Newtree : Announcements and Notices - Discloseable Transaction in Relation to Disposal of the Entire Equity Interest in Brighten Tree Limited

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

Newtree Group Holdings Limited

友川集團控股有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1323) DISCLOSEABLE TRANSACTION IN RELATION TO DISPOSAL OF THE ENTIRE EQUITY INTEREST IN BRIGHTEN TREE LIMITED THE DISPOSAL

The Board is pleased to announce that on 5 May 2017 (after trading hours), the Vendors, which are wholly-owned subsidiaries of the Company, the Company as Vendors' guarantor and the Purchasers entered into the Disposal Agreement, pursuant to which the Vendors have agreed to sell and the Purchasers have agreed to purchase the Sale Shares, representing the entire issued share capital of the Target Company, and the Sale Loans, at the total Consideration of HK$85,000,000.

Upon Completion, the Target Group will cease to be subsidiaries of the Company.

LISTING RULES IMPLICATIONS

As one or more of the applicable percentage ratios calculated in accordance with the Listing Rules in respect of the Disposal exceed 5% but are below 25%, the Disposal constitutes a discloseable transaction of the Company and is subject to reporting and announcement requirements as set out in Chapter 14 of the Listing Rules.

THE DISPOSAL

The Board is pleased to announce that on 5 May 2017 (after trading hours), the Vendors, which are wholly-owned subsidiaries of the Company, the Company as Vendors' guarantor and the Purchasers entered into the Disposal Agreement, pursuant to which the Vendors have agreed to sell as beneficial owners and the Purchasers have agreed to purchase the Sale Shares, representing the entire issued share capital of the Target Company, and the Sale Loans.

THE DISPOSAL AGREEMENT

Date: 5 May 2017 (after trading hours)

Parties:	(1)	Tary Limited, a wholly-owned subsidiary of the Company, as Vendor A;
(2)	Ramber Industrial Limited, a wholly-owned subsidiary of the Company, as Vendor B;
(3)	the Company, as Vendors' guarantor;
(4)	Mr. Lin Damin, as Purchaser A; and
(5)	Mr. Chang Yikui, as Purchaser B.

To the best of the Directors' knowledge, information and belief having made all reasonable enquiries, the Purchasers are Independent Third Parties.

Subject matter

Pursuant to the Disposal Agreement:

1. Vendor A shall sell as beneficial owner and Purchaser A shall purchase the Sale Shares A and the Sale Loan A; and

2. Vendor B shall sell as beneficial owner and Purchaser B shall purchase the Sale Shares B and the Sale Loan B.

The Sale Shares, representing the entire issued share capital of the Target Company, will be sold free from all Encumbrances together with all rights now and hereafter attaching thereto including but not limited to all dividends to be paid, declared or made in respect thereof at any time on or after the date of Completion.

The Sale Loans, representing the shareholders' loans owing by the Target Company to the Vendors at Completion, will be sold free from all Encumbrances together with all its rights, titles, benefits and interests with effect from Completion. As at the date of this announcement, the Sale Loan A and the Sale Loan B amounted to HK$19,448,117 and HK$19,717,385 respectively.

The Vendors shall not be obliged to complete the sale and purchase of any of the Sale Shares and the Sale Loans unless the sale and purchase of all the Sale Shares and the Sale Loans are completed simultaneously.

Consideration

The Consideration for the sale and purchase of the Sale Shares and the Sale Loans shall be HK$85,000,000, which shall be apportioned as follows:

1. the consideration for the Sale Loans shall be the outstanding amount of the Sale Loans as at the date of Completion on a dollar for dollar basis; and

2. the consideration for the transfer of the Sale Shares shall be the amount of the Consideration less the consideration for the Sale Loans set out in the sub-paragraph (1) above.

   The Consideration shall be payable by the Purchasers to the Vendors in the following manner:

3. HK$65,000,000, being the Deposit and part payment of the Consideration, has been paid by the Purchasers to the Vendors in cash as to HK$32,500,000 to Vendor A and HK$32,500,000 to Vendor B upon signing the Disposal Agreement;

4. HK$14,000,000 shall be paid by the Purchasers to the Vendors in cash as to HK$7,000,000 to Vendor A and HK$7,000,000 to Vendor B at Completion; and

5. a retention money in the sum of HK$6,000,000 (the "Retention Money") shall be paid by the Purchasers to the Escrow Agent upon Completion, which, having deducted the Offsetting Amount (as defined below), shall be released to the Vendors in equal shares within five Business Days after the receipt of the Adjustment Notice (as defined below) from the Purchasers quantifying the Offsetting Amount.

