade A office buildings in Beijing in the market report provided by professional real estate agents; (ii) the current market rent payable for a lease of similar or comparable location, area and conditions, and (iii) the premium decoration, location and conditions of Zhongwang Tower.

The Directors (including the independent non-executive Directors) are of the view that

1. 1. the Lease Agreement I and Lease Agreement II and the transactions contemplated thereunder are on normal commercial terms and the terms of the Lease Agreement I and Lease Agreement II are fair and reasonable; and (ii) the entering of the Lease Agreement I and Lease Agreement II and the transactions contemplated thereunder are in the ordinary and usual course of business of the Group and are in the interest of the Company and the Shareholders as a whole.
2. LISTING RULES IMPLICATION
3. 
   As at the date of this announcement, Beijing Zhongyan is an associate of Mr. Liu Zhongtian, the controlling shareholder of the Company. Therefore, under Chapter 14A of the Listing Rules, the entering of the Lease Agreement I and Lease Agreement II and Rent Payment constitute connected transactions of the Company.
   Given that all the applicable percentage ratios in respect of the Lease exceed 0.1% but are less than 5%, the Lease is exempt from the circular and Shareholders' approval requirement, but are subject to the reporting and announcement requirements under the Chapter 14A of the Listing Rules.
   As Mr. Lu Changqing is the chairman of J.K. Life Insurance Corporation, a company holding 100% equity interest in Beijing Zhongyan, and Mr. Chen Yan is a director of J.K. Life Insurance Corporation as at the date of this announcement, Mr. Lu Changqing and Mr. Chen Yan are deemed to have a material interest in the Lease Agreement I and Lease Agreement II. Therefore, Mr. Lu Changqing and Mr. Chen Yan have abstained from voting on the relevant Board resolutions approving the transactions contemplated under the Lease Agreement I and Lease Agreement II. Save for the above, to the best knowledge, information and belief of the Directors after having made all reasonable enquiries, no other Director has a material interest in the Lease Agreement I and Lease Agreement II and will be required to abstain from voting on the relevant Board resolution approving the Lease Agreement I and Lease Agreement II and the transactions contemplated thereunder.

- 5 -

1. DEFINITIONS

Unless the context otherwise requires, the terms used in this announcement shall have the following meanings:

''Beijing Zhongyan''	Beijing Zhongyan Real Estate Development Co., Ltd.*
	(北京中言房地產開發有限公司), a company incorporated
	in the PRC with limited liability
''Board''	the board of Directors
''China'' or ''PRC''	the People's Republic of China, and for the purpose of
	this announcement, excludes Hong Kong Administrative
	Region of the People's Republic of China, Macau Special
	Administrative Region of the People's Republic of China
	and Taiwan
''Company''	China Zhongwang Holdings Limited* (中國忠旺控股有
	限公司), a company incorporated in the Cayman Islands
	with limited liability and the shares of which are listed
	on the Stock Exchange
''Directors''	the directors of the Company
''Group''	the Company and its subsidiaries
''IFRSs''	International Financial Reporting Standards
''Lease''	the lease of the Premises I and Premises II pursuant to
	the Lease Agreement I and Lease Agreement II
''Lease Agreement I''	the agreement dated 6 December 2019 entered into
	between the Company and Beijing Zhongyan in relation
	to the leasing of the Premises I
''Lease Agreement II''	the agreement dated 6 December 2019 entered into
	between Liaoning Zhongwang and Beijing Zhongyan in
	relation to the leasing of the Premises II
''Liaoning Zhongwang''	Liaoning Zhongwang Group Co., Ltd.* (遼寧忠旺集團
	有限公司), a limited liability company incorporated
	under the laws of the PRC and an indirect subsidiary of
	the Company
''Listing Rules''	the Rules Governing the Listing of Securities on The
	Stock Exchange of Hong Kong Limited
''Premises I''	the whole of the 39th floor of Zhongwang Tower
	(Building 1, Zone 4 of Wangjing East Park, Chaoyang
	District, Beijing)

- 6 -

''Premises II''	the whole of each of the 6th, 7th, 8th, 9th, 10th,	15th,
	30th,	31st,	32nd,	33rd,	35th,	36th,	37th,	38th,	40th,
	41st, 42nd and 43rd floor of Zhongwang Tower
	(Building 1, Zone 4 of Wangjing East Park, Chaoyang
	District, Beijing)
''Rent Payment''	the rent payment to be made by the Company and
	Liaoning Zhongwang to Beijing Zhongyan pursuant to
	the Lease Agreement I and the Lease Agreement II
''Shareholder(s)''	holder(s) of shares of the Company
''Stock Exchange''	The Stock Exchange of Hong Kong Limited
''Zhongwang Tower''	Grade A office buildings located at Zone 4 of Wangjing
	East Park, Chaoyang District, Beijing

By order of the Board

China Zhongwang Holdings Limited

Lu Changqing

Chairman

Hong Kong, 6 December 2019

As at the date of this announcement, the Board consists of:

Executive Directors

Mr. Lu Changqing and Ms. Ma Qingmei

Non-executive Directors

Mr. Chen Yan, Mr. Lin Jun and Mr. Wei Qiang

Independent Non-executive Directors

Mr. Wong Chun Wa, Mr. Wen Xianjun, Mr. Shi Ketong and Mr. Lo Wa Kei, Roy

• For identification purpose only

- 7 -