Shandong Weigao Medical Polymer : 25/05/2016 EXEMPTED CONNECTED TRANSACTION - DEEMED DISPOSAL OF INTEREST IN WEIGA...

E160531330Ann.indd

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山 東 威 高 集 團 醫 用 高 分 子 製 品 股 份 有 限 公 司 Shandong Weigao Group Medical Polymer Company Limited *

(a joint stock limited company incorporated in the People's Republic of China with limited liability)

(Stock Code: 1066)

EXEMPTED CONNECTED TRANSACTION - DEEMED DISPOSAL OF INTEREST IN WEIGAO ORTHO DEEMED DISPOSAL OF INTEREST IN WEIGAO ORTHO

Weigao Ortho and the Subscribers entered into the Subscription Agreement, pursuant to which Weigao Ortho agreed to issue, and the Subscribers agreed to subscribe for, the Subscription Shares at an aggregate consideration of approximately RMB311 million (equivalent to approximately HK$373.7 million). Upon completion of the Subscription Agreement, the equity interest of the Company in Weigao Ortho has been reduced from 90% to 81%. The Subscription constituted a deemed disposal under Chapter 14 of the Listing Rules.

Each of the Subscribers is controlled by Mr. Gong, an executive Director, and a connected person of the Company. The Subscription constituted a connected transaction of the Company under Chapter 14A of the Listing Rules.

As the applicable percentage ratios in respect of the Subscription Agreement and the transactions contemplated thereunder are more than 0.1% but less than 5%, the Subscription is subject to the reporting and announcement requirements but exempt from the independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.

* For identification purpose only

DEEMED DISPOSAL

The Subscription Agreement Date: 29 April 2016

Parties:

1. Weigao Ortho as the issuer

2. the First Partnership and the Second Partnership as the Subscribers

Assets to be disposed

Weigao Ortho agreed to issue, and the First Partnership agreed to subscribe for, 15,555,555 Ortho Shares at the subscription price of RMB14 per Ortho Share, representing approximately 7% of the enlarged registered capital of Weigao Ortho upon completion of the Subscription Agreement.

Weigao Ortho agreed to issue, and the Second Partnership agreed to subscribe for, 6,666,667 Ortho Shares at the subscription price of RMB14 per Ortho Share, representing approximately 3% of the enlarged registered capital of Weigao Ortho upon completion of the Subscription Agreement.

Completion took place on 12 May 2016. Immediately prior to completion, Weigao Ortho was owned as to 90% by the Group and as to 10% by the Minority Shareholder. Upon completion, the registered capital of Weigao Ortho has been increased from RMB200 million to approximately RMB222 million, and Weigao Ortho was owned as to 81%, 9%, 7% and 3% by the Group, the Minority Shareholder, the First Partnership and the Second Partnership, respectively.

Consideration

The cash consideration for the Subscription of approximately RMB311 million (equivalent to approximately HK$373.7 million) was determined after arm's length negotiations by Weigao Ortho and the Subscribers having taking into account the financial position of Weigao Ortho. The cash consideration has been fully paid by the Subscribers.

Information on Weigao Ortho

Weigao Ortho is principally engaged in the manufacturing of orthopaedic medical device products. The consolidated financial information of Weigao Ortho and its subsidiaries for two years ended 31 December 2015 was as follows:

Year ended 31 December

2014

Year ended 31 December

2015

Audited Audited

(RMB'000) (RMB'000)

Net Assets 377,376 648,337

Revenue 601,633 669,687

Net Profit before taxation and extraordinary items 258,496 255,453

Net Profit after taxation and extraordinary items 218,760 214,452

Financial Impact on the Group

Following completion of the Subscription Agreement, the equity interest of the Group in Weigao Ortho has been reduced from 90% to 81% and Weigao Ortho continues to be a subsidiary of the Company. Its financial results continue to be consolidated with the Group's results.

Use of Proceeds

Both the gross proceeds and the net proceeds (after deducting estimated expenses from the issue of the Subscription Shares) from the Subscription is estimated to be approximately RMB311 million. The Group intends to apply the net proceeds of the Subscription as general working capital of Weigao Ortho and to purchase land use right and building from the Company.

Information on the Subscribers

The First Partnership is a limited partnership to hold 15,555,555 Ortho Shares for the benefit of the Management Team. It is principally engaged in sales of the electronic products and research and development of the computer hardware and software.

The Second Partnership is a limited partnership to hold 6,666,667 Ortho Shares for the benefit of Mr. Gong. It is principally engaged in sales of the electronic products.

Information on the Group

The Group is principally engaged in the research and development, production and sale of single-use medical devices, orthopaedic products and blood purification products.

Reasons and Benefits for the Subscription

The Subscription aims to recognise the contribution of and incentivise the members of the Management Team, align their interests with those of Weigao Ortho and encourage them to optimise their performance and efficiency so as to maximise the equity return of the Group.

The Directors (including the independent non-executive Directors but excluding Mr. Gong) consider that the Subscription is on normal commercial terms and in the ordinary and usual course of business of the Group, and is fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Mr. Gong is considered to have a material interest in the Subscription by virtue of his interest in the Ortho Shares through the Subscribers. As a result, Mr. Gong has abstained from voting on the board resolutions for approving the Subscription.

Listing Rules Implications

The Subscription constituted a deemed disposal under Chapter 14 of the Listing Rules.