TONLY ELECTRONICS HOLDINGS LIMITED 通力電子控股有限公司. (Incorporated in the Cayman Islands with limited liability) (Stock Code: 01249)

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1 Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement. TONLY ELECTRONICS HOLDINGS LIMITED 通力電子控股有限公司 (Incorporated in the Cayman Islands with limited liability) (Stock Code: 01249) DISCLOSEABLE AND CONNECTED TRANSACTION ACQUISITION OF 30.08% OF THE ISSUED SHARE CAPITAL OF THE TARGET COMPANY SHARE TRANSFER AGREEMENT The Board is pleased to announce that on 9 November 2018, TCL Technoly (an indirect wholly-owned subsidiary of the Company), Mr. Weng and the Target Company entered into the Share Transfer Agreement pursuant to which TCL Technoly has agreed to purchase, and Mr. Weng has agreed to sell, the Sale Shares, representing approximately 30.08% of the total number of issued shares of the Target Company as of the date of this announcement, at the Share Consideration of RMB29,040,000 by two stages. As at the date of the Share Transfer Agreement, the Target Company has 38,000,000 issued shares, out of which the Group held 10,000,000 representing approximately 26.32% of the total number of issued shares of the Target Company. Immediately after completion of the Acquisition, the Group would hold approximately 56.40% of the total number of issued shares of the Target Company and therefore, the Target Company would become a subsidiary of the Company and be consolidated into the financial statements of the Group. 1

2 LISTING RULES IMPLICATIONS TCL Corporation, the ultimate controlling Shareholder which currently holds approximately 48.70% of the issued share capital of the Company, is a controller of the Company within the meaning of the Listing Rules. In addition, TCL Corporation holds over 50% interest in Huizhou Kaichuang, which in turn holds 10% of the total number of issued shares of the Target Company. Therefore, TCL Corporation is a substantial shareholder of the Target Company and accordingly, the Acquisition constitutes a connected transaction of the Company pursuant to Rule 14A.28(1) of the Listing Rules. As one or more of the applicable percentage ratios (other than the profits ratio) in respect of the Acquisition exceeds 0.1% but are all less than 5%, the Acquisition is exempted from the circular (including independent financial advice) and independent Shareholders approval requirement under Rule 14A.76(2)(a) but is subject to the reporting, announcement and annual review requirements under Chapter 14A of the Listing Rules. Further, as the profits ratio in respect of the Acquisition exceeds 5% but is less than 25%, the Acquisition constitutes a notifiable transaction of the Company and is subject to the reporting and announcement requirements under Chapter 14 of the Listing Rules. The Board is pleased to announce that on 9 November 2018, TCL Technoly (an indirect wholly-owned subsidiary of the Company), Mr. Weng and the Target Company entered into the Share Transfer Agreement pursuant to which TCL Technoly has agreed to purchase, and Mr. Weng has agreed to sell, the Sale Shares, representing approximately 30.08% of the total number of issued shares of the Target Company as of the date of this announcement, at the Share Consideration of RMB29,040,000 by two stages. As at the date of the Share Transfer Agreement, the Target Company has 38,000,000 issued shares, out of which the Group held 10,000,000 representing approximately 26.32% of the total number of issued shares of the Target Company. Immediately after completion of the Acquisition, the Group would hold approximately 56.40% of the total number of issued shares of the Target Company and therefore, the Target Company would become a subsidiary of the Company and be consolidated into the financial statements of the Group. The principal terms of the Share Transfer Agreement are summarised as below: 2

