Global Market : Collaboration to develop land in Guangzhou

Collaboration to develop land in Guangzhou

Global Market Group Limited

(the "Company" or "GMG")

Collaboration to develop land in Pazhou District, Guangzhou

Further to the Company's announcement on 10 August 2015 regarding the payment of a deposit in connection with a potential land acquisition, the Company would like to announce details of this potential opportunity.

The Land Project

In early 2015, the municipal government of Guangzhou, the capital of Guangdong Province, PRC, revealed that it would start the construction of an e-commerce zone in Pazhou Island (the "Pazhou e-commerce zone"). Pursuant to the plan, the Pazhou e-commerce zone would house a central business district centering on e-commerce. The Pazhou e-commerce zone expects to attract leading Chinese IT companies and, upon completion, to generate e-commerce business transactions of over RMB100 billion annually. Companies which have reportedly acquired land use rights in the Pazhou e-commerce zone include some of China's largest technology companies including Tencent, Alibaba, Gome, Fosun and MOBI.

The Company was offered the opportunity to bid for a track of land of approximately 4,269 sqm (the "Land") in the Pazhou e-commerce zone at a price of RMB 709.88 million. The Land has the development potential to yield a gross floor area ("GFA") of approximately 57,000sqm. Depending on the design and materials used, the Company believes that approximately RMB490 million will be required to build, thereby bringing the total gross development cost of the project (the "Land Project") to an estimated RMB1.2 billion.

The Company believes that the Land, which is being offered only to eligible IT related companies, was offered by the Guangzhou government at a very attractive price. In addition, the Company believes that relocating the Company's group operations to the Pazhou e-commerce zone once it has been developed would have enhanced the Company's prestige, reputation and brand image.

However, the Group's requirement is only for approximately one-fifth of the total GFA from the Land Project. The size of the Land is therefore larger than the Company's own current requirements and the total cost of approximately RMB710 million to acquire the Land and the additional amount require to build exceeds the Company's financing capabilities. The Company also does not believe that it should utilise any material part of its financial resources in a project which is not core to its business needs. In addition, given the size of the transaction, the acquisition would have triggered a reverse takeover under AIM Rule 14.

Hence, the Company would like to collaborate with others such that the Company would be able to utilise the opportunity presented by the Guangzhou government and secure office space in the Pazhou e-commerce zone at no financial risks to it.

Proposed Collaboration Arrangements

If the Group had wanted to bid for the Land, it was required to submit its bid for the Land ("Land Bid") on 10 August 2015 together with an initial deposit to the Guangzhou municipal government of RMB 142 million (the "Initial Deposit").

To achieve its objectives and not utilise its financial resources:

· T he Company established Winning Planet Limited ("WP") a BVI wholly owned subsidiary of the Company. WP holds 100% of Global Pearl Limited ("GP") which is another BVI company. GP then indirectly holds Guangzhou Wang Long ("GWL"), a limited liability company established in the PRC. GWL would be the bid vehicle for the Land Bid.

· The Company wished to collaborate with Luo Xian Hao ("Mr Luo") whereby Mr. Luo would provide RMB110 million for the Initial Deposit and agree to provide another RMB40 million if the Land Bid were successful. Under that arrangement, Mr. Luo would acquire a 9.43% interest in GWL for that RMB150 million and on completion would be able to exchange that interest for approximately the same proportion of GFA in the completed development. On 30 July 2015, GP, GWL and Mr. Luo entered into a collaboration agreement (the "Onshore Collaboration Agreement") to document their arrangements.

· The Company also wished to collaborate with Global Marketing Group Holding Limited ("GMGH") whereby GMGH would acquire a 75% economic interest in the remaining Land Project with the remaining 25% being kept by WP. The intention being that GMGH would take all the risks and obligations of the development (including sourcing the necessary funding for the Land Project's gross development cost). On completion, WP would exchange the interests kept by it for approximately the same proportion of GFA in the completed development (being approximately 13,000 sqm of projected office space ("Office Space")) on an unencumbered basis. The collaboration agreement between WP and GMGH (the "Offshore Collaboration Agreement") has not been signed pending clarification whether this agreement would amount to a reverse takeover for the Company under AIM Rule 14.

GMGH is a British Virgin Islands ("BVI") company wholly owned by Mr. Weijia Pan ("David Ling") who is the Company's Chairman, Chief Executive Officer and controlling shareholder. Mr Luo is a PRC national and is independent of the Company and its related parties.

All the necessary funding for the Land Project was to be provided by Mr Luo or sourced by GMGH on a non-recourse basis to the Company. The collaboration arrangements with GMGH and Mr. Luo would have allowed the Company to eventually acquire the Office Space in the resulting development at no upfront cost, ongoing financial liability to the Company or financial risk to the Company.

Had the Offshore Collaboration Agreement been entered into, it would have amounted to a related party transaction under AIM Rule 13. However, the purpose of the Offshore Collaboration Agreement was intended not to benefit David Ling and its connected persons but to provide a vehicle for the Company to be ring-fenced from all financial obligations for the Land Project. GMGH would have to undertake all the necessary fund-raising and sales to raise money for the Land cost as well as the building cost. Upon successful completion of development, the Company would get the unencumbered Office Space.

The Offshore Collaboration Agreement contains an option for the Company to acquire the entire Land Project should it choose to do so within a year. As advised by the Company's then nominated adviser, the Offshore Collaboration Agreement might amount to a reverse takeover under AIM Rule 14.

The Bid

As required to keep to the deadline, on 10 August 2015, GWL submitted the Land Bid and paid the Initial Deposit. Of the RMB 142 million of the Initial Deposit, Mr. Luo extended RMB 110 million and the Company extended the remaining RMB32 million (the "Loan").

