Global Strategic : DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO THE CAPITAL CONTRIBUTION AGREEMENT

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ᐑଢ኷ଫණྠϞࠢʮ̡

GLOBAL STRATEGIC GROUP LIMITED ᐑଢ኷ଫණྠϞࠢʮ̡

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8007)

DISCLOSEABLE AND CONNECTED TRANSACTION

IN RELATION TO THE CAPITAL CONTRIBUTION AGREEMENT

CAPITAL CONTRIBUTION AGREEMENT

On 4 January 2019 (after trading hours of the Stock Exchange), Global Billion Access, an indirect wholly-owned subsidiary of the Company, entered into the Capital Contribution Agreement with Hubei Biaodian and the Subscribers pursuant to which the Subscribers agreed to make capital contribution in the aggregate amount of RMB134,695,000 (as to RMB13,475,000 by Mr. Li, RMB67,347,500 by Yichang Platinum and RMB53,872,500 by Yichang Meiyan) into Yichang Biaodian.

Global Billion Access and Hubei Biaodian will not participate in the Subscription. Upon Completion, Global Billion Access will hold 25% of the enlarged equity interests in Yichang Biaodian.

IMPLICATIONS UNDER THE GEM LISTING RULES

Following completion of the Subscription, the Group's interest in Hubei Biaodian will be diluted from 49% to 25%, which gives rise to the Deemed Disposal pursuant to Rule 19.29 of the GEM Listing Rules. As one or more of the applicable percentage ratios in respect of the Subscription is more than 5% but less than 25%, the Subscription constitutes a discloseable transaction on the part of the Company under Chapter 19 of the GEM Listing Rules and is therefore subject to the reporting and announcement requirements under Chapter 19 of the GEM Listing Rules.

As at the date of this announcement, Yichang Biaodian, being a subsidiary of the Company, is owned as to 10% by Mr. Li and Mr. Li is a substantial shareholder (within the meaning of the GEM Listing Rules) of Yichang Biaodian. As such, Mr. Li is a connected person of the Company and the subscription and increase in capital contribution by Mr. Li into Yichang Biaodian under the Capital Contribution Agreement constitutes a connected transaction on the part of the Company under Chapter 20 of the GEM Listing Rules.

Given that: (i) Mr. Li is a connected person of the Company only at the subsidiary level; (ii) the Board has approved the Capital Contribution Agreement and the transactions contemplated thereunder; and (iii) all the independent non-executive Directors have confirmed that the terms of the transactions contemplated under the Capital Contribution Agreement are fair and reasonable, are on normal commercial terms or better and in the interest of the Company and the Shareholders as a whole, the Capital Contribution Agreement is only subject to the reporting and announcement requirements and is exempt from the circular, independent financial advice and Shareholders' approval requirements under Rule 20.99 of the GEM Listing Rules.

On 4 January 2019 (after trading hours of the Stock Exchange), Global Billion Access, an indirect wholly-owned subsidiary of the Company, entered into the Capital Contribution Agreement with Hubei Biaodian and the Subscribers pursuant to which the Subscribers agreed to make capital contribution in the aggregate amount of RMB134,695,000 (as to RMB13,475,000 by Mr. Li, RMB67,347,500 by Yichang Platinum and RMB53,872,500 by Yichang Meiyan) into Yichang Biaodian.

Global Billion Access and Hubei Biaodian will not participate in the Subscription. Upon Completion, Global Billion Access will hold 25% of the enlarged equity interests in Yichang Biaodian. Details of the Capital Contribution Agreement are set out below:

CAPITAL CONTRIBUTION AGREEMENT

Date:

4 January 2019 (after trading hours of the Stock Exchange)

Parties:	(1)	Hong Kong Global Billion Access Investments Limited;
(2)	ಳ̏ᅺՊ˂್ंϞࠢʮ̡ (Hubei Biaodian Natural Gas Co., Ltd.*);
(3)	Mr. Li Wanqing;
(4)	֝׹ήཔಥঐ๕Ϟࠢʮ̡ (Yichang Platinum Port Energy Co., Ltd.*); and
(5)	֝׹ߕ֧ঐ๕Ϟࠢʮ̡ (Yichang Meiyan Energy Co., Ltd.*).
2

To the best knowledge, information and belief of the Directors having made all reasonable enquiries, (i) Hubei Biaodian is a company established in the PRC with limited liability and is principally engaged in natural gas production and supply, investment in natural gas projects for civil use, equity investment, investment management and consulting; (ii) Yichang Platinum is a company established in the PRC with limited liability and is principally engaged in sales of gas in towns and warehousing services; (iii) Yichang Meiyan is a company established in the PRC with limited liability and is principally engaged in sales of gas in towns; and (iv) each of Yichang Platinum, Yichang Meiyan and their respective ultimate beneficial owners are Independent Third Parties.