3 SHARE TRANSFER AGREEMENT Date: 9 November 2018 Parties: (i) TCL Technoly (ii) Mr. Weng; and (iii) Target Company The Acquisition: TCL Technoly agreed to acquire from Mr. Weng and Mr. Weng agreed to transfer to TCL Technoly the Sale Shares, representing approximately 30.08% of the total number of issued shares of the Target Company subject to the terms and conditions of the Share Transfer Agreement. The parties agreed that the Acquisition would be conducted in two stages: 1. Subject to the due performance of the payment obligations by TCL Technoly of the Share Consideration as set out in the paragraph headed Payment of Share Consideration below, Mr. Weng shall within 7 days from the date of the Share Transfer Agreement transfer the Stage 1 Shares to TCL Technoly and arrange to carry out the registration procedures in respect of such transfer. 2. Subject to the due performance of the payment obligations by TCL Technoly of the Share Consideration as set out in the paragraph headed Payment of Share Consideration below, Mr. Weng shall within 10 working days after the expiry of a 6-month period subsequent to Mr. Weng s resignation of his role(s) in the Target Company as director, supervisor, senior management personnel (where applicable) transfer the Stage 2 Shares to TCL Technoly and arrange to carry out the registration procedures in respect of such transfer. From the date of payment of the relevant portion of the Share Consideration, TCL Technoly shall be entitled to such rights and benefits as shareholder of the relevant portion of the Sale Shares according to the applicable laws, regulations and the constitution of the Target Company. 3

4 Completion: The transfer of the Stage 1 Shares shall be completed and the relevant changes in relation thereto shall be duly registered with the relevant government authorities in the PRC within 20 working days from the date of payment of the first 50% of the Stage 1 Consideration. The transfer of the Stage 2 Shares shall be completed and the relevant changes in relation thereto shall be duly registered with the relevant government authorities in the PRC within 20 working days after the expiry of the 6-month period subsequent to Mr. Weng s resignation of his role(s) in the Target Company as director, supervisor, senior management personnel (where applicable). Share Consideration: Payment of the Share Consideration: The Share Consideration shall be at RMB29,040,000 (being RMB2.54 per issued share of the Target Company) and shall be settled by bank transfer. 50% of the Stage 1 Consideration shall be payable by TCL Technoly to Mr. Weng within 7 days from the date of the Share Transfer Agreement. The remaining 50% of the Stage 1 Consideration shall be payable by TCL Technoly to Mr. Weng within 7 days from the completion of the transfer of the Stage 1 Shares. The Stage 2 Consideration shall be payable by TCL Technoly to Mr. Weng within 7 days of the completion of the transfer of the Stage 2 Shares. Condition Precedent: TCL Technoly shall have the right to terminate the Share Transfer Agreement should Mr. Weng and the Target Company fail to register the relevant changes in relation to the Acquisition with the relevant government authorities in the PRC within 30 days after the time as stipulated in the Share Transfer Agreement, save and except where such failure is a result of governmental reasons or force majeure. Mr. Weng shall refund to TCL Technoly the entirety of such amount of the Share Consideration already paid by TCL Technology, with interest, within 15 working days upon Mr. Weng being informed in writing by TCL Technoly in respect of termination of the Share Transfer Agreement. 4

5 BASIS OF THE SHARE CONSIDERATION The Share Consideration was determined after arm s length negotiation between Mr. Weng and TCL Technoly based on the principle of fairness and with reference to various factors, including the net asset value of the Target Company as at 31 August INFORMATION OF THE TARGET GROUP The Target Company is a company established in the PRC with limited liability and currently a 51% holding company of Huizhou Nikko. The Target Group is principally engaged in the business of research and development, manufacturing and sales of diffuser and optical film in the PRC. Set out below is the shareholding structure of the Target Company immediately before completion of and after completion of the Acquisition: Shareholder Shareholding percentage immediately before completion of the Acquisition (approximately) Shareholding percentage immediately after completion of the Acquisition (approximately) Mr. Weng 30.08% TCL Technoly 26.32% 56.40% Huizhou Tong-Ruijie 11.79% 11.79% Mr. Li 10.38% 10.38% Huizhou Kaichuang 10.00% 10.00% Mr. Yu 4.21% 4.21% Mr. Wong 3.02% 3.02% Ms. Li 2.10% 2.10% Mr. Ren 2.10% 2.10% To the best of the knowledge, information and belief of the Directors having made all reasonable enquiries, save and except for TCL Technoly, Huizhou Kaichuang (in which TCL Corporation holds over 50% interest), Mr. Yu, Ms. Li and Mr. Ren, each of the existing shareholders of the Target Company and their respective ultimate beneficial owner(s) is an Independent Third Party. 5