The results of the Land Bid were to be announced in the late afternoon (China time) on 20 August 2015. If the GWL were successful in the bid, it would be obliged to enter into a land transfer agreement to acquire the Land or lose the Initial Deposit.

By early morning (China time) 20 August 2015, the Company could not ascertain if the Offshore Collaboration Agreement would amount to a reverse takeover under AIM Rule 14. Had the Companyentered into the Offshore Collaboration Agreementand it is subsequently ruled that it is a reverse takeover under AIM Rule 14, the Company would be in breach of the AIM Rules which require prior shareholders' approval to be given.

However, without the Offshore Collaboration Agreementbeing entered into, the Company would trigger a reverse takeover in breach of AIM Rule 14 if GWL were to be successful in the Land Bid.

The Company has no intention of undertaking any transaction which breach the AIM Rules. Hence, the Company decided that its best course of action would be to divest itself of the entire Land Project immediately.

Sale of the GP Group

To divest itself of the Land Project, in the late morning of 20 August 2015, the Company and WP entered into a sale and purchase agreement ("SPA") with GMGH and its connected parties, World Target Limited and Future World International Limited (the "Connected Purchasers") whereby WP transferred the entire issued share capital of GP to the Connected Purchasers. The consideration for the purchase was US$1,000, as GP and its subsidiaries (the "GP Group") had no assets at the time of the transfer. The Connected Purchasers collectively own more than 50% shares in the Company.

The SPA confirms that for the purposes of paying the Initial Deposit, the Company loaned to GWL the Loan. Under the SPA, this Loan shall be repaid forthwith if the Land Bid were unsuccessful and the Guangzhou government returns the Initial Deposit to GWL. The Loan shall be repaid forthwith if the Land Bid were successful and Mr. Luo pays the outstanding balance of RMB 40 million by 31 August 2015 to the GP Group pursuant to the Onshore Collaboration Agreement. Failing both, GMGH is required to procure the Loan to be repaid or to pay the Loan itself no later than six months after the date of the SPA.

In addition, under the SPA:

· WP has the right to require the Connected Purchasers to transfer to it a 25% equity interest in GP ("GP Transfer") for no consideration if such transfer would not cause the Company to breach the AIM Rules.

· WP also has an option ("Option") to acquire the entire interest in the GP Group from the Connected Purchasers for a total consideration of the amount invested in the Land Project by the Connected Purchasers, the total costs incurred by them in the Land Project and a premium of US$1 million.

The GP Transfer is given to ensure that, if the Company were to be permitted to hold interests in the Land Project without breaching the AIM Rules, it would do so. The Company is currently trying to seek clarification from the Exchange.

The Option is a call option given to the Company for no premium. The Company has the sole right and discretion whether to exercise the option. The Company has no present intention to exercise the Option to acquire the Land Project as (i) it does not wish to be a developer - it only wants the Office Space in the resulting development without financial costs or risks, (ii) it does not wish to be portrayed to be fundamentally changing its business (due to the property development activities) when in fact it is not, (iii) it does not believe that it is in the interest of the Company's shareholders (especially minority shareholders) to trigger a pro-longed suspension of its shares pending the publishing of a re-admission document particularly as this is non-core to its business, and (iv) the Company does not wish to take on any financial commitment for the Land Project.

However, the Option gives the Company the opportunity to obtain more benefit from the Connected Purchasers in future should the independent Directors believe that there is a substantial upside from the development beyond the Office Space which it wishes to hold.

Subsequent to the signing of the SPA, in the late afternoon (China time) 20 August 2015, it was announced that GWL was indeed successful in the Land Bid. On the same day, GWL signed the land transfer agreement with the Guangzhou government.

The results of the sequence of event are that:

· If the Company gets clarity that the GP Transfer would not breach the AIM Rules, the Company will (through WP) acquire 25% of the GP Group for no consideration pursuant to the GP Transfer. If so, the Company will be entitled to the Office Space when the development is completed as per the original arrangement under the Offshore Collaboration Agreement.

· If not, the Company will not proceed with the GT Transfer.

· The Company has the Option to acquire the Land Project which it currently does not wish to exercise.

Substantial Transaction and Related Party Transaction

Under the AIM Rules:

· The Onshore Collaboration Agreement with Mr. Luo and the payment of the Initial Deposit for the Land is a substantial transaction for the Company.

· The SPA is a related party transaction for the Company as Connected Purchasers are wholly-owned or controlled by David Ling. Having consulted the Company's then nominated adviser (who did not express an opinion), the Company's independent directors consider that the terms of the SPA are fair and reasonable insofar as the Company and its shareholders are concerned.

The Company will remain suspended pending the appointment of a new nominated adviser and the publication of further information required under the AIM Rules for Companies.

About Global Market Group Limited

Global Market generates revenues by operating the online portal www.globalmarket.com that connects high-quality manufacturers in China with buyers from all over the world. GMC manufacturers listed on the portal with "GMC" logo undergo independent quality audits conducted by Germany's respected TUV Rhineland group ("TUV") to gain Global Manufacturer Certificate (or "GMC") certification, assuring international buyers they have met demanding and independently-assessed certification standards, thus reducing risk, building trust, and providing a convenient and inexpensive route for manufacturers to access an international buying audience. Manufacturers pay to use the web portal, and international buyers are offered free access.

For further information, please visit www.globalmarket.com or contact:

David Ling/ Cheandy Hu/ Mophy Fan

Global Market Group Limited: [phone]

Martin Davison

Westhouse Securities Limited, Broker: [phone]