Huabao International : Announcements and Notices - Revision of Annual Cap ...

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(Incorporated in Bermuda with limited liability)

(Stock Code: 00336)

REVISION OF ANNUAL CAPS FOR CERTAIN EXISTING CONTINUING CONNECTED TRANSACTIONS WITH CUSTOMERS

INTRODUCTION

To align with the change of the financial year end date of the Company from 31 March to 31 December, the Company proposes to revise the annual caps for certain existing continuing connected transactions of the Group such that the revised annual caps, to the extent possible, will cover the period ending 31 December, which will be same financial year end date of the Company. Therefore, this announcement is published to comply with the requirements under Rule 14A.54 of the Listing Rules.

REVISION OF ANNUAL CAPS

The aggregate annual caps for the continuing connected transactions contemplated under the Hongta HB Flavours Framework Agreement and Hongta JY Framework Agreement are revised to be (1) for the period from 1 April 2018 to 31 December 2018 at the sum of RMB93,700,000; (2) for the financial year ending 31 December 2019 at the sum of RMB181,350,000; and (3) for the period from 1 January 2020 to 31 March 2020 at the sum of RMB46,600,000, respectively.

The aggregate annual caps for the continuing connected transactions contemplated under the HB Flavours Framework Agreement, JY Framework Agreement and JK Framework Agreement are revised to be (1) for the period from 1 April 2018 to 31 December 2018 at the sum of RMB138,120,000; and (2) for the financial year ending 31 December 2019 at the sum of RMB264,000,000.

IMPLICATIONS UNDER THE LISTING RULES

Transactions with Hongta Tobacco Group

Since the highest of the applicable percentage ratios of the revised annual caps (in aggregate) of the continuing connected transactions contemplated under the Hongta HB Flavours Framework Agreement and the Hongta JY Framework Agreement as calculated pursuant to Rule 14.07 of the Listing Rules exceed 1% but not more than 5%, such continuing connected transactions contemplated under the Hongta HB Flavours Framework Agreement and the Hongta JY Framework Agreement are subject to the reporting, annual review, announcement but are except from the independent shareholders' approval requirements.

Transactions with Guangdong Tobacco Company

Since the highest of the applicable percentage ratios of the revised annual caps (in aggregate) of the continuing connected transactions contemplated under the HB Flavours Framework Agreement, JY Framework Agreement and JK Framework Agreement as calculated pursuant to Rule 14.07 of the Listing Rules exceed 5%, such continuing connected transactions contemplated under the HB Flavours Framework Agreement, JY Framework Agreement and JK Framework Agreement are subject to the reporting, annual review, announcement and the independent shareholders' approval requirements.

As (i) Guangdong Tobacco Company are regarded as connected persons at the subsidiary level of the Company; (ii) the continuing connected transactions contemplated under each of the HB Flavours Framework Agreement, the JY Framework Agreement and the JK Framework Agreement are on normal commercial terms; and (iii) the Board (including all the independent non-executive Directors) has approved the continuing connected transactions and confirmed that the terms of the continuing connected transactions are fair and reasonable and that the continuing connected transactions are on normal commercial terms or better and in the interests of the Company and the Shareholders as a whole, the continuing connected transactions contemplated under each of the HB Flavours Framework Agreement, JY Framework Agreement and JK Framework Agreement (including their respective revised annual caps) are subject to the reporting and announcement requirements, but are exempt from the circular, independent financial advice and independent shareholders' approval requirements under Rule 14A.101 of the Listing Rules.

INTRODUCTION

Reference is made to the announcement issued by the Company on 11 December 2018 regarding the change of financial year end date of the Company from 31 March to 31 December. The change of financial year end date of the Company is to take effect from the financial period ended on 31 December 2018.

To align with the change of the financial year end date of the Company from 31 March to 31 December, the Company proposes to revise the annual caps for certain existing continuing connected transactions of the Group such that the revised annual caps, to the extent possible, will cover the period ending 31 December, which will be same financial year end date of the Company. Therefore, this announcement is published to comply with the requirements under Rule 14A.54 of the Listing Rules.

EXISTING CONTINUING CONNECTED TRANSACTIONS

To enable the Group's business segments to operate independently and enhance relevant internal control measures, Huabao Flavours Company is principally engaged in the flavours and fragrances business, whereas the Remaining Group (including Guangdong Jinye Group) is principally engaged in business segments of tobacco raw materials (including RTL and new materials products applicable to tobacco industry), aroma raw materials, condiment products and other segments.

Accordingly, the existing continuing connected transactions with customers are primarily classified under two categories, namely, (A) transactions between Huabao Flavours Company and the Remaining Group (including Guangdong Jinye Group), respectively, with Hongta Tobacco Group; and (B) transactions between Huabao Flavours Company and the Remaining Group (including Guangdong Jinye Group), respectively, with Guangdong Tobacco Company.

