China Touyun Tech : DISCLOSEABLE TRANSACTIONS AND VOLUNTARY ANNOUNCEMENT - BUSINESS UPDATE

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China Touyun Tech Group Limited

中 國 透 雲 科 技 集 團 有 限 公 司

(Incorporated in Bermuda with limited liability)

Website: www.chinatouyun.com.hk

(Stock Code: 1332)

DISCLOSEABLE TRANSACTIONS

AND

VOLUNTARY ANNOUNCEMENT - BUSINESS UPDATE

DISCLOSEABLE TRANSACTIONS

1. Reference is made to the announcement of the Company dated 14 May 2020 in relation to the construction of fermentation and related facilities for the production of chlamydomonas reinhardtii, micro-algae and related products.
   On 28 August 2020, the Subsidiary and the Contractor entered into the Fourth Agreement and the Fifth Agreement in relation to the construction of fermentation and related facilities for the production of chlamydomonas reinhardtii, micro-algae and related products.
   As the highest applicable percentage ratio (as defined under the Listing Rules) in respect of the transactions contemplated under the Fourth Agreement and the Fifth Agreement, when aggregated with the First Agreement, the Second Agreement and the Third Agreement, exceeds 5% but is less than 25%, the entering into of the Fourth Agreement and the Fifth Agreement constitutes a discloseable transaction of the Company under the Listing Rules and is subject to the reporting and announcement requirements under Chapter 14 of the Listing Rules.

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1. On 31 March 2020, the Subsidiary and Hebei Contractor entered into First Fermentation Tank Agreement, pursuant to which Hebei Contractor agreed to design, production and installation of 8 fermentation tanks for the production of chlamydomonas reinhardtii, micro-algae and related products at the consideration of RMB13,600,000 (equivalent to HK$14,824,000). As the applicable percentage ratios (as defined under the Listing Rules) were below 5%, such transaction contemplated under the First Fermentation Tank Agreement did not constitute a notifiable transaction to the Company under Chapter 14 of the Listing Rules. On 28 August 2020, the Subsidiary and Hebei Contractor entered into Second Fermentation Tank Agreement, pursuant to which Hebei Contractor agreed to design, production and installation of 23 dialysate tanks, homogenizing buffer tanks and other related tanks for the production of chlamydomonas reinhardtii, micro-algae and related products. As the highest applicable percentage ratio (as defined under the Listing Rules) in respect of the transactions contemplated under the Second Fermentation Tank Agreement, when aggregated with the First Fermentation Tank Agreement, exceeds 5% but is less than 25%, the entering into the Second Fermentation Tank Agreement constitutes a disclosable transaction of the Company under the Listing Rule and is subject to the reporting and announcement requirements under Chapter 14 of the Listing Rules.

BUSINESS UPDATE

This is a voluntary announcement made by the Group in relation to the latest business development of chlamydomonas reinhardtii, micro-algae and related products of the Group. Details of these are set out in the section headed ''Business Update'' set out below.

1. THE CONSTRUCTION OF THE FERMENTATION AND RELATED FACILITIES
   On 28 August 2020, the Subsidiary and the Contractor entered into the Fourth Agreement and the Fifth Agreement in relation to the construction of fermentation and related facilities for the production of chlamydomonas reinhardtii, micro-algae and related products. The principal terms of each of the Fourth Agreement and the Fifth Agreement are set out below.

(1) The Fourth Agreement
Subject matter	: The construction of a inventory warehouse with 972
	square metre and a raw material warehouse with 972
	square metre in connection with the production of
	chlamydomonas reinhardtii, micro-algae and related
	products at the Project Site.
Consideration	: RMB2,916,000, on the basis of RMB1,500 per
	completed square metre.

