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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.

DISCLOSEABLE AND CONNECTED TRANSACTION FINANCE LEASE ARRANGEMENT FINANCE LEASE ARRANGEMENT

The Board is pleased to announce that, on 29 June 2016 (after trading hours), Tengzhou Eastern (an indirect wholly-owned subsidiary of the Company) and South China Leasing entered into the Finance Lease Arrangement comprising, among others, (i) the Sale and Purchase Agreement and (ii) the Finance Lease Agreement, whereby Tengzhou Eastern, being the owner of the Machineries and Equipment, agreed to sell the Machineries and Equipment to South China Leasing at the Purchase Consideration of RMB70,000,000 (equivalent to approximately HK$81,620,000) and South China Leasing agreed to lease back the Machineries and Equipment to Tengzhou Eastern for the Lease Consideration of approximately RMB78,158,000 (equivalent to approximately HK$91,132,228), comprising the rental principal of RMB70,000,000, the lease interest of approximately RMB6,058,000 and the lease handling fee of RMB2,100,000, for a term of thirty-six (36) months.

On the same date, the Company entered into the Guarantee Agreement in favour of South China Leasing as security for the payment obligations of Tengzhou Eastern under the Finance Lease Agreement. The Finance Lease Arrangement is also secured by a letter of comfort to be signed by Shougang Holding.

LISTING RULES IMPLICATIONS

As one or more of the applicable percentage ratios under Rule 14.07 of the Listing Rules in respect of the transactions contemplated under the Finance Lease Arrangement is/are more than 5% but less than 25%, the Finance Lease Arrangement 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.

As at the date hereof, Shougang Holding is entitled to exercise or control the exercise of the voting rights in respect of 217,984,000 Shares, representing approximately 11.34% of the number of issued shares of the Company, and is a substantial Shareholder and a connected person of the Company. South China Leasing is an indirect 75% owned subsidiary of Shougang Concord Grand, which is in turn held as to approximately 50.53% by Shougang Holding. As such, South China Leasing is an associate of Shougang Holding and is also a connected person (at the issuer level) of the Company. The Finance Lease Arrangement also constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules and is subject to the reporting, announcement and Independent Shareholders' approval requirements thereunder.

GENERAL

The GM will be held for the Independent Shareholders to consider, and if thought fit, approve, by way of poll, the Finance Lease Arrangement and the transactions contemplated thereunder. Shougang Holding and its associates are considered to have material interests in the Finance Lease Arrangement, and they will abstain from voting on the resolutions relating to the Finance Lease Arrangement and the transactions contemplated thereunder at the GM. Mr. Li Shaofeng (Chairman of the Company and an executive Director) holds the directorship in Shougang Holding and/or certain of its subsidiaries, abstained from voting on the relevant Board resolutions for the approval of the Finance Lease Arrangement. Save as the aforesaid, none of the Directors has a material interest in the Finance Lease Arrangement and therefore none of them abstained from voting on the relevant Board resolutions approving the same.

The Independent Board Committee comprising all independent non-executive Directors, namely Mr. Yip Kin Man, Raymond, Mr. Law Yui Lun and Mr. Lam Yiu Kin, each of whom has no material interest in the transactions under the Finance Lease Arrangement, has been formed to consider and advise the Independent Shareholders on the terms of the Sale and Purchase Agreement and the Finance Lease Agreement.

Quam Capital Limited has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders on the Finance Lease Arrangement and the transactions as contemplated thereunder.

A circular containing, among other things, (i) further details of the Finance Lease Arrangement; (ii) recommendations from the Independent Board Committee; (iii) a letter of advice from the independent financial adviser to the Independent Board Committee and the Independent Shareholders; and (iv) a notice of the GM is expected to be despatched to the Shareholders on or before 21 July 2016 in accordance with the Listing Rules.

FINANCE LEASE ARRANGEMENT

The Board is pleased to announce that, on 29 June 2016 (after trading hours), Tengzhou Eastern (an indirect wholly-owned subsidiary of the Company) and South China Leasing entered into the Finance Lease Arrangement comprising, among others, (i) the Sale and Purchase Agreement and (ii) the Finance Lease Agreement, whereby Tengzhou Eastern agreed to sell the Machineries and Equipment to South China Leasing at the Purchase Consideration of RMB70,000,000 (equivalent to approximately HK$81,620,000) and South China Leasing agreed to lease back the Machineries and Equipment to Tengzhou Eastern for the Lease Consideration of approximately RMB78,158,000 (equivalent to approximately HK$91,132,228) for a term of thirty-six (36) months.

A summary of the salient terms of the Sale and Purchase Agreement, the Finance Lease Agreement and the Guarantee Agreement is set out below:

  1. SALE AND PURCHASE AGREEMENT Date: 29 June 2016 Parties: Tengzhou Eastern (as seller)

    South China Leasing (as purchaser)

    Subject matter

    Pursuant to the Sale and Purchase Agreement, Tengzhou Eastern, being the owner of the Machineries and Equipment, agreed to sell, and South China Leasing agreed to purchase from Tengzhou Eastern the Machineries and Equipment at the Purchase Consideration of RMB70,000,000 (equivalent to approximately HK$81,620,000).

    The Machineries and Equipment consist of certain machineries and equipment primarily used by Tengzhou Eastern for manufacturing of steel cord.

    The Purchase Consideration of RMB70,000,000 (equivalent to approximately HK$81,620,000), which is equivalent to the rental principal under the Finance Lease Agreement as detailed below, was determined after arm's length negotiations between Tengzhou Eastern and South China Leasing with reference to the carrying value of the Machineries and Equipment of approximately RMB91,930,000 as reflected in the Group's consolidated financial statements as at the date of the Sale and Purchase Agreement, the lease term and similar prevailing finance lease arrangements.

    Conditions

    South China Leasing agreed to pay the Purchase Consideration to a designated bank account of Tengzhou Eastern upon fulfillment of all conditions set out as follows:

    1. the Finance Lease Agreement having been duly executed and become effective;

    2. the letter of comfort having been signed by Shougang Holding;

    3. insurance having been taken out to cover the Machineries and Equipment pursuant to the Finance Lease Agreement with the original of the insurance policy having been delivered to South China Leasing; and

    4. Tengzhou Eastern having paid the first instalment of the lease handling fee and the security deposit (for details of each of the lease handling fee and the security deposit, please refer to the paragraph headed "(II) Finance Lease Agreement - Lease Consideration" below to South China Leasing pursuant to the Finance Lease Agreement).

    5. Ownership of the Machineries and Equipment

      The ownership of the Machineries and Equipment will be passed from Tengzhou Eastern to South China Leasing upon payment of the Purchase Consideration by South China Leasing in full in accordance with the Sale and Purchase Agreement.

    Shougang Concord Century Holdings Ltd. published this content on 29 June 2016 and is solely responsible for the information contained herein.
    Distributed by Public, unedited and unaltered, on 29 June 2016 12:30:09 UTC.

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