The Vendors jointly and severally undertake that they shall assume all liabilities and obligations and to satisfy all claims and demands arising out of and in connection with

(i) the outstanding transactions between the Target Group and any third parties other than the Purchasers, the Vendors and the Company up to the date of Completion; and (ii) the termination of the employment contracts with all existing employees of the Target Group (the "Assumed Liabilities").

The Purchasers shall be entitled to deduct from the Retention Money the actual amounts (the "Offsetting Amount") paid by the Purchasers and/or the Target Group in connection with the Assumed Liabilities, and the Purchasers shall deliver a notice (the "Adjustment Notice") setting out the Offsetting Amount to the Vendors and the Escrow Agent within three Business Days after the expiry of the retention period of four months from the date of Completion. The Retention Money, having deducted the Offsetting Amount as set out in the Adjustment Notice, shall be released to the Vendors within five Business Days after the receipt of the Adjustment Notice from the Purchasers. The Adjustment Notice shall, in the absence of manifest error, be final and conclusive of the matters stated therein and binding on the Vendors and the Purchasers, and the Offsetting Amount shall not exceed the amount of the Assumed Liabilities as quantified by the Vendors upon Completion.

The Consideration was arrived at after arm's length negotiations between the Vendors and the Purchasers on normal commercial terms by taking into account (i) the net asset value of the Target Group attributable to the Sale Shares; (ii) the operating performance of the Target Group over the past few years; (iii) the prospect of the household and clinical hygienic disposables business segment; and (iv) the payment mechanism of the Retention Money.

Having considered the above factors, the Board considers that the Consideration, which was arrived at after arm's length negotiations, is fair and reasonable and is in the interests of the Company and the Shareholders as a whole.

Conditions precedent

Completion is conditional upon and subject to the following conditions:

1. the Purchasers having completed the due diligence review on the assets, liabilities, operations and affairs of the Target Group;

2. all necessary consents, licences and approvals required to be obtained on the part of the Vendors in respect of the sale and purchase of the Sale Shares and the Sale Loans having been obtained;

3. all necessary consents, licences and approvals required to be obtained on the part of the Purchasers in respect of the sale and purchase of the Sale Shares and the Sale Loans having been obtained;

4. there being no matters, facts or circumstances which constitute or will constitute breach of the warranties given by the Vendors contained in the Disposal Agreement; and

5. there being no matters, facts or circumstances which constitute or will constitute breach of the warranties given by the Purchasers contained in the Disposal Agreement.

The Vendors shall use their best endeavours to procure the fulfillment of the conditions set out in (1), (2) and (4) above. The Purchasers shall use their best endeavours to procure the fulfillment of the conditions set out in (3) and (5) above. The Vendors may in their absolute discretion at any time waive the condition set out in (5) above. The Purchasers may in their absolute discretion at any time waive the conditions set out in (1) and (4) above. None of the conditions set out in (2) and (3) above are capable of being waived.

If the conditions set out above have not been satisfied (or as the case may be, waived) on or the Long Stop Date, the Disposal Agreement shall cease and determine and thereafter neither party shall have any obligations and liabilities towards each other hereunder save for any antecedent breaches of the terms hereof, and the Vendors shall refund the Deposit to the Purchasers without interest within ten Business Days.

Guarantee provided by the Company

In consideration of the Consideration and the Vendors entering into the Disposal Agreement, the Company has unconditionally and irrevocably guaranteed to the Purchasers the due and punctual performance and observance by the Vendors of all of the obligations and commitments under the Disposal Agreement and agreed to indemnify the Company against all losses, liabilities, damages, expenses and costs which the Purchasers may suffer through or arising from the non-performance or delay in performance by the Vendors. The maximum liability of the Company under the Disposal Agreement shall not exceed HK$6,000,000.

Completion

Completion shall take place within three Business Days after the fulfillment or waiver (as the case may be) of the conditions precedent set out in the Disposal Agreement or such other date as the Vendors and the Purchasers may agree in writing.

