CHIGO : DISCLOSEABLE TRANSACTION FINANCE LEASE ARRANGEMENT (in PDF)

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CHIGO HOLDING LIMITED

志高控股有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 449) DISCLOSEABLE TRANSACTION FINANCE LEASE ARRANGEMENT FINANCE LEASE ARRANGEMENT

The Board is pleased to announce that, on 20 January 2017, Guangdong Chigo, an indirect wholly-owned subsidiary of the Company, entered into the Finance Lease Contract with Ping An Leasing, pursuant to which Ping An Leasing has conditionally agreed to purchase the Equipment from Guangdong Chigo at an aggregate consideration of RMB31,591,928 (equivalent to approximately HK$35,497,000) and lease the Equipment back to Guangdong Chigo for a period of 36 months.

LISTING RULES IMPLICATIONS

As the Previous Finance Lease Arrangement and the Finance Lease Arrangement were made by the parties within a 12-month period prior to and inclusive of the date of the Finance Lease Arrangement, and were both entered into between Guangdong Chigo and Ping An Leasing, they would be aggregated as a series of transactions pursuant to Rule 14.22 of the Listing Rules. As one of the applicable percentage ratios in respect of the Finance Lease Arrangement, when aggregated with the Previous Finance Lease Arrangement, is more than 5% but all of the ratios are less than 25%, the Finance Lease Arrangement constitutes a discloseable transaction for the Company which is subject to the reporting and announcement requirements under the Listing Rules.

1. INTRODUCTION

   The Board is pleased to announce that, on 20 January 2017, Guangdong Chigo, an indirect wholly-owned subsidiary of the Company, entered into the Finance Lease Contract with Ping An Leasing, pursuant to which Ping An Leasing has conditionally agreed to purchase the Equipment from Guangdong Chigo at a consideration of RMB31,591,928 (equivalent to approximately HK$35,497,000) and lease the Equipment back to Guangdong Chigo for a period of 36 months.

2. FINANCE LEASE ARRANGEMENT

   The principal terms of the Finance Lease Contract are set out as follows:

   Date

   20 January 2017

   Parties

3. Ping An Leasing, as the purchaser and the lessor under the Finance Lease Contract

4. Guangdong Chigo, as the seller and the lessee under the Finance Lease Contract

To the best of the Directors' knowledge, information and belief, having made all reasonable enquiries, as at the date of this announcement, Ping An Leasing and its ultimate beneficial owner(s) are third parties independent of and are not connected persons (as defined under the Listing Rules) of the Company.

Subject Matter

Sale of the Equipment to Ping An Leasing

Pursuant to the Finance Lease Contract, Guangdong Chigo will sell, and Ping An Leasing will purchase, the Equipment owned by Guangdong Chigo free from any title defects and encumbrances at an aggregate consideration of RMB31,591,928 (equivalent to approximately HK$35,497,000) (the "Purchase Price"). The Purchase Price was determined after arm's length negotiation between Guangdong Chigo and Ping An Leasing with reference to the initial purchase price and the carrying value of the Equipment.

The Purchase Price (after deducting the Security Deposit as mentioned in the paragraph headed "Security Deposit" below) shall be paid by Ping An Leasing to Guangdong Chigo within five working days upon the fulfilment of certain conditions including, among others, Guangdong Chigo having delivered to Ping An Leasing an original payment request in respect of the Purchase Price.

Lease back of the Equipment by Guangdong Chigo

Pursuant to the Finance Lease Contract, the Equipment is then leased back to Guangdong Chigo for a period of 36 months. The Finance Lease Contract will only become effective upon the satisfaction of certain conditions including, among others, (i) the Corporate Guarantee having been granted; (ii) Guangdong Chigo having delivered to Ping An Leasing the board resolutions of Guangdong Chigo approving, inter alia, the signing of the relevant Finance Lease Contract; and (iii) the Company having delivered to Ping An Leasing the board resolutions of the Company approving, inter alia, the grant of the relevant Corporate Guarantee.

