Trigiant : (009) Letter from the Board

TRIGIANT - 1J!i> ffl ­ TRIGIANT GROUP LIMITED 1t D Iii N 0 *

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 1300)

Executive Directors:

Mr. Qian Lirong ( Chairman)

Mr. Jiang Wei ( Group chief executive officer)

Non-executive Director:

Dr. Fung Kwan Hung

Independent non-executive Directors:

Professor Jin Xiaofeng

Mr. Poon Yick Pang, Philip Mr. Ng Wai Hung

Ms. Jia Lina

Alternate Director to M r. Qian Lirong:

Mr. Qian Chenhui

Registered office: Cricket Square Hutchins Drive

P.O. Box 2681

Grand Cayman KY l-1111 Cayman Islands

Principal place of business in Hong Kong:

Room 1801, 18th Floor Tai Tung Building

8 Fleming Road Wanchai

Hong Kong

10 May 2017

To the Shareholders

Dear Sir or Madam,

1. DISCLOSEABLE AND CONNECTED TRANSACTION -

   ACQUISITION OF THE REMAINING 40% INTEREST IN A NON-WHOLLY-OWNED SUBSIDIARY AND

   ISSUE OF CONSIDERATION SHARES UNDER SPECIFIC MANDATE; AND

2. APPLICATION OF WHITEWASH WAIVER

INTRODUCTION

Reference is made to the Announcement in which the Company announced that after trading hours on 30 March 2017, the Purchaser, the Vendor and the Warrantors entered into the SP Agreement in relation to the Acquisition, the Consideration of which shall be partly

* For identification purpose only

satisfied by the allotment and issue, credited as fully paid, of the Consideration Shares to the Vendor at Completion. The EGM will be convened for the purpose of, among other matters, considering, and if thought fit, approving the Acquisition and the grant of the Specific Mandate and the Whitewash Waiver.

The purpose of this circular is to give you, among other matters, (i) details of the SP Agreement and the transactions contemplated thereunder and other information as required to be disclosed under the Listing Rules and the Takeovers Code; (ii) details of the application for the Whitewash Waiver; (iii) the recommendation from the Independent Board Committee to the Independent Shareholders in relation to the SP Agreement and the transactions contemplated thereunder and the Whitewash Waiver; (iv) a letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders; and (v) the notice of the EGM.

THE SP AGREEMENT

Date

30 March 2017

Parties

1. the Purchaser, a wholly-owned subsidiary of the Company;

2. the Vendor; and

3. the Warrantors, being all the shareholders of the Vendor.

   The Vendor is a company incorporated in the BVI with limited liability which is principally engaged in investment holding. The Vendor is owned by the Warrantors as to 40% by Mr. Zhu Xujin, who is also its sole director, and 30% by Mr. Shao Yijun and 30% by Mr. Zhao Ting. The Vendor currently holds approximately 12.79% of the issued share capital of the Company as at the Latest Practicable Date and is thus a substantial shareholder of the Company. Accordingly, the Vendor is a connected person of the Company under the Listing Rules.

   Assets to be acquired

   The Purchaser conditionally agreed to purchase and the Vendor conditionally agreed to sell the Sale Shares free from all encumbrances together with all rights now or thereafter attaching thereto, including all dividends or distributions which may be paid, declared or made in respect thereof at any time on or after the Completion Date. The Sale Shares represent 40% of the issued shares of the Target Company.

   The Group acquired 60% of the issued shares of the Target Company under the Previous Acquisition. Further particulars of the Previous Acquisition, the Target Company and the Target Group are set out in the section headed "Information on the Target Group" below.

   Consideration

   The Consideration for the Acquisition is RMB377,434,849 (equivalent to approximately HK$425,672,000), which shall be settled in the following manner:

4. as to RMB140,095,440 (equivalent to HK$158,000,000) in cash; and

5. as to RMB237,339,409 (equivalent to approximately HK$267,672,000) by the allotment and issue, credited as fully paid, of 228,000,000 Consideration Shares to the Vendor at Completion.