INFORMATION ON THE TARGET GROUP

The Target Company is a company incorporated in Hong Kong with limited liability, which is principally engaged investment holding. The Target Company holds 100% equity interests in the PRC Company, a company incorporated in the PRC with limited liability and is principally engaged in the manufacture of plastic disposables, environmental friendly disposable lunch boxes, plastic additives, plastic machinery and equipment, plastic clinical products (except for licensed products) and packaging of plastic products. The Target Group is the manufacturing arm of the household and clinical hygienic disposables business segment of the Group and the PRC Company owns a manufacturing plant in Huizhou.

Set out below is a summary of the key financial data of the Target Group extracted from the audited consolidated financial statements of the Group for the years ended 31 March 2015 and 2016 and the unaudited consolidated management accounts of the Group for the 11 months ended 28 February 2017 which were prepared in accordance with the generally accepted accounting principles in Hong Kong:

For the year ended 31 March 2015 For the year ended 31 March 2016 For the 11 months ended 28 February 2017

HK$'000 (audited) (audited) (unaudited)

Revenue	94,283	54,650	39,993
Net (loss) before tax	(3,873)	(4,564)	(4,699)
Net (loss) after tax	(3,969)	(4,602)	(4,699)
Net assets	37,901	30,999	25,172

FINANCIAL EFFECT OF THE DISPOSAL

Upon Completion, the Group will cease to have any interests in the Target Group. The Group will no longer own any interest in the manufacturing arm of the household and clinical hygienic disposables business and the assets, liabilities and financial results of the Target Group will not be consolidated in the financial statements of the Group following Completion.

GAIN OR LOSS ATTRIBUTABLE TO THE DISPOSAL

Based on the preliminary assessment on the unaudited combined financial information of the Target Group, the Group will record a gain of approximately HK$60 million as a result of the Disposal. The actual gain or loss as a result of the Disposal to be recorded by the Group is subject to final audit to be performed by the auditors of the Company. The proceeds from the Disposal will be applied towards the general working capital of the Group, potential expansion of the Group's other existing business and for future potential investment opportunities as may be identified from time to time.

REASONS FOR THE DISPOSAL

The Group is principally engaged in (i) manufacturing and trading of the household and clinical hygienic disposables and trading of related raw materials; (ii) wholesale and retail of household consumables; (iii) coal trading business; (iv) digital technology business; (v) education business; and (vii) provision of money lending services.

The Group's household and clinical disposables business segment has been making losses for the past three years due to the intensified competition, loss of customers, rising manufacturing and labour costs. In view of the unsatisfactory results and the uncertain operating environment of the business, the Board considers that it is appropriate and in the interests of the Group to terminate its loss-making business and to reallocate more resources on other business segments of the Group.

Accordingly, the Directors are of the view that the terms of the Disposal Agreement are on normal commercial terms and are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

LISTING RULES IMPLICATIONS

As one or more of the applicable percentage ratios calculated in accordance with the Listing Rules in respect of the Disposal exceeds 5% but are below 25%, the Disposal constitutes a discloseable transaction of the Company and is subject to reporting and announcement requirements as set out in Chapter 14 of the Listing Rules.

DEFINITIONS

Unless otherwise specified, the following terms have the following meanings in this announcement:

"Board" the board of Directors

"Business Day(s)" a day (other than a Saturday, Sunday or public holiday) on which the licensed banks in Hong Kong are generally open for business throughout their normal business hours

"Company" Newtree Group Holdings Limited, a company incorporated in the Cayman Islands with limited liability and the issued shares of which are listed on the Main Board of the Stock Exchange (stock code: 1323)

"Completion" completion of the Disposal

"connected person" has the meaning ascribed to it under the Listing Rules "Consideration" the consideration of HK$85,000,000 payable by the Purchasers

to the Vendors for the acquisition of the Sale Shares and the Sale Loans under the Disposal Agreement

"Deposit" a sum of HK$65,000,000 being the deposit and part payment of the Consideration to be made by the Purchasers to the Vendors for the purchase of the Sale Shares and the Sale Loans

"Director(s)" the director(s) of the Company

"Disposal" the Disposal of the Sale Shares and the Sale Loans by the Vendors to the Purchasers pursuant to the terms of the Disposal Agreement

