China Vanguard : Connected Transaction - Proposed Amendments to The Terms of The Convertible Bonds

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 contents of this announcement.

(Incorporated in the Cayman Islands with limited liability)

Stock Code: 8156

CONNECTED TRANSACTION PROPOSED AMENDMENTS TO THE TERMS OF THE CONVERTIBLE BONDS

Reference is made to the announcements of the Company dated 13 January 2014 and 17 January 2014. Unless the context requires otherwise, capitalized terms used herein but not otherwise defined shall have the same meanings as those given to them in the announcements.

On 13 January 2014, the Company entered into the Subscription Agreement with the Subscriber, as the Bondholder pursuant to which the Company conditionally agreed to issue the Convertible Bonds, in the aggregate principal amount of HK$89,625,000, to the Bondholder. On 17 January 2014, the Company completed to issue the Convertible Bonds to the Bondholder pursuant to the Subscription Agreement.

As at the date of this announcement, none of the Convertible Bonds have been redeemed nor converted.

THE AMENDMENT AGREEMENT

The Board announces that on 18 January 2017 (after trading hours), the Company and the Bondholder entered into the Amendment Agreement. Principal terms of the Amendment Agreement are set out below:

Date : 18 January 2017

Parties : The Company and the Bondholder

To the best of the Directors' knowledge, information and belief, that as at the date of this announcement, the Bondholder is interested in 472,723,000 Shares, representing approximately 14.65% of the issued Share capital of the Company, being a substantial shareholder and a connected person of the Company under Rule 20.07(1) of the GEM Listing Rules. Pursuant to the Subscription Agreement, if all conversion rights attaching to the Convertible Bonds in the principal amount of HK$89,625,000 are exercised by the Bondholder in full, for a maximum number of originally 150,000,000 Shares to be allotted and issued to the Bondholder and thereafter Bondholder will be interested in 622,723,000 Shares, representing approximately 19.30% of the current issued Share capital of the Company and approximately 18.44% of the enlarged issued Share capital of the Company.

The Proposed Amendments

Pursuant to the Amendment Agreement, the Company and the Bondholder agreed to amend certain terms and conditions of the Convertible Bonds are as follows:

1. The Conversion Price of the Convertible Bonds shall be amended from HK$0.598 per Share to HK$0.359 per Share, which can be converted into for the maximum number of 249,651,810 Shares.

2. The Maturity Date of the Convertible Bonds issued under the Subscription Agreement shall be extended for six months from 17 January 2017 to 17 July 2017 with a further six months extension upon a prior written consent from the Bondholder.

3. Clause 5 of Schedule 2 set in the Subscription Agreement regarding the bearing interest rate of the Convertible Bonds shall be increased from the rate of 2% per annum to 8% per annum and interest shall be paid semi-annually from the date of the Amendment Agreement.

4. Clause 6(a)(iv) of Schedule 2 set in the Subscription Agreement in respect of the par value in the share capital of the Company shall be adjusted to HK$0.0125.

5. Clause 14(a)(xii) of Schedule 2 set in the Subscription Agreement shall be amended as that the shareholding interest of existing controlling Shareholder of the Company, Best Frontier, remains less than 30 per cent and having not been obtained the written consent from the Bondholder.

Save and except for the aforesaid, there are no other material amendments to the terms of the Convertible Bonds.

Conditions Precedent

The Proposed Amendments shall be subjected to the following conditions precedent:

1. all necessary consents and approvals required to be obtained on part of the Company in respect of the Proposed Amendments having been obtained;

2. the Stock Exchange approving the Proposed Amendments including the listing on the Stock Exchange of Conversion Shares arising from conversion of the Convertible Bonds during the extended conversion period as mentioned above; and

3. the passing by the Independent Shareholders at the EGM of the necessary resolutions to approve the Amendment Agreement and the Proposed Amendments.

None of the above conditions could be waived by the parties to the Amendment Agreement. As at the date of this announcement, none of the conditions have been satisfied.

Adjusted Conversion Price per Conversion Share

The adjusted Conversion Price of HK$0.359 per Conversion Share represents:

1. a discount of approximately 11.36% to the closing price per Share of HK$0.405 as quoted on the Stock Exchange on 18 January 2017 (the date of the Amendment Agreement);

2. a discount of approximately 13.08% to the average closing price per Share of approximately HK$0.413 as quoted on the Stock Exchange for the last five consecutive trading dates up to and including 18 January 2017 (the date of the Amendment Agreement); and

3. a premium of approximately 1. 41 % to the average closing price per Share of approximately HK$0.354 as quoted on the Stock Exchange for the last twenty consecutive trading dates up to and including 18 January 2017 (the date of the Amendment Agreement).

The Conversion Price was determined based on arm's length negotiations between the parties with reference to the prevailing market prices of the Shares as quoted on the Stock Exchange.

Specific Mandate for the Issuance of the Additional Conversion Shares

Under the Proposed Amendments, the Conversion Price, which originally HK$0.598 per Share is adjusted to HK$0.359 per Share, which can be converted into the maximum number of 249,651,810 Shares from originally 150,000,000 Shares upon conversion of the Convertible Bonds in full. As result of the Proposed Amendments, the additional Conversion Shares of 99,651,810 at the adjusted Conversion Price of HK$0.359 will be allotted and issued by the Company. The issuance of the additional Conversion Shares by the Company is subject to the Shareholders' approval. The Application will be made to the Listing Committee of the Stock Exchange for the granting of the listing of, and permission of deal in, the proposed issuance of the additional Conversion Shares falling to be allotted and issued under the Proposed Amendments.

Ranking of Conversion Shares

The Conversion Shares, when fully paid, issued and allotted, will rank pari passu in all respects with all Shares in issue as at the date of issuance of the Conversion Shares.

GEM LISTING RULES IMPLICATION

Pursuant to Rule 34.05 of the GEM Listing Rules, any alterations in the terms of convertible debt securities after issue must be approved by the Stock Exchange, except where the alterations take effect automatically under the existing terms of such convertible debt securities. The Company will apply to the Stock Exchange for its approval of the Proposed Amendments contemplated under the Amendment Agreement pursuant to Rule 34.05 of the GEM Listing Rules.

As at the date of this announcement, the Bondholder is interested in 472,723,000 Shares, representing approximately 14.65% of the issued Share capital of the Company. Accordingly, the Bondholder is a substantial Shareholder and a connected person of the Company under Rule 20.07(1) of the GEM Listing Rules. Accordingly, the Proposed Amendments as contemplated under the Amendment Agreement constitutes a connected transaction of the Company under the GEM Listing Rules.

As the Proposed Amendments does not fall into any exemption under Rule 20.71 of the GEM Listing Rules, the Proposed Amendments is subject to the reporting, announcement and the shareholders' approval requirements under Chapter 20 of the GEM Listing Rules. The Bondholder and its associates will abstain from voting in the EGM for approval of the Amendment Agreement, the Proposed Amendments and the transactions contemplated thereunder.