I. Transaction Overview
1. Basic transaction information
In order to further promote the development strategy of the Company for group-based and integrated operations, and to improve our market competitiveness and shareholder value, the Company purchased a stake in Union Trust Limited in a market-orientated way.
On September 12, 2009, the Company entered into a Shares Transfer Agreement with New Hope Group and Sichuan South Hope Enterprises Co., Ltd, specifying that the Company would acquired a 41.18% stake in Union Trust jointly held by New Hope Group and Sichuan South Hope Enterprises Co., Ltd. at a price of 2.55 times the net assets value per share of Union Trust at the end of 2008 as confirmed by both the buyer and seller following a due diligence investigation. On September 23, 2009, the Company signed an Agreement on the Shares Transfer with Fujian Overseas Chinese Investment Co., Ltd., specifying that the Company would acquire a stake of 10% in Union Trust held by Fujian Overseas Chinese Investment Co., Ltd. at a price 2.55 times the net assets value per share of Union Trust at the end of 2008 as confirmed by both the buyer and seller after due diligence investigation. Because the abovementioned Agreements on Shares Transfer expired in December 2010, all parties concerned reached a Supplementary Agreement through consultation and consensus to extend the effective period of the two shares transfer agreements correspondingly.
After the above transactions are completed, the Company will hold a stake of 51.18% in Union Trust and become its controlling shareholder.
As of the disclosure date of the announcement, the Company does not have any related party relations with Union Trust or the sellers, and this acquisition does not constitute a related party transaction of the Company.
2. Review and approval by the Board of Directors
The 17th session of the sixth Board of Directors of the Company was held on August 21, 2009 and all the 14 directors who should be present attended the session. With a voting result of 14 supporting votes, 0 opposing vote and 0 abstentions vote, the Board of Directors reviewed and approved the Proposal on Investing in and Controlling of Union Trust Limited. The Board of Directors approved the Company to purchase of the 51.18% stake of Union Trust Limited held by the sellers, and authorized the senior management team of the Company to handle all matters relating to the purchases. The authorized rights of the senior management team include but are not limited to:
(1). Execute the purchase plan in accordance with the provisions of national laws and regulations, relevant provisions of regulatory authorities and resolutions of the Board of Directors.
(2). Hold negotiations with related parties to discuss all matters relating to the purchase and sign all agreements and legal documents related thereto.
(3). Make adjustments to the purchase plan according to market conditions, policy adjustment and opinions of relevant regulatory authorities.
(4). Handle matters regarding the application of the purchase, including but not limited to proceedings for examination, registration, filing, approval and ratification, etc. with relevant government agencies and regulatory authorities (if necessary) and execution of relevant amendment documents made due to changes in laws and regulations or requirements of regulatory authorities.
II. Introduction to the Sellers Holding the Target Stakes that are to be Purchased
1. New Hope Group Co., Ltd.
Place of registration: Sichuan Province, China
Address of Principal Office: No. 45, Section 4, South Renmin Road, Chengdu City, Sichuan Province, China
Registered capital: RMB 800,000,000
Legal representative: Liu Yonghao
Main financial indicators of last year: as at the end of 2009, the total assets (not audited) reached RMB27.175 billion, total liabilities RMB15.019 billion, and owners’ equity RMB12.156 billion.
2. Sichuan South Hope Enterprises Co., Ltd.
Place of registration: Sichuan Province, China
Address of Principal Office: No. 22, West Xiwang Road, Xinjin County Industrial Zone, Sichuan Province, China
Registered capital: RMB 451,000,000
Legal representative: Xie Hong
Main financial indicators of last year: as at the end of 2009, the total assets (not audited) reached RMB11.977 billion, total liabilities RMB5.461 billion, and owner's equity RMB6.516 billion.
3. Fujian Overseas Chinese Investment Co., Ltd.
Place of registration: Fujian Province, China
Address of Principal Office: F1-6 Huaxin Mansion, No. 152 Hudong Road, Fuzhou City, Fujian Province, China
Registered capital: RMB 159,000,000
Legal representative: Su Wensheng
Main financial indicators of last year: as at the end of 2009, the total assets (not audited) reached RMB572 million, total liabilities RMB166 million and owner's equity RMB406 million.
4. Shareholdings of sellers
As of the disclosure date of the announcement, New Hope Group Co., Ltd. held approx.15.69% stock rights of Union Trust, Sichuan South Hope Enterprises Co., Ltd. approx. 25.49%, and Fujian Overseas Chinese Investment Co., Ltd. approx. 31.96%.