(A) Transactions with Hongta Tobacco Group

Continuing connected transactions contemplated under the Hongta HB Flavours Framework Agreement

As disclosed in the announcement issued by the Company on 26 May 2017, among other things, Huabao Flavours entered into the Hongta HB Flavours Framework Agreement with Yunnan Hehe on 26 May 2017 regarding the provision of tobacco flavours products and related services by Huabao Flavours Company to Hongta Tobacco Group. The term of the Hongta HB Flavours Framework Agreement shall be for a term of 3 years from 1 April 2017 to 31 March 2020 (both days inclusive).

Pursuant to the Hongta HB Flavours Framework Agreement, prices of the products will be by reference to the bidding price (if applicable); or the prevailing market price. Such prices and terms payable to Huabao Flavours Company shall be no less favourable than those terms offered by independent third party customers for provision of similar products and services in its ordinary and usual course of business. Payments of the transactions will be settled in arrears by cash transfer, or such other manners as agreed by the parties in accordance with the agreed timing and manners as specified in the separate implementation agreements to be entered into between the parties from time to time.

Continuing connected transactions contemplated under the Hongta JY Framework Agreement

As disclosed in the announcement issued by the Company on 26 May 2017, among other things, Guangdong Jinye entered into the Hongta JY Framework Agreement with Yunnan Hehe on 26 May 2017 regarding the provision of RTL, stem powder, auxiliary materials and related services by Guangdong Jinye Group (except for Huabao Flavours Company) to Hongta Tobacco Group. The term of the Hongta JY Framework Agreement shall be for a term of 3 years from 1 April 2017 to 31 March 2020 (both days inclusive).

Pursuant to the Hongta JY Framework Agreement, prices of the products will be by reference to the bidding price (if applicable); or the prevailing market price. Such prices and terms payable to Guangdong Jinye Group shall be no less favourable than those terms offered by independent third party customers for provision of similar products and services in its ordinary and usual course of business. Payments of the transactions will be settled in arrears by cash transfer, or such other manners as agreed by the parties in accordance with the agreed timing and manners as specified in the separate implementation agreements to be entered into between the parties from time to time.

(B) Transactions with Guangdong Tobacco Company

Continuing connected transactions contemplated under the HB Flavours Framework Agreement

As disclosed in the announcement issued by the Company on 1 March 2017, among other things, Huabao Flavours entered into the HB Flavours Framework Agreement with Guangdong Tobacco on 1 March 2017 regarding the provision of tobacco flavours products and related services by Huabao Flavours Company to Guangdong Tobacco Company. The term of the HB Flavours Framework Agreement shall be for a term of 3 years from 1 January 2017 to 31 December 2019 (both days inclusive).

Pursuant to the HB Flavours Framework Agreement, prices of the products will be by reference to the bidding price (if applicable); or the prevailing market price. Such prices and terms payable to Huabao Flavours Company shall be no less favourable than those terms offered by independent third party customers for provision of similar products and services in its ordinary and usual course of business. Payments of the transactions will be settled in arrears by cash transfer, or such other manners as agreed by the parties in accordance with the agreed timing and manners as specified in the separate implementation agreements to be entered into between the parties from time to time.

Continuing connected transactions contemplated under the JY Framework Agreement

As disclosed in the announcement issued by the Company on 1 March 2017, among other things, Guangdong Jinye entered into the JY Framework Agreement with Guangdong Tobacco on 1 March 2017 regarding the provision of RTL products and related services by Guangdong Jinye Group (except for Huabao Flavours Company) to Guangdong Tobacco Company. The term of the JY Framework Agreement shall be for a term of 3 years from 1 January 2017 to 31 December 2019 (both days inclusive).

Pursuant to the JY Framework Agreement, prices of the products will be by reference to the bidding price (if applicable); or the prevailing market price. Such prices and terms payable to Guangdong Jinye Group shall be no less favourable than those terms offered by independent third party customers for provision of similar products and services in its ordinary and usual course of business. Payments of the transactions will be settled in arrears by cash transfer, or such other manners as agreed by the parties in accordance with the agreed timing and manners as specified in the separate implementation agreements to be entered into between the parties from time to time.

Continuing connected transactions contemplated under the JK Framework Agreement

As disclosed in the announcement issued by the Company on 1 March 2017, among other things, Guangdong Jinke entered into the JK Framework Agreement with Guangdong Tobacco on 1 March 2017 regarding the provision of auxiliary materials and related services by Guangdong Jinye Group (except for Huabao Flavours Company) to Guangdong Tobacco Company. The term of the JK Framework Agreement shall be for a term of 3 years from 1 January 2017 to 31 December 2019 (both days inclusive).

Pursuant to the JK Framework Agreement, prices of the products will be by reference to the bidding price (if applicable); or the prevailing market price. Such prices and terms payable to Guangdong Jinye Group shall be no less favourable than those terms offered by independent third party customers for provision of similar products and services in its ordinary and usual course of business. Payments of the transactions will be settled in arrears by cash transfer, or such other manners as agreed by the parties in accordance with the agreed timing and manners as specified in the separate implementation agreements to be entered into between the parties from time to time.