   The Group plans to fund the cash portion of the Consideration by its internal resources. Having considered the current level of internal resources of the Group and the need to preserve the cash reserve of the Group, the Group may have to consider debt financing if the entire Consideration is to be settled by cash, which would incur additional finance costs to the Group and further increase the gearing of the Group. To prudently manage its financial position without incurring additional interest expenses to the Group, the Board considers that the proposed settlement for the Consideration, being partly through the issue of Consideration Shares which would not require cash outflow from the Company and hence strain the Company's working capital, would allow the Group to maintain a more steady working capital level and more well positioned to pursuing or financing the Group's other business and projects.

   The 228,000,000 Consideration Shares represent (i) approximately 14.58% of the issued share capital of the Company as at the Latest Practicable Date; and (ii) approximately 12.73% of the issued share capital of the Company as enlarged by the allotment and issue of the Consideration Shares (assuming that there is no other change to the share capital of the Company prior to Completion).

   The issue price of approximately HK$1.174 per Consideration Share represents:

6. a discount of approximately O.51% to the closing price of HK$ l.18 per Share as quoted on the Stock Exchange on the Last Trading Day, being the date of the SP Agreement;

1. a discount of approximately 0.68% to the average closing price of HK$1.182 per Share as quoted on the Stock Exchange for the 5 consecutive trading days of the Shares immediately prior to the Last Trading Day;

2. equivalent to the average closing price of HK$ l.l74 per Share as quoted on the Stock Exchange for the 5 consecutive trading days of the Shares immediately prior to and including the Last Trading Day; and

3. a discount of approximately 5.32% over the closing price of HK$1.24 per Share as quoted on the Stock Exchange on the Latest Practicable Date.

The issue price per Consideration Share also represents a discount of approximately 38.7% to the audited consolidated net asset value of the Company as at 31 December 2016 attributable to the owners of the Company per Share of approximately RMB 1.697 (equivalent to approximately HK$1.91), based on the number of the issued Shares as at 31 December 2016.

Based on the number of 228,000,000 Consideration Shares and assuming that there is no change in the issued share capital of the Company from the Latest Practicable Date up to Completion, the number of Shares in issue will increase from 1,563,500,000 Shares to 1,791,500,000 Shares upon Completion and the shareholding of Independent Shareholders would be diluted from approximately 47.40% to approximately 41.37%, representing a dilution effect of approximately 12.72% as a result of the issue of the Consideration Shares. Notwithstanding the potential dilution impact on the Independent Shareholders' shareholding, taking into account that (i) the issue price of the Consideration Shares represents a slight discount of approximately 0.51% to the closing price of HK$1. l 8 per Share on the Last Trading Day and is equivalent to the average closing price of HK$1.174 per Share for the 5 consecutive trading days of the Shares immediately prior to and including the Last Trading Day; (ii) the proposed settlement for the Consideration partly by way of the issue of Consideration Shares can serve to reduce the strain on the working capital, preserve the cash reserve of the Group and enlarge the capital base of the Group; and (iii) debt financing would incur additional finance costs to the Group and further increase the gearing of the Group, the Directors (including the non-executive Director and all the independent non-executive Directors after taking into account the advice of the Independent Financial Adviser) consider that the settlement for the Consideration partly by way of the issue of Consideration Shares and the Subscription Price are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

The Consideration Shares will be issued under the Specific Mandate to be granted to the Directors by the Shareholders at the EGM.

Application will be made to the Stock Exchange for the listing of, and permission to deal in, the Consideration Shares. The Consideration Shares to be allotted and issued shall rank pari passu among themselves and with all Shares in issue on the Completion Date.

The Consideration was arrived at after arm's length negotiation between the parties to the SP Agreement on normal commercial terms with reference to (i) the audited profit after tax of Trigiant Optic-Electric for the year ended 31 December 2016; (ii) the exchange loss recorded by the Target Company in relation to its investments in Trigiant Optic-Electric for the year ended 31 December 2016; (iii) the historical performance of the Target Group taking into account the effective interest of 35% in Trigiant Optic-Electric to be acquired by the Group under the Acquisition and considering comparable companies, namely Nanfang Communication Holdings Limited (Stock code: 1617) and Yangtze Optical Fibre and Cable Joint Stock Limited Company (Stock code: 6869), which were companies listed on the Stock Exchange. For such purpose, such comparable companies were selected based on factors that, similar to the Target Group, the comparable companies are principally engaged in the optical fibre business; that the revenue of each such comparable companies is mainly attributable to sales of optical fibre cable and related products; that such comparable companies are profit-making based on their recent published financial information; that the major customers of such comparable companies