Global Billion Access is a company incorporated in Hong Kong with limited liability and an indirect wholly-owned subsidiary of the Company. It is principally engaged in investment holding.

Subscription of registered capital of Yichang Biaodian

As at the date of this announcement, the registered capital of Yichang Biaodian was RMB30,000,000. Pursuant to the Capital Contribution Agreement, the Subscribers agreed to make capital contribution in the aggregate amount of RMB134,695,000 into Yichang Biaodian as follows:

(i) Mr. Li agreed to subscribe for and inject RMB13,475,000 into Yichang Biaodian, of which (a)

RMB2,880,000 shall be contributed to the registered capital of Yichang Biaodian; and (b) the remaining RMB10,595,000 shall be accounted for as capital reserve of Yichang Biaodian;

• (ii) Yichang Platinum agreed to subscribe for and inject RMB67,347,500 into Yichang Biaodian, of which (a) RMB14,400,000 shall be contributed to the registered capital of Yichang Biaodian; and (b) the remaining RMB52,947,500 shall be accounted for as capital reserve of Yichang Biaodian; and

• (iii) Yichang Meiyan agreed to subscribe for and inject RMB53,872,500 into Yichang Biaodian, of which (a) RMB11,520,000 shall be contributed to the registered capital of Yichang Biaodian; and (b) the remaining RMB42,352,500 shall be accounted for as capital reserve of Yichang Biaodian.

Following completion of the Subscription, the registered capital of Yichang Biaodian will be increased to RMB58,800,000.

Global Billion Access and Hubei Biaodian will not participate in the Subscription and have agreed not to exercise their preemptive right in respect of the Subscription.

Consideration

The total consideration for the Subscription shall be RMB134,695,000, which shall be payable by the Subscribers to Yichang Biaodian in cash on the Completion Date.

The consideration for the Subscription was determined after arms' length negotiations among the parties to the Capital Contribution Agreement with reference to the valuation of Yichang Biaodian covering the Supply Area that Yichang Biaodian currently supplies gas to prepared by BMI Appraisals Limited, an independent valuer, of approximately RMB235,000,000 under the income based approach as at 30 June 2018. Further details of the Valuation are set out in the section headed "Valuation" below.

Conditions precedent

The Capital Contribution Agreement shall be unconditional.

Undertakings

The parties to the Capital Contribution Agreement have agreed that the Subscription is based on the premises that:

• (a) the number of directors appointed by Global Billion Access will form a majority of the board of directors of Yichang Biaodian; and

• (b) Global Billion Access will remain as the single largest shareholder of Yichang Biaodian after taking into account the dilution effect on its shareholding from the Subscription.

Completion

The completion of the Subscription shall take place on the Completion Date.

Immediately upon Completion, Global Billion Access will continue to be the single largest shareholder of Yichang Biaodian and have control over its board of directors. As such, Yichang Biaodian will remain as a subsidiary of the Company and its financial results will continue to be consolidated into the Company's consolidated financial statements.

INFORMATION ON YICHANG BIAODIAN

As at the date of this announcement, Yichang Biaodian is a 49% indirectly owned subsidiary of the Company and is also owned as to 41% by Hubei Biaodian and 10% by Mr. Li. The business scope of Yichang Biaodian includes investment in natural gas projects, sales of natural gas, natural gas cooking appliance and accessories and pipeline installation. Yichang Biaodian had been granted with the approval of exclusive right to construct and operate the natural gas project in the industrial parks and commercial area around Wufeng National Industrial Zone and Yichang New and High (Technology) District Baiyang Industrial Zone in Zhijiang City, Hubei Province, the PRC by Hubei Provincial Development and Reform Commission€ಳ̏޲೯࢝ձҷࠧ։ࡰึ.

FINANCIAL INFORMATION ON YICHANG BIAODIAN

Set out below is the unaudited financial information of Yichang Biaodian for the years ended 31 December 2016 and 31 December 2017 prepared in accordance with Hong Kong Financial Reporting Standards:

Year ended 31 December

2016	2017
HK$'000	HK$'000
(Loss) before income tax	(4,276)	(13,303)
(Loss) after income tax	(2,357)	(11,680)

The unaudited net liabilities of Yichang Biaodian as at 31 December 2017 amounted to approximately HK$678,000.

Financial effect of the deemed disposal on the Group

Upon completion of the Subscription, the Group is expected to record an unaudited financial gain of approximately RMB35,700,000, which is estimated based on 25% of the net asset value of Yichang Biaodian upon Completion minus 49% of the net liabilities of Yichang Biaodian as at the date of the Capital Contribution Agreement.