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Payment terms and	:	The Subsidiary shall pay a prepayment of
adjustment		RMB1,800,000 within 7 days upon signing the
		Fourth Agreement. The remaining consideration (of
		which 3% of the consideration will be retained by
		the Subsidiary and shall be payable after expiry of
		the 2 year warranty period upon completion of the
		construction of the facility) shall be payable upon
		the completion of the facility.
		The consideration will be subject to dollar- to-
		dollar upward or downward adjustment based on the
		actual cost of labour, raw materials and machinery,
		which will be determined by the relevant local
		authorities. The Company does not expect that there
		will be any significant fluctuations during the period
		of construction. Any upward adjustments will be
		subject to the prior consent of the Company and the
		Company will comply with the relevant Listing
		Rules requirements
Construction term	: Commencing August	2020 and	completing on	or
		before October 2020
(2) The Fifth Agreement
Subject matter	:	The construction of a two storey building as
		fermentation facilities (dehydrating zone) in
		connection with the production of chlamydomonas
		reinhardtii, micro-algae and related products of site
		area 5,400 square metre at the Project Site.
Consideration	: RMB9,612,000, on	the basis	of RMB1,780	per
		completed square metre
Payment terms and	:	The Subsidiary shall pay a prepayment of
adjustment:		RMB6,000,000 within 7 days upon signing the Fifth
		Agreement. The remaining consideration (of which
		the 3% of the consideration will be retained by the
		Subsidiary and shall be payable after expiry of the 2
		year warranty period upon completion of the
		construction of the facility) shall be payable upon
		the completion of the construction of facility.

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	The consideration will be subject to dollar-to-dollar
	upward or downward adjustment based on the actual
	cost of labour, raw materials and machinery, which
	will be determined by the relevant local authorities.
	The Company does not expect that there will be any
	significant fluctuations during the period of
	construction. Any upward adjustments will be
	subject to the prior consent of the Company and the
	Company will comply with the relevant Listing
	Rules requirements.
Construction term:	Commencing August 2020 and completing on or
	before October 2020

1. THE DESIGN, PRODUCTION AND INSTALLATION OF FERMENTATION TANKS
2. 1. The First Fermentation Tank Agreement

Subject matter	: The design, production and installation of 8
	fermentation tanks in connection with the
	production of chlamydomonas reinhardtii, micro-
	algae and related products at the Project Site.
Consideration	: RMB13,600,000, on the basis of RMB1,700,000 per
	tank
Payment terms	: The Subsidiary shall pay 30% of the consideration
	within 15 days upon signing the First Fermentation
	Tank Agreement. The 40% of the consideration shall
	be payable within 15 days upon the delivery of the
	fermentation tanks at the Project Site. The 25% of
	the consideration shall be payable within 15 days
	upon the installation of fermentation tanks with
	satisfactory test result. The remaining 5% of the
	consideration will be retained by the Subsidiary and
	shall be payable after expiry of the 18 months
	warranty period upon the delivery of the
	fermentation tanks or after expiry of the 12 months
	warranty period upon the installation of fermentation
	tanks with satisfactory test result, whichever is
	earlier.
Construction term	: Within 80 days upon receiving the 30% of the
	consideration

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(2) The Second Fermentation Tank Agreement

Subject matter	: The design and supply of 23 dialysate tanks,
	homogenizing buffer tanks and other related tanks in
	connection with the production of chlamydomonas
	reinhardtii, micro-algae and related products at the
	Project Site.
Consideration	: RMB1,883,100, on the basis of ranged from
	RMB23,300 to RMB134,200 per tank
Payment terms	: The Subsidiary shall pay 30% of the consideration
	within 10 days upon signing The Second
	Fermentation Tank Agreement. The 50% of the
	consideration shall be payable upon the delivery of
	the tanks at the Project Site. The 15% of the
	consideration shall be payable upon the installation
	of the tanks with satisfactory test result. The
	remaining 5% of the consideration will be retained
	by the Subsidiary and shall be payable after the
	expiry of the 18 months warranty period upon the
	delivery of the fermentation tanks or after the expiry
	of the 12 months warranty period upon the
	installation of fermentation tanks with satisfactory
	test result, whichever is earlier.
Construction term	: Within 90 days upon receiving the 30% of the
	consideration

INFORMATION OF THE PARTIES

1. The Subsidiary and the Group
   The Subsidiary is a company established in the PRC and an indirect wholly-owned subsidiary of the Company. It was established in March 2020 for the purpose of engaging in the chlamydomonas reinhardtii, micro-algae and related products business.
   The principal activities of the Company and its subsidiaries are (i) provision of QR codes on product packaging and solutions and online advertising display services; (ii) the manufacture and sale of packaging products; (iii) investments and trading in securities and money lending; and (iv) production and sale of chlamydomonas reinhardtii products.

