China Fortune Financial : Announcements and Notices - Major Transaction Establishment of Joint Venture Company

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China Fortune Financial Group Limited

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 290)

Website: http://www.290.com.hk

MAJOR TRANSACTION

ESTABLISHMENT OF JOINT VENTURE COMPANY

Reference is made to the announcement of the Company dated 30 September 2016 in relation to the discussions on the formation of a joint venture securities company in the PRC.

ESTABLISHMENT OF THE JV COMPANY

On 23 January 2017 (after trading hours), Fortune Securities, a wholly owned subsidiary of the Company, entered into the Subscription Agreement with Qingdao Ruiyuan, Gongqing City Huiquan, Beijing JinXiuHuaCheng, Qingdao New Energy and Beijing Hongtai, in relation to the establishment of the JV Company.

Pursuant to the Subscription Agreement, the parties agreed, among other things, that:

1. the Total Investment Amount for the establishment of the JV Company shall be RMB1,000 million (equivalent to approximately HK$1,112 million), which is subject to the approval by relevant regulatory authorities, shall be contributed by Fortune Securities, Qingdao Ruiyuan, Gongqing City Huiquan, Beijing JinXiuHuaCheng, Qingdao New Energy and Beijing Hongtai in the amount of RMB300 million (equivalent to approximately HK$334 million), RMB325 million (equivalent to approximately HK$361 million), RMB196 million (equivalent to approximately HK$218 million), RMB80 million (equivalent to approximately HK$89 million), RMB50 million (equivalent to approximately HK$56 million) and RMB49 million (equivalent to approximately HK$54 million), respectively. The JV Company will be held as to 30.0%, 32.5%, 19.6%, 8.0%, 5.0% and 4.9% shareholding in the JV Company, respectively;

2. each of the JV Partners shall fully pay their respective capital contribution amounts within six months after the document on approving the establishment of the JV Company is signed and issued by the CSRC; and

3. subject to the JV Company obtaining the requisite approvals from relevant regulatory authorities, the JV Company is expected to become a full-licensed securities company permitted to conduct securities brokerage, proprietary securities trading, underwriting and sponsorship in securities, and securities and assets management businesses in the PRC.

The Subscription Agreement will become effective upon:

1. the JV Partners having obtained necessary authorised internal approvals and the Company having obtained the approval and authorisation from the Shareholders in relation to the Subscription Agreement and the transactions contemplated thereunder; and

2. where applicable, the JV Partners having obtained the approval and authorisation from the relevant regulatory authorities in relation to the Subscription Agreement and the transactions contemplated.

LISTING RULES IMPLICATIONS

As one of the applicable percentage ratios as set out in Rule 14.07 of the Listing Rules in relation to the capital commitment of Fortune Securities under the Subscription Agreement is more than 25% but all of the applicable percentage ratios are less than 100%, the entering into of the Subscription Agreement and the transactions contemplated thereunder constitute a major transaction of the Company under Chapter 14 of the Listing Rules and is subject to the reporting, announcement and shareholders' approval requirements.

GENERAL

The EGM will be convened for the Shareholders to consider and, if thought fit, approve the Subscription Agreement and the transactions contemplated thereunder.

A circular containing, among others, further details of Subscription Agreement and the transactions contemplated thereunder and a notice of the EGM is expected to be despatched to the Shareholders on or before 15 February 2017.

As the Subscription Agreement is subject to the fulfillment of certain conditions precedent and may or may not proceed, Shareholders and potential investors should exercise caution when dealing in the securities of the Company.

Reference is made to the announcement of the Company dated 30 September 2016 in relation to the discussions on the formation of a joint venture securities company in the PRC.

ESTABLISHMENT OF THE JV COMPANY

On 23 January 2017 (after trading hours), Fortune Securities, a wholly owned subsidiary of the Company, entered into the Subscription Agreement with Qingdao Ruiyuan, Gongqing City Huiquan, Beijing JinXiuHuaCheng, Qingdao New Energy and Beijing Hongtai, in relation to the establishment of the JV Company.