III. Basic Information Regarding the Subject Matter of the Transaction
1. Basic information of Union Trust
Union Trust Limited was established in March 2003. It is a non-banking financial institution duly incorporated under the approval of the State Council and People’s Bank of China. It is also the only provincial trust company of Fujian Province and one of the first groups of Chinese trust companies to introduce strategic overseas investors. The company is headquartered in Fuzhou City, Fujian Province and its current registered capital is RMB 510 million.
With the approval of China Banking Regulatory Commission, Union Trust Limited engages in the following businesses: capital trusts, movable trusts, real estate trusts, valuable negotiable securities trusts, other property or property right trusts, investment fund business engaged as an initiator of investment funds or as a fund management company; cooperate assets restructuring, mergers and acquisitions, project financing, corporate financing, financial consulting, operating securities underwriting approved by competent departments of the State Council; transacting intermediary, consulting, credit investigations, custody and safety-deposit box business, mobilization of fixed assets by way of inter-bank deposits, inter-bank offers, loans, leases, investments; providing guarantees for others with fixed assets; engaging in inter-bank lending/borrowing and other businesses specified in laws and regulations or approved by the China Banking Regulatory Commission.
According to the audited financial statements of Union Trust, as of December 31, 2009, the total assets of Union Trust reached RMB 775,585,323, total liabilities RMB 39,160,099, and net assets RMB 736,425,224; the net profits realized in 2009 amounted to RMB 38,244,482.
2. Basic information of target shareholdings
As of the disclosure date of the announcement, the current shareholdings of Union Trust are listed as follows:
| Name of Shareholder | Proportion of shares held (%) |
| Fujian Overseas Chinese Investment Co., Ltd. | 31.96 |
| Sichuan South Hope Enterprises Co., Ltd. | 25.49 |
| National Australia Bank Limited | 20 |
| New Hope Group Co., Ltd. | 15.69 |
| Yong’an Assets Management Co., Ltd. | 4.90 |
| Nanping Investment Guarantee Center | 1.96 |
| Total | 100 |
After the transaction, the shareholdings of Union Trust shall be divided as follows:
| Name of Shareholder | Proportion of shares held (%) |
| Industrial Bank Co., Ltd. | 51.18 |
| Fujian Overseas Chinese Investment Co., Ltd. | 21.96 |
| National Australia Bank Limited | 20 |
| Yong’an Assets Management Co., Ltd. | 4.90 |
| Nanping Investment Guarantee Center | 1.96 |
| Total | 100 |
As is acknowledged and warranted by sellers in the Agreement on Shares Transfer, all registered capital of Union Trust has been lawfully paid and approved by all internal authorities of the company and government agencies and filed or registered with all government agencies as required. The target stock rights have been lawfully paid for by the sellers and no encumbrances have been set against such stock rights. Union Trust and the sellers have not issued any options or other similar rights, nor signed any documents which may lead the stock rights of Union Trust to be subscribed or purchased by any other third party; the sellers have not entered into any agreement with any other third party regarding the exercise of voting rights of the stock rights of Union Trust.
Other shareholders of Union Trust have waived their preemptive right to the target stock rights.
IV. Main Contents of the Agreement on Shares Transfer
A. Main clauses of the Agreement on the Assignment on Shares Transfer
The Company has entered into two Agreements on Shares Transfer with the sellers: the Agreement on Shares Transfer signed with New Hope Group Co., Ltd. and Sichuan South Hope Enterprises Co., Ltd. on September 12, 2009 and that signed with Fujian Overseas Chinese Investment Co., Ltd. on September 23, 2009.
1. The Agreement on Shares Transfer signed between the Company and New Hope Group Co., Ltd. and Sichuan South Hope Enterprises Co., Ltd.
(1) Proportion of shares to purchase
The Company will purchase the 41.18% stock rights of Union Trust held by New Hope Group Co., Ltd. and Sichuan South Hope Enterprises Co., Ltd. as provided in the Agreement on Assignment of Shares Transfer signed on September 12, 2009.
(2) Means of purchase
The Company will purchase the target shares in cash.
(3) Price of purchase
To purchase the 41.18% stake of Union Trust, the Company shall pay RMB 685,737,000 in total.
The Company will pay the foregoing consideration in the following manner:
(a) The down payment of RMB 171,000,000 in total (accounting for 25% of the transfer price) has been paid by the Company to New Hope Group Co., Ltd. and Sichuan South Hope Enterprises Co., Ltd. within 7 business days after the execution of the Agreement on Shares Transfer.
