Chiho Tiande : CONTINUING CONNECTED TRANSACTIONS SALES FRAMEWORK AGREEMENT AND REFRESHMENT OF SCHEME MANDATE LIMIT

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CHIHO-TIANDE GROUP LIMITED

齊 合 天 地 集 團 有 限 公 司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 976)

1. CONTINUING CONNECTED TRANSACTIONS SALES FRAMEWORK AGREEMENT

   AND

2. REFRESHMENT OF SCHEME MANDATE LIMIT

CONTINUING CONNECTED TRANSACTIONS - SALES FRAMEWORK AGREEMENT

On 11 January 2017, the Company and Loncin International entered into the Sales Framework Agreement, pursuant to which Loncin International shall purchase and the Company shall supply, or shall procure relevant member(s) of the Group to supply, certain Products to Loncin International for a term commencing from 11 January 2017 and ending on 31 December 2019.

Mr. Tu, a Director and controlling shareholder of the Company, holds 98% equity interests in Loncin Group, which in turn holds 98% equity interests in Loncin Holdings. Loncin International is wholly-owned by Loncin Holdings. Therefore, Loncin International is a connected person of the Company under the Listing Rules by virtue of being an associate of Mr. Tu. The transactions contemplated under the Sales Framework Agreement constitute continuing connected transactions for the Company under the Listing Rules.

As one or more of the applicable percentage ratios for the proposed Annual Caps in respect of the Sales Framework Agreement exceeds 5%, the Sales Framework Agreement is subject to the reporting, announcement and Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.

REFRESHMENT OF SCHEME MANDATE LIMIT

The Board has resolved to refresh the Scheme Mandate Limit so as to provide the Company with the flexibility of granting further Share Options under the Post-IPO Share Option Scheme and to provide incentives to, and recognise the contributions of, the Group's employees and other selected grantees. The Board proposes to seek the approval of the Shareholders at the EGM to refresh the Scheme Mandate Limit.

DESPATCH OF CIRCULAR

A circular containing, among other things, (i) further details about the Sales Framework Agreement and the transactions contemplated thereunder; (ii) details about the proposed refreshment of the Scheme Mandate Limit; (iii) the recommendations from the Independent Board Committee in relation to the Sales Framework Agreement; (iv) a letter of advice from the independent financial adviser to the Independent Board Committee and the Independent Shareholders in relation to the Sales Framework Agreement and the transactions contemplated thereunder; and (v) a notice convening the EGM, will be dispatched to the Shareholders in accordance with the requirements of the Listing Rules. It is currently expected that the circular will be dispatched to the Shareholders on or about 23 January 2017.

CONTINUING CONNECTED TRANSACTIONS SALES FRAMEWORK AGREEMENT

Date: 11 January 2017

Parties: (1) the Company (for itself and on behalf of the members of the Group)

(2) Loncin International

Term: The Sales Framework Agreement is conditional upon the obtaining of the Independent Shareholders' approval at the EGM in accordance with the Listing Rules. Subject to the aforesaid, the term of the Sales Framework Agreement shall commence from 11 January 2017 and end on 31 December 2019.

Nature of transactions: Relevant member(s) of the Group will supply certain

Products to Loncin International, including but not limited to, nonferrous metal.

Pricing and its determination: The price at which the Group will supply the Products to

Loncin International will be determined based on:

1. the government-prescribed price; or

2. if there is no applicable government-prescribed price, the Market Price

Time and method of payment: Based on market practice

Access to records: Loncin International undertakes to the Company to allow

the Company's auditors sufficient access to the records of Loncin International for the purpose of reporting on the transactions under the Sales Framework Agreement so as to enable the Company to comply with its relevant obligations under the Listing Rules.

PROPOSED ANNUAL CAPS AND BASIS OF DETERMINING THE ANNUAL CAPS

The proposed Annual Caps in respect of the transactions contemplated under the Sales Framework Agreement are US$150,000,000 for the year ending 31 December 2017, US$250,000,000 for the year ending 31 December 2018 and US$350,000,000 for the year ending 31 December 2019.

The proposed Annual Caps of the transactions contemplated under the Sales Framework Agreement are determined with reference to the following factors:

1. the estimated purchase orders to be placed by Loncin International with the Group;

2. the projected increase in the volume and Market Prices of the Products to be sold to Loncin International during the term of the Sales Framework Agreement; and

3. expected increase in the price of raw materials and labour costs in the next few years.

The Directors (excluding all independent non-executive Directors who will express their views after considering the opinion of the independent financial adviser) consider that the Annual Caps are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

INTERNAL CONTROL MEASURES

To ensure that the terms offered by the Group to Loncin International are no less favourable than those entered into between the Group and independent third parties and that the proposed Annual Caps are not exceeded, the Group will adopt the following internal control measures:

1. the prices for the Products will be negotiated on arm's length basis and at prices with reference to the prevailing market prices of similar products, which will be determined through periodic price research conducted by the staff of the operation department of the Company by obtaining the prices of products charged by the independent third parties for similar products comparable to the Products under the Sales Framework Agreement;

2. the compliance department of the Company will closely monitor the transaction amounts in relation to the transactions under the Sales Framework Agreement to ensure that the proposed Annual Caps are not exceeded;

3. the independent non-executive Directors will review and confirm whether the transactions contemplated under the Sales Framework Agreement are entered into in the ordinary and usual course of business of the Group, on normal commercial terms or better and are fair and reasonable and in the interests of the Shareholders as a whole; and

4. the Company will engage its auditors to review the data of the transactions under the Sales Framework Agreement in compliance with the annual reporting and review requirements under the Listing Rules.

REASONS FOR AND BENEFITS OF THE TRANSACTIONS

The Directors consider that the transactions contemplated under the Sales Framework Agreement will broaden the revenue base of the Group. It is expected that the demand for a constant supply of Products by Loncin International from the Group will last for the next three years. The entering into of the Sales Framework Agreement will enable the Group to comply with the applicable requirements under the Listing Rules in respect of continuing connected transactions and allow Loncin International to purchase the Products from the Group on an uninterrupted basis during the term of the Sales Framework Agreement, thereby generating revenue for the Group.

The Company completed the acquisition of Scholz Holding in December 2016. Upon completion of such acquisition, the Group will be able to leverage on Scholz Group's technological capabilities and know-how to enhance its recycling operations and to secure its upstream material supplies from the European and U.S. markets. The entering into of the Sales Framework Agreement will enable the Group to best utilise its facilities to enhance the overall operating performance of the Group.