Ownership of the Equipment

During the Lease Period, the ownership of the Equipment shall vest in Ping An Leasing.

Subject to Guangdong Chigo having duly and fully performed all its obligations under the Finance Lease Contract, Ping An Leasing shall transfer the ownership of the Equipment to Guangdong Chigo at an agreed nominal consideration of RMB100 (the "Nominal Buy-back Consideration") upon the expiry of the Lease Period.

Lease Payments

The aggregate lease payments (the "Lease Payments") payable by Guangdong Chigo to Ping An Leasing under the Finance Lease Contract shall be RMB34,063,200 (equivalent to approximately HK$38,273,000) (including tax) (subject to the changes of the Benchmark Interest Rates in China), comprising the principal sum of RMB31,591,928 (equivalent to approximately HK$35,497,000) and interest of approximately RMB2,471,300 (equivalent to approximately HK$2,776,700) (subject to the changes of the Benchmark Interest Rates in China), and shall be payable in 36 monthly installments by Guangdong Chigo to Ping An Leasing.

The Lease Payments to be made under the Finance Lease Contract were determined after arm's length negotiations between Guangdong Chigo and Ping An Leasing with reference to the prevailing market rates for finance lease of comparable equipment and machinery. The Lease Payments payable by Guangdong Chigo is expected to be settled by cash out of the Group's internal resources.

Security Deposit

Pursuant to the Finance Lease Contract, a refundable security deposit (the "Security Deposit") of RMB5,370,628 is payable by Guangdong Chigo to Ping An Leasing and will be deducted from the Purchase Price to be paid by Ping An Leasing to Guangdong Chigo under the Finance Lease Contract.

Ping An Leasing is entitled to deduct from the Security Deposit if there is any outstanding payment or penalty resulting from any breach caused by Guangdong Chigo. Within six months prior to the expiry of the Lease Period, Ping An Leasing, at the request of Guangdong Chigo, is entitled to deduct the Security Deposit (or any part thereof) for the purpose of offsetting the last installments of the Lease Payments and the Nominal Buy-back Consideration. Any outstanding Security Deposit as at the expiry of the Lease Period will be refunded to Guangdong Chigo on the expiry date of the Lease Period.

Corporate Guarantee

Pursuant to the Finance Lease Contract, the Company has on 20 January 2017 provided a corporate guarantee (the "Corporate Guarantee") in favour of Ping An Leasing to secure the obligations of Guangdong Chigo under the Finance Lease Contract.

5. THE PREVIOUS FINANCE LEASE ARRANGEMENT

   On 13 December 2016, Guangdong Chigo had entered into a finance lease contract with Ping An Leasing, pursuant to which Ping An Leasing had conditionally agreed to purchase certain equipment from Guangdong Chigo at an aggregate consideration of RMB60,300,000 (equivalent to approximately HK$67,752,800) and lease such equipment back to Guangdong Chigo for lease payments of RMB65,003,400 (equivalent to approximately HK$73,037,500) in aggregate for a period of 36 months (the "Previous Finance Lease Arrangement").

   For details of the Previous Finance Lease Arrangement, please refer to the announcement of the Company dated 13 December 2016.

6. INFORMATION OF GUANGDONG CHIGO AND PING AN LEASING

   Guangdong Chigo is a company established in the PRC with limited liability and is principally engaged in the manufacture and sales of air-conditioners. Guangdong Chigo is an indirect wholly-owned subsidiary of the Company.

   Insofar as the Company is aware, Ping An Leasing is a company established in the PRC with limited liability and is principally engaged in the finance lease and other leasing business.

7. REASONS FOR AND BENEFITS OF THE FINANCE LEASE ARRANGEMENT

The Company is an investment holding company and the Group is principally engaged in the design, development, manufacturing and sale of air-conditioning products.

The Directors consider that the Finance Lease Arrangement would enhance the working capital position of and provide medium term financing alternate to short-term loans for the Group, without material impact on the actual production and operation of Guangdong Chigo. Further, the terms of the Finance Lease Arrangement have been agreed after arm's length negotiations