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1. The Contractor/Hebei Contractor
   The Contractor is a state-owned enterprise established in the PRC and is principally engaged in the business of construction and engineering contracting.
   The Hebei Contractor is a private entity established in the PRC and is principally engaged in the business of fermentation tanks contracting.
   To the best of the Directors' knowledge, information and belief, and having made all reasonable enquiries, each of the Contractor and Hebei Contractor and its ultimate beneficial owners is a third party independent of the Company and its connected persons.

REASONS FOR ENTERING INTO THE AGREEMENTS

Reference is made to the announcement of the Company dated 21 February 2020 in relation to the co-operation agreement entered into between the Company and the People's Government of Wucheng District, Changzhi City, Shanxi Province* (山西省長治市潞城區 人民政府) (the ''District Government'').

Based on the co-operation agreement dated 21 February 2020, the District Government agreed to support the construction of the chlamydomonas reinhardtii and related products facilities by the provision of the relevant land use right for the construction of the facilities. As at the date of this announcement, the Company has submitted the relevant documents for the formal application of the land use right. On 9 April 2020, the Natural Resources Bureau of Wucheng District, Changzhi City* (長治市潞城區自然資源局) confirmed that the construction of manufacturing facilities for chlamydomonas reinhardtii at a site of approximately 12.44 hectares conform with the overall land use planning of the relevant area.

The construction of the fermentation and related facilities is the first step in the Group's diversification into chlamydomonas reinhardtii, micro-algae and related products business. It is expected that the Company will commence the production of chlamydomonas reinhardtii, micro-algae and related products in 2021. The Subsidiary currently has 12 employees including technicians and engineers who are experienced and specialise in fermentation process and production management of chlamydomonas reinhardtii, micro-algae; and administrative supporting staff.

Given the trend of health food in recent years, the Group considers the investment in chlamydomonas reinhardtii and micro-algae business is a good opportunity for the Group to diversify its income base.

The consideration under each of the Agreements was determined after arm's length negotiations between the parties with reference to the published cost of labour, raw material and machinery by the relevant authorities. It is expected that the total consideration will be settled by internal resources of the Group.

• For identification purposes only

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The Board considers that the terms of the Agreements are on normal commercial terms and are fair and reasonable and that the transactions contemplated thereunder are in the interest of the Company and its shareholders as a whole.

IMPLICATION UNDER THE LISTING RULES

The Fourth Agreement and the Fifth Agreement

As the highest applicable percentage ratio (as defined under the Listing Rules) in respect of the transactions contemplated under the Fourth Agreement and the Fifth Agreement, when aggregated with the First Agreement, the Second Agreement and the Third Agreement, exceeds 5% but is less than 25%, the entering into of the Fourth Agreement and the Fifth Agreement constitutes a discloseable transaction of the Company under the Listing Rules and is subject to the reporting and announcement requirements under Chapter 14 of the Listing Rules.

The First Fermentation Tank Agreement and The Second Fermentation Tank Agreement

As the highest applicable percentage ratio (as defined under the Listing Rules) in respect of the transactions contemplated under the Second Fermentation Tank Agreement, when aggregated with the First Fermentation Tank Agreement, exceeds 5% but is less than 25%, the entering into the Second Fermentation Tank Agreement constitutes a disclosable transaction of the Company under the Listing Rule and is subject to the reporting and announcement requirements under Chapter 14 of the Listing Rules.

