Cosmo Lady China : Connected Transaction Disposal of Equity Interest in A Subsidiary

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Cosmo Lady (China) Holdings Company Limited

都市麗 人（中 國）控股有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 2298) CONNECTED TRANSACTION DISPOSAL OF EQUITY INTEREST IN A SUBSIDIARY DISPOSAL

The Board announces that on 23 June 2017, the Vendor, an indirect wholly-owned subsidiary of the Company, and the Purchaser entered into the Equity Transfer Agreement, pursuant to which the Vendor has agreed to dispose of, and the Purchaser has agreed to purchase, the Equity Interest, representing 95% of the registered capital of CLGIII, at a consideration of RMB10,809,100 (equivalent to approximately HK$12,342,000) in cash.

CLGIII owns the land use right of the Land which is planned to be developed into an industrial complex. Following a business review by the Group after the recent share allotment to a strategic investor, the Group believes that there will be better and more development on its existing business in the future to expand its market share in the lingerie and apparel industries, and it therefore intends to focus on its existing business in view of bringing greater return to the Shareholders.

IMPLICATIONS UNDER THE LISTING RULES

As the Purchaser is owned as to 90% by Mr. Zheng, the chairman, the chief executive officer, an executive Director and a controlling shareholder of the Company, each of Mr. Zheng and the Purchaser is a connected person of the Company under Chapter 14A of the Listing Rules. Accordingly, the Disposal constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules.

As the applicable percentage ratios under the Listing Rules in respect of the Disposal are more than 0.1% but less than 5%, the Disposal is only subject to reporting and announcement requirements and is exempt from the independent Shareholders' approval requirement under Chapter 14A of the Listing Rules.

DISPOSAL

The Board announces that on 23 June 2017, the Vendor, an indirect wholly-owned subsidiary of the Company, and the Purchaser entered into the Equity Transfer Agreement, pursuant to which the Vendor has agreed to dispose of, and the Purchaser has agreed to purchase, the Equity Interest, representing 95% of the registered capital of CLGIII.

INFORMATION ON CLGIII

CLGIII is an investment holding company with limited liability established on 8 November 2016 in the PRC and is wholly owned by the Vendor. CLGIII owns the land use right of the Land located at Golden Phoenix Industrial Zone, Fenggang Town, Dongguan City, Guangdong Province, the PRC with a total site area of 34,959 square metres for industrial use. The Land is planned to be developed into an industrial complex.

The original acquisition cost of the Land by CLGIII through a public auction in March 2017 was RMB47,200,000 (equivalent to approximately HK$53,893,000).

Set out below is the summary of the key financial information extracted from the unaudited financial statements of CLGIII for the period from 8 November 2016 to 31 December 2016 and the five months ended 31 May 2017:

For the period from 8 November 2016 to 31 December 2016	For the five months ended 31 May 2017
Approximately RMB	Approximately RMB
Loss before and after taxation (unaudited)	-	288,000 (equivalent to approximately HK$329,000)

The unaudited book value of total assets and the unaudited book value of net assets of CLGIII as at 31 May 2017 were approximately RMB63,402,000 (equivalent to approximately HK$72,392,000) and approximately RMB9,712,000 (equivalent to approximately HK$11,089,000) respectively.

EQUITY TRANSFER AGREEMENT

The major terms of the Equity Transfer Agreement are set out below:

Date

23 June 2017 (after trading hours)

Parties

Vendor:	廣東都市麗人實業有限公司(Cosmo Lady Guangdong Holdings Limited*), a company established in the PRC with limited liability and an indirect wholly-owned subsidiary of the Company as at the date of this announcement.
Purchaser:	廣東正基創新產業園發展有限公司(Guangdong Zhengji Innovative Industrial Park Development Co., Ltd.*), a company established in the PRC with limited liability and is owned as to 90% by Mr. Zheng and 10% by an Independent Third Party as at the date of this announcement.

The Purchaser is principally engaged in investment holding. For more details about Mr. Zheng, the Purchaser and their relationship with the Company, please refer to the paragraph headed "Implications under the Listing Rules" in this announcement below.

Assets to be disposed of

The Vendor has agreed to dispose of, and the Purchaser has agreed to purchase, the Equity Interest, representing 95% of the registered capital of CLGIII.

As at the date of this announcement, CLGIII owns the land use right of the Land. For more details, please refer to the paragraph headed "Information on CLGIII" in this announcement above.

Repayment of the amount due from CLGIII to the Group

As at the date of this announcement, CLGIII is indebted to Cosmo Lady Guangdong Holdings Limited, a wholly-owned subsidiary of the Company, the Intra-Group Balance of approximately RMB52,800,000 (equivalent to approximately HK$60,287,000). The Intra-Group Balance was advanced to CLGIII to finance the acquisition of the Land and other costs related to the Land. Under the Equity Transfer Agreement, the Purchaser has undertaken to the Vendor that it will repay the Intra-Group Balance in full for and on behalf of CLGIII within 15 days from the date of the Equity Transfer Agreement and in any event no later than the date of Completion.

Consideration

The Group has appointed an independent professional valuer to perform a valuation on the book value of net assets of CLGIII. Taking into account the value of the land use rights of the Land and the Intra-Group Balance, using the asset-based approach, the appraised value of the total net assets of CLGIII as at 31 May 2017 was approximately RMB11,378,000 (equivalent to approximately HK$12,991,000), which is higher than the unaudited book value of net assets of CLGIII as at 31 May 2017 of approximately RMB9,712,000 (equivalent to approximately HK$11,089,000) by approximately RMB1,666,000 (equivalent to approximately HK$1,902,000).

The Consideration is RMB10,809,100 (equivalent to approximately HK$12,342,000). The Purchaser shall pay to the Vendor in full in cash within 15 days from the date of signing the Equity Transfer Agreement. The Consideration was determined after arm's length negotiations between the Vendor and the Purchaser on normal commercial terms with reference to the above appraised value of the total net assets of CLGIII as at 31 May 2017.

The aggregate of the Consideration and the Intra-Group Balance to be received by the Group amounts to RMB63,609,100 (equivalent to approximately HK$72,629,000) as at the date of this announcement.

Completion

Completion shall take place upon the completion of registration of the Disposal with the competent industrial and commercial administration bureau of the PRC.

Immediately after Completion, the Vendor will continue to hold 5% of the equity interests in CLGIII, CLGIII will cease to be a subsidiary of the Company and the financial results of CLGIII will no longer be consolidated into the Group's financial statements.

REASONS FOR AND BENEFITS OF THE DISPOSAL

The Group is principally engaged in the designing, researching, developing and selling of intimate wear products in the PRC.

As the Land is located close to the headquarters of the Group, the Group originally intended to develop the Land into an industrial complex mainly for leasing of premises to the suppliers of the Group so as to shorten the distance to the suppliers, enhance communications with them, improve the efficiency of supply chain department and reduce the transportation costs and travelling expenses of the Group in the future. Following a business review by the Group after the recent share allotment to a strategic investor, the Group believes that there will be better and more development on its existing business in the future to expand its market share in the lingerie and apparel industries, and it therefore intends to focus on its existing