(b) The second installment of RMB 240,000,000 (accounting for 35% of the transfer price) must be paid by the Company to New Hope Group Co., Ltd. and Sichuan South Hope Enterprises Co., Ltd. within 5 business days after the official document approving the trade are served by relevant banking regulatory authorities and other requirements are satisfied.
(c) The third installment of RMB 274,737,000 (accounting for 40% of the transfer price) must be paid by the Company to New Hope Group Co., Ltd. and Sichuan South Hope Enterprises Co., Ltd. within 5 business days after the Company reestablishes the articles of association with Union Trust, goes through the industrial and commercial business registration procedures and meets other requirements regarding the transfer of stock rights.
(4) The Company agrees with New Hope Group Co., Ltd. and Sichuan South Hope Enterprises Co., Ltd. that if upon expiration of the agreement the parties or either party cancels the above agreement as provided, New Hope Group Co., Ltd. and Sichuan South Hope Enterprises Co., Ltd. shall pay the Company the down payment plus the repayment interest in one lump sum.
(5) Effectiveness of agreement
The agreement shall come into effect from the day when it is approved by the banking regulatory authorities.
2. The Agreement on Shares Transfer signed between the Company and Fujian Overseas Chinese Investment Co., Ltd.
(1) Proportion of shares purchased
The Company will purchase the 10% stock rights of Union Trust held by Fujian Overseas Chinese Investment Co., Ltd. as provided in the Agreement on Shares Transfersigned on September 23, 2009.
(2) Means of purchase
The Company will purchase the target shares in cash.
(3) Price of purchase
To purchase the 10% stake of Union Trust, the Company shall pay RMB 166,536,165 in total.
The Company will pay the foregoing consideration in the following manner:
(a) The advance payment of RMB 49,960,850 in total (accounting for 30% of the transfer price) has been paid by the Company to Fujian Overseas Chinese Investment Co., Ltd. within 5 business days after the execution of the Agreement on Shares Transfer.
(b) The cleared funds of RMB 116,575,315 in total (accounting for 70% of the transfer price) shall be paid by the Company to Fujian Overseas Chinese Investment Co., Ltd. within 15 days after the transfer of stock rights receives official approval from the banking regulatory authorities, is approved by Fujian Provincial Department of Finance and meets other requirements and the Company receives relevant written notifications and certifications as well as corresponding duplicates provided by Fujian Overseas Chinese Investment Co., Ltd.
(4) The Company agrees with Fujian Overseas Chinese Investment Co., Ltd. that if upon the expiration of the agreement, the parties or either party cancels the agreement or the agreement is cancelled automatically as provided, Fujian Overseas Chinese Investment Co., Ltd. shall pay the Company the down payment plus the repayment interest in one lump sum.
(5) The Company agrees with Fujian Overseas Chinese Investment Co., Ltd. that, if the Agreement on Shares Transfer signed between the Company and New Hope Group Co., Ltd. and Sichuan South Hope Enterprises Co., Ltd. is cancelled or terminated due to any cause, the Agreement on Shares Transfer signed between the Company and Fujian Overseas Chinese Investment Co., Ltd. will be terminated upon the rescission or termination of the foregoing transfer agreement.
(6) Effectiveness of agreement
The agreement shall come into effect from the day when it is approved by the banking regulatory authorities.
V. Other Arrangements Involving the Transaction
1. Relationship between the Company and Union Trust after the transaction
After the above transactions of shares transfer are completed, the Company will hold a 51.18% stake in Union Trust and become the controlling shareholder of Union Trust.
Pursuant to relevant provisions, the Company and Union Trust will continue to strictly separate the personnel, assets and finances of each other after the completion of the transaction.
VI. Purpose of Purchase and Sale of Assets and affect on the Company
1. To purchase a trust company is an important strategic step for the Company to implement integrated operation. The transaction will achieve the objective of holding a controlling stake by purchasing the stock rights of Union Trust, and will be helpful for the Company to accelerate its implementation of its integrated business development strategy, elevate its overall financial service capacity, and hence, improve the core competitiveness of the Company.
2. After the completion of the transaction, Union Trust will become a subsidiary controlled by the Company and will be covered in the scope of consolidated financial statements of the parent company.
VII. Catalog of Documents for Reference
1. Resolution of 17th session of the sixth Board of Directors of Industrial Bank Co., Ltd..
2. Agreement on shares transfer of Union Trust Limited.
3. 2009 financial statement of Union Trust Limited.
4. Reply of China Banking Regulatory Commission on the Modification of Shareholding and the Shareholding Restructuring of Union Trust Limited (CBRC Reply No [2011] 35).
Industrial Bank Co., Ltd.
9 February, 2011