BUSINESS UPDATE

Reference was made to the Company's announcement dated 21 February 2020, the Group plan to construct the manufacturing facilities for chlamydomonas reinhardtii, micro-algae and related products, with production scale of 10,000 tons/year in the first stage, in the Wucheng District, Changzhi City, Shanxi Province, PRC. The construction was officially launched on 23 April 2020. According to the latest development and as of 25 August 2020, eight 180,000-liter fermentation tanks of the first phase (with an annual output of 4,000 tons of chlamydomonas reinhardtii) of the first stage have been successfully installed and landed. The civil engineering works are expected to be completed by the end of 2020 and the system installation will be completed in the first quarter of 2021. Operation trial and production will be commenced in second quarter of 2021. Given the trend of health food in recent years, the Group considers the investment in chlamydomonas reinhardtii and micro-algae business is a good opportunity for the Group to diversify its income base.

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DEFINITIONS

In this announcement, unless the context otherwise requires, the following words and expressions shall have the following meanings when used herein:

''Agreements''	the Fourth Agreement, the Fifth Agreement, the First
	Fermentation Tank Agreement and the Second Fermentation
	Tank Agreement
''Board''	the board of the Company
''Company''	China Touyun Tech Group Limited, a company with limited
	liability incorporated under the laws of the Bermuda whose
	shares are listed on the Stock Exchange (Stock Code: 1332)
''Contractor''	Shijiazhuang Yijian Construction Group Co., Ltd.* (石家莊
	一建建設集團有限公司)
''Director(s)''	the director(s) of the Company
''Fifth Agreement''	the agreement dated 28 August 2020 entered into between
	the Subsidiary and the Contractor in relation to the
	construction of a fermentation facilities (dehydrating zone)
''First Agreement''	the agreement dated 14 May 2020 entered into between the
	Subsidiary and the Contractor in relation to the construction
	of the general administration building
''First Fermentation Tank	the agreement dated 31 March 2020 entered into between
Agreement''	the Subsidiary and the Hebei Contractor in relation to the
	design, production and installation of fermentation tanks
''Fourth Agreement''	the agreement dated 28 August 2020 entered into between
	the Subsidiary and the Contractor in relation to the
	construction of a inventory warehouse and a raw material
	warehouse
''Group''	the Company and its subsidiaries
''Hong Kong''	the Hong Kong Special Administrative Region of the
	People's Republic of China
''Hebei Contractor''	Hebei Jineng Chemical Equipment Co., Ltd.* (河北冀能化
	工設備有限公司)
''Listing Rules''	the Rules Governing the Listing of Securities on the Stock
	Exchange

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''Project Site''	Wucheng Economic and Technological Development Zone,
	Changzhuang Village, Dianshang Town, Wucheng District,
	Changzhi City, Shanxi Province, PRC* (山西省長治市潞城
	區店上鎮常莊村潞城經濟技術開發區), with a total site area
	of approximately 12.44 hectares
''RMB''	Renminbi, the lawful currency of the PRC
''Second Agreement''	the agreement dated 14 May 2020 entered into between the
	Subsidiary and the Contractor in relation to the construction
	of the employees accommodation building
''Second Fermentation Tank	the agreement dated 28 August 2020 entered into between
Agreement''	the Subsidiary and the Hebei Contractor in relation to the
	design and supply of dialysate tanks, homogenizing buffer
	tanks and other related tanks
''Stock Exchange''	The Stock Exchange of Hong Kong Limited
''Subsidiary''	Shanxi Touyun Biotechnology Company Limited* (山西透
	雲生物科技有限公司)
''Third Agreement''	the agreement dated 14 May 2020 entered into between the
	Subsidiary and the Contractor in relation to the construction
	of the fermentation plant
	By order of the Board
	China Touyun Tech Group Limited
	Wang Liang
	Chairman
Hong Kong, 28 August 2020

As at the date of this announcement, the Board comprised the following Directors:

Executive Directors	Non-executive Directors
Mr. Wang Liang (Chairman)	Mr. Chen Hui
Mr. Du Dong	Ms. Tian Yuze
Mr. Lo Yuen Wa Peter
	Independent non-executive Directors
	Mr. Cheung Wing Ping
	Mr. Ha Kee Choy Eugene
	Mr. To Shing Chuen

* for identification purposes only

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