"Disposal Agreement" the Disposal Agreement dated 5 May 2017 and entered into between the Purchasers, the Vendors and the Company in relation to the Disposal

"Encumbrances" any mortgage, charge, pledge, lien (otherwise than arising by statute or operation of law), hypothecation or other encumbrance, priority or security interest, deferred purchase, title retention, leasing, sale and purchase or sale and leaseback arrangement whatsoever nature and includes any agreement for any of the same

"Escrow Account" a bank account for holding the Retention Money which is operated and maintained by the Escrow Agent

"Escrow Agent" the escrow agent to be appointed by the Vendors and the Purchasers jointly for the purpose of operating and maintaining the Escrow Account

"Group" the Company and its subsidiaries

"Hong Kong" the Hong Kong Special Administrative Region of the PRC

"Independent Third Party(ies)"

third party(ies) independent of and not connected with the Company and its connected persons

"Listing Rules" Rules Governing the Listing of Securities on the Stock Exchange

"Long Stop Date" the date falling twenty Business Days after the date of the Disposal Agreement, or such later date as the Vendors and the Purchasers may agree in writing

"PRC Company" 惠州市駿洋塑膠有限公司(Huizhou Junyang Plastics Company Limited*), a company established in the PRC with limited liability and a direct wholly-owned subsidiary of the Target Company

"PRC" the People's Republic of China

"Purchaser A" Mr. Lin Damin

"Purchaser B" Mr. Chang Yikui

"Purchasers" Purchaser A and Purchaser B

"Retention Money" has the meaning ascribed to it under the paragraph headed "The Disposal Agreement - Consideration" of this announcement

"Sale Loan A" the shareholder's loan owing by the Target Company to Vendor A at Completion and all obligations, liabilities and debts owing or incurred by the Target Group to Vendor A on Completion whether actual, contingent or deferred and irrespective of whether or not the same is due and payable on Completion. As at the date of this announcement, the Sale Loan A amounted to approximately HK$19,448,117

"Sale Loan B" the shareholder's loan owing by the Target Company to Vendor B at Completion and all obligations, liabilities and debts owing or incurred by the Target Group to Vendor B on Completion whether actual, contingent or deferred and irrespective of whether or not the same is due and payable on Completion. As at the date of this announcement, the Sale Loan B amounted to approximately HK$19,717,385

"Sale Loans" the Sale Loan A and the Sale Loan B

"Sale Shares" Sale Shares A and Sale Shares B, representing the entire issued share capital of the Target Company

"Sale Shares A" 5,000 shares in the Target Company owned by Vendor A as at the date of this announcement, representing 50% of the entire issued share capital of the Target Company

"Sale Shares B" 5,000 shares in the Target Company owned by Vendor B as at the date of this announcement, representing 50% of the entire issued share capital of the Target Company

"Share(s)" ordinary share(s) of HK$0.01 each in the share capital of the Company

"Shareholder(s)" holder(s) of issued Shares

"Stock Exchange" The Stock Exchange of Hong Kong Limited

"Target Company" Brighten Tree Limited, a company incorporated in Hong Kong with limited liability

"Target Group" Target Company and the PRC Company

"Vendor A" Tary Limited, a company incorporated in Hong Kong with limited liability and a wholly-owned subsidiary of the Company

"Vendor B" Ramber Industrial Limited, a company incorporated in Hong Kong with limited liability and a wholly-owned subsidiary of the Company

"Vendors" Vendor A and Vendor B

"HK$" Hong Kong dollar, the lawful currency of Hong Kong

"%" per cent.

* For identification purposes only

By Order of the Board

Newtree Group Holdings Limited Mr. Wong Wai Sing

Chairman and Executive Director

Hong Kong, 5 May 2017

As at the date of this announcement, the executive Directors are Mr. Wong Wai Sing, Mr. Chan Kin Lung, Mr. Lee Chi Shing, Caesar, Ms. Yick Mi Ching, Dawnibilly and Mr. Wong Jeffrey; the non-executive Director is Ms. Lin Fang; and the independent non-executive Directors are Mr. Kwok Kam Tim, Dr. Hui Chik Kwan and Mr. Tso Ping Cheong, Brian.