6 Set out below is certain financial information of the Target Group (on a consolidated basis) for the year ended 31 December 2017 and 31 December 2016 respectively, as extracted from the Target Group s audited financial statements (on a consolidated basis) prepared in accordance with the PRC Accounting Standards for Business Enterprises: For the year ended 31 December 2016 RMB 000 For the year ended 31 December 2017 RMB 000 Revenue 112, ,199 Net profit before tax 20,339 19,165 Net profit after tax 15,299 14,608 For the year ended 31 December 2017 RMB 000 Total assets 172,716 Net assets 97,784 REASONS AND BENEFITS OF THE ACQUISITION The Acquisition would expand the component business of the Group to cover optical component business, which would have synergy effect with the Group s development of smart home products in lighting. It would also further the Group s business integration with Huizhou Nikko (51% shares of which are held by The Target Company) to strengthen business synergies, elicit more support from existing clients and promote the expansion into overseas markets by the Target Company and Nikko. The terms of the Share Transfer Agreement were determined after arm s length negotiations between the parties thereto and on normal commercial terms. The Directors (including the independent non-executive Directors) are of the view that (i) the terms of the Share Transfer Agreement are fair and reasonable; (ii) the Share Transfer Agreement is entered into in the ordinary and usual course of business of the Group and on normal commercial terms; and (iii) the entering into of the Share Transfer Agreement is in the interests of the Company and the Shareholders as a whole. 6

7 LISTING RULES IMPLICATIONS TCL Corporation, the ultimate controlling Shareholder which currently holds approximately 48.70% of the issued share capital of the Company, is a controller of the Company within the meaning of the Listing Rules. In addition, TCL Corporation holds over 50% interest in Huizhou Kaichuang, which in turn holds 10% of the total number of issued shares of the Target Company. Therefore, TCL Corporation is a substantial shareholder of the Target Company and accordingly, the Acquisition constitutes a connected transaction of the Company pursuant to Rule 14A.28(1) of the Listing Rules. As one or more of the applicable percentage ratios (other than the profits ratio) in respect of the Acquisition exceeds 0.1% but are all less than 5%, the Acquisition is exempted from the circular (including independent financial advice) and independent Shareholders approval requirement under Rule 14A.76(2)(a) but is subject to the reporting, announcement and annual review requirements under Chapter 14A of the Listing Rules. Further, as the profits ratio in respect of the Acquisition exceeds 5% but is less than 25%, the Acquisition constitutes a notifiable transaction of the Company and is subject to the reporting and announcement requirements under Chapter 14 of the Listing Rules. INFORMATION OF THE GROUP The Group is principally engaged in the research and development, manufacturing and sales of audio visual products (excluding TV sets) for third parties brands on an ODM (original design manufacture) basis. For more information on the Group, please visit its official website at (the information that appears in that website does not form part of this announcement). Notwithstanding the respective interest of certain Directors in TCL Corporation and the Target Company, none of the Directors is considered as having a material interest in the connected transaction contemplated under the Share Transfer Agreement. Therefore, all Directors are entitled to vote for the resolutions proposed at the Board meeting held to approve the connected transaction contemplated under the Share Transfer Agreement pursuant to the Company s articles of association. DEFINITIONS Acquisition Board Company connected person(s) the acquisition of 30.08% of the issued share capital of the Target Company as contemplated under the Share Transfer Agreement the Board of the Directors Tonly Electronics Holdings Limited, a company incorporated in the Cayman Islands with limited liability, the shares of which are listed on the Main Board of the Stock Exchange (stock code: 01249) has the meanings ascribed to it under the Listing Rules 7

