361 DEGREES INTERNATIONAL : Announcements and Notices - Discloseable Transaction Deemed Disposal of the Equity Interest in Zhuji 361 Degrees

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361 Degrees International Limited 361 ܓ਷ყϞࠢʮ̡

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1361)

DISCLOSEABLE TRANSACTION

DEEMED DISPOSAL OF THE EQUITY INTEREST IN ZHUJI 361 DEGREES

THE INVESTMENT AGREEMENT

The Board is pleased to announce that, on 9 November 2018, the Group has entered into the Investment Agreement, pursuant to which the Investor agreed to acquire approximately 14.93% of the equity interest in Zhuji 361 Degrees by way of subscription of its additional registered capital at a total consideration of RMB500,000,000. Upon completion of the Subscription, Zhuji 361 Degrees will be owned as to approximately 85.07% and 14.93% to by the Company and the Investor respectively, will become an indirect non-wholly owned subsidiary of the Company and its financial results will continue to be consolidated into that of the Company.

LISTING RULES IMPLICATIONS

Upon completion of the Subscription, the Company's interest in Zhuji 361 Degrees would decrease from 100% to approximately 85.07%. As such, the Subscription and the entering into of the Investment Agreement will constitute a deemed disposal under Chapter 14 of the Listing Rules. As one or more of the relevant applicable percentage ratios (as defined under the Listing Rules) in respect of the Subscription are more than 5% but less than 25%, the Subscription constitutes a discloseable transaction of the Company under Chapter 14 of the Listing Rules and will be subject to reporting and announcement requirements under the Listing Rules.

As completion of the Subscription is conditional upon satisfaction of the conditions precedent as set out under the section headed "The Investment Agreement - Conditions Precedent" in this announcement, the Subscription may or may not proceed. Shareholders and potential investors of the Company shall exercise caution when dealing in the shares of the Company.

INTRODUCTION

The Board is pleased to announce that, on 9 November 2018, the Group has entered into the Investment Agreement, pursuant to which the Investor agreed to acquire approximately 14.93% of the equity interest in Zhuji 361 Degrees by way of subscription of its additional registered capital for a total consideration of RMB500,000,000. Upon completion of the Subscription, Zhuji 361 Degrees will be owned as to approximately 85.07% and 14.93% to by the Company and the Investor respectively, will become an indirect non-wholly owned subsidiary of the Company and its financial results will continue to be consolidated into that of the Company.

THE INVESTMENT AGREEMENT

The principal terms of the Investment Agreement are summarised as follows:

Date:

9 November 2018

Parties:

• (1) The Investor;

• (2) 361 Degrees (Hong Kong); and

• (3) Zhuji 361 Degrees.

Subject Matter:

The Investor agreed to acquire approximately 14.93% of the equity interest in Zhuji 361 Degrees by way of subscribing for additional registered capital of in the amount of approximately RMB18,526,000 (equivalent to approximately HK$21,052,000).

361 Degrees (Hong Kong) will, through a series of internal restructuring, gradually transfer the Group's children's wear business to Zhuji 361 Degrees over time such that Zhuji 361 Degrees will become the holding company of the Group's children's wear business.

Consideration:

The Consideration payable by the Investor for the acquisition of equity interest in Zhuji 361 Degrees is RMB500,000,000.

As it was intended that Zhuji 361 Degrees will, over time, become the holding company of the children's wear business of the Group, the Consideration was determined after arm's length negotiations among the parties to the Investment Agreement with reference to, among others, the registered capital of Zhuji 361 Degrees before the Subscription and the business prospects of Group's children's wear business.

Payment Terms and

Schedule:

The Consideration comprises of the Initial Investment and the Subsequent Investment.

The Initial Investment shall be RMB350,000,000, out of which approximately RMB12,968,000 (equivalent to approximately HK$14,736,000) will be used to increase the registered capital of Zhuji 361 Degrees. The Initial Investment shall be paid in the following manner:

• (1) RMB175,000,000 to be paid within 10 business days from the date on which the Conditions Precedent have been satisfied; and

• (2) RMB175,000,000 to be paid within 10 business days after the necessary registration and filings in relation to the Subscription has been effected.

The Subsequent Investment shall be RMB150,000,000 to be paid by 10 September 2019, out of which approximately RMB5,558,000 (equivalent to approximately HK$6,316,000) will be used to increase the registered capital of Zhuji 361 Degrees.