THE SUBSCRIPTION AGREEMENT

The principal terms of the Subscription Agreement are as follows:

Date:

23 January 2017

Parties:

1. Fortune Securities;

2. Qingdao Ruiyuan;

3. Gongqing City Huiquan;

4. Beijing JinXiuHuaCheng;

5. Qingdao New Energy; and

6. Beijing Hongtai.

   To the best of the Directors' knowledge, information and belief, having made all reasonable enquiries, Qingdao Ruiyuan, Gongqing City Huiquan, Beijing JinXiuHuaCheng, Qingdao New Energy and Beijing Hongtai, and their respective ultimate beneficial owner(s) are third parties independent of and not connected with the Company and its connected persons as defined under the Listing Rules.

   Shareholding Structure and Capital Contribution

   Pursuant to the Subscription Agreement, the parties agreed, among other things, that:

7. the Total Investment Amount for the establishment of the JV Company shall be RMB1,000 million (equivalent to approximately HK$1,112 million) which, subject to the approval by relevant regulatory authorities, shall be contributed by Fortune Securities, Qingdao Ruiyuan, Gongqing City Huiquan, Beijing JinXiuHuaCheng, Qingdao New Energy and Beijing Hongtai in the amount of RMB300 million (equivalent to approximately HK$334 million), RMB325 million (equivalent to approximately HK$361 million), RMB196 million (equivalent to approximately HK$218 million), RMB80 million (equivalent to approximately HK$89 million), RMB50 million (equivalent to approximately HK$56 million) and RMB49 million (equivalent to approximately HK$54 million), respectively. The JV Company will be held as to 30.0%, 32.5%, 19.6%, 8.0%, 5.0% and 4.9% shareholding in the JV Company, respectively;

8. each of the JV Partners shall fully pay their respective capital contribution amounts within six months after the document on approving the establishment of the JV Company is signed and issued by the CSRC; and

9. subject to the JV Company obtaining the requisite approvals from relevant regulatory authorities, the JV Company is expected to become a full-licensed securities company permitted to conduct securities brokerage, proprietary securities trading, underwriting and sponsorship in securities, and securities and assets management businesses in the PRC.

10. The respective amounts of capital contributions of the JV Partners were determined after arm's length negotiation among the parties to the Subscription Agreement with reference to the initial capital requirement of the JV Company and the capital contribution intentions of the parties. Fortune Securities' capital contribution of RMB300 million (equivalent to approximately HK$334 million) will be funded by internal resources and/or borrowings of the Group.

    Conditions Precedent

    The Subscription Agreement will become effective upon:

11. the JV Partners having obtained necessary authorised internal approvals and the Company having obtained the approval and authorisation from the Shareholders in relation to the Subscription Agreement and the transactions contemplated thereunder; and

12. where applicable, the JV Partners having obtained the approval and authorisation from the relevant regulatory authorities in relation to the Subscription Agreement and the transactions contemplated.

Restrictions on Transfer of Shares of the JV Company

Each of the JV Partners shall not:

1. transfer any part of the shares of the JV Company within 48 months from the date of establishment of the JV Company; and

2. transfer any part of the shares of the JV Company, which are issued prior to the public offering of the shares of the JV Company, within 1 year from the day the shares of the JV Company are listed on any recognised stock exchange.

Boards of Directors and Supervisors of the JV Company

The board of directors of the JV Company shall consist of 9 directors (including 2 independent directors). Pursuant to the Subscription Agreement, each of Fortune Securities and Qingdao Ruiyuan is entitled to nominate 2 directors and recommend a candidate of independent director while Gongqing City Huiquan is entitled to nominate 2 directors and Beijing JinXiuHuaCheng is entitled to nominate 1 director. The chairman of the board of directors of the JV Company shall be a director nominated by Qingdao Ruiyuan. The JV Company shall in each year hold at least two board of directors' meetings. Each director of the JV Company is entitled to one vote for every board resolution. All board resolutions shall be passed by a simple majority of votes.

JV Company shall have a board of supervisors which shall consist of 3 supervisors. Pursuant to the Subscription Agreement, each of Fortune Securities and Qingdao Ruiyuan is entitled to nominate 1 supervisor and the remaining supervisor shall be an employee of the JV Company who is being elected at the JV Company's employees' representatives conference. The chairman of the board of supervisors of the JV Company shall be the supervisor nominated by Fortune Securities. The JV Company shall hold at least one board of supervisors' meeting in every six months. Each supervisor of the JV Company is entitled to one vote for every matter that is decided by the board of supervisors. Any action or resolution of the board of supervisors shall be passed by a simple majority of votes.