A-Cap Energy approved off-market transfer shares and appointed new directors

Dear Shareholder

Approval of off-market transfer shares by Jiangsu Shengan Resources Group Co., Ltd, Company Number: 913209007365155768 to Singapore Shenke International Investment Pte. Ltd, UEN: 201402514Z and the appointment of Mr Jiandong He and Mr Meng Weijun as directors of the Company

This package relates to the seeking of shareholder approval for a private transaction between an existing A-Cap substantial shareholder, Jiangsu Shengan Resources Group Co., Ltd (Jiangsu), who intends to transfer its entire shareholding interest held in A-Cap Energy Limited (A-Cap) shares to Singapore Shenke International Investment Pte. Ltd. (Shenke) subject to the terms and conditions of the off-market transfer including A-Cap shareholder approval (Proposed Transaction) and the appointment of Mr Jiandong He and Mr Meng Weijun as directors of the Company.

Under the Proposed Transaction, Jiangsu and Shenke have entered into a conditional agreement for an off-market share transfer. Jiangsu is a public company listed on the China National Equities Exchange and Quotations known as the New Third Board, the over counter exchange in China. The Proposed Transaction is conditional on the shareholders of A-Cap approving the transaction as set out in this notice.

Jiangsu released an exchange announcement to the New Third Board on 23 December 2019 confirming Jiangsu shareholder approval of the transfer of Jiangsu’s entire shareholding interest held in A-Cap covering 357,786,934 ordinary fully paid shares representing a current substantial interest of 41.04% equity interest in all of A-Cap issued ordinary shares for nil (A$0.00) consideration, which transfer is subject to the following material terms and conditions:

1. 1. Receipt of all necessary regulatory, board and shareholder approvals relating to the offmarket transfer.
   2. Within six months from the date of receipt of all necessary regulatory, board and shareholder approvals relating to the off-market transfer in condition (i), Shenke to provide an undertaking to release the right pledge guarantee provided by Jiangsu to the Industrial and Commercial Bank of China Co., Ltd. Shanghai Hongqiao Business District Sub-branch (ICBC) held for US$5 million by any of the following ICBC right pledge guarantee release options:
      b. providing a cash deposit to replace Jiangsu existing security deposit held by ICBC against A-Cap’s borrowings from ICBC for US$5 million;
      c. providing A-Cap with all the cash funds required to repay the principal and interest of its ICBC loan for US$5 million in advance of the loan repayment dates; or
      d. other ways to facilitate the release of Shenke security deposit held by ICBC against ACap’s borrowings from ICBC for US$5 million including co-operating with A-Cap and its substantial shareholders to raise additional capital.
   3. A-Cap obtains all necessary regulatory, board and shareholder approvals to conditionally approve the off-market share transfer between Jiangsu (the transferor) and Shenke (the transferee) in respect to 357,786,934 ordinary fully paid A-Cap shares;
   4. The off-market transfer will be held in escrow by A-Cap pending completion of the conditions listed in paragraphs (i), (ii) and (iii) above. If the off-market transfer fails to meet the conditions within twelve months from 21 December 2019 (i.e. the date of the conditional off-market transfer agreement), the off-market transfer will no longer take effect unless Jiangsu and Shenke agree otherwise; and

Although not a condition of the Proposed Transaction, following further discussions with Jiangsu and Shenke in relation to the Proposed Transaction, A-Cap has been advised that it has been agreed between Jiangsu and Shenke that Mr Angang Shen and Mr Chenghu Zhu will retire from  4 the A-Cap board, and both Mr Angang Shen and Mr Chenghu Zhu had informed the Company that it is their intention to so resign, and two (2) additional directors, Mr Jiandong He and Mr Meng Weijun, be appointed to the A-Cap board with effect from the approval of resolutions to appoint them.

Mr Meng Weijun is not a director or shareholder of Shenke or Shenke Holdings Pty Ltd. Mr Meng Weijun holds voting power of 13.30% in Jiangsu. Mr Meng Weijun holds Nil voting power in A-Cap. Shenke and any of its directors and shareholder are not associates pursuant to the Corporations Act 2001 (Cth) of either A-Cap or Jiangsu. Shenke will become a substantial shareholder of A-Cap with voting power of 41.04% in all A-Cap issued ordinary shares following the completion of the off-market transfer. A-Cap’s issued shares as of the date of this notice amount to amount 871,884,866 ordinary fully paid shares.

At the date of this notice, Mr Jiandong He holds voting power of 12.36% in Jiangsu. Mr Jiandong He holds Nil voting power in A-Cap. At the date of this notice, Mr Meng Weijun holds voting power of 13.30% in Jiangsu. Mr Meng Weijun holds Nil voting power in A-Cap. Mr Meng Weijun is not a director of Shenke and Shenke Holdings Ltd.

Jiangsu and Shenke have obtained the necessary regulatory, board and shareholder approvals to enter into the off-market share transfer with completion now subject to the terms and conditions summarised in paragraphs (i) to (iv) above. Given Mr Ji Jijing Niu and Mr Chenghu Zhu are directors of Jiangsu and A-Cap they did not vote on the resolution put to Jiangsu shareholders to approve the off-market share transfer. Additionally, given Mr Angang Shen is chairman of A-Cap and a shareholder of Jiangsu, Mr Shen did not vote on the resolution put to Jiangsu shareholders to approve the off-market share transfer.

The Proposed Transaction relates to the proposed off-market transfer of ordinary shares in the Company and does not involve any of its assets. However, because the Proposed Transaction will increase the voting power of Shenke above 20%, shareholder approval is required under the Corporations Act 2001 (Cth).

Mr Ji Jijing Niu and Mr Chenghu Zhu are directors of both A-Cap and Jiangsu and cannot be considered as independent directors of A-Cap for purposes of the Proposed Transaction. A-Cap’s independent directors are all the A-Cap directors other than Mr Angang Shen, Mr Ji Jijing Niu and Mr Chenghu Zhu. Only A-Cap’s independent directors have been involved in A-Cap board discussions or voting on this issue to recommend that shareholders vote to approve the Proposed Transaction. The reasons for this recommendation are contained in the explanatory notes to the resolution. A-Cap independent directors consider the Proposed Transaction is unfair and reasonable having regard to the interests of the non-associated shareholders.

At the date of this notice, Mr Jiandong He holds voting power of 12.36% in Jiangsu and Mr Meng Weijun holds voting power of 13.30% in Jiangsu. Shenke and Shenke Holdings Ltd hold no voting power or shares in Jiangsu.

If you are unable to attend the meeting on 28 February 2020, we ask that you complete and send your proxy form to the Company which must reach us by 10.00am AEDT on 26 February 2020.

Yours sincerely
Mr Angang Shen
Chairman

• A-Cap Energy Limited on AfricanFinancials