Conditions Precedent:

The Subscription shall be subject to the following conditions precedent:

• (1) No material negative change in the business operation and valuation of Zhuji 361 Degrees;

• (2) The representations and warranties given by Zhuji 361 Degrees and 361 Degrees (Hong Kong) being true, accurate and complete from the date of the Investment Agreement until the First Payment Date;

• (3) All relevant transaction documents related to the Investment Agreement have been executed and delivered;

• (4) Zhuji 361 Degrees has obtained all necessary internal approvals; and

• (5) The due diligence result being satisfied by the Investor.

FINANCIAL INFORMATION OF ZHUJI 361 DEGREES

Zhuji 361 Degrees is a company established in the PRC in September 2018 and has not yet commenced operations as at the date of this announcement. As such, no financial information for Zhuji 361 Degrees for the last two financial years is available. The net profits of 361 Degrees Children's Clothing for the financial years ended 2016 and 2017 based on the financial statements are as follows:

Year ended	Year ended
31 December	31 December
2016	2017
(Audited)	(Audited)
RMB	RMB
Profit before tax	195,248,000	169,485,000
(equivalent to	(equivalent to
approximately	approximately
HK$221,873,000)	HK$192,597,000)
Profit after tax	159,337,000	121,495,000
(equivalent to	(equivalent to
approximately	approximately
HK$181,065,000)	HK$138,063,000)

FINANCIAL IMPACT OF THE SUBSCRIPTION TO THE GROUP

Upon completion of the Subscription, the registered capital of Zhuji 361 Degrees will be increased from HK$120,000,000 to approximately HK$141,052,000 (equivalent to approximately RMB124,126,000), and will be held as to approximately 85.07% and 14.93% by 361 Degrees (Hong Kong) and the Investor respectively.

Based on the net asset value of Zhuji 361 Degrees attributable to the Group before and after the Subscription, it is expected that the share capital and premium to be received by the Group from the Subscription by 31 December 2018 will amount to RMB350,000,000, which will be treated as advancement to the Group on a temporary basis, until such time when Zhuji 361 Degrees controls the substantive operations of the Group's children's wear business, at which point such share capital and premium will be accounted for as an equity transaction of the Group. The Subscription is not expected to have any significant impact to the profit or loss of the Group.

The Group intends to utilise the proceeds from the Subscription for the development and expansion of its children's wear business.

REASONS FOR AND BENEFITS OF ENTERING INTO THE INVESTMENT AGREEMENT

The Group has been engaging in the children's wear business for over 9 years through 361 Degrees Children's Clothing, an indirect non-wholly owned subsidiary of the Company.

The Board believes that the Subscription would provide the Group with access to additional source of capital to facilitate the further development of the Group's children's wear business.

The Directors consider the terms of the Investment Agreement are negotiated at arm's length basis and on normal commercial terms, which are fair and reasonable and in the interests of the Company and its Shareholders as a whole.

INFORMATION OF THE PARTIES

The Group is a sporting goods brand enterprise in China with a growing international presence. The Group designs, develops, manufactures and sells high performance, innovative and stylish sporting products to cater to the activity, athletic and casual goods needs of adults, young adults and children.

361 Degrees (Hong Kong) is a non-wholly owned subsidiary of the Company and primarily engages in investment holding.

The Investor is a limited liability partnership principally engaged in investment holding. To the best of the Directors' knowledge after making all reasonable enquiries, the Investor, its ultimate beneficial owners and its respective associates are independent third parties to the Group and its connected persons.

LISTING RULES IMPLICATIONS

Upon completion of the Subscription, the Company's interest in Zhuji 361 Degrees would decrease from 100% to approximately 85.07%. As such, the Subscription and the entering into of the Investment Agreement will constitute a deemed disposal under Chapter 14 of the Listing Rules. As one or more of the relevant applicable percentage ratios (as defined under the Listing Rules) in respect of the Subscription are more than 5% but less than 25%, the Subscription constitutes a discloseable transaction of the Company under Chapter 14 of the Listing Rules and will be subject to reporting and announcement requirements under the Listing Rules.

As completion of the Subscription is conditional upon satisfaction of the conditions precedent as set out under the section headed "The Investment Agreement - Conditions Precedent" in this announcement, the Subscription may or may not proceed. Shareholders and potential investors of the Company shall exercise caution when dealing in the shares of the Company.

DEFINITION

"361 Degrees Children's

Clothing"

361 Degrees Children's Clothing Company Limited* €ɧʬɓܓഁༀϞࠢʮ̡ , a limited liability company incorporated in the PRC and a non-wholly owned subsidiary of the Company

"361 Degrees (Hong Kong)"

361 Degrees (Hong Kong) Investment Limited, a limited liability company incorporated in Hong Kong and a non-wholly owned subsidiary of the Company