CONNECTED TRANSACTION: DISPOSAL OF NON-WHOLLY OWNED SUBSIDIARY

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CHINA LESSO GROUP HOLDINGS LIMITED

中 國 聯 塑 集 團 控 股 有 限 公 司*

(incorporated in the Cayman Islands with limited liability)

(Stock Code: 2128) CONNECTED TRANSACTION: DISPOSAL OF NON-WHOLLY OWNED SUBSIDIARY THE DISPOSAL

The Board is pleased to announce that on 7 July 2017 (after trading hours of the Stock Exchange), the Vendor, an indirect wholly-owned subsidiary of the Company, entered into the Agreement with the Target and the Purchaser (the latter being indirectly wholly-owned by Mr. Wong (the chairman of the Company, an executive Director and the controlling Shareholder)), pursuant to which the Vendor has agreed to sell and the Purchaser has agreed to acquire (i) the Sale Interest, representing 75% equity interest of the Target; and

(ii) the Sale Loan, at the Consideration of RMB56,338,000 (equivalent to approximately HK$64,794,000), which is further subject to Adjustment. The Disposal is not subject to any conditions precedent. Upon registration of the Disposal, the Disposal Group will cease to be subsidiaries of the Company.

LISTING RULES IMPLICATIONS

The Purchaser is indirectly wholly-owned by Mr. Wong. Mr. Wong is the chairman of the Company, an executive Director and the founder of a trust which holds the entire issued share capital of Xi Xi Development Limited, which in turn holds New Fortune Star Limited, holder of approximately 68.28% of the issued share capital of the Company as at the date of this announcement. Accordingly, the Purchaser is a connected person of the Company under the Listing Rules.

The applicable percentage ratios (as defined in the Listing Rules) for the Disposal are between 0.1% and 5%. Accordingly, the Disposal constitutes a non-exempt connected transaction and is subject to the reporting and disclosure requirements but exempt from the independent shareholders' approval requirement pursuant to Chapter 14A of the Listing Rules.

INTRODUCTION

On 7 July 2017 (after trading hours of the Stock Exchange), the Vendor, an indirect wholly- owned subsidiary of the Company, entered into the Agreement with the Target and the Purchaser (the latter being indirectly wholly-owned by Mr. Wong (the chairman of the Company, an executive Director and the controlling Shareholder)), pursuant to which the Vendor has agreed to sell and the Purchaser has agreed to acquire (i) the Sale Interest, representing 75% equity interest of the Target; and (ii) the Sale Loan, at the Consideration of RMB56,338,000 (equivalent to approximately HK$64,794,000), which is further subject to Adjustment.

The principal terms of the Agreement are set out as follows:

THE DISPOSAL Date

7 July 2017 (after trading hours of the Stock Exchange)

Parties

Vendor: the Vendor, being Guangdong Lesso Mall Co., Ltd.* (廣東聯塑五 金電氣建材商城有限公司), an indirect wholly-owned subsidiary of the Company

Purchaser: the Purchaser, being Foshan Star Excel Property Development Co., Ltd.* (佛山市星俊置業發展有限公司), a company indirectly wholly-owned by Mr. Wong

According to the Purchaser, it is principally engaged in property leasing and management.

Assets to be disposed of

1. The Sale Interest, being 75% equity interest of the Target, representing all equity interest in the Target owned by the Group at the signing of the Agreement. The remaining 25% equity interest of the Target is held by third parties which together with their ultimate beneficial owners are, to the best of the Director's knowledge, information and belief having made all reasonable enquiry, independent of the Group and its connected persons; and

2. the Sale Loan, being the loan owing by the Target to the Vendor, which as at 30 June 2017 (being the Calculation Date) amounted to RMB31,338,000 (equivalent to approximately HK$36,042,000).

The original acquisition cost of the Target amounted to RMB56,338,000 (equivalent to approximately HK$64,794,000).

The Consideration and Adjustment

The Consideration for the Disposal is RMB56,338,000 (equivalent to approximately HK$64,794,000), out of which the consideration for the Sale Interest is equal to RMB25,000,000 (equivalent to approximately HK$28,752,000) and the consideration for the Sale Loan (as of the Calculation Date) is RMB31,338,000 (equivalent to approximately HK$36,042,000) (the "Basic Loan Consideration"), which shall be payable by the Purchaser to the Vendor in cash within 90 days after the date of the Agreement.

The Consideration is subject to the adjustment as follows:

The Vendor and the Purchaser shall engage third party auditors to conduct an audit on the Target's financial position as at 30 June 2017 (the "Audit"). The Vendor and the Purchaser agreed there be an adjustment to the Basic Loan Consideration on a dollar-for-dollar basis based on the Audit in relation to any amount due and owing to the Vendor as at 30 June 2017 (the "Adjustment"). However, the consideration for the Sale Loan after Adjustment should not exceed RMB50,000,000 (equivalent to approximately HK$57,505,000).

The Consideration and the Adjustment were arrived at after arm's length negotiations between the Purchaser and the Vendor on normal commercial terms with reference to the amount injected by the Group to the Disposal Group up to the Calculation Date.

The Directors (including the independent non-executive Directors) consider the Consideration and the Adjustment are fair and reasonable, which are on normal commercial terms, and are in the interests of the Company and the Independent Shareholders as a whole.

The parties to the Agreement agree all liabilities of the Target incurred before Calculation Date shall be borne by the Vendor in proportion to its equity interest in the Target and those incurred after the Circulation Date shall be borne by the Purchaser in proportion to its equity interest in the Target.

Registration of transfer

Pursuant to the Agreement, the parties shall proceed with registration of transfer in relation to the Sale Interest (the "Registration") within 10 days after the Vendor's receipt of the Consideration (and the Adjustment, if any).

Upon Registration, the Disposal Group will cease to be subsidiaries of the Company and the Company will cease to have any interests in the Disposal Group.

Within 60 days after the Registration, the Disposal Group shall cease to use the trademarks, names and advertising materials containing the names and trademarks of "聯塑" ("Lesso") and "領尚" ("Lesso").

INFORMATION OF THE DISPOSAL GROUP

Lesso Mall is an online platform of products display and offline (via physical stores) trading platform in the PRC of the Group, trading hardware, electrical equipment and building materials. The Target is a company established in the PRC on 3 August 2016 with a registered capital of RMB 60,000,000 (equivalent to approximately HK$69,006,000). The Disposal Group is principally engaged in offline trading platform (via physical stores) of building materials, hardware and interior decoration products for Lesso Mall.