8 Director(s) Group Hong Kong Huizhou Kaichuang Huizhou Nikko Huizhou Tong-Ruijie Independent Third Party Listing Rules Mr. Li Mr. Ren Mr. Wang Mr. Weng Mr. Yu the director(s) of the Company the Company and its Subsidiaries the Hong Kong Special Administrative Region of the PRC Huizhou Kaichuang Venture Capital Partnership (Limited Partnership)* ( 惠州市憶創創業投資合伙企業 ( 有限合伙 )), a limited partnership established in the PRC, in which TCL Corporation holds over 50% interest as of the date of this announcement Huizhou Nikko Optoelectronics Co., Ltd.* ( 惠州尼日科光電有限公司, a company established in the PRC with limited liability) Huizhou Tong-Ruijie Investment Partnership (Limited Partnership)* ( 惠州市通瑞捷投資合伙企业 ( 有限合伙 )), a limited partnership established in the PRC a party who is not a connected person of the Company and is independent of and not connected with the Company and its connected persons the rules governing the listing of securities on the Stock Exchange Mr. Li Fengxiang, a shareholder of the Target Company Mr. Ren Xuenong, a shareholder of the Target Company and a director of the Company Mr. WangXiumeng, a shareholder of the Target Company Mr. Weng Xiaoyu, a director and shareholder of the Target Company Mr. Yu Guanghui, a shareholder of the Target Company and a director of the Company 8

9 Ms. Li PRC RMB Sale Shares Ms. Li Yuchun, a shareholder of the Target Company and the spouse of Mr. Song Yonghong, a director of the Company the People s Republic of China excluding Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan for the purposes of this announcement Renminbi, the lawful currency of the PRC the aggregate of Stage 1 Shares and Stage 2 Shares Share Transfer Agreement the share transfer agreement entered into on 9 November 2018 among TCL Technoly, Mr. Weng and the Target Company Share Consideration the aggregate of Stage 1 Consideration and Stage 2 Consideration, i.e. RMB29,040,000 Shareholder(s) Stage 1 Consideration Stage 1 Shares Stage 2 Consideration Stage 2 Shares Stock Exchange Subsidiary / Subsidiaries Target Company the shareholders of the Company the consideration for the transfer of the Stage 1 Shares, i.e. RMB7,240,000 2,850,000 shares of the Target Company held by Mr. Weng the consideration for the transfer of the Stage 2 Shares, i.e. RMB21,800,000 8,580,000 shares of the Target Company held by Mr. Weng The Stock Exchange of Hong Kong Limited has the meaning ascribed thereto under the Listing Rules and Subsidiaries shall be construed accordingly Guangdong Regency Optics-electron Co., Ltd.* ( 廣東瑞捷光電股份有限公司, a company established in the PRC with limited liability 9

10 Target Group TCL Corporation TCL Technoly The Target Company and its Subsidiaries TCL Corporation (TCL 集團股份有限公司 ), a joint stock company established under the laws of the PRC, the ultimate controlling Shareholder of the Company, the shares of which are listed on Shenzhen Stock Exchange (stock code: ) TCL Technoly Electronics (Huizhou) Co., Ltd.* (TCL 通力電子 ( 惠州 ) 有限公司, a company established in the PRC with limited liability and an indirect wholly-owned Subsidiary of the Company) % per cent The English translation of Chinese names or words in this announcement, where indicated by *, are included for information purpose only, and should not be regarded as the official English translation of such Chinese names or words. Hong Kong, 9 November 2018 On behalf of the Board LIAO Qian Chairman As at the date of this announcement, the Board comprises Mr. YU Guanghui, Mr. SONG Yonghong and Mr. REN Xuenong as executive Directors, Mr. LIAO Qian as non-executive Director and Mr. POON Chiu Kwok, Mr. LI Qi and Mr. LEONG Yue Wing as independent non-executive Directors. 10